Export prohibition under drugs law did not cover Sibutramine hydrochloride; confiscation and related penalties failed.

A restriction under the Drugs and Cosmetics Act on manufacture, sale or distribution of specified drugs did not amount to a prohibition on export, because section 26A does not extend to export and Sibutramine hydrochloride was treated as a distinct salt outside the notification's wording. Goods already exported were also outside section 113(d) of the Customs Act, which applies to export goods intended to be taken out of India; on that basis, confiscation of the goods failed. As confiscation under section 121 depends on smuggled goods and the sale proceeds, and the penalties under sections 114(i) and 114AA, were derivative, they also could not survive.

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Issues: (i) Whether Notification GSR 82(E) dated 10.02.2011 issued under section 26A of the Drugs and Cosmetics Act, 1940 prohibited export of Sibutramine hydrochloride, and whether the drug was covered by the notification. (ii) Whether goods already exported could be confiscated under section 113(d) of the Customs Act, 1962, whether the sale proceeds were liable to confiscation under section 121, and whether penalties under sections 114(i) and 114AA could survive.

Issue (i): Whether Notification GSR 82(E) dated 10.02.2011 issued under section 26A of the Drugs and Cosmetics Act, 1940 prohibited export of Sibutramine hydrochloride, and whether the drug was covered by the notification.

Analysis: The notification prohibited manufacture, sale and distribution of specified drugs, but did not mention export. Sibutramine hydrochloride was held to be a distinct salt and was not covered by the expression "Sibutramine and its formulations." Section 26A authorises regulation, restriction or prohibition of manufacture, sale or distribution, and the Act's scheme was treated as not extending to prohibition of export. Rule 94 of the Drugs and Cosmetics Rules, 1945 was understood as dealing with export labelling and certain NOC requirements in a limited context, not as creating a general export prohibition for drugs covered by section 26A.

Conclusion: The notification did not prohibit export of Sibutramine hydrochloride and the exported goods were not prohibited on that ground.

Issue (ii): Whether goods already exported could be confiscated under section 113(d) of the Customs Act, 1962, whether the sale proceeds were liable to confiscation under section 121, and whether penalties under sections 114(i) and 114AA could survive.

Analysis: Section 113(d) was read as applying only where export is contrary to a prohibition imposed by or under law, and only to export goods, that is, goods intended to be taken out of India. Since the goods had already been exported, they were held to fall outside section 113(d). As confiscation under section 121 depends on smuggled goods and smuggling in turn depends on liability to confiscation under section 113, the sale proceeds could not be confiscated either. Once the foundation for confiscation failed, the penalties under sections 114(i) and 114AA also could not stand.

Conclusion: Confiscation of the exported goods and sale proceeds was not sustainable, and the penalties were not sustainable.

Final Conclusion: The appeal succeeded and the impugned order was set aside with consequential relief.

Ratio Decidendi: A mere restriction on manufacture, sale or distribution under the Drugs and Cosmetics Act does not amount to a prohibition of export for the purposes of section 113(d) of the Customs Act, and goods already exported cannot be confiscated as export goods under that provision.

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