2020 (2) TMI 1604 - AT - Customs

Customs Appeal Upheld: Importance of Regulatory Compliance & Expertise in Enforcement

COMMISSIONER OF C. EX. & CUS., NASHIK Versus MYLAN LABORATORIES LTD.

COMMISSIONER OF C. EX. & CUS., NASHIK Versus MYLAN LABORATORIES LTD. - 2021 (378) E.L.T. 371 (Tri. - Mumbai) Issues Involved:1. Applicability of Customs Act, 1962 for compliance with conditions under other laws.2. Classification of imported goods under Drugs and Cosmetics Act, 1940.3. Compliance with Rule 43A of Drugs and Cosmetics Rules, 1945.4. Authority of customs officials versus designated officials under Drugs and Cosmetics Act, 1940.5. Legitimacy of transshipment and clearance procedures for 100% export-oriented units.Issue-wise Detailed Analysis:1. Applicability of Customs Act, 1962 for compliance with conditions under other laws:The judgment discusses the limitations of the Customs Act, 1962, particularly regarding the enforcement of conditions imposed under other laws. The appellate authority emphasized that the Customs Act, 1962, primarily concerns the assessment and collection of duties on cross-border trade in goods, and while it does enable prohibitions under Section 11, it should not be used to enforce compliance with other statutes like the Drugs and Cosmetics Act, 1940.2. Classification of imported goods under Drugs and Cosmetics Act, 1940:The original authority classified the imported goods as 'drugs' under the Drugs and Cosmetics Act, 1940, leading to penalties under Section 111(d) and Section 112 of the Customs Act, 1962. However, the appellate authority found that the goods did not fit the pharmaceutical definition of 'drugs' and that substantive compliance had been evidenced by certification from the relevant authority, thus precluding the need for confiscation and penalties.3. Compliance with Rule 43A of Drugs and Cosmetics Rules, 1945:The goods were imported to Nhava Sheva, a designated port, and then transshipped to ICD/CFS Nashik. The appellate authority noted that the landing at Nhava Sheva complied with the requirement of Rule 43A of the Drugs and Cosmetics Rules, 1945. The reviewing authority's contention that clearance at Nashik warranted confiscation was dismissed, as the transshipment was approved by the Assistant Drugs Controller.4. Authority of customs officials versus designated officials under Drugs and Cosmetics Act, 1940:The judgment clarifies that the customs officials should defer to the expertise of the officers authorized under the Drugs and Cosmetics Act, 1940, for determining the applicability of the regulatory regime. The appellate authority found that the customs officials overstepped their jurisdiction by attempting to enforce the Drugs and Cosmetics Act, 1940, without proper devolution of authority.5. Legitimacy of transshipment and clearance procedures for 100% export-oriented units:The respondent, a 100% export-oriented unit, had imported goods intended for manufacturing and filed 'into bond' bills of entry. The appellate authority noted that such units operate under specific exemptions and procedures, and the goods are not subject to the same clearance requirements as other imports. The transshipment and subsequent utilization of the goods were approved by the Assistant Drugs Controller, and thus, the customs authorities had no grounds for confiscation or penalties.Conclusion:The appellate authority dismissed the appeal of Revenue, finding no merit in the original authority's decision to confiscate the goods and impose penalties. The judgment emphasized the need for customs officials to respect the regulatory framework and expertise of designated authorities under the Drugs and Cosmetics Act, 1940, and highlighted the specific procedures applicable to 100% export-oriented units. The decision underscored the importance of adhering to the legislative intent and proper jurisdictional boundaries in enforcement actions.