2025 (7) TMI 730 - HC - Customs

Imported ayurvedic drugs must meet same standards as domestic products before customs clearance

M/s. Axeon Marketing India, Represented by its Managing Partner, Mr. M.H. Jiffry Kasim Versus The Assistant Commissioner of Customs (Group 2), The Deputy Commissioner of Customs, The Assistant Drugs Controller (India), The Drug Controller General of India (DCGI), The State Licensing Authority (IM), The Secretary to Government, New Delhi

The HC directed that imported ayurvedic drugs must comply with standards prescribed for similar products manufactured in India before clearance. The ... Seeking a direction to the first and second respondents to permit the petitioner to clear all goods covered by bill of entry - violation of Section 33EEA of the Drugs and Cosmetics Act, 1940 (Drugs & Cosmetics Act) and Rule 154 of the Drugs and Cosmetics Rules, 1945 (Drugs & Cosmetics Rules) - HELD THAT:- There is a strong public interest element, specifically public health element, in relation to the import of drugs. The drug involved in this case is Axe Medicated Oil and, in that specific context, the public health threat may not be significant. It is conceivable, however, that other non-allopathic medicines could have, for example, heavy metal content and, therefore, the need for regulation cannot be disregarded. As held above, the statute and rules framed thereunder apply to ayurvedic drugs. As regards import, while Rule 23 uses the expression “drugs” and not drugs used in allopathy, the forms referred to therein and in Rule 24 do not apply to the import of ayurvedic or non-allopathic drugs. Therefore, it is necessary for the rule making authority to modify existing rules, prescribe standards and prepare appropriate forms in which applications may be made and import licenses granted to persons importing ayurvedic drugs. Meanwhile, given the fact that the statute clearly applies to ayurvedic drugs and does not currently contain a prohibition or exemption in respect of import of ayurvedic drugs, as a pre-condition for clearance, it is necessary that the products imported by the petitioner are in conformity with standards prescribed for similar products manufactured in India. For such purpose, it is necessary that this consignment be tested by one of the laboratories accredited to the CDSCO. This process shall be overseen by the 5th respondent, which is the licensing authority for the manufacture of ayurvedic drugs. All expenses relating to such testing shall be borne by the petitioner. If a satisfactory report is received from such laboratory, the 5th respondent shall certify that the manufacturing process is in conformity with the process prescribed for the manufacture of ayurvedic drugs in India. A copy of such certificate shall be provided to the first and second respondents, who, on receipt thereof, shall permit the release of goods covered under bill of entry No.8438669. Petition disposed off. 1. ISSUES PRESENTED and CONSIDERED(a) Whether ayurvedic drugs, specifically the imported Axe Brand Medicated Oil products, fall within the definition of 'drug' under the Drugs and Cosmetics Act, 1940 and are subject to its regulatory framework, including import licensing requirements.(b) Whether the provisions of the Drugs and Cosmetics Act and the Drugs and Cosmetics Rules, 1945, particularly those concerning import licensing (Rules 23 and 24), apply to ayurvedic drugs or only to allopathic drugs.(c) Whether the petitioner, as an authorized importer of ayurvedic drugs, is required to obtain an import licence under the current statutory framework to clear the goods covered by the relevant bill of entry.(d) Whether the absence of specific forms and licensing procedures for ayurvedic drugs under the existing rules renders the import licensing requirement inapplicable or unenforceable in respect of such drugs.(e) The scope and applicability of the guidelines issued by the Central Drugs Standard Control Organization (CDSCO) for import of ayurvedic drugs, and whether these guidelines can be followed to permit clearance of the impugned consignment.(f) The role and jurisdiction of the licensing authority for ayurvedic drugs, particularly the 5th respondent, in regulating the import of such drugs.(g) The public interest and health considerations involved in regulating the import of ayurvedic drugs and the necessity of ensuring conformity with prescribed standards before permitting clearance.(h) The appropriate procedural mechanism for clearance of the impugned consignment pending amendment or modification of the rules governing import of ayurvedic drugs.2. ISSUE-WISE DETAILED ANALYSIS(a) Classification of the imported goods as ayurvedic drugs within the Drugs and Cosmetics ActThe Court relied on the binding precedent from the Customs Excise and Service Tax Appellate Tribunal (CESTAT), which held that Axe Brand Universal Oil is classifiable under chapter 30 of the Customs Tariff Heading (CTH) as an ayurvedic drug. This classification was undisputed and not appealed, establishing that the goods fall within the ambit of the Drugs and Cosmetics Act. The definitions under Sections 3(a) and 3(b) of the Act were examined, confirming that ayurvedic drugs are expressly included within the statutory definition of 'drug.' The Court observed that Part XVI of the Drugs and Cosmetics Rules specifically regulates ayurvedic drugs, underscoring Parliament's intention to regulate this category.(b) Applicability of import licensing provisions to ayurvedic drugsRule 23 of the Drugs and Cosmetics Rules mandates an import licence for drugs without excluding ayurvedic drugs. However, the forms prescribed under Rules 23 and 24 (Forms 8, 8A, 9, 10, and 10A) appear designed exclusively for allopathic drugs, making them inappropriate for ayurvedic drugs. The Court noted this lacuna but emphasized that the absence of appropriate forms does not imply exemption from the licensing requirement. The statutory language is inclusive, and no express exemption exists for ayurvedic drugs. The Court highlighted that the rule-making authority must address this gap by modifying the rules to prescribe suitable forms and standards for ayurvedic drug imports.(c) Petitioner's entitlement to import without licence and the impact of CDSCO guidelinesThe petitioner contended that the import policy permits ayurvedic drugs to be imported 'free,' i.e., without a licence, and relied on CDSCO guidelines that provide a procedure for import clearance based on examination of manufacturer's test reports, samples, and issuance of a no objection certificate (NOC). The Court acknowledged the existence of such guidelines but clarified that these do not override statutory requirements. The guidelines may serve as an interim measure but cannot substitute for formal licensing under the Act and Rules. The Court also noted the petitioner's submission regarding the manufacturer's compliance with Good Manufacturing Practices (GMP) as certified by the Health Sciences Authority, Singapore, which supports the product's quality but does not negate the need for statutory clearance.(d) Role of the licensing authority and jurisdictional issuesThe 5th respondent, as the licensing authority for manufacture of ayurvedic drugs, submitted that its jurisdiction does not extend to import licensing. The Court held that while the 5th respondent's statutory role is confined to manufacturing licenses, it is appropriate for this authority to oversee the testing and certification of imported ayurvedic drugs to ensure conformity with Indian manufacturing standards. This approach balances regulatory oversight with practical administration pending formal rule amendments.(e) Public health and regulatory considerationsThe Court emphasized the strong public health interest in regulating drug imports, including ayurvedic drugs. It acknowledged that certain non-allopathic medicines could contain harmful substances (e.g., heavy metals) necessitating stringent regulation. The Drugs and Cosmetics Act's inclusive definitions and Part XVI of the Rules demonstrate Parliament's intent to regulate ayurvedic drugs comprehensively. The Court rejected the petitioner's argument that the import provisions do not apply to ayurvedic drugs, underscoring the necessity of regulatory compliance to protect public health.(f) Interim procedural mechanism for clearance of the consignmentGiven the statutory framework and the regulatory gaps identified, the Court directed that the impugned consignment be subjected to testing by a CDSCO-accredited laboratory to verify conformity with Indian standards for ayurvedic drugs. The 5th respondent shall oversee this testing and, upon receipt of a satisfactory report, issue a certificate confirming compliance with manufacturing standards. The first and second respondents shall then permit release of the goods upon receipt of this certificate. The Court mandated completion of this process within eight weeks, preferably six weeks, from the date of the order's uploading. The petitioner shall bear all expenses related to testing. The Court clarified that all other conditions under the Drugs and Cosmetics Rules relating to import of drugs shall apply mutatis mutandis.3. SIGNIFICANT HOLDINGS'On examining the definition of drug and ayurvedic, siddha or unani drug in Section 3(b) and Section 3(a), respectively, of the Drugs and Cosmetics Act, it appears that ayurvedic drugs clearly fall within the ambit of the statute. Indeed, Parliament's intention to regulate this category is expressed beyond doubt in Part XVI of the Drugs and Cosmetics Rules, which expressly regulate ayurvedic drugs.''Rule 23 of the Drugs & Cosmetics Rules provides for an import licence to import drugs. No carve out has been made in the said rule in relation to ayurvedic or any other drugs. Therefore, it appears prima facie that the intention of Parliament was to provide for an import licence for all drugs.''The forms referred to in Rules 23 and 24 do not apply to the import of ayurvedic or non-allopathic drugs. Therefore, it is necessary for the rule making authority to modify existing rules, prescribe standards and prepare appropriate forms in which applications may be made and import licenses granted to persons importing ayurvedic drugs.''Given the fact that the statute clearly applies to ayurvedic drugs and does not currently contain a prohibition or exemption in respect of import of ayurvedic drugs, as a pre-condition for clearance, it is necessary that the products imported by the petitioner are in conformity with standards prescribed for similar products manufactured in India.''This process shall be overseen by the 5th respondent, which is the licensing authority for the manufacture of ayurvedic drugs. All expenses relating to such testing shall be borne by the petitioner. If a satisfactory report is received from such laboratory, the 5th respondent shall certify that the manufacturing process is in conformity with the process prescribed for the manufacture of ayurvedic drugs in India.''Other conditions in the Drugs and Cosmetics Rules relating to the import of drugs shall apply mutatis mutandis.'Final determinations:- Ayurvedic drugs fall within the definition of 'drug' under the Drugs and Cosmetics Act and are subject to its regulatory framework, including import licensing.- The current rules require an import licence for ayurvedic drugs, but the prescribed forms are inappropriate for such drugs, necessitating rule amendments.- Interim clearance of the impugned consignment is permitted subject to testing by a CDSCO-accredited laboratory and certification by the licensing authority for ayurvedic drugs.- The petitioner must bear testing costs and comply with all other applicable regulatory conditions.- The regulatory authorities are directed to complete the clearance process within a specified timeframe.