2016 (5) TMI 1113 - AT - Customs

Classification and eligibility to the benefit of Notification - Import of chemicals of various descriptions declared them as Pharmaceutical Reference Standards (PRS) classifying the same under Customs Tariff Heading No.38 22 00 90 - claimed benefit of Notification No.21/2002-Cus. dated 1.3.2002 and Notification No.12/2002-Cus. dated 17.3.2012 - Duty demanded alongwith interest and imposition of penalty Held that - it is found that the appellant had shown that the imported products, which had label and certificate of analysis from United State Pharmacopoeia convention indicating that Pharmaceutical Reference Standards is as per the standard laid down by them. It has to be noted that Pharmaceutical Reference Standards which are accompanied by the certificate issued by US Pharmacopoeia are distinctive product and gets classified under laboratory chemical or under Chapter Heading 3822 read with Chapter Notes of Chapter 38 as reproduced herein above. The conclusion that can be reached is that Pharmaceutical Reference Standard cannot be classified as certified Reference Materials and consequently not extending the scope of applicability of notification to products other than covered under Chapter Heading 28 and Chapter 29 is also not applicable. The adjudicating authority has come to a conclusion that Pharmaceutical Reference Standard can be classified under Chapter Heading 38 22 as well but denied the benefit of Notification of reduced rate of duty only on the ground that the appellant has not passed the conditions of Chapter Note 2A and not produced documents required under the said exemption Notification to avail the benefit. As already reproduced by us, the condition of Notification only requires that the certificate of Physician Reference Samples are issued by an organization accepted by the International Standard Organisation. In the documents produced before us, we find that the US Pharmacopoeia convention is recognized by International Standard Organisation in respect of the quality of the goods and the systems which they are following. As there is no dispute that the products imported being classified under Chapter Heading 3822, Revenue having not filed any appeal against the adjudicating authority s order by holding that the product imported are classifiable under Chapter Heading 3822, we have to draw adverse inference that Revenue has accepted that the Pharmaceutical Reference Samples are classifiable under 38 22. In our considered view, if the products are classifiable under Chapter Heading 38 22, benefit of exemption Notification cannot be denied to the appellant as per the facts in this case, and it is accepted that the goods which are imported are nothing but Pharmaceutical Reference Standard. Applying the World Health Organisation s definition of Reference Standard to the products imported by appellant, it has to be held that imported products are Pharmaceutical Reference Standards, are squarely covered by the benefit of Notification as these Reference Standards imported by the appellants from U.S. Pharmacopoeia Convention or other Pharmacopoeia Convention are for the use of their clients either in the manufacturing of bulk drugs or consumption of bulk drugs. Period of limitation - Held that - it is found that the adjudicating authority has also not accepted the limitation aspect on the findings that the appellant had not produced any of the documents before the authorities while seeking clearances of the goods by claiming benefit of Notification. In our view this approach of the adjudicating authority on the point of limitation seems to be not in consonance with the law. It is undisputed that the bills of entry which are filed by appellant indicated these items as Pharmaceutical Reference Standards and all the relevant documents for clearance of goods were filed with the authorities, at the time of clearance of goods; which was accepted by the department, hence they permitted clearance on final assessment by extending benefit of notification. In our view Revenue cannot today say that appellant had suppressed the facts with intention to avail ineligible benefit of Notification. It was for the Assessing Officers to seek further clarification on the matter, if they find that the appellant had claimed ineligible benefit of Notification. In all probability the Assessing Officers when they cleared the consignments were of the view that the appellant is eligible for the benefit of Notification as the goods imported were Pharmaceutical Reference Standard. Therefore, the demand for the duty liability is not sustainable and is liable to be set aside. Since we are holding that the duty liability is not sustainable, the question of imposing any penalties on main appellant or other appellants does not arise. - Decided in favour of appellant with consequential relief

Issues Involved:
1. Classification of imported goods.
2. Eligibility for exemption under Notifications No. 21/2002-Cus. and No. 12/2012-Cus.
3. Compliance with Chapter Notes 2(A) and 2(B) of Chapter 38.
4. Validity of extended period for demand of differential duty.
5. Imposition of penalties on the appellants.

Issue-wise Detailed Analysis:

1. Classification of Imported Goods:
The main appellant classified the imported chemicals as "Pharmaceutical Reference Standards" under Customs Tariff Heading No. 3822 00 90. The Department argued that the goods were "Certified Reference Materials" (CRM) and should be classified based on their chemical composition under respective Chapter Headings. The adjudicating authority rejected the appellant's classification and reclassified the goods under respective chapters based on chemical composition.

2. Eligibility for Exemption under Notifications No. 21/2002-Cus. and No. 12/2012-Cus.:
The appellant claimed the benefit of the said notifications, which provide reduced duty rates for "Pharmaceutical Reference Standards." The Department contended that the goods did not qualify for the exemption as they were CRM and did not meet the conditions stipulated in Chapter Notes 2(A) and 2(B) of Chapter 38. The adjudicating authority denied the benefit of the notifications and confirmed the demand of differential duty.

3. Compliance with Chapter Notes 2(A) and 2(B) of Chapter 38:
The adjudicating authority held that the imported goods did not comply with Chapter Notes 2(A) and 2(B) of Chapter 38, which define CRM and their classification precedence. The appellant argued that the goods were not claimed as CRM and thus did not need to comply with these Chapter Notes. The Tribunal found that the goods imported were indeed "Pharmaceutical Reference Standards" and not CRM, and therefore, the Chapter Notes 2(A) and 2(B) were not applicable.

4. Validity of Extended Period for Demand of Differential Duty:
The adjudicating authority invoked the extended period for demanding differential duty, alleging intentional mis-declaration by the appellant. The Tribunal found that the appellant had declared the goods as "Pharmaceutical Reference Standards" and provided all necessary documents, which were accepted by the Customs authorities during clearance. The Tribunal held that the extended period was not applicable as there was no suppression of facts or mis-declaration by the appellant.

5. Imposition of Penalties on the Appellants:
The adjudicating authority imposed penalties on the main appellant and other appellants under various sections of the Customs Act, 1962. The Tribunal, having set aside the demand for duty liability on merits and limitation, also set aside the penalties imposed on the appellants.

Conclusion:
The Tribunal concluded that the imported goods were "Pharmaceutical Reference Standards" and not CRM, making them eligible for the benefit of the exemption notifications. The demand for differential duty was set aside, and the extended period for demand was held to be invalid. Consequently, the penalties imposed on the appellants were also set aside. All appeals were allowed with consequential relief.

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