HETERO DRUGS LIMITED Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) AFTER examining the records and hearing both sides, we are of the view that the appeal itself requires to be finally disposed of at this stage. Accordingly, after dispensing with predeposit, we take up the appeal for disposal.

(2.) THE original authority confirmed demand of total amount of duty of over Rs. 55 lakhs against the appellants under Section 28(1) of the Customs Act in respect of a medicinal item, viz. "Zidovudine" imported by them and cleared under two Bills of Entry, one of these Bills dated 6.7.04 and the other dated 30.7.04. Aggrieved by the older of that authority, the assessee preferred an appeal to the Commissioner (Appeals) and also filed therein an application for waiver of predeposit and stay of recovery in respect of the duty amount. The said application was disposed of on 12.1.06 without hearing the party. The appellate commissioner's interim order dated 12.1.06 directed the assessee to predeposit 75% of the duty amount on or before 25.2.2006. That order also stated that, in the event of compliance, the appeal would be heard on 28.2.2006. Having found no report of compliance, ld. Commissioner (Appeals) took up the appeal for disposal on 27.2.2007, a day before the appointed date. In the circumstances, the party did not have an opportunity to be heard. Ld. Commissioner (Appeals) passed a final order on 27.2.06 dismissing the assessee's appeal on the sole ground non -compliance with Section 129E of the Customs Act. It is submitted by Counsel for the appellants today that the impugned order is grossly violative of the principles of natural justice inasmuch as the appeal and the stay application filed by the assessee were disposed of in undue haste without giving the appellants a reasonable opportunity of being heard. It is also submitted that, upon receipt of the interim order dated 12.1.2006, the assessee had filed an application with the Commissioner (Appeals) seeking modification of the said order claiming strong prima facie case on merits. Ld. Counsel submits that the contentions raised in the modification application were not duly considered by the appellate authority. We have heard ld. SDR with reference to the submissions made by ld. Counsel. After considering the submissions, we find that the short question to be considered by us at present is whether, before the lower appellate authority, the assessee had prima facie case. The demand of duty is on account of denial of the benefit of Customs Notification No. 21/02 to the assessee in respect of the item imported by them. This Notification, as it stood prior to 9.7.04 (the date on which the relevant entry in the Notification was amended) provided effective rate of 5% for (A) Drugs or medicines specified in List 3 and (B) Bulk drugs used in the manufacture of the drugs or medicines at (A) above vide Sl. No. 80 in the table annexed to the Notification. Prior to 9.7.2004, the effective rate of CVD for bulk drugs was nil. After the said date, by virtue of the amendment to the Notification, there was no rate prescribed for CV duty on bulk drugs. For the entire period, there was a condition attached to bulk drugs, which was to the effect that the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 should be followed by the importer. Admittedly, in this case, the appellants did not follow such procedure. However, it is the submission of ld. Counsel that the benefit of exemption which was otherwise available to bulk drugs in terms of Sl. No. 80(B) of the table annexed to the above Notification should not have been denied to the assessee on a procedural ground. In this connection, reliance is placed on Thermax Private Limited v. CC 1992 (61) ELT 352 (SC), wherein a default of the assessee in the matter of compliance with Chapter X Procedure was condoned and the benefit of Rule 192 of the Central Excise Rules, 1944 was allowed. Alternatively it is submitted by the Counsel that, as bulk drugs are also drugs in terms of Clause 2(f) of Drugs (Prices Control) Order, 1995, at least the benefit of entry at Sl. No. 80(A) should have been allowed to the appellants in respect of the imported item. In this connection, it is pointed out that it is not in dispute that the item imported specifically figured in list 3 and therefore was covered by Sl. No. 80(A) of the table annexed to the above Notification. We have heard ld. SDR also, on merits. It is submitted by ld. SDR the exemption Notification should be strictly construed and therefore it was not open to the authorities to consider drugs and bulk drugs mentioned separately in the Notification as one and the same goods. In this connection, ld. SDR claims support from the Supreme Court's judgment in Sarabhai M. Chemicals v. CCE, Vadodara , wherein an end -use condition prescribed in a Notification was enforced by the Apex Court.

(3.) AFTER examining the records and considering the submissions, we find that the import documents present the goods in bulk quantities. This is not in dispute. Hence, in the conflict between (A) and (B) under Sl. No. 80 of the Notification, we think, we must prefer (B) covering bulk drugs used in the manufacture of the item mentioned in (A). For the goods so understood, there was a specific condition to be followed by the importer vide condition No. 5 mentioned in the Notification. This was a condition relating to the manufacturing process to be undertaken by the importer and has to be taken as analogous to the end -use condition considered by the apex Court in Sarabhai case (supra). In this view of the matter and having regard to the need to interpret strictly the above entry in the exemption Notification, we take the view that the appellants were not eligible for the benefit of the Notification and they cannot claim prima facie case against the demand of basic customs duty.