Customs Duty Exemption Allowed for ‘hCG Pregnancy Test Kits’ Based on Essential Character from Agglutinating Sera: Supreme Court Upholds CESTAT Order [Read Order]
The CESTAT upheld this view, noting that agglutinating sera, the only active component, determined the classification under CTH 3002, making the kits eligible for nil-rate duty.
Custom - duty - exemption - taxscan
Custom - duty - exemption - taxscan
The Supreme Court of India, upheld the Customs,Excise and Service Tax Appellate Tribunal (CESTAT) order allowing customs duty exemption for hCG Pregnancy Test Kits, finding that their essential character derived from agglutinating sera.
The Department-appellant, appealed against the 21.11.2022 order of the Commissioner of Customs, ICD Tughlakabad, which had dropped proceedings initiated through show cause notices against Rapid Diagnostics Pvt. Ltd.respondent-assessee, and its Director, Bharat Bhushan Jindal.
The issue was whether the imported hCG Pregnancy Rapid Test Strip and Cassette qualified for customs duty exemption under Notifications 12/2012-Cus and 50/2017-Cus.
The facts of the case are as., the assessee, a private limited company, imported “hCG Pregnancy Rapid Test Strip” and “hCG Pregnancy Rapid Test Cassette” between 31.08.2016 and 07.07.2021. The goods were classified under CTH 3002 of the Customs Tariff Act, 1975, and exemption from basic customs duty at nil rate was claimed under the relevant notifications.
The products were pregnancy detection kits that worked on antigen-antibody reaction using agglutinating sera. Customs authorities initiated proceedings on the ground that these were complete test kits and not agglutinating sera. Samples were tested at AIIMS Biochemistry Department and the National Institute of Immunology. During investigation, the company deposited ₹70,00,000 towards duty and interest without prejudice.
Show cause notices alleged misclassification, proposed recovery of duty with interest, confiscation of goods, and penalties, including penalty on the company’s director. The company, in its reply, maintained that the kits derived their essential character from agglutinating sera and were correctly classifiable under CTH 3002, making them eligible for full exemption.
The Commissioner accepted this contention, noting that although the goods were complete kits, their essential character came from agglutinating sera, supported by test reports. Relying on judicial precedents, the Commissioner held that the exemption applied and dropped the proposed duty demand, confiscation, and penalties.
The Department later filed appeals against this order dated 21.11.2022.
The department counsel submitted that the imported hCG pregnancy test kits and agglutinating sera were not the same. He argued that the exemption applied only to agglutinating sera, not to the complete test kits, and noted that other manufacturers imported agglutinating sera as raw material to claim the exemption, showing that raw materials and finished products could not be treated the same.
The assessee counsel argued that the company correctly claimed the exemption. They stated that the test kits were based on agglutinating sera, classifiable under CTH 3002, and relied on tribunal decisions allowing exemption for pregnancy test kits containing agglutinating sera.
The submissions of both sides were considered.
The two member bench Justice Dilip Gupta (President) and P.V.Subba Rao( Technical Member) noted that the question in the appeals was whether the “hCG Pregnancy Rapid Test Strip” and “hCG Pregnancy Rapid Test Cassette” were classifiable under CTH 3002 and eligible for nil-rate basic customs duty under the Exemption Notifications.
CTH 3002 covered human or animal blood prepared for therapeutic, prophylactic, or diagnostic use, antisera, and other immunological products. The Exemption Notifications dated 17.03.2012 and 30.06.2017 provided duty exemption to lifesaving drugs, their salts and esters, and diagnostic test kits specified in List 4.
The tribunal observed that the assessee claimed the essential character of the kits was provided by agglutinating sera containing monoclonal hCG antibodies. The kits were rapid chromatographic immunoassays detecting hCG in urine, with agglutinating sera as the only active component and other parts, like membrane sheet, plastic cassette, and absorbent, as passive components.
The appellate tribunal relied on the decision in Inter Care Ltd., where the benefit of the Exemption Notifications was allowed to pregnancy test kits based on agglutinating sera. It noted that the kit form did not affect the classification, and that agglutinating sera provided the essential character of the goods.
The Commissioner, following this reasoning, dropped the proposed duty demands, holding that the kits were classifiable under CTH 3002 and eligible for exemption under the notifications.The tribunal found that these findings were consistent with earlier decisions and did not suffer from any infirmity.
The tribunal dismissed the two appeals filed by the department.
The matter was heard on 04-09-2025 before Justice J.B. Pardiwala and Mr. Justice Manmohan. The Court found no reason to interfere with the order dated 19.11.2024 passed by the CESTAT. The appeals were dismissed, and any pending applications were also disposed of.
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