Controlled-substance classification and penalty limits under customs law: preparations not expressly listed, and residuary penalty provision cannot apply.

A controlled-substance entry in Schedule-B was not extended to preparations containing Ergotamine because the schedule expressly listed Ergotamine and its salts, and the product was treated as a preparation rather than the controlled substance itself; therefore, no No Objection Certificate was required for export. Penalty under the Customs Act could not be imposed on the customs broker for the alleged breach of the Customs Broker Licensing Regulations because the Regulations contained their own penalty mechanism, making the residuary provision inapplicable. The appeal was allowed and the penalty order was set aside.

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Issues: (i) Whether the product exported as MIGRAN, containing Ergotamine in preparation form, fell within Schedule-B of the Narcotic Drugs and Psychotropic Substances (Regulation of Controlled Substances) Order, 2013 so as to require a No Objection Certificate from the Narcotics Commissioner; and (ii) whether penalty could be imposed on the customs broker under Section 117 of the Customs Act, 1962 for the alleged violation of Regulation 10(d) of the Customs Broker Licensing Regulations, 2018.

Issue (i): Whether the product exported as MIGRAN, containing Ergotamine in preparation form, fell within Schedule-B of the Narcotic Drugs and Psychotropic Substances (Regulation of Controlled Substances) Order, 2013 so as to require a No Objection Certificate from the Narcotics Commissioner.

Analysis: Schedule-B specifically lists "Ergotamine and its salts" and does not refer to preparations thereof. The reasoning applied was that when the legislative intent is to include salts or preparations, the schedule says so expressly. On the facts, the product contained only a small percentage of Ergotamine and was treated as a preparation rather than the controlled substance itself. The absence of express coverage of preparations meant that the export did not attract the same NOC requirement as direct export of Ergotamine.

Conclusion: The product was not covered by Schedule-B as a controlled substance requiring a No Objection Certificate, and this issue was answered in favour of the appellant.

Issue (ii): Whether penalty could be imposed on the customs broker under Section 117 of the Customs Act, 1962 for the alleged violation of Regulation 10(d) of the Customs Broker Licensing Regulations, 2018.

Analysis: Section 117 is a residuary penal provision and cannot be invoked where the Regulations themselves contain a specific penalty mechanism. Regulation 18 of the Customs Broker Licensing Regulations, 2018 expressly provides for penalty for contravention or failure to comply with the Regulations and also states that such action is without prejudice to action under the Customs Act, 1962 or any other law. In the circumstances, the Regulations constituted a self-contained code for penalty, and recourse to Section 117 was impermissible. The absence of a clear basis to attribute technical knowledge to the customs broker on the disputed classification issue further weakened the penalty basis.

Conclusion: Penalty under Section 117 of the Customs Act, 1962 was not sustainable against the customs broker, and this issue was answered in favour of the appellant.

Final Conclusion: The penalty order could not stand either on the classification issue or on the choice of penal provision, and the impugned order was set aside, resulting in allowance of the appeal.

Ratio Decidendi: Where a specific penalty provision exists in the governing regulatory framework, a residuary penalty under the Customs Act cannot be invoked, and a controlled-substance entry will not be extended to preparations unless the schedule expressly so provides.

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