The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ), South Zonal Bench, Chennai, has held that deodorants are not considered prohibited goods under the Drugs and Cosmetics Rules, 1945. The bench dismissed the penalties and fines imposed on the importer highlighting the lack of legal basis in the re-determination of the value based on non-contemporaneous imports.
The appellant, M/s. Gypsie Impex, an importer based in Mumbai, had filed a Bill of Entry for the clearance of 1337 cartons of deodorants. The declared value for the goods was Rs.16,27,025/-. However, the customs authorities, based on intelligence, examined the imported goods and discovered that the deodorants, featuring various brands like Lomani, Remi, Maxi, and Santago, were subject to certain restrictions.
According to Circular No.8/2010-Cus. dated 26.03.2010 issued by the Central Board of Indirect Taxes and Customs ( CBIC ), the import of cosmetics through Tuticorin port was prohibited. The circular explicitly specified that cosmetics should be imported through specific points of entry and Tuticorin was not among them.
Further, the imported goods lacked the mandatory affixation of Maximum Retail Price ( MRP ) or Retail Selling Price ( RSP ) on the packages, raising concerns about adherence to Standards of Weights & Measures ( Packaged Commodities ) Rules, 1977.
The customs authorities, after drawing samples and obtaining a No Objection Certificate ( NOC ) from the Additional Drug Controller, Chennai, concluded that the goods were imported in violation of Rule 43A of the Drugs and Cosmetics Rules, 1945, and Standards of Weights & Measures ( Packaged Commodities ) Rules,1977. The declared value of Rs.16,27,025/- was rejected, and the value was re-determined at Rs.46,22,202/-.
The customs authorities confiscated the goods and provided the option for redemption on payment of a fine of Rs.2,00,000/-, along with imposing a penalty of Rs.5,00,000/- under Section 112(a) of the Customs Act, 1962.
The appellant, M/s. Gypsie Impex appealed to the Commissioner of Customs, Challenging this decision. The appeal was rejected and aggrieved by the same, the assessee filed an appeal before the CESTAT.
The appellant, represented by Mr. B. Satish Sundar, argued that the order lacked sustainability in law. It was also contended that the goods were available in stock lots and the supplier agreed to sell them at the invoice price after extensive negotiations.
The appellant emphasised that the invoice value should be considered the transaction value. The appellant also contested the re-determination of the value of the imported goods, pointing out that the lower authority had not followed the sequential process outlined in the Customs Valuation ( Determination of Price of Imported Goods ) Rules, 1988.
It was argued that the values declared by other importers, which formed the basis of the enhancement, were not disclosed to the appellant, undermining the fairness of the process.
The appellant highlighted the judgments in Topsia Estates Pvt. Ltd. Vs. CC ( Import-Seaport ), Chennai, Varus Overseas Vs. CCE New Delhi and Unit Traders Vs. CC Tuticorin, and emphasised that the Customs Valuation Rules were self-contained and the original authority had deviated from the prescribed procedures.
The respondent revenue, represented by Mr. Harendra Singh Pal contended that deodorants shall be categorised as “prohibited goods” that are not allowed to be imported under Rule 133 read with Rule 43-A of the Drugs and Cosmetics Rules, 1945.
The bench held that the imported deodorants were not prohibited goods under Rule 133 read with Rule 43-A of the Drugs and Cosmetics Rules, 1945. Representative samples had been granted a No Objection for clearance, further affirming the legal importation of the goods.
Regarding the re-determination of value, the CESTAT found that the lower authorities had relied on non-contemporaneous imports, rendering their decision unsupported by a legal basis.
The two-member bench comprising Mr. S.S. Garg ( Judicial Member ) and Mr. Ajit Kumar ( Technical Member ) set aside the enhancement and dismissed penalties and fines, except for a Rs.1,00,000 penalty under Section 111(d) of the Customs Act, 1962, for the violation of port restrictions.
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