Customs, Excise and Gold Tribunal - Mumbai
M/S. Max International vs Commissioner Of Customs, Acc, Mumbai on 23 April, 2001
Equivalent citations: 2001(77)ECC125, 2001(132)ELT53(TRI-MUMBAI)
ORDER JH Joglekar, Member (T)
1. The appellants in this case filed a Shipping Bill under the claim of DEPB declaring the export product as '4-(4-Chlorophenyl)-4-Hydroxypiperdine. Samples were drawn and tested by several authorities during the course of investigation. The Asst. Drugs Controller stated that "the chemical tested was not of standard quality as defined in the Drugs & Cosmetics Act, 1940". The DYCC, New Customs House stated that "the chemical was found to be inorganic silicates in the form of powder each was other than '4-(4-Chlorophenyl-4-Hydroxypiperdine." The test report of a private company showed that the product was the combination of the chemical plus inorganic silicates slightly over 80%. The 4th agency also a private laboratory was not able to give any opinion. The value declared was about Rs. 18 lakhs. The exporters claimed that the consignment was purchased from a trader for Rs. 16.25 lakhs. It was claimed that the payment was made in cash. The cash withdrawals from the bank were shown as supporting evidence. Show cause notice was issued alleging that the goods were liable to confiscation under Sec. 113(d) of the Customs act 1962 and that the unit and the proprietor were liable to penalty. The Commissioner in the order now impugned before us confiscated the goods absolutely and imposed penalty of Rs. 17,91,733/- each on the exporter unit and also on the proprietor thereof. Since the unit was owned by the proprietor, only one appeal is filed by Shri J.P. Joshi.
2. On hearing both the sides on the stay application, the issue was posed for final disposal. We have heard Shri Diophode appearing alongwith Smt. P. Singh, advocate for the appellants. Shri B.K. Choubey, JDR appeared fro the Revenue. The strong point made by Shri Diophode was that the Revenue was expected to spell out the prohibition in regard to the goods sought to be exported and the face of failure of the Revenue to do so the exporter was not in a position to defend himself. It is his submission that on this ground the order becomes unsustainable.
3. Section 113(d) of the Act reads as under:-
"any goods attempted to be exported or brought within the limits of any customs area for the purpose of being exported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force".
4. The show cause notice does not spell out whether the confiscation was alleged for contravention of he provisions of the Customs Act or for any other law. Both sides felt that the first cited finding of the Asstt. Drug controller was the key and that the export was in contravention of the provisions of the Drugs and Cosmetic act, 1940.
5. The phrase "standard quality" means as per paragraph 16 of the Drugs and Cosmetic Act, 1940 -(a) in relation to a drug that the drug complies with the standard set out in the Second Schedule, and (b) in relation to a cosmetic, that the cosmetic complies with such standard as may be prescribed. In the present case, we are unable to make out whether the product declared was a drug or whether it was a cosmetic. No guidance is available form the proceedings at all. Shri Diophode was instructed to state that it was a drug intermediate. The search through the Martingale's Extra Pharmacopoeia does not show coverage of this substance. If it is a drug then in terms of the Second Schedule, the standard prescribed in the Pharmacopoeia would become the standard to determine whether a particular product is of this standard quality or not. The first drawback we face is the lack of definitive statement as to the identity of the product. In the absence of that, we find little substance in the statement made by the Asstt. Drug Controller that the chemical was not of standard quality.
6. The Drugs and Cosmetics Act. 1940 in Chapter IV speaks of misbranded drugs, adulterated drugs, misbranded cosmetics and spurious cosmetics. The punishment is prescribed for a person who adulterates the cosmetic as per Section 13 of the Act. It is not the case made by the Revenue her that the substance rendered for export was misbranded or adulterated.
7. The examination made by M/s. Avik Pharmaceutical ltd. holds that this substance contained about 80% inorganic silicates and the balance is chemicals. Whether the addition of inorganic silicates to the basic substance would alter the identity of the substance has not been discussed in the proceedings. Where from a particular substance another substance is manufactured by way of addition of chemicals etc. this becomes a point of enquiry to decide whether such an addition would alter the identity of such substance or not. In the case reported in 1995(80)ELT 696 the Bombay High Court held that where by virtue of addition of certain substance, there was a change in the physical form of substance that itself would not lead to the conclusion that a new article had been manufactured. Although the High Court was conducting an enquiry into an activity covered by Sec.2(f) of the Central Excise Act, 1944, the view expressed is material. In this case, from the proceedings we do not know whether an addition of inorganic silicate would take away or materially alter the character of 4-(4-Chlorophenyl)-4 Hydroxypiperdine, or not.
8. In the proceedings much has been said about the source from which the substance was obtained. Mention is made of the previous export Doubts are cast whether the amounts changed hands from the exporter to the consumers of the substance or not. Shri Choubey took us through this portion of this order. we observe that the charge is not of the misdeclaration of the value but of the character of the substance exported. We, therefore, do not attach much importance to the enquiry about the acquisition and payment.
9. As we observed above, any action under Sec. 113(d) of the Customs Act must necessarily flow from a specific charge of contravention of a specific provision of a specific Act. Only when such a basis is shown, then the exporter is expected to put forth his claim. But where a sweeping generalization is made without giving any grounds, the exporter is put to in difficult situation.
10. At this stage we will not pronounce on the legality of the exports because from the proceedings very little is known as to the identity of the export product with or without the addition of other chemicals. These matters will have to be examined and brought out on record to determine the degree and the extent of culpability of the exporters. This is a question of examination of facts.
11. We, therefore, allow this appeal and remand the proceedings back to the jurisdictional Commissioner. In denovo adjudication, he will go into various aspects as referred to by us above. he will refer to technical literature on this substance. he is free to rely upon the text books or on opinion of experts. The exporters shall put forth their view on the various observations made by us as above. The Commissioner thereafter shall pass a comprehensive order.
(Dictated in Court)