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TMI BlogEXPORTED GOODS CANNOT BE CONFISCATED UNDER SECTION 113(d) OF CUSTOMS ACT, 1962X X X X Extracts X X X X X X X X Extracts X X X X ..... EXPORTED GOODS CANNOT BE CONFISCATED UNDER SECTION 113(d) OF CUSTOMS ACT, 1962 - By: - Mr. M. GOVINDARAJAN - Customs - Import - Export - SEZ - Dated:- 5-5-2022 - - Confiscation of exported goods Section 113 of the Customs Act, 1962 ( Act for short) provides the list of goods that are confiscated that are attempted to be improperly exported. According to this section to the following goods are liable for confiscation- any goods attempted to be exported by sea or air from any place other than a customs port or a customs airport appointed for the loading of such goods; any goods attempted to be exported by land or inland water through any route other than a route specified in a notification issued under clause (c) of section 7 for the export of such goods; any goods brought near the land frontier or the coast of India or near any bay, gulf, creek or tidal river for the purpose of being exported from a place other than a land customs station or a customs port appointed for the loading of such goods; any goods attempted to be exported or brought within the limits of any customs area for the purpose of being exported, contrary to any prohibitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n imposed by or under this Act or any other law for the time being in force; any goods found concealed in a package which is brought within the limits of a customs area for the purpose of exportation; any goods which are loaded or attempted to be loaded in contravention of the provisions of section 33 or section 34 ; any goods loaded or attempted to be loaded on any conveyance, or water-borne, or attempted to be water-borne for being loaded on any vessel, the eventual destination of which is a place outside India, without the permission of the proper officer; any goods which are not included or are in excess of those included in the entry made under this Act, or in the case of baggage in the declaration made under section 77 ; any goods entered for exportation which do not correspond in respect of value or in any material particular with the entry made under this Act or in the case of baggage with the declaration made under section 77 ; any goods entered for exportation under claim for drawback which do not correspond in any material particular with any information furnished by the exporter or manufacturer under this Act in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the fixation of rate of drawback under section 75 ; any goods on which import duty has not been paid and which are entered for exportation under a claim for drawback under section 74 ; any goods entered for exportation under claim of remission or refund of any duty or tax or levy to make a wrongful claim in contravention of the provisions of this Act or any other law for the time being in force; any goods cleared for exportation which are not loaded for exportation on account of any willful act, negligence or default of the exporter, his agent or employee, or which after having been loaded for exportation are unloaded without the permission of the proper officer; any specified goods in relation to which any provisions of Chapter IVB or of any rule made under this Act for carrying out the purposes of that Chapter have been contravened. Issue The issues to be discussed in this article whether the goods exported which are not prohibited are liable to be confiscated under section 113(d) of the Act with reference to the decided case law. Case law The CESTAT, Hyderabad i n NOSCH LABS PVT LTD. VERSUS COMMISSIONER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OF CUSTOMS, HYDERABAD CUSTOMS [2022 (3) TMI 561 - CESTAT HYDERABAD], held that the goods which are not prohibited for export are not liable to be confiscated under section 113(d) of the Act. In this case the appellant manufactures bulk drugs and semi-finished formulations. It has four units in Andhra Pradesh all of which are 100% Export Oriented Units. The appellants manufactured and exported Sibutramine Hydrochloride. The Government of India, vide Notification dated 10.02.2011 prohibited the manufacture, sale and distribution of certain drugs for human use including Sibutramine and R-Sibutramine and their formulations under section 26A of the Drugs and Cosmetics Act, 1940. On receipt of intelligence that the appellant had manufactured and exported Sibutramine in violation of the aforesaid notification dated 10.02.2011the Directorate of Revenue Intelligence ( DRI for short) on verification found 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 Act and the sale proceeds of the exports were liable for confiscation under Section 121 of the Act. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant was also liable for penalty under Section 114(i) and 114AA of the Act, 1962. A show cause notice was issued to the appellants. The Additional Commissioner of Customs adjudicated the said show cause notice vide order dated 23.11.2012 holding that the drug, Sibutramine Hydrochloride valued at Rs. 46,84,174/- exported by the appellant was liable for confiscation under section 113(d) . The Adjudicating Authority also appropriated the amount realized on export of the said drug under section 121 of the Act vide its order dated 05.09.2011. Penalty was also imposed on the appellant- Rs. 5,00,000/- under Section 114(i) ; and Rs. 2,00,000/- under Section 114AA of the Act. The appellant, aggrieved against the said order filed an appeal to Commissioner (Appeals). The Commissioner (Appeals), by his order dated 12.02.2013, dismissed the appeal for not making the pre-deposit as per Section 129E of the Act. The appellant filed appeal before the Tribunal against the order passed by Commissioner (Customs). The Tribunal remanded the matter to the Commissioner (Appeals) with a direction to decide the matter afresh on merits without insist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on any pre-deposit after giving a reasonable opportunity to the appellant to present their case. In the remanding the Commissioner (Appeals) passed the order upholding the Order-in-Original but reduced the penalty under Section 114(i) from Rs. 5,00,000/- to Rs. 2,50,000/- and the penalty under Section 114AA from Rs. 2,00,000/- to Rs. 1,00,000/- vide his order dated 22.01.2014. Being aggrieved against the order of Commissioner (Appeals) in remand, the appellant filed the present appeal before the CESTAT. The appellant submitted the following before the Tribunal- The Notification dated 10.2.2011 issued under Section 26A of the Drugs and Cosmetics Act, 1940 did not cover Sibutramine Hydrochloride which the appellant had exported. It covered Sibutramine which is a different molecule with a different molecular weight. The notification prohibited manufacture, sale and distribution of Sibutramine and other drugs, i.e., only the domestic trade is prohibited. Export was not prohibited at all. In the absence of any prohibition on export of Sibutramine hydrochloride under the notification, the drug has been correctly exported by the appellant. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince there is no prohibition of export either under the Act or under any other law, Section 113 (d) of the Act does not apply to their case and confiscation cannot be sustained. Consequently, the penalties imposed under section 114(i) and 114AA also need to be set aside. The appeal may, therefore, be allowed with consequential relief to the appellant. The Tribunal heard the arguments of both sides. The Tribunal observed that since the goods were already exported, the proposal in the SCN was to confiscate the sale proceeds of the exports. The Tribunal analyzed the provisions of Section113 , 2(18) , 2(19) , 2(33) , 2(39) and 121 of the Act. The Tribunal found that the following questions are to be answered in this case- Did the notification GSR 82(E) 10.2.2011 issued by the Ministry of Health and Family Welfare under section 26A prohibit export of the drugs in question? Does the Drugs and Cosmetics Act, 1940 have any provision to prohibit or regulate exports under any section including section 26A? Is Sibutramine hydrochloride exported by the appellant prohibited good as per Section 2(33) of the Act? If the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... export is not prohibited but there are some other regulations or restrictions which have been violated, does the export of such goods get covered by section 113 ? Does section 113 provide confiscation of only export goods, i.e., goods which are to be exported or does it also extend to goods which have already been exported? Considering the above, can the confiscation of the goods under section 113 be upheld? Have the penalties under section 114 (i) and 114AA been correctly imposed? For deciding the first issue the Tribunal analyzed the Notification No.GSR 82(E), dated 10.02.2011. The Central Government prohibits Sibutramine and its formulations for human use, and R-Sibutramine and its formulations for human use. The Tribunal observed that 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. If the notification had mentioned Salbutramine and its salts the expression would have covered all its salts includin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Salbutramine hydrochloride. The Tribunal held that 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. For the second question the Tribunal observed that the very purpose of the Drugs and Cosmetics Act, 1940 is to regulate import, manufacture, sale and distribution of drugs and cosmetics and not to regulate exports at all. 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 notification and section 26A also does not envisage prohibition of exports. The Tribunal observed that in the show cause notice it was alleged that as per guidelines issued by Ministry of Health and Family Welfare 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 Standard Control Organizat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (CDSCO) for export of banned/prohibited drugs in India . The appellant has not made any application for the four consignments exported after the imposition of prohibition on manufacture/ sale/ distribution as per the stated guidelines and provisions of the Drugs and Cosmetic Act, 1940. Since the appellant did not apply for no objection certificate for the export of banned goods, no permission was issued by the competent authority for export of banner or prohibited goods from India. The Tribunal analyzed the provisions of Rule 94. The Tribunal observed that Rule 94 is meant to make exceptions to the Packing and Labeling Requirements as per Part IX of the Rules. This Rule mirrors the requirements under the NDPS Rules so that there is no gap in the Regulation. Rule 94 nowhere states that any drug whose manufacture and sale is prohibited under Section 26A of the Drugs and Cosmetics Act cannot also be exported without an NOC from the Drugs Controller General. Further, any violation of any guidelines does not make goods liable for confiscation under Section 113 (d) (which applies only if there is prohibition of export under any law) and the Customs officers have no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction even if there are violations of guidelines. The Tribunal found that Salbutramine hydrochloride was not covered in the notification dated 10.2.2011 at all. The third question is whether Salbutramine hydrochloride is prohibited goods in terms of section 2(33) of the 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. The Tribunal observed that- Salbutramine hydrochloride or salts of salbutramine were not covered under the notification dated 11.2.2011; and the notification does not prohibit import or export of the drugs which are notified but only prohibits manufactured, sale and distribution. Therefore the Tribunal held that Salbutramine hydrochloride exported by the appellant is NOT prohibited goods in terms of section 2(33) of the Act. The fourth question is - if the export is not prohibited but there are some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other regulations or restrictions under some other laws, such as Drugs and Cosmetics Act, 1940, Drugs and 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) ? The Tribunal found that Section 113 of the Act provides for confiscation of export goods i.e., goods attempted to be exported. It does not provide for confiscation of goods which have already been exported. In this case, the goods were already exported and hence they cannot be confiscated under section 113(d). The Tribunal held that since the goods are not liable to be confiscated the proceeds of the export are not liable to be confiscated. 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. The Tribunal answered the questions framed by it as below- 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It also did not prohibit export but only prohibited manufacture, sale and distribution. The Drugs and Cosmetics Act, 1940 does have any provision to prohibit or regulate exports under any section including section 26A. Sibutramine hydrochloride exported by the appellant is not prohibited good as per Section 2(33) of the Act because it is not liable for confiscation under section 113(d). If the export is not prohibited, even if there are some other violations of Act or Rules or regulations or restrictions such goods are not covered by section 113(d). Section 113 provides for confiscation of only export goods, i.e., goods which are to be exported and not goods which have already been exported. Confiscation of the goods under section 113 by the impugned order cannot therefore, be sustained. The amounts paid by the appellant through a Pay Order during investigation cannot be confiscated under section 121 of the Act. The penalties under section 114 (i) and 114AA need to be set aside. The appeal is allowed by the Tribunal and the impugned order is set aside with consequential relief to the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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