Customs, Excise and Gold Tribunal - Calcutta
Commissioner Of Customs vs Globe Trotters Pvt. Ltd. on 7 March, 2008
ORDER Chittaranjan Satapathy, Member (T)
1. Heard both sides in respect of MA & Appeal filed by the applicant/appellant Commissioner and the Appeal filed by the appellant importer.
2. In the Miscellaneous Application, it has been stated by the applicant Commissioner that the submission made by the appellant importers before the Tribunal regarding non-drawal of samples by Customs officials, is not true and factually correct and that the appellant importers have misled the Hon'ble CESTAT to get a favourable Stay Order. He further states that the samples were drawn in presence of the authorised CHA of the appellants and forwarded to the Assistant Drug Controller, which was duly acknowledged by him. He has also stated that in respect of importation of drugs it is a mandatory and statutory obligation on the part of Customs Authorities to ascertain as to whether the drugs under import comply with the standards laid down in the provisions of Drugs and Cosmetics Act, 1940. No clearance is allowed until and unless that procedure is followed. In the instant case, medicines were Life Saving Drugs, as submitted by the party and utilization of such medicines without getting N.O.C. from the competent authority about its compliance with the standards laid down by the Government of India is a highly irresponsible and illegal act on the part of the importer. Besides, it has been stated on behalf of the department that in terms of the Condition No. 2 of the bond executed by the appellant importer, it was categorically undertaken by them not to dispose off the consignment till receipt of the N.O.C. from the Drugs Control Authorities. Hence, the applicant Commissioner has prayed for vacation of the stay granted. However, since both the appeals filed by the appellant importer and the appellant Commissioner are being taken up for hearing together and they are being disposed off by this common Order, we are of the view that no separate Order on the MA for vacation of the stay is warranted at this stage.
3. The appellant importer is in appeal against the penalty of Rs. 5.00 lakhs (Rupees five lakhs) imposed on them under the impugned Order. The department is in appeal, as the Committee of Chief Commissioners has come to the conclusion that the Adjudicating Commissioner is not correct in not confiscating the impugned goods and not imposing the redemption fine.
4. It is worthwhile to reproduce the brief facts of the case as summarised by the Committee of Chief Commissioners as follows:
1.0. M/s. Globe Trotters Pvt. Ltd., 167 CST Road, Kalinga, Santa Cruz (E), Mumbai-400 098 were show-caused by the Deputy Commissioner, Land Customs Station, Raxaul vide C.No. VIII(29)2-B/Entry/Sample/RXL/04/1763 dt.21.03.2005 as to why the drugs manufactured by M/s. Concept Pharmaceuticals (Nepal) Ltd., Nepal and imported by the said importer vide Bill of Entry No. 5202 dt. 03.03.2004, 7073 and 7074 both dt. 29.03.2004 totally valued at Rs. 46,73,304/- (Rupees Forty Six lacs, Seventy-three Thousand, Three Hundred and Four) should not be confiscated under Section 111(d) of the said Act and why penalty should not be imposed upon them under Section 112 of the said Act.
The fact of the case is that the said importer imported the drugs viz. Rifa 16 KID, Ultracycline, Rifacept KID - 3 Rifacept - 3, Rifa 16 Kid forte manufactured by M/s. Concept Pharmaceuticals (Nepal) Ltd., Nepal, vide Bill of Entry No. 5202 dt.03.03.2004, 7073 and 7074 both dt. 29.03.2004 totally valued at Rs. 46,73,304/- (Rupees Forty-Six Lacs, Seventy-three Thousand, Three Hundred and Four).
In respect of importation of drugs it is mandatory to ascertain as to whether the drugs under import comply with standards laid down in the provision of Drugs and Cosmetics Act, 1940. No clearance is allowed until and unless that procedure is followed. Accordingly, the Bills of Entry were appraised and batchwise samples of all the medicines under the said Bills of Entry were drawn at the time of importation and were sent to the office of Assistant Drug Controller, Kolkata, for sending them to the Central Drug Laboratory to ascertain with the standards laid down under the Drugs and Cosmetics Act, 1940. However, in terms of Rules 40 & 41 of Drugs and Cosmetics Rules 1945, the drugs were allowed clearance as per the request of the importer on the basis of the undertaking in the form of continuity bond with the specific condition that the consignment of such medicines will be produced within ten days of the receipt of the notice from the Customs Authorities at Land Customs Station, Raxaul, for further formalities. The consignment of drugs imported from Nepal was allowed clearance as per the request by the said importer for safe storage at their Patna depot on the basis of undertaking furnished by the importer as required under Rules 40 & 41 of Drugs & Cosmetics Rules, 1945 with the specific condition that -
i. The consignment would not be sold or distributed in market till the Assistant Drug Controller provides "NO OBJECTION CERTIFICATE' after testing/verification of the samples of the medicines for its compliance as per Drugs and Cosmetics Act, 1940.
ii. In case the samples failed to comply with the provisions of the Drugs and Cosmetics Act, 1940 the consignment of such medicine would be produced within 10 days of receipt of the notice from the Customs authorities.
The Assistant Drug Controller informed to the Deputy Commissioner, Land Customs Station, Raxaul for redrawal of the samples as the samples sent to him got mixed up and misplaced. The Assistant Drug Controller, was informed that the consignment of the medicines has been allowed clearance as per the request of the importer on an undertaking executed by them in terms of Rules 40 & 41 of the Drugs and Cosmetics Rules, 1945 for safe storage at the Patna depot of the importer and therefore, samples may be drawn from the Patna depot of the noticee. However, it was informed by the Assistant Drug Controller that almost all the consignment except a little stock of Ultracycline has been cleared by the said importer in the market in violation of the undetaking and in violation of Drugs & Cosmetics Act, 1940. The said importer at their Patna Office as well as their Mumbai Office were requested by the Dy. Commissioner, LCS Raxaul to produce the consignment to Customs within ten days as per the undertaking given by them in terms of Rules 40 & 41 of the Drugs and Cosmetics Rules, 1945 which they failed to do so; instead, their Manager Commercial of Mumbai Office informed vide letter dt. 20.12.2004 that -
i. The consignment was supposed to be cleared by the ADC with regard to the quality fulfilling the requirement of quality standards laid down in the Indian Pharmacopeias and Drugs Act.
ii. In normal course, the office of the ADC inspects the consignments and releases depending on experience and judgment as per his direction. However, he has the discretion to get the samples tested.
iii. As per their experience in the last 12 months only once samples (drawn by the Customs) were sent for testing (by the ADC), for testing (to the Central Drug Laboratory) and the rest of the time ADC office released the consignment without testing (of the samples sent by the Customs) because of the good tract record of the supplier(exporter). Therefore, they believed that even this time ADC has cleared the consignment.
iv. They waited or a reasonable time after clearance as per the normal system. They decided to release (the drugs), for sale relying on the test report given by the supplier.
v. It was also admitted that there was some mistake on their part not to stick to the system in strict sense which was totally unintentional.
vi. Lastly, they requested to condone the lapse and it was assured that proper system would be followed in future.
2.0. Show Cause Notice was issued alleging that any violation of the prohibitions under Rule 40 of the Drugs and Cosmetics Rules, 1945, will be construed as violation of the prohibitions under Chapter III of the Drugs and Cosmetics Act, 1940. As per the provisions of the Section 11 of the Drugs and Cosmetics Act, if the drugs are imported in violation of the provisions of Chapter III of the Drugs and Cosmetics Act, 1940, they would be deemed to have been imported in violation of Section 11 of the Customs Act, 1962 and all the provisions of Customs Act, 1962 would be applicable. Any drug which has been imported contrary to the provisions of the Rule 40 of the Drugs and Cosmetics Rules, 1945 would be liable for confiscation under Section 111(d) of the Customs Act, 1962. In their defense-reply, the said importer stated that almost all the medicines were life savings drugs and have limited self-life; that they are reputed company both in India and Nepal and necessary checks are exercised by the concerned authorities in both the countries; that they waited for a reasonable time after clearance, but due to non-receipt of the 'NO OBJECTION CERTIFICATE' from the Assistant Drug Controller, they decided for sale relying on the test report given by the supplier. They further stated that the violation is established only when the goods are found sub-standard and they are given opportunity to challenge the report. They also objected with respect to the role played by the Assistant Drug Controller, Kolkata. It is also stated that the drugs imported by them are not prohibited goods as the notification issued under Section 10A of Drugs and Cosmetics Act, 1940 does not cover the impugned goods. They further requested for supply of some documents/information.
3.0. After considering the facts and circumstances, 'the Commissioner' adjudicated the case and observed that there is no point in the contention of the notice that the drugs imported are not prohibited goods being not notified under Section 10A of Drugs and Cosmetics Act, 1940, as in the instant case, the subject goods were allowed clearance for safe storage under the conditions of the Bond executed in writing. So far as the role played by the Assistant Drug Controller, Kolkata and procedural impediments are concerned, these are inter-departmental matters and beyond the ambit of the Show Cause Notice. As claimed that the drug imported in question has short life, as such the same was cleared from their Patna depot is misleading as the life period of such drugs is up to 18 months. As such there was no legal exigency faced by the importer to remove the goods from their depot. They neither intimated the concerned Customs authorities before taking such bold step nor took any sanction in this regard from the Customs authorities as pledged in the Bond executed by them as required under Rule 40 of Drugs and Cosmetics Rules, 1945. In their reply dt. 20.12.2004, the said importer has categorically admitted that some omissions have been committed by them so far as removal of the consignment of drug is concerned from their depot as they did not stick to their earlier system and prayed to condone the lapse on their part. It is further noted by the Commissioner in the paras 2.21, 2.22 and 2.25 of the Adjudication Order which produced verbatim that -
2.21. As per the Customs Appraising Manual (erroneously written as Customs Manual), Vol. I, para 14(56)(i), the goods will be allowed clearance from the jetties on a guarantee, should the importer so desire. The type of guarantee whether a guarantee or a Bond (with suitable Bank's surety) will depend on the standing or the repute of the importer. The decision to accept a guarantee or a Bond according to the importer's standing will rest with the Customs House.
(ii) The drugs and medicines cleared against a guarantee pending test under Rule 40 of the Drugs and Cosmetics Rules must be returned by the importer within 10 days of the receipt of the notice from the Assistant Commissioner. The concession of clearance of drugs and medicines against guarantee shall be withdrawn who failed to comply with the terms of the guarantee.
2.22. Thus it is held that the notice has utterly failed to adhere to and comply with term and condition of the undertaking executed at the time of importation by releasing the consignment of the drugs stored in their Patna depot without taking the consent of Customs authorities and awaiting NOC from Assistant Drug Controller, Kolkata. Thus the notice has contravened the provisions of the Rules 40 & 41 of the Drugs and Cosmetics Rules, 1945.
2.25. Thus I find that the said importer has violated the provisions of Section 11 of the Customs Act, 1962, read with section of Drugs and Cosmetics, 1940 and Rule 40 of the Drgus and Cosmetics Rules, 1945 inasmuch as they released the consignment of the drugs which have been cleared pending test report of the laboratory without the consent of the Customs authorities at Land Customs Station, Raxaul, rendering the aforesaid consignment of the drugs liable for confiscation under Section 111(d) of the Customs Act, 1962. The said importer is also liable for penalty under Section 112 of the Customs Act, 1962 for omissions and commissions made.
4.0. On the basis of the discussions and findings narrated in the instant Order-in-Original, Commissioner has passed the following order, Since the goods in question are not in existence, I refrain from confiscating the goods. However, I impose personal penalty of Rs. 5,00,000/- (Rupees Five Lacs only) upon the noticee i.e. M/s. Globe Trotters Pvt. Ltd., 167 CST Road, Kalinga, Santacruz(E), Mumbai-400 098 for the omissions and commissions on their part.
5. Shri S.M. Tata, learned SDR appearing on behalf of the department cites the decision of the Hon'ble Supreme Court in the case of Weston Components Ltd. v. CC, New Delhi which has held that redemption fine is imposable even after the release of the goods on execution of bond. He also cites another decision in the case of Jain Exports Pvt. Ltd. v. Union of India which held that quantum of redemption fine should depend on totality of facts and circumstances of each case and that bona fide action of the assessee by itself cannot entitle him to claim full waiver of fine. While arguing for imposition of redemption fine in respect of the impugned goods, Shri Tata, learned SDR also supports the imposition of penalty of Rs. 5.00 lakhs.
7. Shri R.L. Thawani, learned Consultant appearing for the appellant importer on the other hand, takes us through various provisions of the Drugs and Cosmetics Act, 1940 and the provisions of the Customs Act, 1962 and argues that the show cause notice in this case is time-barred and adequate number of samples including the control samples were not drawn in this case and information regarding drawal of samples was not given to the appellant importer. He also states that the appellant importer had imported similar medicines earlier and has been selling the same without receipt of any N.O.C. from the Drugs Control Authorities/Customs Officials and no objection had ever been taken by the authorities in the past. He also submits that the Adjudicating Authority has not cited the provisions of law under which he is imposing the penalty and since it has not been proven that the impugned drugs were not of standard quality, spurious, misbranded or adulterated, the same cannot be confiscated and penal action cannot be taken. He cites the following decisions in support of his contentions:
(i) Modipon Fibres Co. v. CCE, Ghaziabad;
(ii) 2002(148) ELT 1183 (Tri.-Del.) Albert David Ltd. v. CCE, Meerut;
(iii) Mohamed Rashid Mohamedi v. V.M. Dosi, I.O., NCB, Mumbai;
(iv) Gujchem Distillers India Ltd. v. C.C. and C. Ex., Surat-II;
(v) Damodar J. Malpani v. CCE.
8. We have considered the submissions made by both sides and we have perused the case-laws cited by both sides along with the case-records.
8.1. As regards Miscellaneous Application, we are of the view that consideration of the same at this stage will be only of academic interest, as we are disposing off both the appeals - one filed by the appellant importer and another by the department, through this Order.
8.2. As regards the department's appeal on the question of confiscation of the impugned goods and imposition of redemption fine, it is not in dispute that when the goods are released on execution of a bond, the power of the Customs Authorities to confiscate the goods and to impose the redemption fine does not go away, if there are any irregularities which entitle the Customs Authorities to confiscate such goods. In the instant case, the situation is somewhat different from the normal cases. It seems that even prior to clearance of the impugned consignment, the Drugs Control and Customs Authorities appear to have been lackadaisical in their control on import of medicines in the jurisdiction of this particular Commissionerate. It also appears from the submissions that the samples have been drawn not conforming to the prescribed procedures and goods are being allowed clearance under bond, but subsequently, no action is being taken to intimate the appellant importer as to whether the imported drugs have met the tests or not. Shri Thawani has categorically stated before us that the appellant importer has been selling the goods under post-clearance bond on their own, as they did not get any communication regarding the test results. It is our view that as far as the imports of drugs of any kind including the Life Saving Drugs are concerned, the public of this country should not be exposed to imported drugs in this manner without proper testing by the concerned Drugs Control Authorities and without the test report being communicated to the Customs Authorities as well as to the importers. There also appears to be no check on the sale of such drugs by the Drug Control Authorities at the field level. This case should be an eye-opener for the authorities concerned to exercise proper control on the imported drugs.
8.3. Coming to the question of confiscation and imposition of redemption fine, we are of the view that if the impugned drugs did not meet the standards, they would have been absolutely confiscated and not allowed redemption on payment of fine. In the event, the drugs conformed to the standards and were tested successfully, there would have been no reason to confiscate them in the first place and therefore, there would be no question of imposition of redemption fine in either case. In view of the peculiar nature of the impugned goods, release on redemption fine is an impossibility since the goods should have been either absolutely confiscated or allowed to be sold, as stated above. Hence, just because the goods have already been sold and the samples also are not available, we do not see any reason to accept the department's appeal and order imposition of redemption fine in lieu of confiscation. As already stated, this case should be an eye-opener for appropriate control over importation of drugs so that the public at large do not face avoidable health hazards from using untested and unchecked drugs sold to them.
8.4. As regards the imposition of penalty, the same stands on a different footing. The appellants were allowed provisional release of the impugned drugs only, for storage purposes and they had no authority whatsoever to sell it in the market without specific clearance from the Drugs Control and Customs Authorities. Their submission that in the past they have done so without any action by the concerned departments, cannot be a reason to condone the lapse in this case. We consider that it is a very serious offence to import drug and sell in the market without obtaining the clearance from the Drugs Control Authorities. If there is delay on the part of the Customs Authorities and/or on the part of the Drugs Control Authorities, it was open to the appellant importer to approach the supervisory officials of both the departments right upto the seniormost level. It is nobody's case that the officials of any department can act irresponsibly or take their own sweet time to deal with such sensitive cases. At the same time, any lapse on the part of the concerned officials is no excuse to allow sale of such goods without proper testing, as it poses enormous risk to public health. By no stretch of imagination, any civilized nation can allow the importers to import drugs and distribute the same in the market without authorisation from the concerned Drugs Control Authorities. Hence, we are of the view that imposition of the penalty on the appellant importer in the circumstances of this case is fully justified. At the same time, we find that the value of the impugned drugs was to the tune of Rs. 46,73,304.00 (Rupees forty-six lakhs seventy-three thousand three hundred and four) and the Adjudicating Commissioner has imposed a penalty of Rs. 5.00 lakhs (Rupees five lakhs) only, which is quite low being about 10% of the value of the drugs. Therefore, the quantum of penalty does not require a reduction. We note in this regard that the department's appeal does not pray for enhancement of the penalty either. The objection by the learned Consultant that the appropriate legal provision has not been cited while imposing penalty is without any merit as the Adjudicating Commissioner has clearly mentioned the legal provisions in paras 2.25 and 2.26 of his Order.
8.5. Consequently, we reject both the appeals filed by the department and the appellant importer for the reasons stated above. The Miscellaneous Application filed by the department also stands disposed off.
Pronounced in the court on 07.03.08