Custom, Excise & Service Tax Tribunal
M/S. Sadanam Personal Products vs Cc, New Delhi on 16 October, 2012
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.2, R.K. PURAM, NEW DELHI-110066.
BENCH-DB
Customs Appeal No. C/223/2012
[Arising out of Order in Original No.04/COMMR/CUS/IND/2012 Dated 15.05.2012 passed by the Commissioner of Customs, New Delhi]
M/s. Sadanam Personal Products Appellant
Vs.
CC, New Delhi Respondent
Present for the Appellant : Mr. Manish Saharan, Advocate Present for the Respondent :Mr. Amrish Jain, DR Coram: HONBLE MR.D.N.PANDA, JUDICIAL MEMBER HONBLE MR. MATHEW JOHN, TECHNICAL MEMBER Reserved on: 04.09.2012 Pronounced on:16th October, 2012 ORDER NO. _______________ DATED: __________ PER: D.N.PANDA
The appellant having faced confiscation of 3,21,264 pieces of Z MAGNETISM FOR MEN DEODORANT BODY SPRAY imported into India from China under Section 111(d) of Customs Act, 1962 (hereinafter referred to as the Act) and penalty under that Act for the contravention of the provisions of Rule 133 of the Drugs & Cosmetic Rule 1945 (hereinafter referred to as the Rules) read with Rule 43A thereof came in appeal before Tribunal. Option was given to the appellants by the Ld. Adjudicating Authority to redeem the goods on payment of redemption fine of Rs.35 lakhs (Rupees thirty five lakhs) along with applicable Custom duty. So also penalty of Rs. 10 lakhs (Rupees ten lakhs) was imposed on the appellant under Section 112 (a) of Act.
2.1 Allegation of customs was that the impugned goods described in the tables appearing in Para-1 and para-9 of the adjudication order were imported by the appellants from China not through prescribed point of entry into India. This was noticed when the appellant filed Warehousing Bill of Entry No. 5286233 dtd. 24/11/11 for storage of the said goods in the Customs bonded warehouse at Pithampur. According to customs those were cosmetics and entry thereof to India ought to have been made through Nhava Sheva in Mumbai which is notified point of entry of import thereof. The description of goods as per Bill of Entry was as under:
Invoice No. & Date Description of goods & sizes Quantity (Pcs) Unit Price (USD) (C&F) Total Value (USD) (C&F) Total CIF Value (Rs.) AJ11AQ4130026 Dt.31.08.2011 Z MAGNETISM FOR MEN DEODORANT BODY SPRAY 150ML/100G 1,39,200 0.6667 92,804.64 46,47,659.16 2.2 Similarly second lot of goods imported in the manner stated above as described in the para 9 of the adjudication order were as under in terms of warehousing bill of entry 5529206 dated 21/12/2011 filed to avail the storage facility.
Invoice No. & Date Description of goods & sizes Quantity (Pcs) Unit Price (USD) (C&F) Total Value (USD) (C&F) Total CIF Value (Rs.) AJ11AQ4131446 DTD.31.08.2011 Z MAGNETISM FOR MEN DEODORANT BODY SPRAY (1) 45ML (2) 75ML (3) 150ML/ 100G 52800 57600 71664 0.4095/Pc 0.4990/Pc 0.6667/pc 21,621.60 28,742.40 47,778.39 TOTAL 1,82,064 98,142.39 51,65,387.02
3. Against allegation of no import of the impugned goods through prescribed entry point resulted in violation of rule 133 read with Rule 43A of the Rules and were liable to be seized and confiscated under section 111(d) of the Act, the appellant failed to succeed before Ld. Adjudicating Authority although various pleas were made as recorded in Para 18 of the Adjudication Order and summarized in Para 20 of the order reading as under:
a) that there was some confusion regarding importability of their goods at this port they were not aware and their CHA was also apparently not aware;
b) that although the Customs department raised the issue orally, they allowed the goods to be stored in the warehouse by giving out of charge order and also drew samples of the goods for sending to the Drug Controllers office for testing; this shows that even the Customs officers were not sure about the importability of their goods through this port;
c) that only after the report was received from the Deputy Drug Controller, show cause notice was issued by the authorities;
d) that had the Customs department been clear about the fact that the goods imported by them are prohibited, goods would not have been allowed clearance for warehousing and samples would not have been drawn;
e) that the subject import is the result of the uninformed position of the rules. The said import is not with any deliberate intentions to circumvent, avoid compliance and/or with any view to violate the prohibition deliberately;
f) that is not true that particularly the second consignment has been imported even after having been informed about the provisions of law, which shows intention to deliberately flout the law; it is submitted that the second consignment arrived at Pithampur on 06-11-2011 i.e. much before even the first BE was filed;
g) their goods have passed the quality requirement as clear from the annexure of the Deputy Drug Controllers letter; hence, the same cannot be prohibited goods;
h) that storing of the subject goods in the bonded warehouse was with a clear intent to remove / take back / shift / transport the said goods to a notified port / other point of entry for Customs clearance once the issues are clarified;
i) that their goods cannot be said to have been imported into India or attempted to be imported into India violating the prohibition contained in the provisions of Drugs and Cosmetic Act and Drugs and Cosmetic Rules; hence, the goods are not liable to confiscation, they are not liable to penalty and the SCN is liable to be dropped;
4.1. In appeal before Tribunal, appearing through different Counsels on different dates it was submitted on behalf of the appellant that the goods imported being substance falling under Sl.No.1 of schedule D appended to the Rules falls under Rule 132 thereof read with Rule 43 enjoys exemption from applicability of the provisions of chapter III of the Drugs & Cosmetic Act, 1940 and Rules made there under. Therefore the restriction of Point of entry is not applicable. To support its argument, the appellant relied on the decision of Tribunal in the case of Max Overseas Vs. Commissioner of Customs, Marmagoa 2010 (254) ELT 479 (Tri. - Mum) and CC, ICD, TKD, New Delhi, V.Roshanlal Aggarwal & Sons Pvt. Ltd. 2009 (245) ELT 711 (Tri-Del).
4.2 It was submitted by the appellant that there was no deliberate intention to bring the goods to Pithampur making any violation of law for which seizure & confiscation of the goods was unwarranted. So also the redemption fine & penalty were not imposable. It was also argued that when the goods were sent for testing, by Director In-charge of CDTL, Mumbai, he stated in his letter No.80/CDTL-MUM/11/12/2457 to 2460 dated 13/12/2012, that Pass with respect to the tests performed in the `Remark column of the letter against each and every sample in the certificate of analysis. Following opinion was given by the Director In-charge CDTL, Mumbai.
In the opinion of the undersigned the given sample complies as per IS specification with respect to test performed. [Emphasis supplied] 4.3 On the aforesaid grounds it was prayed that the goods may be allowed to go back to any other notified point of entry under the provisions of the Drugs & Cosmetic Rules 1945 and clear thereof may be ordered on payment of appropriate Customs Duty.
5.1 Ld.DR appearing on behalf of revenue submitted that the goods imported were Cosmetics as defined by section 3(aaa) of the Drugs & Cosmetics Act, 1962 and the term drug is defined by section 3 (b) of the Drug and Cosmetics Act, 1940. Cosmetic does not fall within the ambit of substance as defined by section 3 (aaa) of the above Act for which cosmetics as such is a different from drug and substance as have different meaning as assigned to them under that law. Legislature consciously used these two different terms in entire Scheme of the Act differently at different places. Therefore, cosmetic should not be confused with drug and substance and vice-versa.
5.2 It was further submitted that circular No.8/2010 Customs dated 26/3/2010 issued by CBE&C clarified that the term cosmetic defined by section 3(aaa) of the Drugs & Cosmetic Act, 1940 does not include any substance, while substance is a member of family of drug u/s 3 (b) of the said Act for which cosmetics cannot be equated with the substance categorized under definition of drug as defined by section 3 (b) of the Drugs & Cosmetic Act, 1940.
5.3 Emphasis was placed by Revenue on entire circular issued by CBE&C to submit that adjudication was done properly in respect of wrongful entry of the goods through different point contravening the provisions of the Drugs & Cosmetic Act, 1940, which called seizure & confiscation thereof. Therefore adjudication being made properly should not be interfered.
6. Heard both sides and pursue the record as well as the provisions of the Drugs & Cosmetic Act, 1940, and Drugs & Cosmetic Rules 1945 including the circular No.8/2010-CUS dated 26/3/2010 issued by CBE&C. 7.1 Factual back ground of the case depicted at the outset remained undisputed by both sides. Accordingly the appeal called for answering whether the goods imported were cosmetics or substance falling under rule 133 read with rule 43 of the Drugs & Cosmetic rule 1945 and whether cosmetic us permitted to be imported through a point of entry different from point of entry prescribed by rule 43 A read with CBE & C circular No.8/2010-CUS dated 26/3/2010. So also when Rule 133 and Rule 43 A apply whether there is contravention of the provisions of the Customs Act 1962.
7.2 Rule 133 of the Drugs and Cosmetics Rules 1945 prohibits importation of cosmetic into India except through the points of entry specified in Rule 43A of the Rules. Rule 43A prescribes point of entry in respect of goods by rail, road, sea and air. Accordingly, when cosmetic is imported into India by sea, the point of entry thereof is Customs sea ports prescribed by that Rule. There is no dispute that the goods came through sea and point of entry was through Nhavs Sheva, Mumabai. Appellant at the initial stage of argument intended to take back the goods to that point of entry from Pithampura. But later suggested that appeal may be disposed exonerating from penalty for expeditious clearance of goods since nearly one year has passed from the date of export of goods from abroad. We perused the observation of learned Adjudicating Authority about outcome of test conducted. Director in-charge CDTL, Mumbai had reported that sample complied as per IS specification with respect to test performed. Accordingly the matter was taken up for disposal with the consent of parties on the issue of consequence of confiscation.
7.3 In view of the above, the issue stated hereinbefore called for answer in this appeal in the light of the definition of the term drug and cosmetic as spearing in section 3(b) and 3(aaa) of the Drugs and Cosmetics Act, 1940. According to section 3(aaa) the term cosmetic reads as under:
3 (aaa) cosmetic means any article intended to be rubbed, poured, sprinkled or sprayed on, or introduced into, or otherwise applied to, the human body or any part thereof for cleaning, beautifying, promoting attractiveness, or intended for use as a component of cosmetic. [Emphasis supplied] Similarly the term drug defined by section 3(b) of the Drugs and Cosmetics Act, 1940 reads as under:
3.(b)drug include---
(i) All medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparation applied on human body for the purpose of repelling insects like mosquitoes;
(ii) such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of vermin or insects which cause disease in human beings or animals as may be specified from time to time by the Central Government by notification in the Official Gazette;
(iii) all substances intended for use as components of a drug including empty gelatin capsules;and
(iv) such devices intended for internal or external use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette, after consultation with the Board [Emphasis supplied] 7.4 The term drug as defined by section 3(b) of the Drugs and Cosmetic Act, 1940 has inclusive definition covering substance within its fold by sub-clause (ii) and (iii) thereof. Accordingly that term not only includes medicines but substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of diseases in human beings or animals are covered in the ambit of drug. Thus any substance which would be used for the preparation of medicine is also included in the scope and ambit of the term drug. Only when a substance is not intended for medicinal use, such substance enjoys exemption from Chapter III of the Drugs and Cosmetics Act, 1940 and Rules made thereunder subject to conditions prescribed by Schedule D under Rule 43 of the Rules.
7.5 The term Cosmetic defined by section 3(aaa) of the Drugs and Cosmetics Act, 1940 is altogether different goods from drug and substance in the eyes of law. Cosmetic imported for manufacture and export by units situated at Special Economic Zones as notified by Government from time to time enjoy exemption from application of Chapter III of the Drugs and Cosmetics Act, 1940 and Rules made thereunder subject to the condition prescribed under ScheduleD under Rule 43 of the Rules.
7.6 Apex Court in Chimanlal Jagjivandas Sheth V. state of Maharashtra AIR 1963 SC 665 held that the expression substances is something other than medicine but used for treatment. Such interpretation brings a significant different between substance and Cosmetic. Similarly while interpreting meaning of the term cosmetic in the case of Puma Ayurvedic Herbal (P) Ltd. CCE (2006) 3 SCC 266 it has been held by Honble Supreme Court that it would be seen from the definition of cosmetic that the cosmetic products are meant to improve appearance of person, that is they enhance beauty, whereas a medicinal product or medicament is meant to treat some medical condition. In the case of Ponds India Ltd V. CIT (2008) 8 SCC 369 it has been held that whether a product would be a drug or cosmetic sometimes poses a difficult question and, thus, answer thereto may not be easy. For the said purpose, the court may not only be required to consider the contents thereof, but also the history of the entry, the purpose for which the product is used, the manner in which it has been dealt with under the relevant statute as also the interpretation thereof by the implementing authority. It was further held that Court must bear in mind the precise purpose for which the statute has been enacted. Parliament consciously has given a restrictive meaning to the term cosmetic while defining that term while an extensive meaning has been given to the word drug. In the Drugs and Cosmetic Act, 1940 the term cosmetic is defined and that term is used wherever such goods are to be referred to. So another word substance used in the same legislation cannot be interpreted to mean cosmetic also. In Schedule D appended to Drugs and Cosmetics Rule 1945 both the words i.e., substance and cosmetic appears under independent serial number bringing out significant difference between the two without being interchangeably used one for the other for their distinct character, nature and properties. So the argument of Appellant that substance covers cosmetic within its scope is devoid of merit.
7.7 There is no dispute that present imports were cosmetic. That was not a substance since cosmetic is different goods altogether. Importation of Cosmetic undergoes the process of Rule 133 of the Rules read with Rule 43A through specified point of entry under the said Rule. At this juncture clarification issued by CBE&C vide circular No. 8/2010-CUS dated 26.3.2010 has relevance and Para 2, 3 and 4 thereof explains the position as under:
2. In terms of Rule 133 of the Drugs and Cosmetics Rules, 1945, no cosmetics shall be imposed into India except through the points of entry specified in Rule 43A of the said Rules. Further, under Schedule D to the said Rules read with Rule 43, an exemption has been provided to certain categories of substances from the restrictions under Chapter III of the Drugs and Cosmetics Act, 1940 relating to import of Drugs and Cosmetics. Therefore, a doubt has arisen as to whether import of cosmetics could be permitted through any port in the country under the Drugs and Cosmetics Rules, 1945. The matter was taken up with the Drugs Controller General of India (DCG) for obtaining necessary clarification.
3. The DCGI has clarified the aforesaid issue. It is stated by them that Rule 133 of the Drugs and Cosmetics Rules limits the import of cosmetics through the points of entry specified under Rule 43A. However, under Schedule D to the said Rules, an exemption has been provided for substances not intended for medical use from the provision of Chapter III of the Drugs and Cosmetics Act and Rules made thereunder. The Act provides for separate definition for cosmetic and drug under Sub-Section 3(aaa) and 3(b), respectively. Hence, they have stated that the phrase substances not intended for medical use would only relate to substances which would otherwise fall under the definition of the term drug under section 3(b) of the Act, but are being imported not for medicinal use or for some other purposes or are of commercial quality and are being labeled indicating that they are not for medicinal use. Accordingly, they had clarified that this exemption does not extend to other categories of products defined under the Act including cosmetics. For the purpose of import of cosmetics, provision of Rule 133 therefore remain applicable.
4. Accordingly, import of cosmetics at points of entry / places other than those specified under Rule 43A may not be permitted as per the provisions of the Drugs and Cosmetics Rules,1945. The points of entry have been specifically mentioned in Rule 43A such as Chennai, Kolkata, Mumbai, Nhava Sheva, Chochin, Kandla, Delhi, Ahmedabad, Hydrabad and Ferozpur Cantonment, Amritsar, Ranaghat, Bongaon and Mohiassan Railway Station. If the imports are noticed through Customs stations, other than the one notified as mentioned above, then necessary action may be taken for non-compliance of the Drugs and Cosmetics Rules in respect of such imports. [Emphasis supplied] 7.8 Appellants claim that the cosmetic imported by appellant shall fall in the category of substance in item of Schedule D under Rule 43 is baseless in view of the aforesaid position of law and the citation made by appellant in the case of Max Overseas V. CC, Marnagoa 2010 (254) ELT 479 (Tri Mum) is of no avail. When the goods were not imported through prescribed point of entry under Rule 43A of the Rules, the goods are bound to suffer consequence of law prescribed by Customs Act, 1962 being prohibited goods as defined by section 2(33) thereof. Accordingly confiscation of the cosmetic imported by the appellant was justified and other consequence of adjudication is in conformity with law. It does not appeal to common sense as to how the appellant shall gain out of the decision reported in 2010 (254) ELT 479 (Tri Mum) which is not a precedent. Appellants further reliance on the decision reported in the case of CC, ICD, TKD, New Delhi V. Roshanlal Aggarwal & Sons Pvt Ltd 2009 (245) ELT 711 (Tri Del) is also of no avail since that is not a precedent while and violation of law makes import confiscable and liable to penal consequence. It is difficult to declare prohibitory goods as non-prohibitory and immune the breach of law from penal consequence.
7.9 The appellant relied on the judgment of Apex Court in the case of Hotel Ashoka V Asst. Commr. Of Com. Taxes 2012 (276) ELT 433 (SC). The decision thereon was made under Karnataka Value Added Tax Act, 2003 and Central Sales Tax Act, 1956 holding that the goods sold beyond Customs frontier of India was not liable to State levy. According to the facts of the present appeal, the cosmetic undisputedly came to India having only dispute on the point of entry thereof. The appellant failed to justify how it shall gain out of the ratio laid down in the above judgment.
8. In view of the aforesaid factual matrix and law stated, the goods were rightly confiscated due to contravention of the applicable provisions of Drugs and Cosmetics Act, 1940 read with the Rules made thereunder. Redemption fine and penalty were rightly ordered by learned Adjudicating Authority. It was explained in the course of hearing the appellant was not aware of complexities of law relating to Drugs and Cosmetics since the import was made for the first time. Keeping such aspect in view and on an overall assessment of the factual back ground of the case and law, adjudication is confirmed and goods are held to be liable to confiscation. However redemption fine is reduced to Rs. 5,00,000 (Rupees five lakhs) and penalty is reduced to Rs. 1,00,000/- to prevent recurrence of contravention of the provisions of the law.
In the result appeal is allowed partly and to the extent indicated above.
(D.N.PANDA) JUDICIAL MEMBER Separate concurrent order (MATHEW JOHN) TECHNICAL MEMBER Per MATHEW JOHN:
While I agree with the decision in appeal made in the preceding paragraphs as above, further reasons which supports the decision is stated as hereunder:
10. An interpretation was canvassed by appellant submitting that if the container in which goods were imported when landed in a port notified under Rule 43A of the Rules, that is, Nava Sheva, Mumbai and thereafter the container moved to Pithampur (which is not specified in Rule 43A) and bill of entry was filed at Pithampur, there is no contravention of Rule 43A because goods entered through Nava Sheva. Such a submission is to be out rightly rejected because restrictions under Rule 43A of the Rules is imposed to enable the Drugs Control Department having testing facilities at the specified places to test the goods for necessary customs clearance by th3e officers authorized at the permitted ports. Under law of Customs, clearance of goods it is necessary to make an entry as envisaged in section 46 of the Customs Act, 1962. It is this entry that is referred into in Rule 43A of Drugs and Cosmetic Rules, 1945. When a container transits through the port of Nava Sheva, the entry required under section 46 of the Customs Act, 1962 for clearing the goods contained in the container is not made unless the mandatory requirement of above Rule is fulfilled. So point of first landing of container is not the criterion to be satisfied in the above Rule. Since in this case, the entry under section 46 was made at Pithampur and not at Nava Sheva, there is a violation of Rule 43A of the Rule which is valid objection of Revenue and is sustainable.
(Pronounced in the Open Court on 16.10.2012 ) (MATHEW JOHN) TECHNICAL MEMBER RK 1 1 Customs Appeal No. C/223/2012