Glucometers Held to Fall Under CTH 9027: Bombay High Court Quashes Customs Demand

Background of the Dispute

The Bombay High Court, in the case of Ascensia Diabetes Care India Pvt. Ltd. Vs Union of India and Anr., examined the legality of an order dated 31 December 2020 passed by the customs authorities. The controversy revolved around the correct tariff classification of imported blood glucose monitoring systems (Glucometers) marketed under the “Contour” line (including Contour Plus, Contour Plus One, Contour TS and Contour).

The assessee was importing these glucometers and declaring them under Customs Tariff Heading (CTH) 9027, which resulted in:

  • Basic Customs Duty (BCD) at NIL rate, and
  • Levy of IGST at 12% on an aggregate assessable value of Rs. 5,44,42,993/-, with IGST of Rs. 65,33,159/-.

Subsequent to clearance, a post‑clearance audit was carried out. The Department took the view that the products were wrongly classified under 9027 and ought instead to be placed under CTH 9018, triggering a demand for differential duty of Rs. 30,79,295/-. This culminated in issuance of a consultative letter, a pre‑notice consultation, and finally a show cause notice dated 30 June 2020 alleging misdeclaration and proposing recovery of the differential duty.

The assessee challenged the adjudication order confirming this demand by filing a writ petition under Article 226 of the Constitution of India before the Bombay High Court.

Relevant Tariff Headings under Chapter 90

The dispute turned on the interpretation of two competing headings under Chapter 90 of the Customs Tariff Act, 1975, which covers optical, photographic and a wide variety of scientific and medical instruments:

  • Heading 9018 – “Instruments and appliances used in medical, surgical, dental or veterinary sciences, including scientigraphic apparatus, other electromedical apparatus and sight‑testing instruments.”
  • Heading 9027 – “Instruments and apparatus for physical or chemical analysis (for example, polarimeters, refractometers, spectrometers, gas or smoke analysis apparatus); instruments and apparatus for measuring or checking viscosity, porosity, expansion, surface tension or the like; instruments and apparatus for measuring or checking quantities of heat, sound or light (including exposure meters); microtomes.”

The assessee consistently maintained that glucometers are instruments for chemical analysis of blood and therefore squarely fall within heading 9027. The Department contended that they are essentially medical diagnostic instruments and belong to heading 9018.

Assessee’s Stand: Reliance on CESTAT’s Bayer Pharmaceuticals Ruling

In reply to the show cause notice, the assessee asserted that glucometers are correctly classifiable under heading 9027, and relied heavily on a prior decision of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in:

Bayer Pharmaceuticals Pvt. Ltd. Vs. Commissioner of Customs, Mumbai
2016 (331) E.L.T. 317

Key planks of the assessee’s argument were:

  • The product considered in Bayer Pharmaceuticals Pvt. Ltd. was essentially the same type of glucometer, comprising glucose meter, test strips, lancet device and user guide.
  • CESTAT had already held that such blood glucose meters are instruments for chemical analysis and therefore classifiable under heading 9027 and not under 9018.
  • The assessee explained that Bayer AG, Germany had sold its global diabetes care business to Panasonic Healthcare, Japan, which then created the Ascensia Diabetes Care group worldwide, including in India. Ascensia Diabetes Care India Pvt. Ltd. was incorporated on 5 November 2015 to acquire the India diabetes care business.
  • On this factual backdrop, the assessee contended that Bayer (supra) was effectively in its own case, dealing with identical goods.
  • It was further urged that judicial discipline and the doctrine of stare decisis mandated that the adjudicating authority must follow the binding precedent of CESTAT unless reversed or distinguished on clear and legitimate grounds.

The assessee also pointed out that even at the appellate level in another matter, customs authorities themselves had previously accepted glucometers as classifiable under heading 9027.

Essence of the CESTAT’s Bayer Pharmaceuticals Ruling

The High Court reproduced and relied on the detailed reasoning of CESTAT in Bayer Pharmaceuticals Pvt. Ltd. Vs. Commissioner of Customs, Mumbai, where the Tribunal had to decide between headings 9018 and 9027 for imported blood glucose meters such as “Breeze 2 Meter” and “Contour TS Meter”.

Key findings of CESTAT included:

1.