TaxTMI 
TaxTMI 
2022 (3) TMI 561
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....ed by the Government of India, Ministry of Health and Family Welfare under Section 26A of the Drugs and Cosmetics Act, 1940, whereby the manufacture, sale and distribution of certain drugs for human use including Sibutramine and R-Sibutramine and their formulations was prohibited. Directorate of Revenue Intelligence [DRI] received intelligence that the appellant had manufactured and exported Sibutramine in violation of the aforesaid notification dated 10.02.2011. After scrutiny of documents, recording statements of the functionaries of the appellant and investigation, DRI found that the appellant had exported Sibutramine through four shipping bills after the issue of notification prohibiting manufacture, sale and distribution of the drug under Section 26A of the Drugs and Cosmetics Act, 1940. Therefore, it appeared that the goods were exported in violation of prohibition imposed under Drugs and Cosmetics Act, 1940 were liable for confiscation under Section 113(d) of the Customs Act, 1962. It also appeared that the sale proceeds of the exports were liable for confiscation under Section 121 of the Customs Act and the appellant was liable for penalty under Section 114(i) and 114AA of ....
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....quently, the penalties imposed under section 114(i) and 114AA also need to be set aside. (vi) The appeal may, therefore, be allowed with consequential relief to the appellant. 3. Learned departmental representative reiterated the findings in the impugned order and asserted that it is proper and calls for no interference. 4. We have heard both sides and perused the records. The show cause notice is issued to the appellant on the ground that the appellant had exported Sibutramine Hydrochloride in violation of the notification issued by the Ministry of Health and Family Welfare vide GSR82(E) dated 10.02.2011. Accordingly, it was felt that the Sibutramine hydrochloride so exported was liable for confiscation under Section 113(d) of the Customs Act. The proposals for imposition of penalties under Section 114(i) and 114AA follow from this. Since the goods were already exported, the proposal in the SCN was to confiscate the sale proceeds of the exports. The relevant legal provisions of the Customs Act are as follows: Section 113: Confiscation of goods attempted to be improperly exported, etc.- The following export goods&....
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.... a Pay Order during investigation be confiscated under section 121 of the Customs Act? h) Have the penalties under section 114 (i) and 114AA been correctly imposed? 6. The first issue which must be examined first is whether export of Sibutramine hydrochloride was prohibited by the Ministry of Health and Family Welfare Notification GSR82(E) dated 10.02.2011. We reproduce the entire notification below: MINISTRY OF HEALTH AND FAMILY WELFARE (Department of Health and Family Welfare) NOTIFICATION New Delhi, the 10th February, 2011 G.S.R. 82(E).---- Whereas the Central Government is satisfied that use of following drugs is likely to involve certain risks to human beings and whereas safer alternatives to the said drugs are available; And whereas the Central Government is satisfied that it is necessary and expedient to prohibit the manufacture, sale and distribution of the said drugs in public interest; Now, therefore, in exercise of the powers conferred by Section 26A of the drugs and Cosmetics Act, 1940 (23 of 1940), the Central Government hereby prohibits the manufacture, sale and distribution of the following drugs with immedi....
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....nd not their export either explicitly or implicitly. 9. The next question is whether Section 26A under which the notification was issued or any other provision of the Drugs and Cosmetics Act, 1940 provides for regulation of exports at all. One aid to construction of the statute is its preamble as it lays down the scope of the Act. The preamble of this Act reads as follows: An Act to regulate the import, manufacture, distribution and sale of drugs and cosmetics. WHEREAS it is expedient to regulate the import, manufacture, distribution and sale of drugs and cosmetics; AND WHEREAS the Legislatures of all the Provinces have passed resolutions in terms of section 103 of the Government of India Act, 1935 (26 Geo. 5, c. 2), in relation to such of the above-mentioned matters and matters ancillary thereto as are enumerated in List II of the Seventh Schedule to the said Act: It is hereby enacted as follows: 10. Thus, the very purpose of the Drugs and Cosmetics Act, 1940 is to regulate import, manufacture, sale and distribution of drugs and cosmetics and NOT to regulate exports at all. The notification was issued by the Ministry of Health ....
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....a. There is no provision, whatsoever, in the entire Drugs and Cosmetics Act, 1940 which authorizes the regulation of export of drugs. 13. It has been mentioned in paragraph 6 & 7 of the show cause notice as follows: "6. Ministry of Health and Family Welfare has also issued guidelines in connection with the export of prohibited drugs from India. As per guidelines issued and Rule 94 of Drugs and Cosmetics Act, 1940, a manufacturer holding valid license copy in Form-25 and Form-28 is required to obtain 'No Objection Certificate' from Zonal/Sub-Zonal Officers of Central Drugs Standard Control Organization (CDSCO) for export of banned/prohibited drugs in India. M/s Nosch has not made any application for the four consignments exported after the imposition of prohibition on manufacture/ sale/ distribution as per the stated guidelines and provisions of the Drugs and Cosmetic Act, 1940. In the absence of any application submitted by M/s Nosch Laboratories Ltd., for 'No Objection Certificate' from Zonal/Sub Zonal Officees of Central Drugs Standard Control Organization (CDSCO) for export of banned/prohibited drugs in India, no permission or 'no objection certificate' was iss....
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....ence under which the drug has been manufactured; (c) batch or lot number; (d) date of expiry, if any: Provided that where a drug, not classified under Schedule F, Schedule F(1) and Schedule X, 5 or blood products defined under rule 122EA is required by the consignee to be not labelled with the name and address of the manufacturer, the labels on packages or containers shall bear a code number as approved by the Licensing Authority mentioned in Rule 21. Provided further that where a drug classified as Narcotic Drug or Psychotropic Substance is to be exported under a code number, the same may be permitted by the said licensing authority on the following conditions, namely:- (i) Each consignment of export shall be accompanied with requisite import license from the importing country; (ii) The applicant shall obtain a no objection certificate from the Drugs Controller, India for manufacture of such formulations to be exported with code number against each export order along with certificate from the regulatory authority of the importing country controlling Narcotic Drugs and Psychotropic Substances that they do....
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.... Drugs Controller General. 17. Even if there are any guidelines for the Ministry of Health and Family Welfare under Rule 94 requiring a NOC to be obtained from the Central Government Drugs Standard Control Organization, such guidelines can only be read within the context of Rule 94. Further, any violation of any guidelines does not make goods liable for confiscation under Section 113 (d) (which applies only if there is prohibition of export under any law) and the Customs officers have no jurisdiction even if there are violations of guidelines. 18. Thus, we find that Salbutramine hydrochloride was not covered in the notification dated 10.2.2011 at all. Further, the notification does not prohibit export of any of the drugs mentioned in it. Section 26A of the Drugs and Cosmetics Act under which the notification was issued does not envisage prohibition of exports. The scope of the Drugs and Cosmetics Act, 1940, as can be seen from the preamble, also does not extend to prohibition of exports. 19. Unless 'salts of Salbutramine' or 'Salbutramine hydrochloride' is read into the notification, prohibition of export is also read into the notification and prohibition....
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....'export goods' is defined in Section 2(19) of the Customs Act as follows: "(19) "export goods" means any goods which are to be taken out of India to a place outside India" 23. Thus, exported goods are not liable for confiscation under Section 113 but only export goods are so liable. Undisputedly, in this case, the goods have been exported. Once, they are exported, they move out of the customs control as well as the territory of India. In fact, the Customs Act, 1962 did not, during the relevant period, extend to outside the territory of India. Section 1 of the Act, as applicable during the relevant period read as follows: Section 1. Short title, extent and commencement. - (1) This Act may be called the Customs Act, 1962. (2) It extends to the whole of India. (3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. 24. In this case, the goods were already exported and hence they cannot be confiscated under section 113(d). For this reason also, the confiscation of the goods which have already been exported cannot be sustained. 25. ....