Recently the Authority for Advance Rulings ( AAR ), Kolkata, in its order held that skin preparations are classifiable as Medicament under heading 3004 only when its used primarily for cure from or treatment or mitigation of or for prevention of a specific skin disease or disorder.
The applicant, Akansha Hair & Skin Care Herbal Unit Pvt Ltd., manufactures skin care preparations and has sought an advance ruling on the classification of 33 of its products. The counsel for the applicant argued that the applicant produced skin care preparations are Ayurvedic Medicaments and that they are meant for therapeutic or prophylactic uses, put up in packaging for retail sale and entirely correspond to the description of goods under HSN 3004 and, therefore, taxable under Schedule II.
The counsel referred the ruling of the Authority for Advance Ruling, Central Excise, Customs & Service Tax, New Delhi. in the matter of M/s Guthy Renker Marketing Pvt Ltd. In that case the AAR pointed out that most of the skin care or toilet preparations containing some recognized medical ingredients and professing to cure or mitigate the skin diseases for which drug licenses have been obtained are held by the apex court as medicaments notwithstanding the fact that they have cosmetic value too (for example, prickly heat powder, anti-dandruff shampoo, anti-pimple herbal powder etc.). According to the AAR if the product can be used for the treatment of specific ailments and the ingredients used are those specified in the medical or pharmacology books, a strong case exists for it being classified as a medicament.
The authority acknowledged the fact that nearly all proper skin care preparations have therapeutic or prophylactic properties, as they help in maintaining or improving the health of the skin. The Authority further noted that the skin care preparations that are used as medicaments may have the effect of enhancing appearance and beauty by restoring skin health. The essential difference, according to the authority, lies in the user’s perception of a particular product and If the user consumes the product primarily for cure from or treatment or mitigation of or for prevention of a specific skin disease or disorder, it should be treated as a medicament classifiable under heading 3004 (unless, of course, it has been specifically included under heading 3304).
The authority comprising of members Vishwanath and Partha Sarathi Dey observed “In the context of the present application, there is no dispute that the products are manufactured under valid drug license and following the formula prescribed in the authoritative textbooks of Ayurveda. A few ingredients may have been added for the preservation of the quality of the product, which, as settled by the apex court on several occasions, should not be considered material while ascertaining the underlying Ayurvedic nature of the product. The Applicant has also furnished various documents for facilitating the common parlance test. .. it appears only the products, Rupam (Pimple pack) and Pailab (Anti-crack cream) of the list of their products are offered for treatment or prevention of specific skin disorders. The products, namely, Swarnajyoti, Sunayana and Tarumitra-60 have not yet come into existence, and, therefore, excluded from the ambit of examination for the purpose of this ruling. The other products are either already specified under heading 3304 (like talcum powder, sunscreen, moisturising lotion etc.) and, therefore, cannot be considered for inclusion under heading 3004. The remaining products mentioned in the list submitted by them are not offered primarily as medicaments and, therefore, not to be included under heading 3004.”
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