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2013 (3) TMI 166 - AT - CustomsImports from China not through prescribed point of entry into India - Confiscation orders and penalty - 3,21,264 pieces of Z MAGNETISM FOR MEN DEODORANT BODY SPRAY confiscated - whether the goods imported were cosmetics or substance falling under Rule 133 r.w.r. 43 of the Drugs & Cosmetics Rules, 1945? - whether cosmetic is permitted to be imported through a point of entry different from point of entry prescribed by Rule 43A read with CBEC Circular No. 8/2010-Cus. dated 26-3-2010. Held that - 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. 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. 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. As decided in Chimanlal Jagjivandas Sheth v. State of Maharashtra 1962 (9) TMI 34 - SUPREME COURT the expression substances is something other than medicine but used for treatment. Such interpretation brings a significant different between substance and Cosmetic . Also interpreting meaning of the term cosmetic in the case of Puma Ayurvedic Herbal (P) Ltd. v. CCE (2006 (3) TMI 141 - SUPREME COURT OF INDIA) 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. So another word substance used in the same legislation cannot be interpreted to mean cosmetic also. In Schedule D appended to Drugs and Cosmetics Rules, 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. There is no dispute that present imports were cosmetic. That was not a substance since cosmetic is different goods altogether. 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 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. For the purpose of import of cosmetics, provision of Rule 133 therefore remain applicable. 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, Hyderabad 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 Appellant s claim that the cosmetic imported by appellant shall fall in the category of substance in item of Schedule D under Rule 43 is baseless & 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. 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 - confiscation of the cosmetic imported by the appellant was justified and other consequence of adjudication is in conformity with law - 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 - partly in favour of assessee.
Issues Involved:
1. Confiscation and penalty under the Customs Act, 1962. 2. Violation of Rule 133 read with Rule 43A of the Drugs & Cosmetic Rules, 1945. 3. Determination of whether the imported goods were "cosmetics" or "substance." 4. Applicability of the Drugs & Cosmetics Act, 1940 and the relevant Customs Circular. Detailed Analysis: Confiscation and Penalty under the Customs Act, 1962 The appellant faced confiscation of 3,21,264 pieces of "Z" MAGNETISM FOR MEN DEODORANT BODY SPRAY imported from China under Section 111(d) of the Customs Act, 1962, and a penalty under Section 112(a) for contravening the provisions of Rule 133 of the Drugs & Cosmetic Rules, 1945, read with Rule 43A. The adjudicating authority allowed the appellant to redeem the goods on payment of a redemption fine of Rs. 35 lakhs along with applicable customs duty and imposed a penalty of Rs. 10 lakhs. Violation of Rule 133 read with Rule 43A of the Drugs & Cosmetic Rules, 1945 The customs authorities alleged that the goods were imported not through the prescribed point of entry into India, which should have been Nhava Sheva in Mumbai. The appellant contended that there was confusion regarding the importability of their goods at the port and that they were unaware of the requirement. The appellant argued that the customs department allowed the goods to be stored in the warehouse and drew samples for testing, indicating uncertainty about the importability. Determination of Whether the Imported Goods Were "Cosmetics" or "Substance" The appellant argued that the goods fell under "substance" as per Rule 132 read with Rule 43, exempting them from the restrictions of Chapter III of the Drugs & Cosmetic Act, 1940. However, the tribunal found that the goods were "cosmetics" as defined by Section 3(aaa) of the Drugs & Cosmetics Act, 1940, and not "substance." The tribunal emphasized the distinction between "cosmetic" and "drug" or "substance," noting that cosmetics are intended for cleaning, beautifying, or promoting attractiveness, while drugs include substances for diagnosis, treatment, or prevention of diseases. Applicability of the Drugs & Cosmetics Act, 1940 and the Relevant Customs Circular The tribunal referred to Circular No. 8/2010-Customs, dated 26-3-2010, which clarified that cosmetics must be imported through specified points of entry under Rule 43A. The circular stated that the exemption for "substances not intended for medical use" does not extend to cosmetics. The tribunal concluded that the appellant's claim that the cosmetics fell under "substance" was baseless and upheld the confiscation and penalty. Separate Judgment by Mathew John, Member (T) Mathew John, Member (T), agreed with the decision but provided additional reasons. He rejected the appellant's interpretation that the goods entered through Nhava Sheva when the container transited through the port. He clarified that the entry under Section 46 of the Customs Act, 1962, must be made at the specified point of entry for customs clearance, which was not done in this case. Conclusion The tribunal confirmed the adjudication, holding the goods liable for confiscation due to the contravention of the Drugs & Cosmetics Act, 1940, and the relevant rules. However, the redemption fine was reduced to Rs. 5 lakhs, and the penalty was reduced to Rs. 1 lakh. The appeal was partly allowed to this extent.
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