2023 (1) TMI 462 - AT - Customs

Wrongful availment of benefit of Duty Drawback - export of spurious drugs - requirement for obtaining NOC from the Drug Controller or not - Confiscation - redemption fine - penalty - HELD THAT - It is evident that there was no requirement of NOC from the Drug Controller in respect of export consignment vide Shipping Bill No. 7099329 dt. 16.04.2016 filed by the appellant for export of drugs to Liberia. Further the evidence led satisfies that the appellant was a genuine manufacturer duly licensed to manufacture and export of drugs. Further even from the test report of CDSCO Mumbai out of the three drugs two drugs namely B-CO syrup and Sabtron have been found to be of standard quality. Thus the whole proceedings by the Customs Authority for confiscation are vitiated. Appeal allowed.

Summary

Issues:
1. Export of pharmaceutical drugs without NOC from Drug Controller
2. Allegation of exporting spurious drugs
3. Confiscation of export consignment and imposition of penalties
4. Requirement of NOC for export as per regulatory authority
5. Compliance with standards for exporting pharmaceuticals

Issue 1: Export of pharmaceutical drugs without NOC from Drug Controller
The appellant, a holder of a license to manufacture drugs, exported pharmaceuticals to Liberia without obtaining a No Objection Certificate (NOC) from the Drug Controller. The Assistant Drug Controller (ADC) observed discrepancies in the manufacturing details, leading to suspicions regarding the authenticity of the drugs. The ADC refused to issue NOC, citing the absence of the principal unit's address on the drugs, raising concerns about the legitimacy of the manufacturing process.

Issue 2: Allegation of exporting spurious drugs
The ADC deemed three drugs as spurious under the Drugs and Cosmetic Act, 1940, due to discrepancies in the manufacturing information and the refusal of the supporting manufacturer to acknowledge the production of the drugs. The government analyst's report highlighted that one of the drugs was not of standard quality, further supporting the claim of exporting spurious drugs.

Issue 3: Confiscation of export consignment and imposition of penalties
The Revenue initiated proceedings to confiscate the goods valued at Rs. 5,74,368 under Section 111 of the Customs Act, alleging the export of spurious drugs. The show cause notice proposed confiscation and penalties under Sections 113(d), 114, and 117 of the Act. The Adjudicating Authority ordered absolute confiscation of the goods and imposed substantial penalties on the appellant.

Issue 4: Requirement of NOC for export as per regulatory authority
The appellant argued that as per a Public Notice issued by the Drug Controller General, NOC was not mandatory for export consignments from 01.01.2016. The appellant provided documents demonstrating compliance with regulatory requirements and the involvement of the supporting manufacturer in the manufacturing process, emphasizing their legitimacy as a manufacturer and exporter of pharmaceuticals.

Issue 5: Compliance with standards for exporting pharmaceuticals
The appellant contended that the drugs were fit for export as they met the standards required by the importing country. Evidence was presented to show that the appellant was a recognized manufacturer, and the drugs had been manufactured for export purposes under proper licenses. The Tribunal found that the appellant was a genuine manufacturer licensed to export drugs, and two out of the three drugs were of standard quality based on the test report from CDSCO, Mumbai.

In conclusion, the Tribunal set aside the impugned order, ruling in favor of the appellant and granting them consequential benefits in accordance with the law. The judgment highlighted the importance of complying with regulatory requirements for exporting pharmaceuticals and emphasized the need for transparency in the manufacturing and export processes to avoid allegations of exporting spurious drugs.