2026 (1) TMI 866 - AT - Customs

- TMI Re-importation of goods - levy of customs duty on re-importation - destruction of goods - remission of duty - abandonment of goods - adjudicating authority - Notification No.52/2003-Cus - Board Circular No.60/1999-Cus - Foreign Trade Policy - Non-payment of duty on destruction within EOU framework - Whether the said drugs could have been re-imported without payment of applicable customs duty or otherwise. - HELD THAT:- Admittedly, the drugs were re-imported after its refusal by the KEMSA, however, at the time of re-import, the CDSCO/ Drugs Controller General of India (DCGI) was informed by the appellant that the goods had less than 60% shelf life and consequently the said organization observed that the re-import could not be used and has to be destroyed. In terms of Rule 31 of the Drugs and Cosmetics Rules, 1945, no drug can be imported, which is having less than 60% residual shelf life on the date of import. Therefore, the import itself was restricted and it was allowed only for the purpose of destruction. It is also on record that the respondents had sought permission to re-import these drugs for destruction on the grounds that the said drugs were having shelf life of less than 60%. The No-Objection was given for reimport for destruction only with condition that no part of consignment of the imported drugs shall be used for domestic purposes under any circumstances. However, while there is no case for any improper import once the permission was granted by CDSCO/DGCI, the fact remains that no duty was paid at the time of clearance of goods from customs area. The goods, which are manufactured in the 100% EOU are also eligible for non-payment of duty if intended for destruction. However, what is to be seen is that at the time of import, even if it was made for destruction after being cleared from the customs area in the factory of the importer, the fact remains that there was no provision under which the duty itself would have been waived at the time of clearance. The proper course would have been that at the time of import, the proper value of the goods should have been arrived at and applicable duty should have been demanded. The respondents could have also availed themselves of the provisions under section 23, which provides for remission of duty on lost, destroyed or abandoned goods. The provisions under section 23(2) of the Customs Act clearly provide for relinquishing the title to the goods and in that case, the importer will not be liable to pay duty thereon. Therefore, for the limited issue of whether duty was payable at the time of clearance by the respondents on the re-imported goods, we find that the department has made out a case and this aspect has not been clearly examined by the adjudicating authority. We also note that there is a clear permission for import of said goods for the purpose of destruction only by the competent authority. Therefore, there could not be any penalty etc., for violation of any restrictions as regards importation of said goods under Drugs and Cosmetics Act read with Customs Act. We, therefore, allow the appeal filed by the department by way of remand to the adjudicating authority to decide the issue in view of our observations above. Issues: Whether re-imported drugs permitted for destruction could be cleared without payment of customs duty or whether duty was payable on re-importation under the Customs Act.Analysis: The re-importation of goods is governed by section 20 of the Customs Act which treats goods re-imported after exportation as liable to duty and subject to the same conditions and restrictions as goods of like kind on importation. Provisions for remission or abatement under sections 22 and 23 and notifications (including Notification No.52/2003-Cus) apply only where expressly provided; FTP para 6.15(b) and EOU-related notifications do not, by themselves, abrogate duty liability under the Customs Act. Rule 31 of the Drugs and Cosmetics Rules, 1945 restricts import of drugs having less than 60% residual shelf life and, when import is permitted for destruction, the import remains conditional. Where no specific exemption from duty at the time of re-importation is shown to apply, the proper procedure is to assess and demand applicable duty at clearance or seek relief under section 23 for destroyed goods; these aspects were not fully examined by the adjudicating authority.Conclusion: The appellate authority found that the department made out a case that duty liability on the re-imported goods required fresh consideration and therefore remanded the matter to the adjudicating authority for decision in light of the statutory provisions and observations above, resulting in an outcome favourable to the Revenue.