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2022 (5) TMI 1318 - AT - CustomsMisdeclaration and undervaluation of imported goods - Cosmetic goods - not supported with certificate of the Controller of Drugs and Cosmetics Organization (CDSCO) - Absolute Confiscation - levy of penalty u/s 112 (a) 114 AA of the CA, 1962 - whether the request for re-export of the imported cosmetics of 2,19,435 pieces, without CDSCO certificate, and 35,712 pieces with CDSCO certificate be allowed or otherwise? - HELD THAT - There is no doubt that since the goods are not supported with CDSCO certificate definitely be considered as prohibited under the Drugs and Cosmetics Act, 1940 and the rules made thereunder and the consequence thereof is confiscation. But, simultaneously, it cannot be ignored that some procedure has been prescribed under Drugs and Cosmetics Rules, 1945 to mitigate such a situation where the imported cosmetics are found to be in contravention with the provisions of Drugs and Cosmetics Act and the rules made thereunder. Under sub-rule(3) of Rule 131 of the said Rules, the Collector of Customs(now Commissioner) is duty bound to communicate to the importer to exercise their option either to re-export the goods to the country of origin or allow the Central Government to take possession of it and destroy the same accordingly. Therefore, it is a statutory right available to an importer which cannot be overlooked by the department; the importer should have been allowed to exercise the option to re-export the goods, as prayed for. Also, the principle laid down by this Tribunal in NATHI MAL RUGAN MAL VERSUS COMMISSIONER OF CUSTOMS, NHAVA SHEVA, RAIGAD 2018 (11) TMI 99 - CESTAT MUMBAI relied by the Commissioner in directing absolute confiscation is not applicable to the facts of the present case, for the simple reason that the Tribunal in the said case was confronted with the question whether after allowing redemption of the goods on payment of appropriate fine, the assessee be forced to export the goods only and not allowed to dispose the same in any other manner including clearance for home consumption. In the present case, however, no such situation arose. On the contrary, the Appellant has requested for re-export of the goods. There are no justification in the impugned order directing absolute confiscation of the imported cosmetics of 2,19,435 pieces, instead of allowing re-export of the same following the procedure laid down under Rule 131(3) of the Drugs and Cosmetics Rules, 1945. The said order of confiscation is set aside and the re-export of 2,19,435 pieces is allowed. In view of the prayer for re-export of the balance 35,712 pieces valued at Rs.20,95,104/- (supported with CDSCO certificate), confiscation is also set aside and the appellant is permitted to re-export the goods. The question of mis- declaration becomes immaterial in view of the prayer for re- export, in accordance with law. We also observe that the appellant has already suffered loss in the whole process (part charges, demurrage, etc.) and thus, the fine and penalties imposed on all the appellants is set aside. The penalties imposed on all the individual appellants viz. Shri Sunil Yadav - Director, Shri Siddiq Yusuf Merchant, and also on Shri Sandip Tandekar - Power of Attorney Holder of CHA also set aside. Appeal allowed.
Issues Involved:
1. Justification of absolute confiscation of goods and imposition of penalties under Sections 112(a) and 114AA of the Customs Act, 1962. 2. Rejection of transaction value and re-determination of assessable value. 3. Denial of re-export of goods imported without valid CDSCO certificate. 4. Imposition of penalties on individual appellants and the CHA. Issue-wise Detailed Analysis: 1. Justification of Absolute Confiscation and Penalties: The Tribunal examined whether the absolute confiscation of 2,19,435 pieces of cosmetics valued at Rs.2,06,51,122/- and the imposition of penalties under Sections 112(a) and 114AA of the Customs Act, 1962, were justified. The Tribunal noted that the goods were imported without a valid CDSCO certificate, making them prohibited under the Drugs and Cosmetics Act, 1940. However, it emphasized that the special provisions under the Drugs and Cosmetics Rules, 1945, should take precedence over the Customs Act, 1962, regarding the disposal of such goods. The Tribunal found that the Commissioner did not follow the prescribed procedure under Rule 131(3) of the Drugs and Cosmetics Rules, 1945, which mandates offering the importer the option to re-export the goods. Consequently, the absolute confiscation was deemed unjustified. 2. Rejection of Transaction Value and Re-determination: Although the appellants initially disputed the rejection of the transaction value and its re-determination, this issue was not pressed during the hearing. The Tribunal noted that the appellants had accepted the mis-declaration of quantity, value, and lack of registration certificate during the investigation. Thus, the Tribunal did not delve into this issue further. 3. Denial of Re-export of Goods: The core argument by the appellants was the denial of their request to re-export the goods imported without a valid CDSCO certificate. The Tribunal highlighted that Rule 131(3) of the Drugs and Cosmetics Rules, 1945, provides a statutory right to the importer to re-export such goods. The Tribunal found merit in the appellants' argument that the Commissioner should have allowed re-export instead of directing absolute confiscation. It emphasized that the special enactment (Drugs and Cosmetics Act and Rules) should take precedence over the Customs Act in this context. Therefore, the Tribunal set aside the order of absolute confiscation and allowed the re-export of 2,19,435 pieces. 4. Imposition of Penalties on Individual Appellants and CHA: The Tribunal examined the penalties imposed on Shri Sunil Yadav (Director), Shri Siddiq Yusuf Merchant, and Shri Sandip Tandekar (Power of Attorney Holder of CHA). It found that the penalties were excessive and harsh, especially since the appellants had already suffered losses (e.g., port charges, demurrage). The Tribunal also noted that there was no evidence to establish that the CHA was aware of the mis-declaration and undervaluation. Consequently, the Tribunal set aside the penalties imposed on all the individual appellants and the CHA. Conclusion: The Tribunal allowed the appeals, setting aside the absolute confiscation of the imported cosmetics and permitting their re-export. It also set aside the fines and penalties imposed on the appellants, emphasizing the precedence of the Drugs and Cosmetics Act and Rules over the Customs Act in this context.
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