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TMI Blog2022 (3) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... of the notification shows that among the drugs which were prohibited was Sibutramine but NOT Sibutramine hydrochloride which was exported. The two are clearly different molecules with different molecular weights although the pharmacological effect of both will be the same. It is a matter of common knowledge that many active ingredients of pharmaceuticals are by themselves not soluble in water and hence cannot be easily digested and absorbed by the human body. Hence, they are reacted with some acid such as Hydrochloric acid, Sulphuric acid or Tartaric acid to get hydrochloride salt or sulphate salt or tartarate salt of the pharmaceutical - if the notification had mentioned Salbutramine and its salts the expression would have covered all its salts including Salbutramine hydrochloride. Clearly, the notification did not cover salts of Salbutramine and therefore, Salbutramine hydrochloride which is allegedly exported by the appellant is not covered in the notification at all. It is also evident from the text of the notification that what was prohibited were the manufacture, sale and distribution of the notified drugs and not their export either explicitly or implicitly. Whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cosmetics Rules, 1945 or any notifications issued under them and which are violated, will such export goods be liable for confiscation under section 113(d)? - HELD THAT:- A plain reading of section 113(d) shows that any goods attempted to be exported or brought within the limits of any customs area for the purpose of being exported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force are liable for confiscation. Thus export itself must be prohibited either under the Customs Act or any other law for the time being in force to attract section 113(d). Any other illegality or violation of any law which is NOT PROHIBITION OF EXPORT either under the Customs Act or under any other law does not attract section 113 (d). Undisputedly, in this case, the goods have been exported. Once, they are exported, they move out of the customs control as well as the territory of India. In fact, the Customs Act, 1962 did not, during the relevant period, extend to outside the territory of India - In this case, the goods were already exported and hence they cannot be confiscated under section 113(d). For this reason also, the confiscation of the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs and Cosmetics Act, 1940. Therefore, it appeared that the goods were exported in violation of prohibition imposed under Drugs and Cosmetics Act, 1940 were liable for confiscation under Section 113(d) of the Customs Act, 1962. It also appeared that the sale proceeds of the exports were liable for confiscation under Section 121 of the Customs Act and the appellant was liable for penalty under Section 114(i) and 114AA of the Customs Act, 1962. Accordingly, a show cause notice was issued to the appellant which was adjudicated by the Additional Commissioner of Customs, Hyderabad by order dated 23.11.2012 holding that the drug, Sibutramine Hydrochloride valued at ₹ 46,84,174/- exported by the appellant was liable for confiscation under section 113(d). He appropriated under section 121 of the Customs Act the amount realized on export of the said drug which was paid by the appellant by pay order dated 05.09.2011. He also imposed on the appellant penalty of ₹ 5,00,000/- under Section 114(i) and penalty of ₹ 2,00,000/- under Section 114AA of the Customs Act, 1962. Aggrieved, the appellant appealed to the Commissioner (Appeals), who, by his order dated 12.02.2013, dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lties under Section 114(i) and 114AA follow from this. Since the goods were already exported, the proposal in the SCN was to confiscate the sale proceeds of the exports. The relevant legal provisions of the Customs Act are as follows: Section 113: Confiscation of goods attempted to be improperly exported, etc.- The following export goods shall be liable to confiscation: . (d): any goods attempted to be exported or brought within the limits of any customs area for the purpose of being exported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force. Section 2(18): export , with its grammatical variations and cognate expressions, means taking out of India to a place outside India. Section 2(19): export goods means any goods which are to be taken out of India to a place outside India. Section 2(33) Prohibited goods means any goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the powers conferred by Section 26A of the drugs and Cosmetics Act, 1940 (23 of 1940), the Central Government hereby prohibits the manufacture, sale and distribution of the following drugs with immediate effect, namely;---- 1. Nimesulide formulations for human use in children below 12 years of age. 2. Cisapride and its formulations for human use. 3. Phenylpropanolamine and its formulations for human use, 4. Human Placental Extract and its formulations for human use, 5. Sibutramine and its formulations for human use, and 6. R-Sibutramine and its formulations for human use. 7. A plain reading of the notification shows that among the drugs which were prohibited was Sibutramine but NOT Sibutramine hydrochloride which was exported. The two are clearly different molecules with different molecular weights although the pharmacological effect of both will be the same. It is a matter of common knowledge that many active ingredients of pharmaceuticals are by themselves not soluble in water and hence cannot be easily digested and absorbed by the human body. Hence, they are reacted with some acid such as Hydrochloric acid, Sulphuric acid or Tartaric acid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The notification was issued by the Ministry of Health and Family Welfare of the Government of India exercising powers under section 26A of this Act. It reads as follows: 26A. Power of Central Government to prohibit manufacture, etc., of drug and cosmetic in public interest. - Without prejudice to any other provision contained in this Chapter, if the Central Government is satisfied, that the use of any drug or cosmetic is likely to involve any risk to human beings or animals or that any drug does not have the therapeutic value claimed or purported to be claimed for it or contains ingredients and in such quantity for which there is no therapeutic justification and that in the public interest it is necessary or expedient so to do, then, that Government may, by notification in the Official Gazette, regulate, restrict or prohibit the manufacture, sale or distribution of such drug or cosmetic. 11. Thus, section 26A also empowers the Central Government to regulate, restrict or prohibit, by notification, three activities viz., manufacture, sale or distribution. These are the very three activities which were prohibited in the notification. Exports were NOT prohibited in the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o objection certificate was issued by the competent authority for export of banned/prohibited drugs from India. 7. A letter F.No.VIII/48/10/2011 dated 14.09.2011 was addressed to the Deputy Drugs Controller, Central Drugs Standard Control Organization, Hyderabad by this Regional Unit of Directorate of Revenue Intelligence requesting for details of No Objection Certificates issued/pending for issue to the manufacturers and traders to export prohibited/ banned drugs of Sibutramine and R- Sibutramine. In reply, vide letter dated 26.09.2011 was informed that they have not accorded any permission/ NOC to any of the manufacturer/ trader located in Andhra Pradesh in respect of drugs Sibutramine its formulations . 14. In paragraph 10 of the impugned order, learned Commissioner (Appeals) observed as follows: The Ministry of Health and Family Welfare has also issued guidelines in connection with the export of prohibited drugs from India. As per these guidelines and Rule 94 of Drugs and Cosmetics Act, 1940, a manufacturer holding valid license copy in Form-25 and Form-28 is required to obtain No Objection Certificate from Zonal/Sub-Zonal Officers of Central Drugs Standar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) The State Licensing Authority shall issue the manufacturing license for these formulations on each export order on the basis of a No Objection Certificate from Drugs Controller , India; (iv) A no objection certificate shall be obtained from the drugs Controller, India for export of each consignment ; and (v) A no objection certificate shall be obtained from the Narcotic Commissioner of India, Gwalior for export of each consignment of the drug . (2) The provisions of Rules 96 to 101 inclusive, shall not apply to a medicine made up ready for treatment, whether after or without dilution, which is supplied on the prescription of a registered practitioner provided that: (i) the medicine is labelled with the following particulars : (a) the name and address of the supplier; (b) the name of the patient and the quantity of the medicine; (c) the number representing serial number of the entry in the prescription register; (d) the dose, if the medicine is for internal use; (e) the words FOR EXTERNEL USE ONLY shall be printed on the label if the medicine is for external application. (ii) Condition (3) of the conditions in Rule 65 is satisfied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not prohibited by the notification. We cannot read anything into the law let alone read so much into all these provisions. 20. The next question is whether Salbutramine hydrochloride is prohibited goods in terms of section 2(33) of the Customs Act. According to Section 2(33), prohibited goods means any goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with. Firstly, Salbutramine hydrochloride or salts of salbutramine were not covered under the notification dated 11.2.2011. Secondly, the notification does not prohibit import or export of the drugs which are notified but only prohibits manufactured, sale and distribution. Therefore, Salbutramine hydrochloride exported by the appellant is NOT prohibited goods in terms of section 2(33) of the Customs Act. 21. The next question is if the export is not prohibited but there are some other regulations or restrictions under some other laws, such as Drugs and Cosmetics Act, 1940, Drugs and Cosmeti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs Act but smuggling is defined as follows: (39) smuggling , in relation to any goods, means any act or omission which will render such goods liable to confiscation under section 111 or section 113; 26. Since we have found that the Salbutramine hydrochloride exported by the appellant is not liable for confiscation under section 113(d), confiscation of the sale proceeds of such exports under section 121 also cannot be sustained. 27. The penalties imposed under Section 114(i) and 114AA also cannot be sustained once the basis for confiscation of goods under Section 113 is absent. 28. We, therefore, answer the questions framed by us in paragraph 5 above as follows: a) Notification GSR 82(E) 10.2.2011 issued by the Ministry of Health and Family Welfare under section 26A does not prohibit export of disputed drug because it neither included Salbutramine hydrochloride or salts of Salbutramine. It also did not prohibit export but only prohibited manufacture, sale and distribution. b) The Drugs and Cosmetics Act, 1940 does have any provision to prohibit or regulate exports under any section including section 26A. c) Sibutramine hydrochloride exported by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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