By TIOL News Service

MUMBAI, APR 27, 2014 : THIS is a Revenue appeal.

The respondents filed a Bill of entry for re-import of 4-Amino-6 (Tri chloroethyl)-1, Benzene Di-sulphonamide which were exported by the respondent. The clearance of the goods was claimed duty free under Notification No. 94/96-Cus dated 16.12.1996. The goods were examined and it was realized that the goods were drugs and, therefore, the matter was referred to Assistant Drug Controller.

The Assistant Drug Controller opined that the goods are Clorsulan which is used for therapeutic purpose. The Assistant Drug Controller also stated that the exporter did not have the manufacturing licence and, therefore, the manufacturer has committed an offence under Section 18(c) punishable under Section 27(ii) of the Drugs and Cosmetics Act, 1940.

The case was adjudicated by the original authority and the goods were confiscated under Sections 111(d), (m) of the Customs Act, 1962. However, the importer was given an option to redeem the goods on payment of fine, besides penalty under Section 112(a) was imposed. Penalty of Rs.50,000/- was also imposed on the Director of the company u/s 112.

The respondents filed appeal before the Commissioner (Appeals), who allowed the appeal on the ground that Clorsulan and 4 Amino-6 (tri-chloroethyl)-1, 3-Benzene Di-sulphonamide are two names of the same product and, therefore, it cannot be called a case of misdeclaration. The Commissioner (Appeals) also held that as per the Import-Export Policy, the said drug is allowed to be imported freely and, therefore, there is no violation of Section 111(d) of the Customs Act inasmuch as confiscation is set aside.

Now, the Revenue is aggrieved and as mentioned is before the CESTAT.

The first ground is that Clorsulan is not the trade name but the generic name by which the said drug is known in the world and since the chemical is a drug, the importer should have given the proper description as a drug in the bill of entry as also at the time of export.

In the matter of confiscation, the Revenue has a lot many submissions to make viz. -

(i) Section 111(d) of the Customs Act covers prohibitions imposed by any law in India and Drugs & Cosmetics Act, 1940/Drugs & Cosmetics Rules, 1945 are such laws.

(ii) Section 18 of the Drugs & Cosmetics Act, 1940 prohibits manufacture and sale in contravention of the said Act. As per the Drugs & Cosmetics Act, 1940 a licence is required for manufacture of drug and it is a fact that these goods were manufactured in India without a valid licence.

(iii) Rule 30(B) of the Drugs & Cosmetics Rules, 1942 prohibits import of a drug, which is prohibited in the country of origin/manufacture. The combined reading of Section 18 and Section 30(B) and other provision of the Drugs & Cosmetics Act, 1940 makes it evident that the goods which are prohibited for manufacture in India may not be allowed to be imported into India whether by way of re-import or otherwise. Section 10 of the Drugs & Cosmetics Act, 1940 prohibits imports of drugs prohibited by Rules made under the Act.

(iv) Rule 23 of the Drugs & Cosmetics Rules, 1945 requires the importer to have a valid licence for import which the importer did not have.

(v) It is a settled position that in case of re-import also, the conditions imposed for normal imports should be satisfied.”

The respondent stated that the presumption of the Assistant Drug Controller that the goods have been manufactured by the respondents is incorrect. Inasmuch as the goods have been manufactured by MogantiPharma, Peddapuram, Andhra Pradesh and the respondent had purchased the goods against Form ‘H' and ARE-1 was also issued by the said firm. That Section 18 of the Drugs & Cosmetics Act speaks about prohibition of manufacture and sale of certain drugs and cosmetics and the impugned drug does not figure in the prohibited list; that the respondent ought to have had a licence for the manufacture of the said drug is irrelevant as they are merely trading in the goods;that Rule 30-B of the Drugs and Cosmetics Rules is not applicable and, therefore, the goods cannot be considered as prohibited for import in India.

The Bench while rejecting the submissions made by the Revenue inter alia observed -

+ The chemical name of the drug was correctly written. It is just that the generic name was not mentioned, so this can be, at the most, a case of not writing the complete description but cannot be treated as misdeclaration.

+ There is no prohibition under the Import Policy for the import of the said item is allowed to be imported freely.

+ The letter of the Assistant Drug Controller, dated 27.7.2009 on the basis of which the department initiated action is based upon the assumption that the goods have been manufactured by the respondents. The fact is that the respondents have acted only as a trader in respect of the said goods and the goods were procured from another manufacturer. As the goods had come under ARE-1 it cannot be said that the goods have been manufactured without proper licence.

+ It is alleged that the manufacturer has committed an offence under Section 18(c) punishable under Section 27(ii) of the Drugs and Cosmetics Act, 1940. The Assistant Drug Controller's letter is based on the assumption that the goods have been manufactured by the respondents, which is not the case. Secondly, even if the manufacturer has committed an offence under Section 18(c) which is punishable under Section 27(ii) of the Drugs and Cosmetics Act, 1940, this would not imply that the goods imported are prohibited goods and are, therefore, imported in violation of Section 111(d) of the Customs Act.

Holding that there is no infirmity in the order of the Commissioner(A), the Revenue appeal was dismissed.

(See 2014-TIOL-641-CESTAT-MUM)