2014 (11) TMI 151 - AT - Customs

Importer not liable for mismatched labels; tribunal dismisses Revenue's appeal. Duty to verify source emphasized.

COMMR. OF CUS. (IMP.), NHAVA SHEVA Versus MEDI PHARMA DRUG HOUSE

The tribunal allowed the assessee's appeal and dismissed the Revenue's appeal in a case involving the import of goods with mismatched labels. The tribunal ... Confiscation of goods - Imposition of penalty - import of drugs - it was found that the labels are not matching to the labels of M/s. North China Pharmaceutical Victor Co. Ltd. of China. - Held that:- As per the licence obtained by the assessee, they were allowed to import the drugs manufactured by M/s. North China Pharmaceutical Victor Co. Ltd. of China. The Licence was granted to import the goods manufactured by the person mentioned in the licence. The licence has not cast the duty on assessee that they have to import the goods from the manufacturer directly. Further, I find that in this case, the assessee has taken every step to import the goods manufactured by M/s. North China Pharmaceutical Victor Co. Ltd. of China as per the condition of indent and invoice issued by the supplier. The assessee came to know only of the fraud when the goods were sent to the Drugs and Control Department for obtaining NOC. As the goods imported by them are as per the licence given to them by the Drugs & Control Department, they have taken every steps to comply with terms and conditions of the licence. relying on the decision of Oriental Containers Ltd. (2003 (3) TMI 126 - HIGH COURT OF JUDICATURE AT BOMBAY) the confiscation of the goods and levy of the penalty is not required and confiscation is also set aside - Decided against Revenue. Issues:Import of goods with mismatched labels, confiscation, redemption fine, penalty imposition, knowledge of fraud by the importer, duty of the importer to verify the source of goods, applicability of penalty in case of lack of knowledge, relevance of previous legal precedents.Analysis:The case involved an appeal by both the assessee and the Revenue against an impugned order regarding the import of a drug with mismatched labels, leading to confiscation, redemption fine, and penalty imposition. The assessee had obtained a license to import the drug from a specific manufacturer in China but received goods with labels not matching the licensed manufacturer. The goods were confiscated, and a penalty and redemption fine were imposed. The assessee contended that they were unaware of the fraud played by the supplier and argued against the penalty imposition, citing previous legal decisions supporting their stance.During the proceedings, it was revealed that the imported goods had been destroyed in a fire before being released, rendering the question of confiscation and redemption fine moot. The focus shifted to the imposition of the penalty on the assessee. The counsel for the assessee argued that the importer was not aware of the fraud as they had followed the terms of the indent and relied on the supplier's assurances regarding the manufacturer's identity. The Revenue, however, argued that it was the importer's responsibility to verify the direct source of goods and supported the penalty imposition.After considering the arguments, the tribunal found that the assessee had taken all necessary steps to import goods from the specified manufacturer as per the license conditions and was unaware of the fraud until later in the process. Relying on a legal precedent, the tribunal concluded that confiscation of goods and penalty imposition were not justified when the importer lacked knowledge of the misrepresentation. Consequently, the confiscation was set aside, and the penalty on the assessee was deemed unwarranted, leading to the allowance of the assessee's appeal with consequential relief while dismissing the Revenue's appeal as infructuous.In summary, the judgment addressed issues related to import compliance, penalty imposition based on knowledge of fraud, and the importer's duty to verify the source of goods. It emphasized the importance of importer's due diligence and knowledge in import transactions while considering legal precedents to determine the appropriate outcome in cases of alleged fraud or misrepresentation during importation.