2010 (6) TMI 386 - AT - Customs

Confiscation and penalty Import of unlabeled toilet soaps 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 - goods were prohibited for import - 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 - 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 - However, the quantum of penalty looks harsh in the facts and circumstances of the case, which we reduce to Rs. 25,000/-.

Summary

Issues:
1. Exemption from special additional duty on imported goods under Notification No 22/99-Cus.
2. Confiscation of goods for being misbranded and prohibited for import under Drugs and Cosmetics Act.
3. Jurisdiction of the adjudicating authority in the case.

Analysis:

Issue 1: Exemption from special additional duty
The appeal was filed by the department challenging the lower appellate authority's order regarding a consignment of "beauty toilet soaps (naked)" imported by the respondent. The respondent had claimed exemption from special additional duty under Notification No 22/99-Cus. The customs authorities contended that the goods were not imported "for sale as such" as they were repackaged and labeled, which could be considered as 'manufacture.' The jurisdictional Jt. Commissioner ordered confiscation of the goods but allowed redemption on payment of a fine. The Commissioner (Appeals) held that the benefit of the notification was admissible to the importer, setting aside the order-in-original.

Issue 2: Confiscation of goods under Drugs and Cosmetics Act
The assessing authority found the soaps to be misbranded and prohibited for import under the Drugs and Cosmetics Act. Initially, the Assistant Drugs Controller recommended confiscation, citing non-compliance with labeling requirements. However, a subsequent report stated that the goods were not for sale but for free distribution, leading to the importer repackaging the soaps. The customs authorities considered this repackaging as 'manufacture,' rendering the goods ineligible for the notification's benefit. The original authority ordered confiscation under Section 111(d) of the Customs Act, which was challenged by the respondent in appeal.

Issue 3: Jurisdiction of the adjudicating authority
The Appellate Tribunal upheld the original authority's decision on confiscation, emphasizing that the goods were unlabelled upon import, making them misbranded and prohibited for import under the Drugs and Cosmetics Act. The Tribunal maintained the fine for redemption but reduced the penalty imposed on the importer. It clarified that the adjudicating authority correctly applied the relevant legal provisions independently, disregarding contradictory reports from the Assistant Drugs Controller. The Tribunal upheld the order of adjudication, allowing the Revenue's appeal partially.

In conclusion, the Tribunal upheld the confiscation of goods under the Customs Act, emphasizing the misbranding and prohibition for import under the Drugs and Cosmetics Act. The jurisdiction of the adjudicating authority was deemed appropriate, and the penalty imposed on the importer was reduced while maintaining the fine for redemption.