Custom, Excise & Service Tax Tribunal
Mumbai vs Sahir Overseas Corporation Ltd on 15 June, 2010
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI APPEAL NO: C/197/2000 (Arising out of Order-in-Appeal No: 106/2000-MCH dated 16/02/2000 passed by the Commissioner of Customs (Appeals), Mumbai.) For approval and signature: Hon'ble Shri P.G. Chacko, Member (Judicial) Hon'ble Shri S.K. Gaule, Member (Technical) 1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? : No 2. Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? : Yes 3. Whether Their Lordships wish to see the fair copy of the Order? : Seen 4. Whether Order is to be circulated to the Departmental authorities? : Yes Commissioner of Customs (Import) Mumbai ...Appellant Vs Sahir Overseas Corporation Ltd. ...Respondent
Appearance:
Dr. T.Tiju, Authorised Representative (SDR) for the appellant None for the respondent CORAM:
Hon'ble Shri P.G. Chacko, Member (Judicial) Hon'ble Shri S.K. Gaule, Member (Technical) Date of decision: 15/06/2010 ORDER NO: ____________________________ Per: P.G. Chacko:
This appeal was filed by the department challenging the order passed by the lower appellate authority in respect of a consignment of "beauty toilet soaps (naked)" imported by the respondent and covered by Bill of Entry dated 17/09/1999 filed by them. There is no representation today for the respondent despite notice, nor any request of theirs for adjournment. This happened on the previous occasions also. We are, therefore, inclined to dispose of this case finally after hearing the learned SDR.
2. In the aforesaid Bill of Entry, the respondent had claimed exemption from payment of special additional duty under Notification No 22/99-Cus dated 28/02/1999 (serial No. 5). The entry at serial No. 5 in the table annexed to the notification reads as under:
"S. No. Description of goods Rate of special additional duty (1) (2) (3)
5. All goods falling under the said First Schedule, which are imported for sale as such, other than by way of high seas sale and the importer at the time of importation or at the time of clearances of warehoused goods for home consumption under the provisions of section 68 of the Customs Act, 1962 (No. 52 of 1962), as the case may be, makes a specific declaration to that effect in the bill of entry in the manner specified below:
Nil Provided that the rate specified herein shall not apply if the importer sells the said imported goods from a place located in an area where no tax is chargeable on sale or purchase of goods.
"Declaration I/We hereby declare that the goods of description ......... imported under Bill of Entry No. .... dated ........ are for sales purpose only. I/we also declare that sale of said goods will not be effected from a place located in an area where no tax is chargeable on sale or purchase of goods. In case the said goods are disposed of in any manner in contravention of the conditions specified in notification No. 20/99-Customs, dated the 28th February, 1999, without prejudice to any other action that may be taken under any law for the time being in force, I/we undertake to pay the special additional duty of customs of Rs. ..... , which is leviable on these goods, but for exemption contained in the said notification.
Sd/-
(Date and stamp)""
3. On first check examination of the goods, the assessing authority found it necessary to obtain a report from the Assistant Drugs Controller (ADC) and, accordingly, samples were drawn and sent to that authority. The ADC in a report dated 30/09/1999 stated that the individual soap did not bear any particulars required under the Drugs and Cosmetics Rules and hence should be considered to be misbranded and to be prohibited for import and consequently to be liable for confiscation. This report was made with reference to Section 9C of the Drugs and Cosmetics Act, 1940 read with Sections 13 and 14 of the same Act as also to the relevant Sections of the Customs Act. However, in a subsequent report sent by the ADC, it was stated thus:
"The matter was examined on the basis of representation made by the importer. The importers have now produced all the relevant documents from the manufacturer. Importers have also agreed to carton soap as required under Drugs & Cosmetic Rules. Since the item is not meant for sale but for free distribution to the industries, earlier remark given by this office dated 30.09.99 may please be treated as cancelled. Samples from the consignment were drawn which, on testing, reported passing as per I S standard. The importer may be permitted to carton all the individual Soaps in the Docks and consignment may be permitted for clearance thereafter"
The above report was given, apparently, pursuant to a representation submitted by the importer. In terms of the above report of the ADC, the importer packed the soaps in cartons and affixed the brandname 'Hilux' thereon. The carton label carried the following particulars also.
"Manufactured by :
Stately formation (m) SDN, BHD (357134-X) Exported by :
Silvas Trading Imported by:
A.J. Traders, Mumbai, India."
It appeared to the customs authorities that the packing and labelling undertaken by the party pursuant to the ADC's advice amounted to 'manufacture' in terms of Note 6 to Chapter 34 of the Schedule to the Central Excise Tariff Act, 1985 and consequently the goods imported by the respondent could not be considered to have been imported "for sale as such", with the result that the benefit of serial No. 5 of the table annexed to the aforesaid notification would not be admissible to the goods. It further appeared that the soaps imported by the respondent fell in the category of "misbranded cosmetics" falling under Section 10 of the Drugs and Cosmetics Act and consequently they were prohibited for import and hence liable to be confiscated under Section 111(d) of the Customs Act. The importer appeared to be liable to penal action under Section 112 of the Customs Act. On this basis, a show-cause notice was issued to the respondent for confiscation of the goods, imposition of penalty on the importer and denial of the benefit of the notification to them. These proposals were contested. The jurisdictional Jt. Commissioner of Customs, in adjudication of the dispute, ordered confiscation of the goods under Section 111(d) of the Customs Act read with the relevant provisions of the Drugs and Cosmetics Act, 1940 and the Trade and Merchandise Marks Act, 1958 and Section 11 of the Customs Act. However, the goods were allowed to be redeemed on payment of a fine of Rs. 1 lakh for the purpose of re-export. A penalty of Rs. 75,000/- was also imposed on the party under Section 112(a) of the Act. A period of three months was given to the importer for redemption and re-export of the goods. Aggrieved by the Jt. Commissioner's decision, the respondent preferred an appeal to the Commissioner (Appeals) and the latter took the view that the lower authority had travelled beyond his jurisdiction to hold the goods to be prohibited for import. The appellate authority further held that the benefit of Notification 22/99-Cus was not deniable to the importer. In the result, the order-in-original came to be set aside.
4. In the present appeal, it is the case of the Revenue that the order of adjudication requires to be upheld for the following reasons;
(a) The soaps were imported without any label as prescribed under the Drugs & Cosmetics Act and hence fell within the category of 'misbranded cosmetics' and consequently the goods were prohibited for import under Section 10 of the said Act.
(b) The activity of labelling and packing undertaken by the importer on the docks, as advised by the Assistant Drugs Controller in his second report, amounted to 'manufacture' in terms of Chapter Note 6 and, therefore, the question of sale of the naked soaps "as such" in the Indian markets did not arise. Consequently, the benefit of the notification would not be admissible to the imported goods.
(c) The labelling done by the importer pursuant to the ADC's advice was also objectionable inasmuch as the brandname used on the containers was deceptively similar to the brand name "Lux" of M/s. Hindustan Lever Ltd., which amounted to breach of the relevant provisions of the Trade and Merchandise Marks Act, yet another reason for the confiscation of the goods under Section 111(d) of the Customs Act read with Section 11 of the same Act.
The learned SDR has reiterated these grounds of the Revenue's appeal.
5. On going through the records, we note that, when the original authority passed the order of adjudication in this case, the respondent's application for registration of the brandname 'Hilux' in favour of M/s. AJ Traders was pending before the competent authority under the Trade and Merchandise Marks Act. It was in view of this fact that the appellate authority opined that the adjudicating authority had travelled beyond his jurisdiction. We do not agree. The question before the original authority was whether the goods imported by the respondent were to be confiscated under Section 111(d) of the Customs Act or to be allowed to be cleared with the benefit of Notification No.22/99-Cus ibid. There were two reports of the ADC before the adjudicating authority, the first one recommending confiscation of the goods, and the second one recommending clearance of the goods. The adjudicating authority was not to be confused with these contradictory reports of the ADC. It was incumbent upon that authority to undertake adjudication of the dispute independently but having regard to the relevant provisions of law. These provisions include Section 10 of the Drugs and Cosmetics Act which laid down to the effect that any misbranded drug or misbranded or spurious cosmetic was prohibited for import into India. Section 9C of the Act provided that a cosmetic shall be deemed to be 'misbranded' if it is not labelled in the prescribed manner or if the label or container or anything accompanying the cosmetic bears any statement which is false or misleading in any particular. One should be concerned with the goods in the form it is imported. The toilet soaps, in the form in which they were imported, were admittedly unlabelled and hence would be deemed to be "misbranded" for purposes of Section 10 of the Act. In another words, the goods were prohibited for import. We are of the view that the original authority took the correct stand with regard to the status of the imported goods with reference to the provisions of the Drugs and Cosmetics Act. Commendably, it did so independently without reference to the second report given by the Assistant Drugs Controller. Prohibited goods imported by a person are per se hit by Section 111(d) of the Customs Act and, therefore, the order of confiscation cannot be faulted.
6. The original authority determined the fine of Rs. 1 lakh to be paid by the importer for redeeming the goods for re-export within a period of three months. It appears from its order that the goods were valued at over Rs. 5.54 lakhs. Having regard to this value of the goods coupled with the fact that the goods prohibited for import were imported by the respondent in violation of Section 10 of the Drugs and Cosmetics Act read with Section 11 of the Customs Act, we are inclined to maintain the fine imposed by the adjudicating authority. However, the quantum of penalty looks harsh in the facts and circumstances of the case, which we reduce to Rs. 25,000/-.
7. With the above modification, the order of adjudication is upheld and this appeal of the Revenue is allowed to the above extent.
(Dictated in Court) (S.K. Gaule) Member (Technical) (P.G. Chacko) Member (Judicial) */as ??
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