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M/s. LGC Promochem India Pvt. Ltd., BR Suryanarayana Rao, New India Shipping Services And SS Prasad Partner Versus Commissioner of Customs and Service Tax Bangalore

2016 (5) TMI 1113 - CESTAT BANGALORE

Classification and eligibility to the benefit of Notification - Import of chemicals of various descriptions declared them as Pharmaceutical Reference Standards (PRS) classifying the same under Customs Tariff Heading No.38 22 00 90 - claimed benefit of Notification No.21/2002-Cus. dated 1.3.2002 and Notification No.12/2002-Cus. dated 17.3.2012 - Duty demanded alongwith interest and imposition of penalty - Held that:- it is found that the appellant had shown that the imported products, which h .....

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is that Pharmaceutical Reference Standard cannot be classified as certified Reference Materials and consequently not extending the scope of applicability of notification to products other than covered under Chapter Heading 28 and Chapter 29 is also not applicable. - The adjudicating authority has come to a conclusion that Pharmaceutical Reference Standard can be classified under Chapter Heading 38 22 as well but denied the benefit of Notification of reduced rate of duty only on the ground t .....

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ation in respect of the quality of the goods and the systems which they are following. As there is no dispute that the products imported being classified under Chapter Heading 3822, Revenue having not filed any appeal against the adjudicating authority's order by holding that the product imported are classifiable under Chapter Heading 3822, we have to draw adverse inference that Revenue has accepted that the Pharmaceutical Reference Samples are classifiable under 38 22. In our considered view, i .....

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of Notification as these Reference Standards imported by the appellants from U.S. Pharmacopoeia Convention or other Pharmacopoeia Convention are for the use of their clients either in the manufacturing of bulk drugs or consumption of bulk drugs. - Period of limitation - Held that:- it is found that the adjudicating authority has also not accepted the limitation aspect on the findings that the appellant had not produced any of the documents before the authorities while seeking clearances of t .....

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inal assessment by extending benefit of notification. In our view Revenue cannot today say that appellant had suppressed the facts with intention to avail ineligible benefit of Notification. It was for the Assessing Officers to seek further clarification on the matter, if they find that the appellant had claimed ineligible benefit of Notification. In all probability the Assessing Officers when they cleared the consignments were of the view that the appellant is eligible for the benefit of Notifi .....

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.V.RAVINDRAN, JUDICIAL MEMBER AND SHRI ASHOK K. ARYA, TECHNICAL MEMBER For the Appellants : Mr. D.B. Shroff, Sr. Advocate, Ms. Rukamni Menon, Advocate, Mr. Kiran S. Javali, Advocate And Mr. Laxminarayan Advocates For the Respondent : Mr. P. R.V. Ramanan, Special Counsel ORDER PER : M.V.RAVINDRAN All these appeals are directed against Order-in-Original No.BLR-CUSTM-000-COM-024-14-15 dated 30.9.2014. Since all these appeals are challenging the findings arising out of the same Order-in-Original and .....

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hat arise for consideration, after filtering out unnecessary details are, the main appellant imported chemicals of various descriptions declared them as Pharmaceutical Reference Standards (PRS) classifying the same under Customs Tariff Heading No.38 22 00 90 claiming the benefit of Notification No.21/2002-Cus. dated 1.3.2002 (Sl. No.138, read with Condition No.17) and Notification No.12/2002-Cus. dated 17.3.2012 (Sl. No.164 read with condition No.12). It is the case of the Department that the go .....

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se notice was issued for demand of differential duty on the goods imported by the appellant and by denying the benefit of Notifications, proposing to impose penalties on the appellants herein. The main appellant as well as other appellants contested the issue on merits as well as on limitation and justified their classification of the product under Chapter Heading No.38 22 and also claimed that their availment of benefit of Notifications was correct. The adjudicating authority did not agree with .....

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o.138), and (ii) No.12/2012-Cus. dt.17/3/2012 (Sl. No.164), as claimed by the importer in respect of the goods imported vide the Bills of Entry listed in the said Annexures A1-ACC to A6-ACC and A1-ICD to A6-ICD and confirm the demand of duty short paid amounting to ₹ 10,86,08,470/- (Rupees Ten Crores Eighty Six Lakhs Eight Thousand Four Hundred and Seventy Only) under Section 28(4) /proviso to erstwhile Section 28(1) of the Customs Act, 1962; (c) I confirm the demand of applicable interest .....

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and (m) of the Customs Act, 1962; (e) I order confiscation of the goods valued at ₹ 27,27,783/- (Rupees Twenty Seven Lakhs Twenty Seven Thousand Seven Hundred and Eighty Three Only) which were seized on 07.01.2014 from the importers premises under Section 111(d) and (m) of the Customs Act, 1962. However, I impose a redemption fine of ₹ 5,00,000/- (Rupees Five Lakhs Only) in lieu of confiscation as the goods were provisionally released to the importer. The Bank Guarantee of ₹ 2, .....

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f ₹ 40,00,000/- (Rupees Forty Lakhs Only) and ₹ 60,00,000/- (Rupees Sixty Lakhs Only) on Shri B. Suryanarayana Rao, Managing Director, M/s. LGC Promochem India Pvt. Ltd., Bangalore under Section 112 and Section 114AA, respectively; (i) I impose a penalty of ₹ 20,00,000/- (Rupees Twenty Lakhs Only) and ₹ 30,00,000/- (Rupees Thirty Lakhs Only) on the CHA M/s. New India Shipping Services, Bangalore under Section 112 and Section 114AA respectively; and (j) I impose a penalty .....

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. The Sr. Counsel for the main appellant after taking us through the show-cause notice and the Order-in-Original draws our attention to the speech of the Finance Minister in respect of reduction of the effective duty on the reference standards. He submits that prior to 2003, the goods which were imported by the main appellant were considered as reference standards and concessional rate of duty was extended only if the goods are imported by the Central Drug Laboratory, Kolkata; subsequently, the .....

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dards but are Certified Reference Materials and having not complied with the condition of Chapter Note 2(A) and 2(B) of Chapter 38 demanded the differential duty. It is his further submission, after taking us through the packing slip, commercial invoices and bills of entries filed by the main appellant that goods which are imported are nothing but reference standards of pharmaceutical goods. Explaining the issue in detail, he would submit that the pharmaceutical goods manufacturers need to adher .....

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s manufactured by them. It is his further submission that the Department had accepted the classification of the imported goods under Chapter Heading 38 22 for so many years and also extended the benefits of Notification. He would then take us through the Chapter Heading 38 22 and submit that the said Chapter Heading squarely covers the products imported. He would submit that the reference to Chapter Note 2(A) of Chapter 38 by the adjudicating authority is incorrect as appellant never claimed the .....

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them as forwarded by USP convention and submit that the labels in the products and the catalogue indicate that the products imported by the main appellant are not certified reference materials. It is his submission that the conclusion reached by the adjudicating authority that the main appellant had not produced any certificate as per the definition of the reference materials is totally incorrect inasmuch as the main appellant had not claimed product as certified reference material. He would sub .....

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that the reference material is special category of certified reference material. It is his submission that in the absence of any certificate as envisaged in Chapter Note No. 2(A) of Chapter 38, product cannot be classified as certified reference materials. It is his further submission that according to Rules of interpretative rules of Customs Tariff, classification has to be determined on the basis of description in the Chapter Heading read with Chapter Notes and in the case in hand, the adju .....

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aterial prepared by European Directorate for Quality of Medicines and submit that both are different and the goods imported by the main appellant are nothing but reference standards. It is his further submission that the adjudicating authority himself had pointed out that on landing of the goods in India, the main appellant has as per the understanding of the product filed the classification. It is his submission that in the matters of classification, if the Department had a different view, it c .....

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e examination report and was conducted as directed by the seniors and all the documents were given to the authorities. It is his submission that the Customs authorities, after ascertaining the propriety of all the documents produced before them accepted the contentions of the main appellant and cleared the goods by extending the benefit of the Notifications which itself would mean that the documents were there and non-presence of such documents in the dockets is not to the knowledge of the appel .....

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tified the confirmation of the demand of extended period by recording that under self-assessment system no verification of documents is done by the officers. He would submit that these findings are incorrect and draws our attention to the various documents filed by them which indicate the queries raised by the Customs Officer, replies given by the main appellant and subsequent clearance of the imported goods. It is his further submission that the reliance placed by the adjudicating authority on .....

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ty liability, which extended and the said imports are not questioned. He would draw our attention to the details furnished by them in respect of clearances that took place in Goa. It is his submission that it is a hostile discretion against the main appellant and relies upon the following decisions. (i) Unipatch Rubber Ltd. vs. Commissioner of Central Excise, Bhopal: 2011 (272) E.L.T. 340 (S.C.) (ii) Damodar J. Malpani vs. Collector: 2002 (146) E.L.T. 483 (S.C.) (iii) Opal Exports Pvt. Ltd. vs. .....

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chemicals and are not exceeding the packages of 500 gram or 500 milliliters. He would submit that this submission of alternative classification was not accepted by the adjudicating authority without recording any findings on the same. 4.1 Learned Shri Kiran S. Javali and Shri Laxminarayan, Advocates for M/s. New India Shipping Services, (CHA), while adopting the arguments made by the learned Sr. counsel for the main appellant has specifically stated that there was no mistake on the part of the C .....

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e main appellant. They would also rely upon the Final Order passed by this Bench in their own case on 19.6.2005 to support their claim that there was no serious omission and the Customs Broker License which was revoked was restored by the Tribunal. 5. The learned special counsel appearing for Revenue would take us through the Order-in-Original. It is his submission that the case of the Department is that the goods which were imported are Certified Reference Material and hence have to comply with .....

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if the importer wants to have the benefit of concessional rate of duty, then he has to produce certificate and copies of documents as per the condition. It is the submission that the adjudicating authority has recorded a finding that the importer or the main appellant has argued that they need not submit any certificates unless called for by the Department, is not a correct finding as it is a settled legal principle of interpretation that in order to avail the exemption Notification, the appella .....

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tes produced with invoices and bills of entry, hence the adjudicating authority has correctly recorded that the main appellant failed to discharge onus cast on them. It is his submission that the adjudicating authority has correctly recorded the finding that the goods imported were CRM as the dockets of the goods imported and cleared showed that the invoices described the goods as CRM whereas in two remaining cases the goods are described as laboratory reagents by the supplier and nowhere the do .....

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pellant are in respect of pharmaceutical reference standards. It is his submission that the question as to whether the imported goods are CRM or PRS is not satisfactorily answered as the goods are identical then why in some cases certificates were apparently available and in some cases it was not so. He would then submit that the meaning of the word Certified Reference Materials and Pharmaceutical Reference Standards as per Wikipedia are different. It is his further submission that there i .....

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r under Chapter 28 or 29. It is his further submission that the findings in respect of the willful misstatement and suppression of facts are very clear as the main appellant has availed ineligible benefit of the Notification by incorrectly describing the products as Pharmaceutical Reference Standards in the documents and as the main appellant was clearing the consignments under RMS, they were not assessed by the lower authorities and it was self-assessment. He would submit that in few cases, the .....

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it that the item certified reference material is totally a different item then the reference standard. It is his submission that the United States Pharmacopoeial Convention itself accepts that both the items are different and the absence of any direct reference to pharmaceutical reference standards, the classification should be in accordance with the product under Chapter 28 or 29. He would also rely upon the meaning of the word reagent as given in the Condensed Chemical Dictionary 10th Editio .....

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king this contention which is beyond the findings of the Order-in-Original. It is further submitted that Pharmacopoeia like United States Pharmacopoeia, European Pharmacopoeia and British Pharmacopoeia from whom PRS are imported are part of regulation set up by the respective Governments who regulate the quality of exports or imports of pharmaceutical goods in their respective countries and the PRS which are imported by the main appellant are the standards which need to be complied with for impo .....

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with Condition No.12) (herein after referred to as Notification) declaring to the Customs department that the products are classifiable under Chapter Heading 38 22. It is also undisputed that the consignments were cleared by Customs Department after final assessment and the period involved is 01.03.2009 to 2.1.2014 while the show-cause notice is dated 28.02.2014, invoking extended period as also seeking to confiscate the seized goods and directing all the appellants to show cause as to why pena .....

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has to comply with the condition of Chapter Note No.2(A) and (B) which in this case was not done so. It is also held by the adjudicating authority that the main appellant had intentionally mis-declared the goods in order to avail ineligible benefit of exemption Notification. 7.3 We find the issue that needs to be decided in this case is regarding the classification and subsequent eligibility to the benefit of Notification to the importer/main appellant. The main appellant had classified the prod .....

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diagnosis: 3822.00 11 Pregnancy confirmation reagents 3822 00 12 Reagents for diagnosing AIDS 3822 00 19 Other 3822 00 90 Other Notification No. 21 / 2002-Customs 20. EFFECTIVE RATES OF DUTY FOR GOODS OF VARIOUS CHAPTERS/HEADINGS GENERAL EXEMPTION NO. 107 Exemption and effective rates of basic and additional duty for special goods of Chapters 1 to 99. - In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962) and in supercession of the notificati .....

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ding of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as are specified in the corresponding entry in column (2) of the said Table, when imported into India,- (a) from so much of the duty of customs leviable thereon under the said First Schedule as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table; (b) from so much of the additional duty leviable thereon under sub-section (1) of section 3 of the said Customs Ta .....

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cified against serial Nos. 250, 251 , 252 and 415 of the said Table on or after the 1st day of March, 2005 . Explanation.- For the purposes of this notification, the rate specified in column (4) or column (5) is ad valorem rate, unless otherwise specified. Table S. No. Chapter or Heading or sub -heading Description of goods Standard rate Additional duty rate Condition No. (1) (2) (3) (4) (5) (6) 1. ... ... .... …. … 2. ….. .... ….. .... …. 3. … …. .....

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er conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India in the erstwhile Ministry of Finance (Department of Revenue) No. 21/2002-Customs, dated the 1st March, 2002, published in the Gazette of India vide number G.S.R. 118(E), dated the 1st March, 2002, namely:- In the said notificati .....

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Note 2(A) and (B) of Chapter 38 in Customs Tariff as under:- 2. (A) For the purpose of heading 3822, the expression certified reference materials means reference materials which are accompanied by a certificate which indicates the value of the certified properties, the methods used to determine these values and the degree of certainty associated with each value and which are suitable for analytical, calibrating or referencing purposes. (B) With the exception of the products of Chapter 28 or 2 .....

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in appellant, are nothing but Reference Standard samples of various bulk drugs which are used for testing the parameters of either the raw materials or the finished goods of the main appellants clients. 7.6 On going through the history of reduced customs duty on the Reference Standard it needs to be understood that first Notification No.21/2002 dated 01.03.2002 granted exemption to Reference Standards. In that Notification, the Govt. of India have granted reduced payment of Customs duty on the .....

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have been marketed by the clients of main appellant. In order to facilitate and in the interest of common man, the Govt. of India though it fit to reduce the customs duty on the Reference Standard of bulk drugs imported by Central Drug Laboratory, Kolkata. Subsequently, it seems that Govt. of India thought the Reference Standard need not to be only imported by the Central Drug Laboratory, Kolkata but can be imported by any other person. Hence by a Notification No.26/03 amended the entry at Sl.1 .....

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to provide data needed to make informed decisions. The quality of this data is as good as the Reference material used and high quality Reference material are available only from the organizations with robust quality system viz. US Pharmacopoeia, British Pharmacopoeia etc. The Reference Standard of the Organisations like United Standard Pharmacopoeia and British Pharmacopoeia instill confidence, as to that the products which are tested against the standard as laid down by these pharmacopeias wou .....

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d competent authority in this matter i.e. Drugs Controller General (India) under Directorate General of Health Services (Drug Division) who vide his letter reference No. X19014/10/04-D dated 17.11.2004 stated as under:- Nirman Bhawan, New Delhi' 17th November, 2004 To M/s. LGC Promochem India Pvt. Ltd. P.O. Box 8.061, .' # 142m 3rd Floor, 5th Cross, RMV Extn., Bangalore,-560 080. Sir, Please refer to your letter dated 12th June, 2004 on the subject above. The Director, Central Drug Testi .....

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clearly indicate that the Reference Standards are substances required for analytical calibrating or referencing purpose which would be required to estimate the standard of the product manufactured or consumed by the clients of the main appellants. It is to be noted that based upon the above clarification, the Central Drug Testing Laboratory Mumbai vide letter No. 80/CDTL-M/2004-05/1469 dated 13.08.2004 clarified as under:- GOVERNMENT OF INDIA (Ministry of Health & Family Welfare) CENTRAL DRU .....

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t mentioned, given below is the clarification sought on Reference Standards based on the enclosed literature. Reference Standards are substances of known purity which are intended to be used exclusively for a specified analytical, calibrating or referencing purpose and not to be used as Drugs, which may be clearly stated on the label and / or accompanying certificate or literature. Yours faithfully, Sd/- (Dr. K.V. Jogi) Director CDTL - Mumbai 7.9 Plain reading of both the communications from the .....

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e of analysis from United State Pharmacopoeia convention indicating that Pharmaceutical Reference Standards is as per the standard laid down by them. It has to be noted that Pharmaceutical Reference Standards which are accompanied by the certificate issued by US Pharmacopoeia are distinctive product and gets classified under laboratory chemical or under Chapter Heading 3822 read with Chapter Notes of Chapter 38 as reproduced herein above. The conclusion that can be reached is that Pharmaceutical .....

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lly covers PRS with classification under heading 2852 and 3822. Therefore, undoubtedly the PRS can be classified under heading 3822 as well. Preceding discussion only indicates that for being classified under heading 3822, even the PRS would have pass the rigours of Chapter Note 2A. Further, even otherwise, the notice has not produced the documents required under the said exemption Notification to avail the benefit. It can be seen from the above reproduced paragraph that the adjudicating authori .....

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ed by an organization accepted by the International Standard Organisation. In the documents produced before us, we find that the US Pharmacopoeia convention is recognized by International Standard Organisation in respect of the quality of the goods and the systems which they are following. As there is no dispute that the products imported being classified under Chapter Heading 3822, Revenue having not filed any appeal against the adjudicating authoritys order by holding that the product importe .....

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Health Organisation has defined the Reference Standard either of pharmaceutical or food related as a particular lot or batch of drug substances specifically prepared either by an independent synthesis or by additional purification of production material and shown by an extensive set of analytical tests, to be authentic material of highest purity reasonably attainable. It is usually used for structural elucidation and is bench mark for working standards. Applying the above definition of Refere .....

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