IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 22.04.2010
Coram
The Honourable Mrs.Justice CHITRA VENKATARAMAN
W.P.No. 4841 of 2010
and MP.Nos. 1 to 3 of 2010
M/S.S.KESARIMAL
A PARTNERSHIP FIRM REP BY ITS PARTNER K.
PRAKASH CHAND NO.11 NAINIAPPA NAICK ST
CHENNAI 3. .... PETITIONER
Vs
1 THE COMMISSIONER OF CUSTOMS
(IMPORTS) CUSTOMS HOUSE ,
NEW NO.60 RAJAJI SALAI CHENNAI 1.
2 THE ASST. COMMISSIONER OF CUSTOMS
SPECIAL INTELLIGENCE AND INVESTIGATION BRANCH CUSTOMS HOUSE
NEW NO.60 RAJAJI SALAI CHENNAI 1.
3 THE DRUGS CONTROLLER GENERAL (INDIA)
DIRECTORATE GENERAL OF HEALTH SERVICES
FDA BHAWAN KOTLA ROAD
NEW DELHI.
4 THE ASSISTANT DRUGS CONTROLLER (I)
CUSTOMS HOUSE
NEW NO.60 RAJAJI SALAI CHENNAI 1. .... RESPONDENTS
Petition under Article 226 of the Constitution of India praying to issue a writ of certiorarified mandamus calling for the records of the 2nd respondent comprised in its communication bearing F. No.S.Misc. 31/2010-SIIB dated 22.2.2010 and quash the same as unconstitutional and ultra vires the provisions of the Drugs and Cosmetics Act 1940 and the rules framed thereunder and consequently direct the respondents to permit import of Benfotiamine dietary supplement by the petitioner meant for non-medical use without insisting upon import licence in Form-10 or at all in view of the exemption from import licence as provided under Rule 43 read with Schedule-D and Rule 123 read with Schedule - K of the Drugs and Cosmetics Rules 1945.
For Petitioner : Mr.Satish Parasaran
For Respondents: Mr.P.Mahadevan,
SCGSC for RR 1 and 2
Mr.K.Mohana Murali
for RR 3 and 4
ORDER
The petitioner has sought for a writ of certiorarified mandamus to declare the communication dated 22.2.2010 issued by the second respondent as unconstitutional and ultra vires the provisions of the Drugs and Cosmetics Act, 1940 and the rules framed thereunder and to consequently direct the respondents to permit import of Benfotiamine dietary supplement by the petitioner meant for non-medical use without insisting upon import licence in Form-10 A in view of the exemption from import licence as provided under Rule 43 read with Schedule-D and Rule 123 read with Schedule – K of the Drugs and Cosmetics Rules 1945.
2. The petitioner contends that in view of Rule 43 read with Schedule D and Rule 123 read with Schedule K of the Drugs and Cosmetics Rules, 1945, the question of the petitioner obtaining import licence in Form 10 A does not arise.
3. The petitioner herein is the importer and supply of drugs to the manufacturers of chemicals, drugs, pharmaceutical and food industry. The petitioner holds a licence under the Drugs and Cosmetics Act, 1940. The petitioner states that one of the substances that is regularly imported by the petitioner for supply to the dietary supplement industry is ‘Benfotiamine’, a synthetic nutritional dietary supplement used for manufacturing dietary supplement finished products. The said substance is supplied by the petitioner to various companies engaged in manufacturing dietary supplements. The petitioner contends that the Drugs and Cosmetics Rules, 1945 provides for exemption from taking import licence in Form-10-A as regards the import of drugs specified in Schedule X. In terms of Rule 43 read with Schedule D and Rule 123 read with Schedule K of the Drugs and Cosmetics Rules, 1945, the petitioner states that it is entitled to have the import of ‘Benfotiamine’ without obtaining any licence under the Drugs and Cosmetics Rules, 1945. However, ignoring the said provision, by proceedings dated 22.2.2010, the second respondent issued a communication that for want of import licence in Form10-A, the petitioner’s import of Benfotiamine had to be detained. The petitioner contends that in the face of the specific provisions and the purport of the import, the communication of the second respondent has to be quashed as illegal and not supported by authority of law. It is further stated that the petitioner has also expressed its utmost readiness and willingness to furnish end-user bond which would adequately safeguard the interest of the respondents and would sub-serve the purpose of the Drugs and Cosmetics Act. Consequently, the petitioner challenges the illegal detention of the consignment. The petitioner has sought for an interim order to release the consignment apart from quashing the communication dated 22.2.2010.
4. On notice, respondents 1 and 2 filed a counter affidavit. It is stated that as the importer had not submitted the required import drug licence, the subject goods were not permitted for clearance. Hence, the goods were liable to be confiscated under Section 111(d) of the Customs Act apart from the importer liable to penalty under Section 112 (a) of the said Act. The petitioner was issued a show cause notice dated 10.3.2010 calling upon the petitioner to place its objections.
5. Respondents 1 and 2 contend that in the absence of import licence in Form 10-A, rightly, the goods were not released by the customs authorities. The respondents state that having regard to the public interest to be safeguarded, the writ petition is liable to be dismissed and the petitioner be directed to face the proceedings before the Customs authorities.
6. Respondents 3 and 4 have also filed a counter affidavit before this court wherein it is averred that the subject goods are used in the treatment of patients with nerve damage and nerve pain and also shown to be effective in diabetic retinopathy, nephropathy and neuropathy. Since some of the drug formulations contain Benfotiamine, the import of the same that it is for manufacture of food supplement, cannot be accepted. It is further stated that the consignments of the petitioner were earlier released on the letter of guarantee executed by the petitioner, wherein the petitioner had clearly given an undertaking that they would not dispose of the goods without the consent of the first respondent. In the light of the Letter of Guarantee dated 25.9.2008 and the undertaking, the contention of the petitioner has to be rejected. It is further pointed out that Rule 43 read with Schedule D and Rule 123 read with Schedule K of the Drugs and Cosmetics Rules, 1945, is applicable only on those products which are of non-medicinal use or is intended for purposes other than medicinal use or is of commercial quantity. Since the product imported by the petitioner does not fall under either of these clauses, the question of granting exemption on the drug formulations containing Benfotiamine does not arise.
7. Heard the learned counsel appearing for the petitioner and the learned counsel appearing for the respondents.
8. Learned counsel appearing for the petitioner laid emphasis on the provisions of the Drugs and Cosmetics Act and in particular with reference to Rule 43 and 123 of the Rules in contra distinction to Rule 23 to submit that the import of Benfotiamine was only for the purposes of supply to food manufacturing industry and not for manufacturing drugs. Consequently, the question of complying with the demand of the respondents does not arise.
9. Chapter IV of Import and Registration of the Drugs and Cosmetics Rules, 1945 deals with the procedure as regards obtaining the import licence to import drugs and the provisions on exemption from obtaining the drug licence. Rule 23 of the Drugs and Cosmetic Rules, 1945 deals with obtaining import licence for the import of drugs. Form-10 is the import licence required to be obtained for import of drugs excluding those specified in Schedule X and Form 10-A is for import of drugs specified in Schedule X. Rule 40 speaks about the procedure for import of drugs. Rule 43 deals with import of drugs which do not require licensing. The said provision reads as follows:-
“The drugs specified in Schedule D shall be exempt from the provisions of Chapter III of the Act and of the Rules made thereunder to the extent, and subject to the conditions specified in that Schedule. ”
10. Rule 123 under Part XI provides for exemption in respect of the drugs specified in Schedule K, which reads as follows:-
“The drugs specified in Schedule K shall be exempted from the provisions of Chapter IV of the Act and the Rules made thereunder to the extent and subject to the conditions specified in that Schedule. ”
11. A reading of the Rules shows that in the event of any abuse of exemption, the authority has the jurisdiction to withdraw the exemption, thereby cancel the licence granted under the above said provisions. Thus a reading of Rule 43 and 123 of the Rules along with Schedule D and K appended to the Rule shows where the substances imported are not intended for medical use, the importer shall certify that the substance is imported for non-medicinal uses. If the import is otherwise than in bulk, each container shall bear a label indicating that the substance is not intended for medicinal use or is intended for some purposes other than medicinal use. Where the imported substance is of commercial quality, the importer need not obtain licence in the Form 10-A.
12. Schedule K to Rule 123 of the Rule specifies numerous conditions on exemption for the drugs. It is not denied by the petitioner that the imported goods concerned can be used for more than one stated purpose and depending on the use, the licence for exemption is to be obtained. As in this case, if the use of the imported substance is for manufacturing a drug, the import requires a licence and does not qualify for exemption as provided for under the above said Rule.
13. A reading of the counter affidavit shows that nowhere the respondents denied the petitioner’s contention that ‘Benfotiamine’ imported by the petitioner is only for the purposes of use in the manufacture of food supplement. Given the fact that the subject good is imported not for the purposes of manufacture of a drug, but is to be used in the manufacture of food supplement, the question of obtaining licence, hence, has to be looked at from the point of the purpose of import and in tune with Rule 43 and 123 of the Rules and not with reference to Rule 23 of the Rule. The Act recognises import of substances as capable of multivarious use. Depending on the purpose of import and the usage for which the import is made, the Act prescribes the procedure for either getting a licence under Rule 23 or for going for an exemption under Rule 43 or 123 of the Rules, as the case may be. That being the case, when a particular drug is imported not for the purpose of use in the manufacture of a drug, but to be used in manufacture of food supplement, Rule 23 of the Act has no relevance in this case and the only other Rule which will have relevance for the purposes of considering the claim of exemption would be either Rule 43 or Rule 123 of the Act. Hence, the usage for which the imported item is intended for has relevance and decisive on the applicability of the relevant Rule in the given case.
14. As far as the present case is concerned, the petitioner states that it regularly imports ‘Benfotiamine’ for supply to industries manufacturing dietary supplement finished products and not for the manufacture of drug as stated in the counter. In the background of this fact, the relevancy of the user theory as applicable to Rule 23 or Rule 43 read with Schedule D and Rule 123 read with Schedule K assumes significance. In the circumstances, given the fact that the import is for the purposes of use in the manufacture of dietary supplement, the petitioner’s case as regards exemption merits acceptance. The requirement of going for licence, as given under Rule 23 of the Rules is not of any relevance to the imported goods which are stated to be for the purposes of use in the manufacture of food supplement only.
15. In the counter filed by respondents 1 and 2, it is stated that earlier the third respondent had categorically informed the petitioner as a trader and not a manufacturer of drugs that an import licence is required for the import of Benfotiamine. It is seen from the paper book filed by the respondents before this Court that while dealing with import of substances/drugs which can be used for more than one purpose, going by Schedule D, wherever the subject material is imported not for the purpose of manufacture of drugs, the respondents insisted on a label only that each container carried the words ‘not to be used in drugs’. The copy of the proceedings dated 24th August, 2009 addressed to Biocon Limited, Bangalore by the Directorate General of Health Services, Office of the Drug Controller General (India), (Import & Registration Division) shows that the third respondent had no objection for importing Benfotiamine to be used as an key ingredient for captive use in the manufacturing of GMAB plus, without attracting the provisions of GSR 604(E) dated 24.8.2001. In the said letter, it is further stated that all the containers of the subject material should be labelled as “not to be used in drugs” before releasing the consignment by the concerned Port Officers. The respondents, however, insist that having regard to the earlier consignment released on a Letter of Guarantee and an undertaking that they would not dispose of the goods without the consent of the first respondent and that they would not import the product in future, the petitioner is bound to produce the licence in Form 10 -A.
16. It is hereby recorded that the petitioner has expressed its willingness to furnish end-user bond which would adequately safeguard the interest of the respondents apart from serving the purpose of the Drugs and Cosmetics Act. Considering the proceedings of the respondents dated 24th August, 2009, as disclosed in the typed set of papers filed by the third and fourth respondent, the fact that the import is not for the manufacture of the drugs but for use in the manufacture of food supplement, when the Rules themselves contemplate sufficient protection in matters of import of an item which is capable of multivarious uses, the insistence on obtaining Form 10-A in terms of Rule 23 does not appear to be a correct approach and the same is contrary to the Rule and the understanding of the respondents as disclosed in the letter dated 24th August, 2009 found in the typed set of papers filed by the third and fourth respondents. Thus, going by the Rules, which provide for exemption from going for licence in Form 10-A depending on the purport for which the import is made, it is difficult to accept the plea of the respondents solely on the basis of the earlier undertaking given by the petitioner or for that matter, the possibility of using the imported items contrary to the disclosed purpose. With the power of inspection available to check any possible abuse, the view of the respondents that the imported items is capable of being used in the manufacture of drug overlooks the very provisions of Rule 43 and 123 of the Rules. Consequently, so long as the disclosed purpose of import is for use in the manufacture of food supplement and hence, falls for consideration either under Rule 43 or 123 of the Rules, it is not open to the respondents to insist on the petitioner obtaining the licence in Form 10-A.
17. In the background of Rule 43 of the Rules, when the petitioner is entitled to import Benfotiamine without a licence by reason of exemption granted under the Rules of the Drugs and Cosmetics Rules, the purpose of import being one for manufacturing food supplement, the question of detention by way of confiscation or further proceeding for the purpose of penalty on the ground that the import is not supported by licence in Form 10-A, hence, does not arise.
18. Learned standing counsel appearing for respondents 1 and 2 pointed out that since a show cause notice had already been issued to the petitioner, the proper course for the petitioner would be to reply to the show cause notice and hence, this Court may not interfere with the proceedings at this stage.
19. Normally, this Court would have accepted the plea of the respondents on the ground of availability of an alternative remedy and the need for filing the objection to the show cause notice. However, having regard to the plain meaning of Rule 43 and 123 of the Rules and the practice of the respondents as indicated in the letter dated 24th August, 2009 that Benfotiamine was allowed to be cleared with a stamping in every consignment that the import is not to be used in drugs, I have no hesitation in rejecting the objection of the respondents in granting the relief to the petitioner. The petitioner has also expressed its willingness to furnish end-user bond which would be in consonance with Rule 43 of the Rules.
20. Having regard to Schedule D read with Rule 43 of the Rules, I have no hesitation in accepting the plea of the petitioner that the consignments shall carry the stamping that the import is not for the purpose of use in the manufacture of drugs.
21. In the light of the above circumstances, I reject the plea of the respondents on the availability of alternative remedy as well as on the merits of the detention. Having regard to the view that I have taken and in the light of the willingness expressed to furnish end-user bond by the petitioner that the import is for the purpose of use in the manufacture of food supplement and hence, governed by Rule 43 read with 123 of the Drugs and Cosmetics Act, I have no hesitation in allowing the writ petition, thereby quashing the proceedings dated 22.2.2010. The petitioner is entitled to remove the goods imported without getting a licence in Form-10-A as provided under Rule 23 of the Act. Consequently, the Writ Petition stands allowed.
22. It is hereby made clear that if the authorities come across any material that the imported substance cleared as an exempted item is not for the declared purpose, it is always open to the respondents to proceed against the petitioner in accordance with law.
Index:Yes/No 22.04.2010
Internet:Yes/No
bg/-
To
1 THE COMMISSIONER OF CUSTOMS, (IMPORTS) CUSTOMS HOUSE
NEW NO.60 RAJAJI SALAI CHENNAI 1.
2 THE ASST. COMMISSIONER OF CUSTOMS
SPECIAL INTELLIGENCE AND INVESTIGATION BRANCH CUSTOMS HOUSE NEW NO.60 RAJAJI SALAI CHENNAI 1.
3 THE DRUGS CONTROLLER GENERAL (INDIA)
DIRECTORATE GENERAL OF HEALTH SERVICES
FDA BHAWAN KOTLA ROAD NEW DELHI.
4 THE ASSISTANT DRUGS CONTROLLER (I)
CUSTOMS HOUSE NEW NO.60 RAJAJI SALAI CHENNAI 1.
CHITRA VENKATARAMAN,J.
bg/-
WP.No. 4841 of 2010
22.04.2010