Case: M/s. Dr. Reddy?s Laboratories Vs. Commissioner of Customs

it allows the customer the flexibility to adapt the system to his own needs.” 6. Finally, he ordered:- “ORDER(i) Under Section 111(m) of the Customs Act, 1962 I order confiscation of goods valued at Rs. 26,97,741/- seized on 8.6.99. However under Section 125 of the Customs Act, 1962 I give M/s. Dr. Reddys Laboratories Ltd., the option to redeem the said goods by paying a fine of Rs. 1,00,000/- (Rupees one lakh only). Since the goods have already been provisionally released to the importer I order that the fine amount of rupees one lakh only be recovered by enforcing the bank guarantee furnished by the importer at the time of provisional release.(ii) Goods valued at Rs. 3,31,55,908/- already cleared and sold by M/s. Dr. Reddys Laboratories Ltd. are also liable for confiscation under Section 111(m) of Customs Act, 1962. But as the said goods were neither seized nor available now for seizure it is not possible for ordering its confiscation at this point of time.(iii) Under Section 112(a) of the Customs Act, 1962 I impose a penalty of Rs. 50,000/- (rupees fifty thousand only) on M/s Dr. Reddys Laboratories Ltd. This amount of penalty is also ordered to be recovered by enforcing the bank guarantee furnished at the time of provisional release of the seized goods.(iv) Under Section 112(a) of the Customs Act, 1962, I impose a penalty of Rs. 5,000/- (rupees five thousand only) on Dr. Jayaram Chigurupati, Sr. Vice-President, M/s Dr. Reddys Laboratories Ltd.(v) I drop further proceedings in respect of rest of the actions proposed in the show cause notice.” 7. Against the said order of the learned Commissioner, revenue filed an appeal under Section 129D(4) of the Customs Act on 12th April, 2002. The assessee filed a reply-cum-cross objection dated 8th June, 2002 in which the assessee specifically stated:- “In all cases, closed or open the in-built software contains programs for analysis and interpretation. The only inputs which are entered in an open system is volume of reagents to be used for each test, time of incubation, temperature for incubation etc. Reagents from each manufacturer have variation in this regard. Even though the Respondents engineers program the machines, for DRL manufactured reagents (nor for reagents manufactured for Bio-systems), the customers can themselves change these programs over a period of time if they choose to purchase reagents from other manufacturers. It is always in customers best interest to have an open system.” 8. By the impugned order, the CESTAT allowed revenue’s appeal. It found fault with the book quoted by the assessee which found favour with the learned Commissioner, and stated “Instead of appreciating the evidence unearthed by the investigating officer with reference to the goods imported, the adjudicating authority has embarked himself on a detour deviating from the main issue”. 9. We are at loss to understand what is meant by this statement. The evidence analysed by the investigating officer in the form of statements made by six persons affiliated to the assessee led to confiscation of the goods and imposition of penalty. Without any analysis of whether the imported equipments were, in fact, auto analysers or were only photometers, the CESTAT went on to conclude that one can never come to a conclusion that a photometer is the same as an auto analyser. The learned Commissioner had held that a photometer is a generic expression and auto analysers are photometers with software installed in them which could then perform various operations. The CESTAT in finding this logic faulty has not given any reason for disregarding the same. It then goes on to say that the whole of paragraph 46 of the Commissioner’s order is irrelevant. In this paragraph the learned Commissioner referred to the Commissioners’ Conference to arrive at the conclusion that since he process of analysis is automatic, though mixing of samples may be done manually, yet since analysis has to be done automatically, an analyser would fall under the expression “auto analysers” for enzymes, drug levels and biochemical investigations. This finding of the learned Commissioner was important in that the model BTS 370 which mixed both samples automatically and did the analysis automatically, was found by the customs authorities to fit the description of auto analyser. In holding that this paragraph is not at all relevant, the CESTAT does not seem to have come to grips with the real issue at all. 10. This is a peculiar case in which it is clear that what has, in fact, been imported is an equipment which is to be used in a pathological lab for the automatic analysis of blood samples. It is an admitted fact that models BTS 310 and BTS 320 were imported with inbuilt software that contained programmes for analysis and interpretation. It is equally an admitted fact that an importer can change such programmes to suit its own convenience. From this it does not follow that what has been imported is only a photometer. Learned senior advocate appearing for the revenue had to admit that a photometer is an instrument which measures intensity of light. There is no necessity for any inbuilt software in such photometer unless such instrument is, in fact, to be used for the automatic analysis of blood samples. This being the case, it is clear that oral statements made by persons affiliated to the assessee to the effect that the description of the imported goods was changed from photometers to auto analysers to avail the benefit of the exemption under notification No. 20/1999, and that the foreign supplier was requested to alter the description of the goods from photometer to auto analysers in order so to do, would not change the position in law. As correctly held by the learned Commissioner, these statements would be material in deciding whether Section 111(m) of the Customs Act read with Section 125 are attracted as to amount to mis-declaration of description of goods resulting in confiscation of the said goods, fine, and penalty under Section 112(a) of the Customs Act.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]10. This is a peculiar case in which it is clear that what has, in fact, been imported is an equipment which is to be used in a pathological lab for the automatic analysis of blood samples. It is an admitted fact that models BTS 310 and BTS 320 were imported with inbuilt software that contained programmes for analysis and interpretation. It is equally an admitted fact that an importer can change such programmes to suit its own convenience. From this it does not follow that what has been imported is only ais no necessity for any inbuilt software in such photometer unless such instrument is, in fact, to be used for the automatic analysis of blood samples. This being the case, it is clear that oral statements made by persons affiliated to the assessee to the effect that the description of the imported goods was changed from photometers to auto analysers to avail the benefit of the exemption under notification No. 20/1999, and that the foreign supplier was requested to alter the description of the goods from photometer to auto analysers in order so to do, would not change the position in law. As correctly held by the learned Commissioner, these statements would be material in deciding whether Section 111(m) of the Customs Act read with Section 125 are attracted as to amount tomisdeclaration of descriptionof goods resulting in confiscation of the said goods, fine, and penalty under Section 112(a) of the Customs Act.We are at loss to understand what is meant by this statement. The evidence analysed by the investigating officer in the form of statements made by six persons affiliated to the assessee led to confiscation of the goods and imposition of penalty. Without any analysis of whether the imported equipments were, in fact, auto analysers or were only photometers, the CESTAT went on to conclude that one can never come to a conclusion that a photometer is the same as an auto analyser. The learned Commissioner had held that a photometer is a generic expression and auto analysers are photometers with software installed in them which could then perform various operations. The CESTAT in finding this logic faulty has not given any reason for disregarding the same. It then goes on to say that the whole of paragraph 46 of theorder is irrelevant. In this paragraph the learned Commissioner referred to theConference to arrive at the conclusion that since he process of analysis is automatic, though mixing of samples may be done manually, yet since analysis has to be done automatically, an analyser would fall under the expressionor enzymes, drug levels and biochemical investigations. This finding of the learned Commissioner was important in that the model BTS 370 which mixed both samples automatically and did the analysis automatically, was found by the customs authorities to fit the description of auto analyser. In holding that this paragraph is not at all relevant, the CESTAT does not seem to have come to grips with the real issue at all.