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

The appellant company had been importing various models of diagnostic equipment such as BTS 302, BTS 310, BTS 320 and BTS 370 manufactured and supplied M/s Bio Systems, Barcelona, Spain. On 27th May, 1999, the appellant in its Bill of Entry filed at Hyderabad for clearance of models of BTS 320 and BTS 310 classified the goods aser Entry 9030.89 of the Customs Tariff Act, 1975. The goods were seized by the custom authorities, being a total of 8 BTS 320 and 15 BTS 310 models, valued at Rs. 26,97,741.21. During the course of investigation, statements of six persons were recorded under Section 108 of the Customs Act. On 2nd November, 1999 the Directorate of Revenue Intelligence, Chennai issued a show cause notice stating that the goods in question are. On this basis, the revenueDuty of Rs.l,79,11,499/[as detailed in Annexure 11 to the Notice] towards import of BTS 302, BTS 310, BTS 320 and BTS 370 from 1994 till 1999.(b) Confiscation of goods valued at Rs.3,31,55,908/imported without payment of duty and sold (in the market) as auto analysers under Section 111(m) of the Customs Act, 1962.(c) Confiscation of goods valued at Rs.26,97,741/imported vide Bill of Entry No. 4454 dt.and seized by the officers of DRI on 8.6.99 under Section 111(m) of the Customs Act, 1962.(d) Penalty under Section 114A of the Customs Act, 1962.(e) Penalty under Section 112(a)/112(b) of the Customs Act on Dr. Jayaram Chigurupati, Senior Vice President andof Diagnostic Division of the Appellant.On 24th December, 1999, the assessee sent a detailed reply to the said show cause notice and explained that the imported equipments werech used the photometry principle and were different from photometers. Being a pathology lab, these equipments were imported for the purpose of automatic analysis of blood samples. This, according to the assessee, could not be done by a photometer. The only difference between the four models imported was that whereas model BTS 370 was technologically superior and fully automatic, the other models were not as technologically advanced nor were they fully automatic. However, insofar as the analysis of Enzymes is concerned, the said two models, namely, BTS 310 and BTS 320 were fully automatic, the onlypart being the manual mixing of certain elements with blood samples. They further relied upon the technical literature to buttress their point and claimed that they were exempted under notification No. 20/1999 dated 28th February, 1999. The said notification exempts medical equipments specified in List 21, serial No. 66 of which reads asNo. 66: Blood Gas Analyser (including cartridges, if any) Sodium Potassium Analyser, Auto Analyser for Enzymes, Drug Levels and Biochemical Investigations, or a combination of two or more of the aforesaid.The assessee was given a hearing on 9th January, 2001 by the learned Commissioner of Customs, Hyderabad. In a detailed order dated 1st March, 2001, the learned Commissioner went through the show cause notice and the reply filed by the assessee. He correctly concluded that the issue for determination was whether the impugned goods were qualified to be calledof Enzymes, drug levels and biochemical investigations. In this connection, he referred to a book byText Book of Clinicalsecond edition, edited by Carl A. Burtis and Edward R. Ashwood. More importantly, in para 46, which deserves to be quoted, the CommissionerThis very question came up for examination before the conference of Commissioners of Customs held in Cochin in October 1995 in the context of Notification No.dated 16.3.95. It would be important and relevant to reproduce the extracts of the minutes of the said conference hereinissue raised by the Board was whether the term "Auto Analysers for enzymes, Drug levels and Biochemical investigations" could be applied to Analyzers in which a part of the operations are performed manually, like some in which mixing of samples and reagents is done manually but the actual analysis is done automatic. The doubt arose since a view existed that the term applied only to those instruments in which all operations, including mixing of samples and reagents are automatic. However, in one particular case oftry Auto Analyzers, the DGHS had clarified that the term could fall within the item auto Analyzers in the predecessor Notification namelyCONCLUSION:The conference was of the view that the process of analysis is automatic, though mixing of sample is done manuaIIy. It is to be noted that for the exemption to accrue under the entry at Sl. No. 77 thereto, all that is required is that the analysis has to be done automatically. TRU may, however, examine in consultation with the administrative Ministry concerned whether they would like this entry to be amended in any manner to remove ambiguity."

Reasoning:
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.