2019 (4) TMI 445 - AT - Customs

Smuggling - export of drugs - prohibited goods or not - allegation in the show-cause notice is that the export of the drug in question was prohibited and 22 consignments of this drug were exported in violation of this prohibition and therefore such exports could amount to smuggling in terms of Section 2 read with 113 of the Customs Act - Confiscation - Held that - The very basis of the show-cause notice that the export of the drug was prohibited is not correct as has been clarified by the Central Drugs Standard Control Organisation vide their letter dated 30.12.2011. The Notification prohibited manufacture, sale and distribution but did not specifically mention export. A doubt can arise whether sale does not include sale through export also. This point was clarified by the very organisation which is supposed to administer the prohibition. Therefore, the drugs in question were not prohibited drugs for export during the relevant period. The related question is whether appellant was required to take NOC from the Drugs Controllers General of India before export and answer is Yes . The appellants have not taken NOC before export. In such a case, when the shipping bills were processed, the exports could have been stopped by the Customs Officer who were processing the goods. Even if the Assessing Officer had missed out the fact that no NOC was submitted, the officer issuing Let Export Order is expected to verify all documents before issuing Let Export Order - It was wrong on the part of the appellant to export the drug without obtaining NOC. It was equally wrong on behalf of the Customs Officer to have cleared the export consignment without the NOC. It does not appear from the show-cause notice that the customs officers have been put to notice for clearing the consignment without NOCs or that any action has been taken against them. The lapse of the appellant in not obtaining an NOC before exporting the drug requires confiscation of the goods which were already exported under Section 113. This section provides for confiscation of goods attempted to be improperly exported - however, once the goods are exported they cease to be export goods and will not be covered by Section 113. It was quite logical why Section 113 did not cover confiscation of goods already exported. As the goods would be outside India and the Customs Act, as per Section 1(2) did not extend outside India during the relevant period. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Prohibition on export of pharmaceutical drug "Cisapride Monohydrate BP" under Govt of India's Notification.
2. Allegations of violation of Customs Act by exporting prohibited drug.
3. Confiscation of goods, sale proceeds, and imposition of penalties under Customs Act.
4. Requirement of obtaining No Objection Certificate (NOC) for drug export.
5. Customs officers' role in overseeing export procedures.
6. Interpretation of relevant sections of the Customs Act regarding confiscation of goods already exported.

Analysis:
1. The appeal challenged the order-in-original citing the prohibition on exporting the drug "Cisapride Monohydrate BP" under a Govt of India notification. The Directorate of Revenue Intelligence (DRI) alleged violation of this prohibition, leading to confiscation of goods and sale proceeds under the Customs Act. The appellant contended that the drug was not prohibited for export during the relevant period, as clarified by the Central Drugs Standard Control Organisation.

2. The show-cause notice accused the appellant of smuggling by exporting the drug in violation of the prohibition, leading to proposed confiscation of sale proceeds and penalties under the Customs Act. However, the Tribunal noted that the drug was not prohibited for export, as clarified by the relevant authority. The Customs Act's sections on confiscation were analyzed, highlighting that confiscation applies to goods attempted to be improperly exported, not to goods already exported.

3. The appellant admitted the error of not obtaining a No Objection Certificate (NOC) for export, but emphasized that all exports were through official channels and not clandestinely. The Customs officers' oversight in processing the exports without NOC was also highlighted. The Tribunal emphasized the importance of proper documentation and verification by Customs officers before issuing export clearance.

4. The Tribunal concluded that the impugned order was unsustainable due to the lack of prohibition on drug export during the relevant period and the incorrect application of confiscation provisions under the Customs Act. The appeal was allowed, setting aside the order-in-original and ruling in favor of the appellant. The judgment emphasized the distinction between export goods and exported goods under the Customs Act, ensuring clarity on confiscation provisions.

Conclusion:
The judgment by the Appellate Tribunal CESTAT HYDERABAD addressed the issues of drug export prohibition, alleged violation of Customs Act, confiscation of goods and sale proceeds, NOC requirement, Customs officers' oversight, and interpretation of relevant Customs Act sections. The Tribunal ruled in favor of the appellant, setting aside the impugned order and emphasizing the importance of proper documentation and verification procedures in export processes.