12% IGST Applies To All “Diagnostic Kits And Reagents” Under Heading 3822: CESTAT [Read Order]

The bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), CESTAT Mumbai, has held that laboratory reagents imported under Heading 3822 are eligible for the concessional rate of Integrated Goods and Services Tax (IGST) at 12% as clarified by the Goods and Services Tax (GST) Council and the Ministry of Finance. Therefore, setting aside the order.

The appeal was filed by Merck Life Science Pvt. Ltd., arising out of an order dated 07 July 2020 passed by the Commissioner of Customs (Import), Mumbai, [CC(I)]. The case originated when the Assessing Officer (AO) reclassified the imported goods from Customs Tariff Heading (CTH) 38220019 to CTH 38220090 and denied the benefit of concessional IGST at 12% under Notification No. 1/2017 dated 28 June 2017.

In addition, the Authority denied exemption from countervailing duty (CVD) and confirmed demands towards interest and penalty.

Aggrieved, the appellant challenged the denial of concessional IGST before the Tribunal.

Appearing for Merck Life Science Pvt. Ltd., Dron Parmar argued that the goods imported being laboratory reagents fell squarely within the ambit of Heading 3822, which covers diagnostic and laboratory reagents.

It was submitted that subsequent clarification by the GST Council and Circular No. 163/19/2021-GST dated 06 October 2021 issued by the Tax Research Unit (TRU), Ministry of Finance, expressly confirmed that the concessional rate of 12% under Notification No. 1/2017 applies to all goods under heading 3822, not merely diagnostic reagents. Therefore, the denial of concessional IGST was contrary to law and liable to be set aside.

Appearing for the Revenue, Ram Kumar contended that the adjudicating authority had correctly held that only diagnostic kits and diagnostic reagents were covered by the notification, and that laboratory reagents, certified reference materials, and pharmaceutical reference standards were excluded. Therefore, the appellant was not entitled to the concessional IGST rate.

The Bench of S.K. Mohanty, Judicial Member and M.M. Parthiban, Technical Member observed that the issue of applicability of concessional IGST on laboratory reagents had been comprehensively addressed by the GST Council and clarified by the Ministry of Finance through Circular No. 163/19/2021-GST.

The Tribunal held that the intention of Entry 80 of Schedule II of Notification No. 1/2017-Integrated Tax (Rate) dated 28 June 2017 was to extend the benefit of 12% IGST to all reagents falling under heading 3822, whether diagnostic or laboratory reagents.

Accordingly, the demand for differential IGST, interest, and penalty confirmed in the impugned order was set aside to that extent.

The Tribunal, however, noted that the appellant had not contested the other demands confirmed in the order-in-original and therefore left them undisturbed, permitting the department to recover them.

Thus, the appeal was partly allowed.

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