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M/s. Dr. Reddy's Laboratories Versus Commissioner of Customs

2015 (9) TMI 244 - SUPREME COURT

Classification of goods as "auto analysers" or "photometers" Appellant filed Bill of Entry for clearance of models of BTS 320 and BTS 310 classified goods as "auto analysers" under Entry 9030.89 of Customs Tariff Act, 1975 Goods were seized by custom authorities, being total of 8 BTS 320 and 15 BTS 310 models DRI issued show cause notice stating that goods in question are "photometers" and not "auto analysers" and demanded duty, Confiscation of goods and imposition of penalty Held that:- .....

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ters to auto analysers to avail benefit of exemption under notification No. 20/1999, would be material in deciding whether Section 111(m) are attracted as to amount to mis-declaration of description of goods resulting in confiscation of said goods, fine, and penalty Therefore, appeal of assesse allowed and order of tribunal imposing penalty set aside Decided in favour of Assesse. - Civil Appeal No. 2603 of 2006, Civil Appeal No. 4374 of 2006 - Dated:- 2-9-2015 - A. K. Sikri And R. F. Nariman .....

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arious models of diagnostic equipment such as BTS 302, BTS 310, BTS 320 and BTS 370 manufactured and supplied M/s Bio Systems, Barcelona, Spain. On 27th May, 1999, the appellant in its Bill of Entry filed at Hyderabad for clearance of models of BTS 320 and BTS 310 classified the goods as "auto analysers" under Entry 9030.89 of the Customs Tariff Act, 1975. The goods were seized by the custom authorities, being a total of 8 BTS 320 and 15 BTS 310 models, valued at ₹ 26,97,741.21. .....

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9. (b) Confiscation of goods valued at ₹ 3,31,55,908/- imported without payment of duty and sold (in the market) as auto analysers under Section 111(m) of the Customs Act, 1962. (c) Confiscation of goods valued at ₹ 26,97,741/- imported vide Bill of Entry No. 4454 dt. 27-05-99 and seized by the officers of DRI on 8.6.99 under Section 111(m) of the Customs Act, 1962. (d) Penalty under Section 114A of the Customs Act, 1962. (e) Penalty under Section 112(a)/112(b) of the Customs Act on .....

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ne by a photometer. The only difference between the four models imported was that whereas model BTS 370 was technologically superior and fully automatic, the other models were not as technologically advanced nor were they fully automatic. However, insofar as the analysis of Enzymes is concerned, the said two models, namely, BTS 310 and BTS 320 were fully automatic, the only non-automatic part being the manual mixing of certain elements with blood samples. They further relied upon the technical l .....

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n 9 th January, 2001 by the learned Commissioner of Customs, Hyderabad. In a detailed order dated 1st March, 2001, the learned Commissioner went through the show cause notice and the reply filed by the assessee. He correctly concluded that the issue for determination was whether the impugned goods were qualified to be called "auto analysers" of Enzymes, drug levels and biochemical investigations. In this connection, he referred to a book by "Tietz Text Book of Clinical Chemistry&q .....

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as whether the term "Auto Analysers for enzymes, Drug levels and Biochemical investigations" could be applied to Analyzers in which a part of the operations are performed manually, like some in which mixing of samples and reagents is done manually but the actual analysis is done automatic. The doubt arose since a view existed that the term applied only to those instruments in which all operations, including mixing of samples and reagents are automatic. However, in one particular case o .....

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cally. TRU may, however, examine in consultation with the administrative Ministry concerned whether they would like this entry to be amended in any manner to remove ambiguity." Thus what is crucial to determine whether a medical equipment is an auto analyser or not is to see whether the analysis is done automatically or not. All the models (BTS 302, BTS 310, BTS 320 and BTS 370) in the impugned goods did not achieve this purpose. Of course, more and more features increasing the extent of au .....

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mend the entry relating to auto analysers if found necessary for the purpose of removing ambiguity, no such amendment has been carried out till date indicating that there is no ambiguity regarding the scope of the expression auto analysers as viewed by the Conference of Commissioners of Customs." 4. He further held: "47. The word photometer used by M/ s. Bio Systems, Barcelona, Spain to describe two out of the four models of the impugned goods (BTS 302 and BTS 310) has been the fundame .....

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of physics dealing with measurement of intensity of light sources. Instruments used for such measurements are called Photometers. However the principle of photometry has found application in the field of clinical chemistry and auto analysers are one type of medical equipment which have been invented incorporating the principle of photometry applied to investigations in clinical laboratories. The catalogues of the manufacturer for the four models of the impugned goods describe the impugned goods .....

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models printed elsewhere in these catalogues. There is no doubt in my mind that these equipments are auto analysers meant for conducting tests in clinical laboratories. Just because the word Photometer has been used by the manufacturer in the catalogues for two first two models, neither will these two models (BTS 302 and BTS 310) nor the other two models (BTS 320 and BTS 370) cease to be auto anlaysers. It is true that all these models are based on the principle of photometry and therefore have .....

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ion and that therefore the impugned goods were liable for confiscation and penalty. However, no penalty under Section 114A was imposed on the importer because there had, in fact, been no evasion of duty on the imported goods. Importantly, the learned Commissioner concluded:- "52. Since the goods under import are required to be programmed after import by feeding standardized procedures separately developed before they can be used as auto analysers it has been aIIeged in the show cause notice .....

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the need to program the impugned goods according to the needs of each individual customer would for that matter render the goods into something entirely different from auto analyser. It is common knowledge that auto analysers come both as closed system and as open systems enabling customers to program them according to their own needs when they are open system models. In fact open systems are more popular these days because it allows the customer the flexibility to adapt the system to his own n .....

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be recovered by enforcing the bank guarantee furnished by the importer at the time of provisional release. (ii) Goods valued at ₹ 3,31,55,908/- already cleared and sold by M/s. Dr. Reddy's Laboratories Ltd. are also liable for confiscation under Section 111(m) of Customs Act, 1962. But as the said goods were neither seized nor available now for seizure it is not possible for ordering its confiscation at this point of time. (iii) Under Section 112(a) of the Customs Act, 1962 I impose a .....

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rest of the actions proposed in the show cause notice." 7. Against the said order of the learned Commissioner, revenue filed an appeal under Section 129D(4) of the Customs Act on 12 th April, 2002. The assessee filed a reply-cum-cross objection dated 8th June, 2002 in which the assessee specifically stated:- "In all cases, closed or open the in-built software contains programs for analysis and interpretation. The only inputs which are entered in an open system is volume of reagents to .....

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e impugned order, the CESTAT allowed revenue's appeal. It found fault with the book quoted by the assessee which found favour with the learned Commissioner, and stated "Instead of appreciating the evidence unearthed by the investigating officer with reference to the goods imported, the adjudicating authority has embarked himself on a detour deviating from the main issue". 9. We are at loss to understand what is meant by this statement. The evidence analysed by the investigating off .....

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talled in them which could then perform various operations. The CESTAT in finding this logic faulty has not given any reason for disregarding the same. It then goes on to say that the whole of paragraph 46 of the Commissioner's order is irrelevant. In this paragraph the learned Commissioner referred to the Commissioners' Conference to arrive at the conclusion that since the process of analysis is automatic, though mixing of samples may be done manually, yet since analysis has to be done .....

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