Unlabelled imported cosmetics are assessed at import, making them prohibited goods and sustaining confiscation, with penalty reduced on proportionality.

Imported toilet soaps assessed in the condition in which they were brought into India were treated as misbranded cosmetics because they were naked and unlabelled at import, and such goods were prohibited for import under the Drugs and Cosmetics Act, 1940. Post-import labelling and packing did not change their imported character or satisfy the condition that the goods be imported for sale as such, so Notification No. 22/99-Cus was unavailable. As the goods were prohibited, confiscation under Section 111(d) of the Customs Act, 1962 and redemption fine were sustained, while the penalty was reduced on proportionality grounds.

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Issues: (i) whether unlabelled imported toilet soaps were misbranded cosmetics and therefore prohibited for import under the Drugs and Cosmetics Act, 1940; (ii) whether labelling and packing undertaken after import meant that the goods were not imported for sale as such so as to deny the benefit of Notification No. 22/99-Cus dated 28-2-1999; (iii) whether confiscation under Section 111(d) of the Customs Act, 1962 and the imposition of redemption fine and penalty were justified.

Issue (i): whether unlabelled imported toilet soaps were misbranded cosmetics and therefore prohibited for import under the Drugs and Cosmetics Act, 1940.

Analysis: The relevant enquiry was the condition of the goods at the time of import. Cosmetics are deemed misbranded if they are not labelled in the prescribed manner, and misbranded cosmetics are prohibited for import. The goods were admittedly imported in naked and unlabelled condition, and the subsequent packing activity did not alter their imported character for the purpose of this statutory prohibition.

Conclusion: The goods were correctly held to be misbranded cosmetics and prohibited for import, against the assessee.

Issue (ii): whether labelling and packing undertaken after import meant that the goods were not imported for sale as such so as to deny the benefit of Notification No. 22/99-Cus dated 28-2-1999.

Analysis: The exemption depended on import for sale as such and on compliance with the declaration condition in the notification. Since the soaps were imported unlabelled and were later packed and labelled only after landing, the goods could not be treated as imported in the same form for sale as such. The post-import activity also could not defeat the statutory consequence flowing from their original condition as imported.

Conclusion: The exemption under Notification No. 22/99-Cus was not available, against the assessee.

Issue (iii): whether confiscation under Section 111(d) of the Customs Act, 1962 and the imposition of redemption fine and penalty were justified.

Analysis: Goods prohibited for import attract confiscation under Section 111(d) of the Customs Act, 1962. In view of the prohibited character of the goods, confiscation was sustainable. Having regard to the value of the goods and the violation involved, the redemption fine was maintained. The penalty, however, was considered excessive on the facts and was reduced.

Conclusion: Confiscation and redemption fine were upheld, while the penalty was reduced, partly in favour of the assessee.

Final Conclusion: The adjudication order was sustained in substance, the confiscation and redemption fine were maintained, and only the penalty was scaled down.

Ratio Decidendi: Imported goods must be assessed in the condition in which they are brought into India, and unlabelled cosmetics are misbranded and prohibited for import; such goods are liable to confiscation, while the quantum of penalty remains subject to proportionality on the facts.

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