One basic thing should be clearly understood by all that classification of any product as medicament or cosmetics is only and exclusively governed by the provisions of the Drugs & Cosmetics Act, 1940. Production/ manufacture/ storage/sale of these products is governed by the provisions of the Act of 1940 including Drugs and Cosmetic Rules, 1945 made thereunder and notifications issued from time to time in exercise of the powers conferred under the Act/Rules.
The legal position needs to be clarified at this stage that no ministry/GST Council is legally competent to declare a product as medicament including sanitizers. In continuation, it should be added that GST Council is capable to declare a rate of GST on medicament and not a classification of sanitizer i.e. medicament or not? It is in the exclusive domain of the Drug Controller of the State where the product is being manufactured/sold.
Therefore, to classify sanitizer on the basis of alcohol dominance clearly is an attempt that is not at all subject matter of the Ministry of Finance.
Before the start of the Covid-19 pandemic, the main consumption of sanitizer was in Central Government/ State Government / Military Hospitals/ Private Hospitals. It needs no arguments that purchases by this class of sanitizers for over half of the century were subject to manufacture/sale by a Drug License Holder.
Miscellaneous Chemical Products
(d)medicaments (Heading3003 or 3004).
|3808||Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant growth regulators, disinfectants and similar products, put up in forms or packings for retail sale or as preparations or articles (for example, sulphur-treated bands, wicks and candles, and fly-papers).||12% IGST or 6% CGST + 6% SGST/ UTGST|
The principle is explained in Maxwell on the Interpretation of Statutes (12th Edition), at page 289, thus:
“Where two or more words which are susceptible to analogous meaning are coupled together, noscuntur a sociis. They are understood to be used in their cognate sense. They take, as it were, their color from each other, the meaning of the more general being restricted to a sense analogous to that of the less general.”
“Thus, if a product comprises of two or more constituents which have been mixed together for therapeutic or prophylactic uses, then it would be medicament. As stated above, the Appellants products were examined by the Chemical Examiner who has opined that these products have therapeutic properties. Also admittedly these products are used for disinfecting the skin prior to surgery. As per Concise Oxford Dictionary, 9th Edition, the term “Prophylactic” would mean “intending to prevent diseases, a preventive medicine or course of action”. It is clear that the Appellants’ products are used as a cleanser for cleaning of wounds and abrasions and minor cuts and to disinfect the skin prior to surgery. They, therefore, also have prophylactic uses. As the products have therapeutic properties and prophylactic uses they are Medicament falling under Chapter 30.
|3004||Medicaments (including veterinary medicaments) used in bio-chemic systems and not bearing a brand name||Kg||2.5%||2.5%||5%||Nil|
As they fall under Chapter 30 by virtue of Note 1(c) to Chapter 38, they do not fall within Chapter 38. It will therefore have to be held that the products cannot be classified under Tariff item 38.08. In this view of the matter, the impugned judgment cannot be sustained and is accordingly set aside. It is held that the Appellants’ products will be classifiable under Tariff Item 3003.10”
The extent or the quantity of medicament used in a particular product will also not be a relevant factor. Normally, the extent of the use of medicament ingredients is very low because a larger use may be harmful to the human body. The medicinal ingredients are mixed with what is in the trade parlance called filler or vehicles in order to make the medicament useful. To illustrate an example of Vicks Vaporub is given in which 98 percent is said to be paraffin wax, while the medicament part, i.e. menthol is only 2 percent. Vicks Vaporub has been held to be medicament by this Court in Collector of Central Excise v. Richardson Hindustan Ltd. 1  42 ELT A100 (SC). Therefore, the fact that the use of medicinal elements in a product was minimal does not detract from it being classified as a medicament.
Sanitizer is a preventive medicine for the safety of patients from germs, insecticides, etc. and therefore as per the terms of Drugs and Cosmetics Act 1940 a Drug License is required for the manufacturing/distribution/sale of sanitizer of medicament grade.
Quantity of medicament is not decisive as was held by the Hon’ble Supreme Court in the case of Vicks Veporub in which medicament is only 2%. Medicament consists of (a) active ingredients of medicine (b) other ingredients (c) vehicles or fillers. To increase the quantity on one hand and on the other the medicine to mark user friendly.
Recently opinions are coming with a quantity of high percentage of Alcohol in sanitizer and merely on this basis, various ministries have come to the conclusion that sanitizer is not a medicament, and hence it is liable to tax at 18%. This is wholly baseless and contrary to the provisions of the Drugs and Cosmetics Act under which the Controller of each State is the final authority to declare that the product is Medicament or not.
Presently there is a great controversy in media regarding the classification of hand sanitizer. In this respect, we humbly present the following for your kind consideration to issue the necessary directions to remove the confusion:
It is, therefore, humbly requested that during the Covid-19 period mask and sanitizer being used by each and every person of the country, government should consider to declare them exempt as they are essential for up keeping the human life.
|Narendra Sharma is an Advocate practising in Kanpur. He can be contacted at email@example.com. Views are Personal.|