Customs, Excise and Gold Tribunal - Delhi
India Drugs And Pharmaceuticals ... vs Collector Of Customs on 7 January, 1988
Equivalent citations: 1988(15)ECR359(TRI.-DELHI), 1988(33)ELT784(TRI-DEL)
ORDER M. Santhanam, Member (J)
1. The appellants imported 3 consignments of 45 MT of Aluminium Foils for strip packing of their products as per their approved programme. The consignments were made in three partial shipments covered by (i) IG Item No. 744/116 BE Cash No. 153, dated 1.8.1980; (ii) IGM/Item No. 967/33 BE Cash No. 438, dated 4.2.1981; and (iii) IGM/Item No. 1234/19 BE Cash No. 3795, dated 30.1.1981. The materials were held up by the assessing officers who disputed about the thickness of aluminium foils covered by the first consignment. The clearing agents had, therefore, to clear the consignments on payment of full duty. The appellants could not execute a bond needed for assessment under the Customs Notification 204/205-Cus., dated 3.10.1979. When the appellants applied for re-assessment and consequential relief, the Assistant Collector rejected the same on the ground that the importers had not executed a bond as required by the said notification. On appeal, under the impugned order, the Collector of Customs (Appeals), Bombay held that the impugned goods were coated with Lacquer on one side and coated with low density polythylene on the other side. He was of the view that the notification would not be applicable to the impugned goods as they were neither "Plain aluminium foil of thickness 0.02 mm to 0.04 mm", nor "aluminium foils laminated with polythylene films". The appeal was rejected.
2. Shri V. Lakshmi Kumaran, Advocate submitted that the Notification 205-Cus., dated 3.10.1979 exempted aluminium foils laminated with polythylene films when imported into India from so much of that portion of the duty of customs leviable thereon as was in excess of 27-1/2% ad valorem and the whole of additional duty leviable under Section 3 of the Customs Act. He submitted that the notification contained the conditions - (i) That the importer should produce a certificate issued by the Director General of Technical Development or Development Commissioner, Small Scale Industries to the effect that (a) he has an approved programme for the manufacture of drugs and medicines; (b) the imported aluminium foil laminated with polythylene film would be used only for strip packing of drugs and medicines. These conditions have been satisfied. (ii) The imported aluminium foil, as per the notification, was of the thickness of 0.02 mm to 0.04 mm and contained more than 97% of aluminium. (iii) The aluminium foil laminated with polythylene film is in a form indicative of ready use for strip packing of drugs and medicines; The Ld. Counsel for the appellants submitted that the execution of the bond contemplated under Clause (d) of the notification would come into play only when a lesser duty was paid. But in this case, the appellants had, in fact, paid duty at a higher rate and hence the necessity for execution of a bond would not arise. The rejection of the prayer for re-assessment by the Assistant Collector would not be thus justified. The Appellate Collector has rejected the appeal on the ground that the notification contemplated merely aluminium foil laminated with polythylene film. In other words, the benefit of Notification 205/79-Cus. was denied on the ground that there was also lacquer on the other side of the aluminium foil. The Ld. Counsel submitted that the lacquering was necessary for the purpose of printing such information as was imperative under the Drugs (Control) Act. The name of the products, batch No., date of manufacture, date of expiry etc. have to be printed on the reverse side. The polythylene coating is required for packing security and pilfer proofing of the medicines while the lacquering was essential for furnishing the relevant information under the Drugs Laws. The imported goods answered to the specifications indicated in the notification and in the absence of any words prohibiting lacquering of the goods, the benefit of notification cannot be denied. He submitted that the imported aluminium foil contained more than 97% of aluminium and the percentage of aluminium should be considered only in respect of the imported aluminium foil without taking into account the lamination with polythylene. The end use certificate was also furnished to the authorities. The imported aluminium foil continued to retain that character despite the lacquering and the rejection by the authorities below was not justified.
3. Shri J. Gopinath, SDR, with his usual fairness, stated that the notification does not prohibit lacquering of the laminated foil. The notification referred to lamination with polythylene, but as there is no other stipulation, he fairly conceded that the rejection of the benefit, under the impugned order on the ground that there was lacquering also, could not be sustained. However, he submitted that the appellants have to establish that the aluminium foil contained more than 97% of aluminium. He referred to us 1987 (29) ELT 428 (Johnson & Johnson v. Collector of Customs, Bombay). In that decision, the question arose on the interpretation of Notification No. 173/77-Cus., dated 8.8.1977 and Notification 67/79-Cus., dated 15.3.1979. It was contended that the aluminium content should not have been calculated with reference to the whole product because the resin and paper which formed part of the product were necessary materials to aluminium foil. The Tribunal held in paragraph 14 as follows :-
"Notification 173 refers to aluminium manufactures containing more than 97% of aluminium. This word could have only one meaning, namely, that the manufacture should have 97% or more of aluminium. This percentage could only be in respect of weight or the contents. In the present case, it is the admitted position that in so far as laminated foil is concerned, the percentage is less than 97%, taking into consideration the total weight of the product and the aluminium content thereof."
4. Shri J. Gopinath, SDR, therefore, urged that since this matter has not been examined by the authorities below, this question has to be considered before relief is granted to the appellants.
5. The point for consideration in this appeal is whether the appellants are entitled to the benefit of Notification 205/79-Cus., dated 3.10.1979 in respect of imported aluminium foil laminated with polythylene film. Even at the outset, we must say that the reasoning of the Assistant Collector cannot be supported. He has rejected the re-assessment on the ground that the bond envisaged under Clause (d) of the notification was not executed. But then, as rightly contended by the Ld. Counsel for the appellants, the question of executing a bond would arise only in cases where the difference between the duty payable and the duty actually paid at the time of importation arises. Since the full duty at the higher rate had actually been paid by the appellants, the question of execution of a bond does not strictly arise.
6. Notification 205-Cus. contemolates an additional condition that the importer should produce a certificate issued by the DGTD. It is established that the appellants have actually produced such certificate and hence there is compliance with this portion of notification also.
7. Under the impugned order, relief was denied to the appellants on the ground that the imported aluminium foil was not only laminated with polythylene film on one side but also had lacquering on the other side. We notice that the colourless lacquer outside is suitable for subsequent printing. The low density polythylene coating inside the foil is essential for the packing, security and pilfer proofing of the drugs and medicines. The Drug (Control) Act stipulates that the name of the product, batch No., date of manufacture, date of expiry and other details had to be furnished to the customers. In order to enable such a compliance with the statute, the aluminium foil has been coated with colourless lacquer outside. The invoice filed refers to the coating both inside and outside the aluminium foil. It must be mentioned that the notification 205-Cus./79 refers to aluminium foil laminated with polythylene film. The notification has to be strictly interpreted and we cannot add to or substract words from a notification to interpret the same one way or the other. In the absence of any words in the notification that aluminium foils lacquered would not be entitled to the benefit of the notification, the relief cannot be denited to the appellants. The aluminium foils would continue to be aluminium foils in spite of lacquering. Further the notification refers to the imported foil being used only for strip packing of drugs and medicines. Lacquering is, therefore, essential.
8. The next question is whether the imported aluminium foil contained more than 97% of aluminium. The thickness should be 0.02 mm to 0.04 mm. In regard to the thickness, there appears to be no dispute because for item (i) the aluminium gauge was 0.040 mm, for item (ii) 0.040 mm; (iii) 0.0398 mm; and (i) 0.0415 mm. The question is whether they contained 97% of aluminium. Shri Lakshmi Kumaran submitted that the polythylene weight should not be taken to determine the percentage of aluminium. He emphasised that Clause (a) of the notification referred only to "imported aluminium foil", in contrast of the words "aluminium foil laminated with polythylene fil:n" in the other sub-clauses. We have, therefore, to consider whether the imported product is a composite product as also the essential character of the same. Since this particular aspect of the case has not been considered by the authorities below, we are of the view that the matter has to be remanded for further examination of the issue. We must also point out that the appellants have produced a certificate of analysis dated 26.6.1980 issued by the manufacturers. The specification is "aluminium foil 0.040 mm lacquered with polythylene coated and the aluminium percentge is noted as 99.15% and 99.30%". The lower authorities appear to have not adverted to these aspects. The applicability of the judgment cited by the SDR has also to be examined. In other circumstances, the impugned order is set aside and the matter is remanded to the Collector (Appeals), Bombay for re-decision in the light of the observations contained in this order.