The Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that a penalty under Customs Act,1962 is not imposable when a “No Objection Certificate” (NOC)is not required to be obtained from Drug Inspector and is free to export Drugs.
The appellant, M/s Medista Overseas is the holder of a license to manufacture drugs with the help of a supporting manufacturer who is named in the license. Under manufacture, the appellant sells the pharmaceutical /drugs and mainly exports the goods. The appellant filed shipping bill No. 7099329 dated 16.04.2016 through the EDI system for the export of six drugs to overseas consignee M/s Bunty Pharmaceuticals, Monrovia, Liberia (West Africa).
The Revenue there is a legal requirement for the exporter to submit a “No Objection Certificate” (NOC) from the Regulatory Authority i.e. Drug Controller. The ADC observed that the drugs under dispute namely E-Mycin Suspension, B-CO Syrupand Sabtron Suspension have been got manufactured by them under manufacturing license No. 28A/14/2013 dt. 19.07.2013 based on loan license from M/s McW Healthcare, Indore. He further assured us to produce the supporting documents like invoice, delivery challan, contract/ agreement and copy of manufacturing license.
The export consignment was seized by the Revenueand handed over to the Drug Inspector for testing purposes. The Drug Inspector forwarded the certificate of analysis & test report done by CDSCO, Mumbai. As per the report of the Government analyst E-Mycin (ErythomycinEstolate Oral Suspension USP, batch No. L-820) was found not of standard quality, while the other drugs namely B-CO Syrup and Sabtron Suspension were found of standard quality.
The Drug Controller informed that drugs manufactured by the appellant which were meant for export are considered to be spurious drugs under Section 17B(e) of the Drugs and Cosmetic Act, as these drugs purport to be the product of the manufacturer of whom it is not truly a product.
The revenue proposed to confiscate the goods valued at Rs. 5,74,368/- under Section 113(d) of the Customs Act and to impose a penalty under Sections 114 and 117 of the Act. Further viewed that appellant has attempted to wrongly avail the benefit of duty drawback. In the first roundof litigation, the matter was remanded to the Commissioner (Appeals) with the direction to hear the appellant and pass a reasoned order.
It was submitted by the assessee that the Government have decided that the requirement of “NOC” concerning Shipping Bills from the Port offices of CDSCO for the export consignments shall not be insisted with effect from 01.01.2016. The appellant also produced a copy of the invoice wherein they purchased drugs from supporting manufacturer M/s McW Healthcare.
The Tribunal observed that the appellant also produced a free sale certificate dt. 30.11.2013 issued by the Licensing Authority, Food and Drugs Administration, M.P., certifying that the appellant is holding a valid manufacturing license which is valid upto 18.07.2018 to manufacture for sale and distribution of drugs for export freely, subject to the law and regulation of the importing country.
A Coram comprising of Mr Anil Choudhary, Member (Judicial)observed that even from the test report of CDSCO, Mumbai, out of the three drugs, two drugs namely B-CO syrup and Sabtronbe of standard quality. While allowing the appeal, the Tribunal set aside the impugned order and held the appellant is entitled to consequential benefits, by law.
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