2020 (2) TMI 1604 - AT - Customs

100% EOU - Classification of imported goods - drugs - restricted goods or not - Rule 43A of Drugs and Cosmetics Rules 1945 - HELD THAT - The goods are admittedly intended for use in manufacture by 100% export oriented unit and for such units imported goods are procured against into bond bill of entry which are then subject to processing in accordance with the Rules framed and for supervision of facilities licenced under Section 65 of Customs Act 1962. Therefore unlike other warehousing procedures clearance against ex bond bill of entry for home consumption is restricted only for removal as such with clearances undergoing the procedure prescribed under Drugs and Cosmetics Act 1940 and Drugs and Cosmetics Rules 1945. Consequently the pre-requisites for clearance of goods for home consumption viz. ascertainment of payment of duties and ascertainment of any prohibition on import prescribed in Section 47 of Customs Act 1962 are not intended to impact the goods procured from abroad by units operating under the scheme. The invoking of Section 111 of Customs Act 1962 on such goods brought into the bonded premises of 100% export oriented units such as that of the respondent is not within the scope of legislative intent. The initiation of proceedings against the respondents herein therefore does not have the sanction of law. The impugned order cannot be faulted for setting aside the confiscation and penalty ordered by the original authority - Appeal dismissed - decided against Revenue.

Issues Involved:
1. Applicability of Customs Act, 1962 for compliance with conditions under other laws.
2. Classification of imported goods under Drugs and Cosmetics Act, 1940.
3. Compliance with Rule 43A of Drugs and Cosmetics Rules, 1945.
4. Authority of customs officials versus designated officials under Drugs and Cosmetics Act, 1940.
5. Legitimacy of transshipment and clearance procedures for 100% export-oriented units.

Issue-wise Detailed Analysis:

1. Applicability of Customs Act, 1962 for compliance with conditions under other laws:
The judgment discusses the limitations of the Customs Act, 1962, particularly regarding the enforcement of conditions imposed under other laws. The appellate authority emphasized that the Customs Act, 1962, primarily concerns the assessment and collection of duties on cross-border trade in goods, and while it does enable prohibitions under Section 11, it should not be used to enforce compliance with other statutes like the Drugs and Cosmetics Act, 1940.

2. Classification of imported goods under Drugs and Cosmetics Act, 1940:
The original authority classified the imported goods as 'drugs' under the Drugs and Cosmetics Act, 1940, leading to penalties under Section 111(d) and Section 112 of the Customs Act, 1962. However, the appellate authority found that the goods did not fit the pharmaceutical definition of 'drugs' and that substantive compliance had been evidenced by certification from the relevant authority, thus precluding the need for confiscation and penalties.

3. Compliance with Rule 43A of Drugs and Cosmetics Rules, 1945:
The goods were imported to Nhava Sheva, a designated port, and then transshipped to ICD/CFS Nashik. The appellate authority noted that the landing at Nhava Sheva complied with the requirement of Rule 43A of the Drugs and Cosmetics Rules, 1945. The reviewing authority's contention that clearance at Nashik warranted confiscation was dismissed, as the transshipment was approved by the Assistant Drugs Controller.

4. Authority of customs officials versus designated officials under Drugs and Cosmetics Act, 1940:
The judgment clarifies that the customs officials should defer to the expertise of the officers authorized under the Drugs and Cosmetics Act, 1940, for determining the applicability of the regulatory regime. The appellate authority found that the customs officials overstepped their jurisdiction by attempting to enforce the Drugs and Cosmetics Act, 1940, without proper devolution of authority.

5. Legitimacy of transshipment and clearance procedures for 100% export-oriented units:
The respondent, a 100% export-oriented unit, had imported goods intended for manufacturing and filed 'into bond' bills of entry. The appellate authority noted that such units operate under specific exemptions and procedures, and the goods are not subject to the same clearance requirements as other imports. The transshipment and subsequent utilization of the goods were approved by the Assistant Drugs Controller, and thus, the customs authorities had no grounds for confiscation or penalties.

Conclusion:
The appellate authority dismissed the appeal of Revenue, finding no merit in the original authority's decision to confiscate the goods and impose penalties. The judgment emphasized the need for customs officials to respect the regulatory framework and expertise of designated authorities under the Drugs and Cosmetics Act, 1940, and highlighted the specific procedures applicable to 100% export-oriented units. The decision underscored the importance of adhering to the legislative intent and proper jurisdictional boundaries in enforcement actions.

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