Drug classification of imported Sorbitol upheld, defeating additional duty and supporting refund of duty wrongly collected.

Imported Sorbitol 70% Liquid USP was treated as a drug where the bill of entry and invoice identified the product with manufacturer details and pharmacopoeial conformity, and any doubt had to be addressed under the Drugs and Cosmetics Rules rather than by denying drug status outright. Once the goods fell within the exempted category of drugs under the applicable notification, additional duty was not recoverable. The refusal to refund the duty was therefore set aside, and repayment of the wrongly collected additional duty was directed subject to verification.

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Issues: (i) Whether the imported consignment of Sorbitol 70% Liquid USP could be denied the character of a drug on the ground of non-compliance with the Drugs and Cosmetics Act, 1940 and the Drugs and Cosmetics Rules; (ii) Whether the imported goods were nevertheless liable to additional duty despite the exemption applicable to drugs.

Issue (i): Whether the imported consignment of Sorbitol 70% Liquid USP could be denied the character of a drug on the ground of non-compliance with the Drugs and Cosmetics Act, 1940 and the Drugs and Cosmetics Rules.

Analysis: The relevant statutory scheme required an imported drug to be accompanied by the prescribed invoice or statement and subjected to the safeguards in the Rules where doubt arose. The description in the bill of entry and invoice identified the goods as Sorbitol 70% Liquid USP, including the manufacturer's particulars and other identifying data. The use of the expression "USP" indicated conformity with recognised pharmacopoeial standards, and any further doubt had to be dealt with through the machinery provided by the Rules rather than by retrospectively denying the status of a drug.

Conclusion: The consignment was treated as a drug, and the contention that it lost that character for want of compliance was rejected.

Issue (ii): Whether the imported goods were nevertheless liable to additional duty despite the exemption applicable to drugs.

Analysis: The exemption notification specifically excluded drugs from the duty otherwise leviable. In that setting, the question whether additional duty could in the abstract be imposed did not survive once the goods were held to fall within the exempted category. The earlier ruling relied upon by the respondents did not assist them on the facts found in this case.

Conclusion: The goods were not liable to additional duty, and the refund claim succeeded.

Final Conclusion: The refusal to refund was set aside, and the respondents were directed to return the additional duty wrongly recovered, with the refund to be verified before payment.

Ratio Decidendi: Where imported goods are identified as exempt drugs under the governing notification and the prescribed import documentation shows compliance with the drug-control requirements, additional duty cannot be retained on the basis of a contrary reclassification or a limitation objection that is inconsistent with the substantive entitlement to refund.

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