2001 (6) TMI 490 - AT - Central Excise

Summary

Issues Involved:
1. Misdeclaration of goods and undervaluation.
2. Denial of exemption under Notification 159/92.
3. Applicability of Notification 208/81.
4. Alternative claim under Notification 45/79.
5. Imposition of penalties and fines.

Issue-wise Detailed Analysis:

1. Misdeclaration of Goods and Undervaluation:
The case involves M.J. Pharmaceuticals (M.J.) importing zinc insulin crystals and sterile beef insulin seed suspension from Eli Lilly Exports, Geneva. The goods were declared as "samples of no commercial value" with an undervalued invoice. The Commissioner alleged that M.J. deliberately undervalued the goods to evade customs duty, proposing a recovery of duty amounting to Rs. 3.20 crores at a rate of 345% ad valorem. The Commissioner dismissed M.J.'s attempts to pay the correct duty as an 'eye wash', suggesting that M.J. was not genuinely willing to comply with customs formalities.

2. Denial of Exemption Under Notification 159/92:
The Commissioner denied the exemption under Notification 159/92, which was intended for specified goods not exceeding a value of Rs. 5,000 imported by registered courier services. The goods were misdeclared, and the exemption was not applicable. The Tribunal found insufficient evidence to conclude that M.J. knowingly facilitated the misdeclaration, suggesting the possibility that the supplier misdeclared the goods due to heavy rush during Christmas.

3. Applicability of Notification 208/81:
The Commissioner denied the benefit of Notification 208/81, which exempts life-saving drugs and medicines from customs duty, arguing that it did not apply to raw materials used for manufacturing medicines and that the imported goods were not mono component insulin. The Tribunal disagreed, stating that the heading "life-saving drugs and medicines" includes goods used to make medicaments. The list under the notification includes various items not strictly drugs or medicines, thus, mono component insulin in any form should be exempted.

4. Alternative Claim Under Notification 45/79:
The appellant alternatively claimed the benefit of Notification 45/79, which exempts goods imported for manufacturing life-saving drugs specified in Notification 208/81. The Tribunal accepted this claim, noting that insulin is classified under Heading 29.37 of the tariff as a hormone. The goods manufactured from the imported insulin and exported to Sri Lanka were mono component insulin injectables, thus qualifying for the exemption under Notification 45/79.

5. Imposition of Penalties and Fines:
The Commissioner imposed fines and penalties on M.J., its Chairman J.M. Shah, and Manager-Purchase G.M. Mehta under Section 112 for misdeclaration and undervaluation. The Tribunal found that M.J.'s conduct, including promptly informing customs authorities and offering to pay the correct duty, did not support an intent to evade duty. Consequently, the Tribunal set aside the penalties and fines imposed.

Conclusion:
The Tribunal allowed the appeals, setting aside the impugned order. The goods were not liable to duty due to the applicability of Notification 208/81 and alternatively Notification 45/79. The penalties and fines imposed on M.J. and its officials were also annulled.