General (India) Directorate General of Health Services FDA Bhawan v. ) Customs House

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED:23.02.2012CORAM:THE HON'BLE MR.JUSTICE P.JYOTHIMANIANDTHE HON'BLE MR.JUSTICE M.DURAISWAMYW.A.NO.1559 OF 2010 1.The Drugs Controller General (India) Directorate General of Health Services FDA Bhawan, Kotla Road, New Delhi 110 002.2.The Assistant Drug Controller (India) Customs House, No.60, Rajaji Salai, Chennai 600 001....AppellantsVs.1.M/s S.Kesarimal, A partnership firm rep. By its partner K.Prakash Chand No.1, Nyniappa Naick Street, Chennai 600 003.2.The Commissioner of Customs (Imports) Customs House, No.60, Rajaji Salai, Chennai 600 001.3.The Assistant Commissioner of Customs Special Intelligence & Investigation Branch, Customs House No.60, Rajaji Salai, Chennai 600 001. ...RespondentsWrit appeal filed against the order dated 22.04.2010 madein W.P.NO.4841 of 2010.Petition under Article 226 of theConstitution of India praying to issue a writ of certiorarifiedmandamus calling for the records of the 2nd respondent comprised inits communication bearing F. No.S.Misc. 31/2010-SIIB dated 22.2.2010and quash the same as unconstitutional and ultra vires theprovisions of the Drugs and Cosmetics Act 1940 and the rules framedthereunder and consequently direct the respondents to permit importof Benfotiamine dietary supplement by the petitioner meant for non- https://hcservices.ecourts.gov.in/hcservices/ medical use without insisting upon import licence in Form-10 or atall in view of the exemption from import licence as provided underRule 43 read with Schedule-D and Rule 123 read with Schedule - K ofthe Drugs and Cosmetics Rules 1945.For Appellant : Mr.K.MohanamuraliFor Respondent No.1: Mr.Satish ParasaranFor Respondent No.2 For Respondent No.3: Mr.P.Mahaadevan ---J U D G M E N T(Judgment of the Court was delivered by P.JYOTHIMANI,J)This writ appeal arises from the order of the learnedSingle Judge passed in W.P.No.4841 of 2010 filed by the firstrespondent in the appeal. The first respondent in the appeal who isthe importer and supply of drugs to the manufacturers of chemicals;drugs, pharmaceutical and food industries, holds a licence under theDrugs and Cosmetics Act, 1940. According to him, he has beenregularly importing a particular drug viz., 'Benfotiamine' which isaccording to the first respondent, a synthetic supplement finishedproduct. Since as per the first respondent, the said substance issupplied by the petitioner to various companies engaged inmanufacturing dietary supplements and not for manufacturingmedicine, as per Rule 43 of the Drugs and Cosmetics Rules, 1945, theexemption granted in respect of the implementation of Chapter III ofthe Drugs and Cosmetics Act, enables him to continue to importwithout getting approval in Form 10 or Form 10A. However, theappellant in the impugned communication dated 22.02.2010, hasinformed the first respondent that since the Assistant DrugController, Custom House has opined that the subject consignment'Benfotiamine' cannot be released without importer's licence inForm- 10, a direction was issued to the first respondent to producethe licence in Form 10 for the purpose of clearance of theconsignment. It was against the said communication of the AssistantDrugs Controller, the first respondent has filed the above saidW.P.No.4841 of 2010 on the ground that inasmuch as the consignmentsought to be released by way of import was not intended to use formedicinal use, there is no question of obtaining any licence, sinceas per Rule 43 of the Drugs and Cosmetics Rules, the firstrespondent is exempted from being an importer from the provisions ofChapter III of the Drugs and Cosmetics Act. The said contentionfound favoured with the learned Single Judge, and, in the impugnedjudgment has allowed the writ petition and held that by virtue ofRule 43 read with Rule 123 of Schedule D of Drugs and CosmeticsRules, 1945, the question of obtaining licence either in Form 10 or https://hcservices.ecourts.gov.in/hcservices/ Form 10-A does not arise. The learned Judge has also held that ifthe first respondent in the guise of getting exemption under Rule43 of the Rules, but attempted to use the imported drugs formedicinal use, it is always open to the authorities to takeappropriate action under the Act, it was with that observation, thewrit petition came to be allowed and the impugned letter of thedrugs authorities came to be set aside. It is as against the saidorder of the learned Judge, the appellant department has filed thepresent appeal. 2. The main ground on which the appeal has been filed isthat by allowing the importer to use the provision of Rule 43 of theRules, there is a possibility of spurious drugs being circulated tothe human use which will be neither allowable nor permissible ,that mere fact that the consignment label carries stamping given bythe importer, it is not for medicinal use itself is not sufficientand it is therefore to have a check over the attempt and in thepublic interest, it was felt that licence in Form 10 or Form 10Ashould have been obtained or in the form of no objection certificatefrom the authority competent, that as per the communication of theDirectorate General of Health Services, Drugs Controller General(I) dated 12.12.2005, it was opined that mere exemption grantedunder Section 43 of the Rules, cannot be allowed to be the ruse fortraders in allowing for sub-stranded and spurious drugs andtherefore, inasmuch as the said communication was arrived at basedon the discussion from various ministries, it is for the purpose ofsuch check and balance, the said impugned letter was passed by theappellant department.3. Mr.Mohana Murali, learned counsel for the appellantdepartment and Mr.P.Mahadevan, SCGSC vehemently contended that sucha drive has been only taken in public interest, since unscrupuloustraders may attempt to supply the spurious drugs for medicinal use,which is not permissible and therefore the public interest has to betaken note of. Merely because Rule 43 of the Rules contemplatesexemption, it does not mean that the authorities have lost theirright of control in respect of distribution of spurious drugs.4. On the other hand, Mr.Satish Parasaran, learned counselfor the first respondent/original writ petitioner has submitted thatinasmuch as by virtue of Rule 43 of the Rules, the application ofChapter III itself has been exempted, there is no question ofissuance of licence either in Form 10 or Form 10A of the Act. It ishis submission that when once the importer follows the conditioncontemplated under Rule 43 of Schedule D of the Act, necessarily hehas got a statutory right of exemption of application of ChapterIII. According to him, it is not as if the department is left inlurch. In the event of failure in person acting as per Rule 43 readwith Schedule D, of the Act, certainly he loses his right ofexemption from the provisions of Chapter III, it is always open to https://hcservices.ecourts.gov.in/hcservices/ the authority to take appropriate action for any violation andsimply because, the department is unable to take action in respectof the unscrupulous traders, which does not mean that the rule hasto be given a go bye. It is his submission that inasmuch the saidrule is a statutory rule by virtue of the power of the Governmentunder Rule 123 of the Act, the statutory rule always prevail and itcannot be sought to be explained by executive instruction as reliedon by the learned counsel for the first respondent.5. We have heard the learned counsel for the appellant andrespondents and we have gone through the Judgment of the learnedJudge.6. On the face of it, it is no body's case that that thesaid 'Benfotiamine'is not a drug, The question is as to whether thedrug is to be used for medicinal use or not. In this regard, it isrelevant to refer to the word 'drug' which is defined as follows:2(b) "drug" includes- (i) all medicines for internal or external useof human beings or animals and all substances intendedto be used for or in the diagnosis, treatment, mitigationor preventive of any disease or disorder in human beingsor animals, including preparations applied on human bodyfor the purpose of repelling insects like mosquitos." The definition makes it clear that the term 'drug'included drug usable not only for human beings, but also to animals.Chapter III of the Drugs and Cosmetics Act deals with the import ofdrugs and cosmetics. In effect that this Chapter which stipulatesthe standard of quality of drugs apart from steps to be takenagainst the misbranded drugs, adulterated drugs, spurious drugs,misbranded cosmetics and spurious cosmetics. Section 10 of the Actalso contemplates certain prohibition in respect of certain type ofdrugs and cosmetics. As per Section 10-A of the Act, the CentralGovernment has power to prohibit the import of certain type of drugsand cosmetics in public interest and Section 12 enables the CentralGovernment to make the rules. In fact, Section 12(2)(o) enables theGovernment in granting exemption of application of any of thechapter of the Act or imposing any condition in respect of theapplication of any of the portion of the Act. The said provision isas follows:"12(2)(o) provide for the exemptionconditionally or otherwise, from all or any of theprovisions of this Chapter or the rules made thereunderof any specified drugs or class of drugs"7. Section 13 of the Act enables the authorities to takeappropriate criminal action in cases of offences committed regardingthe distribution of spurious drugs and adulterated drugs etc., ascontemplated under Section 9-A, 9-B or 9-D of the Act and Section 14also enables the authority, apart from taking criminal action to https://hcservices.ecourts.gov.in/hcservices/ confiscate the goods. Therefore, the said Chapter, which speaksabout the maintenance of quality of drugs, gives ample power uponthe authorities not only to supervise that the drugs are properlydistributed for the specific purpose, but also enables the authorityto take appropriate action in the public interest. It is by virtueof the powers conferred under Section 12 of the Act, the CentralGovernment has framed the Drugs and Cosmetic Rules 1945, as enabledby the Government under Section 12(2)(o) of the Act, extractedabove. In the said Drugs and Cosmetics Rules, 1945, the CentralGovernment has granted exemption in respect of some of the drugsunder Rule 43 of the Rules which is as follows:"Rule 43 The drugs specified in Schedule D shallbe exempt from the provisions of Chapter III of the Actand of the rules made thereunder to the extent, andsubject to the conditions specified in that Schedule."8. As per the said rule, the drugs which are substancesunder schedule D are exempted from the provisions of Chapter III ofthe Act. A reference to schedule D shows that the product in issuecomes under Item No.1 "substances not intended for medical use"under the caption "Class of drugs"'. The said schedule D alsocontains the conditions based on which exemption is granted. Theconditions are extracted below:"All provisions of Chapter III of the Act andrules thereunder subject to the condition that if thesubstance is imported in bulk, the importer shall certifythat the substance is imported for non-medical uses, andif imported otherwise than in bulk, each container shallbear a label indicating that the substance is notintended for medicinal use or is intended for somepurposes other than medicinal use or is of commercialquality"9. Therefore the condition in respect of drugs which arenot intended for medical use is that if the substance is imported inbulk and it should be certified that it is imported for non-medicaluse and each of the container shall bear a label indicating that thesubstance is not intended for medicinal use and therefore if thesaid conditions are complied with, Chapter III of the Act does notapply. Consequently, the question of obtaining Form 10 or Form 10Ain the form of licence in respect of those drugs, does not arise. 10. It is not in dispute that in respect of the firstrespondent -importer, he has imported the above said drug''Benfotiamine' and the condition contemplated under schedule D hasbeen complied with. If that is so, the contention of the learnedcounsel for the appellant that the authority must be given effectivepower to supervise and the parties must be directed to approach theauthority for 'No Objection Certificate 'has no meaning. The https://hcservices.ecourts.gov.in/hcservices/ contention of the learned counsel for the appellant, placingreliance on the circular issued by the Directorate General of HealthServices dated 13.12.2005 cannot supersede the statutory rulesframed by the Government, as per the powers conferred in the Drugsand Cosmetics Act, 1945. The said circular which is heavily reliedon by the learned counsel for the appellant reads as follows:CIRCULARSub: Import of drugs having dual use and drugs which are used as a raw material for the manufacture of other drugs by the actual users only- regardingRepresentations have been received from various quartersincluding manufacturers of food items, Cosmetics, Textileindustries, chemical industries etc., regarding import of certaindrugs, which are also used for purposes other than medicinal use.Representations have also been received from various actual users ofsuch bulk drugs that are used as an intermediate for the manufactureof other drugs.These issues were examined in consultation with theMinistry of Health & Family Welfare and DGFT, Ministry of Commerceand Industry. A view has been taken that a blanket exemption fromregistration and from provisions contained in Chapter III of theDrugs & Cosmetics Act as given in Schedule D to the Drugs &Cosmetics Rules, cannot be given for import of such categories ofdrugs, which are not intended for medicinal use or drugs which maythemselves be used as drugs but are used for manufacture of otherdrugs.To waive registration and import licence in Form 10 forimport of drugs not intended for medicinal purpose, the importerwill have to make an application to CDSCO, HQ where case to caseexamination will be done and after due scrutiny, permission toimport dual purpose drugs, for non medicinal use, withoutregistration and import licence maybe granted.The Zonal/Sub Zonal Officers of CDSCO with the help ofState Drug Control will ensure random post import checks to ensurethat such products are not diverted by importers for medicinal use.However, the containers of such substances should carry the label"Not for Medicinal Use."Sd/-Drugs Controller General(I) https://hcservices.ecourts.gov.in/hcservices/

11. A reference to the said circular shows that thedepartment has taken a view that giving blanket exemption from theapplicability of Chapter III of the Drugs and Cosmetics Act, wouldcause harm to the public interest and therefore to have asupervision over the use of the said drugs, the importer must bedirected to obtain licence in Form 10. The said circular even thoughis stated to have been issued by taking note of the public interest,after consulting the various Ministries, in our considered view,cannot attempt to take away and supersede the statutory provisionscontained in Rule 43 of Rules as extracted above. As correctly foundby the learned Judge, the department is not left in lurch, in theevent of any of the unscrupulous importer attempted to use or sellthe above said drugs for medicinal purpose. A joint reading of theabove said provision extracted would categorically show that theexemption granted to the importer from the applicability of ChapterIII is available, only when the conditions contemplated under Rule43 read with schedule D of the Rules is fulfilled scrupulously. Ifonly the department comes to a conclusion on evidence and proof thatthere is breach of such condition of Rule 43 of Schedule D, themoment it is proved, the importer loses his right of exemption underChapter III of the Act. Certainly, the authority in suchcircumstances would have a right to interfere for insistingnecessary licence or make necessary search and enforce the provisionunder Section 13 of the Act for any violation. When such powersare available to the authorities, it is not known as to how theappellant is repeatedly referring to the word 'public interest'.Simply because the authorities who are expected to enforce thelaw are unable to enforce effectively, it does not meanthat the statutory provision must be given a go bye and such aconstruction would be antitheses to the concept of rule of law. Thelearned Judge in a categoric manner has given liberty to takeappropriate action in cases where the authorities come across anymaterial that are imported on the declared purpose is attempted tobe used for different purpose. The operative portion of the order ofthe learned Judge is extracted below:"22.It is hereby made clear that if the authorities comeacross any material that the imported substance clearedas an exempted item is not used for the declaredpurpose, it is always open to the respondents to proceedagainst the petitioner in accordance with law". The said direction has given abundant powers to the authoritieswhich are already available under the Act. 12. The law is well settled that the *an Executivefiat cannot over-ride a statutory rule as it was held inK.Kuppusamy and another Vs. Sftate of T.N. and others reported in(1998) 8 SCC 469. https://hcservices.ecourts.gov.in/hcservices/

13. When once the right has been conferred under statutoryrule, the same cannot be taken away by any executive fiat, as it washeld by the Supreme Court in Priya Blue Industries Limited Vs.Commissioner of Customs (Preventive) reported in 2004 (172) E.L.T145 . The relevant portion is extracted as follows:"6.We are unable to accept this submission. Justsuch a contention has been negatived by this Court inFlock (India)'s case (supra). Once an order of Assessmentis passed the duty would be payable as per that order.Unless that order of assessment has been reviewed underSection 28 and/or modified in an appeal that order stands.So long as the order of Assessment stands the duty wouldbe payable as per that order of Assessment. A refund claimis not an appeal proceeding. The officer considering arefund claim cannot sit in appeal over an assessment madeby a competent officer. The officer considering the refundclaim cannot also review an assessment order."14. While so, we do not agree with the contention of thelearned counsel for the appellant and accordingly the appeal failsand the same is dismissed. No costs.VJYSd/-Asst. Registrar28.2.2012*Corrected as per the order of this Court dated 1.3.2012.Sd/-Asst Registrar1.3.2012//True Copy//Sub Asst. RegistrarTo1.The Commissioner of Customs (Imports) Customs House, No.60, Rajaji Salai, Chennai 600 001.2.The Assistant Commissioner of Customs Special Intelligence & Investigation Branch, Customs House No.60, Rajaji Salai, Chennai 600 001. https://hcservices.ecourts.gov.in/hcservices/ + 2 ccs to Mr. Satish Parasaran, Advocate SR No.12734, 14372+ 1 cc to Mr. P. Mahadevan, To be substitutedAdvocate SR No.13028to the order alreadydespatched on+ 1 cc to Mr. S. Baskaran, 28.2.2012Advocate SR No.13116+ 1 cc to Mr. K. Mohanamurali, Advocate SR No.12369MG(CO)SR/28.2.20121.3.2012W.A.NO.1559 OF 2010