M/S. DR. REDDY'S LABORATORIES versus COMMISSIONER OF CUSTOMS
[2015] 10 S.C.R. 386, Supreme Court of India, 2015
Outcome: Disposed off
Segment: Facts
A 
B 
[2015] 10 S.C.R. 386 
MIS. DR. REDDY'S LABORATORIES 
v. 
COMMISSIONER OF CUSTOMS 
(Civil Appeal No.2603 of 2006) 
SEPTEMBER 02, 2015 
[A.K. SIKRI AND R.F. NARIMAN, JJ.] 
Customs Act, 1962-ss. 111(m), 114A- Customs Tariff 
Act, 1975 - Classification of goods as auto analysers or 
C photometers - Appellant filed Bill of Entry for clearance of 
goods classified as auto analysers under Entry 9030. 89 -
Goods seized by custom authorities - Issuance of notice 
stating that the said goods were photometers and not auto 
0 
analysers - Demand of duty - Confiscation of goods and 
imposition of penalty - Commissioner held that goods 
imported were auto analysers, thus, amounted to 
misdeclaration of description and that the goods were liable · 
for confiscation and penalty - No evasion of duty on the 
E imported goods, thus, no penalty uls. 114A - Tribunal set 
aside the order- Held: Without any analysis of whether the 
imported equipments were, in fact, auto analysers or were 
only photometers, the tribunal concluded that one can never 
come to a conclusion that a photometer is the same as an 
F auto analyzer - 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 - Tribunal found this logic faulty but did 
not given any reason for disregarding the same -
G Commissioner concluded that since the 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 -
H Thus, the order of the tribunal is set aside and that of the 
386
DR. REDDY'S LABORATORIES v. COMMISSIONER OF 387 
CUSTOMS 
Commissioner is restored. 
Tietz Text Book of Clinical Chemistry edited by Carl A 
Burtis and Edward R. Ashwood 2"d Edn - referred 
to. 
A 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 
B 
2603 of 2006. 
From the Judgment and Order No. 99 of 2006 dated 
20.01.2006 of Customs, Excise and Service Tax Appellate 
Tribunal, South Zonal Bench at Bangalore in Appeal No. Cl c 
130/2002. 
WITH 
Civil Appeal No. 4374 of2006. 
Aurav Agrawal, Vyom Shah, Manisha Singh, Vishal 
Gehrana, Abhijit Mitra, Ruby Singh Ahuja, B. Krishna Prasad D 
for the Appellant. 
YashankAdhyaru, Rupesh Kumar, Shirin Khajuria, Jitin 
Singhal, B. Krishna Prasad for the Respondent. 
The Judgment of the Court was delivered by 
E 
R. F. NARIMAN, J. 1. The present case relates to appeals 
filed both by the assessee and by the revenue against the 
judgment dated 2ot11 January, 2006 passed by Customs, Excise 
and Service Tax Appellate Tribunal (hereinafter referred to as F 
"CESTAT"). 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 
Mis Bio Systems, Barcelona, Spi:iin. On 271h May, 1999, the 
appellant in its Bill of Entry filed at Hyderabad for clearance of G 
models of BTS 320 and BTS 310 classified the goods as "auto 
analysers" under 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 H
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SUPREME COURT REPORTS 
[2015] 10 S.C.R. 
A of six persons were recorded under Section 108 of the 
Customs Act. On 2"d November, 1999 the Directorate of 
Revenue Intelligence, Chennai issued a show cause notice . 
stating that the goods in question are "photometers" and not 
B 
c 
D 
E 
F 
"auto analysers". On this basis, the revenue demanded:-
( a) Duty of Rs.1,79, 11,499/- [as detailed inAnnexure 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. 27-05-99 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 
Acton Dr. Jayaram Chigurupati, SeniorVice President 
and in-charge of Diagnostic Division of the Appellant. 
2. On 241h December, 1999, the assessee sent a detailed 
reply to the said show cause notice and explained that the 
imported equipments were "Auto Analysers" which used the 
photometry principle and were different from photometers. 
G 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 . 
H fully automatic, the other modelS>Were not as technologically
DR. REDDY'S LABORATORIES v. COMMISSIONER OF 389 
CUSTOMS [R.F. NARIMAN, J.] 
advanced nor were they fully automatic. However, insofar as A 
the analysis of Enzymes is concerned, the said two models, 
namely, BTS 310 and BTS 320 were fully automatic, the only 
non-automatic part being the manual mixing ~f certain elements 
with blood samples. They further relied upon the technical 
literature to buttress their point and claimed that they were B 
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 as follows:-
"SI No. 66: Blood Gas Analyser (including cartridges, if C 
any) Sodium Potassium Analyser, Auto Analyser for 
Enzymes, Drug Levels and Biochemical Investigations, 
or a combination of two or more of the aforesaid." 
3. The assessee was given a hearing on 9th January, 2001 
D 
by the learned Commissioner of Customs, Hyderabad. In a 
detailed order dated 1•t 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 E 
qualified to be called "auto analysers" of Enzymes, drug levels 
and biochemical investigations. In this connection, he referred 
to a book by "Tietz Text Book of Clinical Chemistry", second 
edition, edited by Carl A. Burtis and Edward R.Ashwood. More 
importantly, in para 46, which deserves to be
quoted, the F 
Commissioner found:-
"46. This 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. G 
55/95-Cus. dated 16.3.95. It would be important and 
relevant to reproduce the extracts of the minutes of the 
said conference herein below:-
"The issue raised by the Board was whether the term H
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SUPREME COURT REPORTS 
[2015] 1 O S.C.R. 
"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 of semi-
automatic analyser "Technician - Chemistry Auto 
Analyzers', the DGHS had clarified that the term could 
fall within the item auto Analyzers in the predecessor 
Notification namely 122/94-Cus. 
CONFERENCE CONCLUSION: 
The conference was of the view that the process of 
analysis is automatic, though mixing of sample is done 
manually. It is to be noted that for the exemption to accrue 
under the entry at SI. No. 77 thereto, all that is required is 
E 
thatthe 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." 
F 
Thus what is crucial to determine whether a medical 
equipment is an auto analyser or not is to see whether 
the analysis is done automatically or not. All the models 
(BTS 302, BTS 310, BTS 320 and BTS 370) in the 
impugned goods did not achieve this purpose. Of course, 
G
more and more features increasing the extent of 
automation have been built-in in the later models as 
compared to the earlier models. But all of them are auto 
analysers. It would also be relevant to note that the 
Minutes of the Conference of Commissioner's of 
H 
Customs extracted above also indicates that DGHS a
DR. REDDY'S LABORATORIES v. COMMISSIONER OF 391 
CUSTOMS [RF. NARIMAN, J.] 
competent expert body did clarify that a semi-automatic A 
analyser was eligible for the exemption under Notfn. No. 
122/ 94-Cus. as auto analyser. Furthermore inspite of 
the recommendation· of the Conference of 
Commissioners of Customs to amend the entry relating 
to auto analysers if found necessary for the purpose of B 
removing ambiguity, no such amendment has been 
carried out till date indicating that there is no ambiguity 
regarding the scope of the expression auto analysers 
as viewed by the Cor.ference of Commissioners of 
Customs." 
C 
4. He further held: 
"47. The word photometer used by M/ s. Bio Systems, 
Barcelona, Spain to describe two out of the four models o 
of the impugned goods (BTS 302 and BTS 310) has 
been the fundamental cause for generating doubts in the 
minds of the investigating officers about the bonafides 
of the importer in availing full exemption on the impugned 
goods from time to time and also in provoking the E 
importer to resort to ways and means to overcome 
problems with Customs in the matter of assessment of 
the impugned goods. Photometer is a generic expression 
meant to refer to a wide range of instruments used for 
taking measurements of light or electro magnetic F 
radiation. Photometry is a branch of physics dealing with 
measurement of intensity of light sources. Instruments 
used for such measurements are called Photometers. 
However the principle of
photometry has found 
application in the field of clinical chemistry and auto G 
analysers are one type of medical equipment which have 
been invented incorporating the principle of photometry 
applied to investigations in clinical laboratories. The 
catalogues of the manufacturer for the four models of the H 
impugned goods describe the impugned goods as
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SUPREME COURT REPORTS 
[2015) 10 S.C.R. 
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follows:-
a) BTS 302 
The Basic Photometer 
B 
The BIOSYSTEMS range of photometers has been 
developed to meet the standards of today's analysis in 
the clinical laboratory. 
b) BTS 310 
c 
The Photometer 
c) BTS 320 
The most versatile and user friendly Semi-Auto analyser 
D 
with capacity to perform ELISA with Microtitre Wells. 
E 
F 
G 
H 
d) BTS 370 
Fully-automatic Clinical Analyser 
Biosystems technology to meet your requirements. 
I have carefully gone through the rest of the salient features 
of each of the above models printed elsewhere in these 
catalogues. There is no doubt in my mind that these 
equipments are auto analysers meant for conducting 
tests in clinical laboratories. Just because the word 
Photometer has been used by the manufacturer in the 
catalogues for two first two models, neither will these two. 
models (BTS 302 and BTS 310) nor the other two models 
(BTS 320 and BTS 370) cease to be auto anlaysers. It 
is true that all these models are based on the principle of 
photometry and therefore have a photometer built-in 
within. It will be totally incorrect to conclude that the 
impugned goods are not auto analysers."
.. 
DR. REDDY'S LABORATORIES v. COMMISSIONER OF 393 
CUSTOMS [R.F. NARIMAN, J.] 
5. Having found that in point of fact what was imported A 
was, in fact, auto analysers, the learned Commissioner held 
that the assessee was guilty o( several manipulations which 
presented a description of the goods convenient for itself, but 
not exactly what the real invoice from the exporter would have 
carried. He thus held that this amounted to a misdeclaration of B 
description and that therefore the impugned goods were liable 
.for confiscation and penalty. However, no penalty under Section 
114A was imposed on the importer because there had, in fact, 
been no evasion of duty on the imported goods. Importantly, 
the learned Commissioner concluded:-
C 
"52. Since the goods under import are required to be 
programmed after import by feeding standardized 
procedures separately developed before they can be 
used as auto analysers it has been alleged in the show D 
cause notice that they cannot be called as auto analysers 
in the condition in which they are imported. After having 
gone through the features of the four models of the auto 
analysers under import as mentioned in the catalogues 
of the manufacturer and also the comparative details of E 
these four models furnished by the importer in their reply 
as Exhibits V and VI to the letter of the importer dated 
24.12.99 sent in reply to the show cause notice, I find 
that there is pabsolutely no merit in this allegation that F 
the need
to program the impugned goods according to 
the needs of each individual customer would for that 
matter render the goods into something entirely different 
from auto analyser. It is common knowledge that auto 
analysers come both as closed system and as open G 
systems enabling customers to program them according 
to their own needs when they are open system models. 
In fact open systems are more popular these days 
because it allows the customer the flexibility to adapt the 
system to his own needs." 
H
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SUPREME COURT REPORTS 
[2015] 10S.C.R. 
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6. Finally, he ordered:-
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"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. Reddy's 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. Reddy's 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. Reddy's 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. Reddy's Laboratories
Ltd. 
(v) I drop further proceedings in respect of rest of the 
actions proposed in the show cause notice."
DR. REDDY'S LABORATORIES v. COMMISSIONER OF 395 
CUSTOMS [RF. NARIMAN, J.] 
7. Against the said order of the learned Commissioner, A 
revenue filed an appeal under Section 1290(4) of tre Customs 
Act on 121h April, 2002. The assessee filed a reply-cum-cross 
objection dated 81h June, 2002 in which the assessee 
specifically stated:-
B 
"ln 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. Rea.gents from each C 
manufacturer have variation in this regard. Even though 
the Respondent's 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 D 
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 E 
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 F 
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 G 
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 CESTATwent on to conclude that one can 
never come to a conclusion that a photometer is the same as H
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SUPREME COURT REPORTS 
[2015] 10 S.C.R. 
A 
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 
B 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 the process 
of analysis is aut~matic, though mixing of samples may be 
C 
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 
0 
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. 
E 
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 fac.t that models BTS 310 and BTS 
F 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 
G 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 
H oral statements made by persons affiliated to the assessee to
DR. REDDY'S LABORATORIES v. COMMISSIONER OF 397 
CUSTOMS [R.F. NARIMAN, J.] 
the effect that the description of the imported goods was A 
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 B 
the learned Commissioner, these statements would be material 
in deciding whether Section 111(m) of the CustomsActread 
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 C 
Act. 
11. We, therefore, allow the appeal of the assessee and 
set aside the order of the CESTAT and restore that of the 
learned Commissioner. Revenue's appeal concerns itself with D 
penalty under Section 114A ofthe Customs Act. Since we have 
set aside the CESTAT's order, which imposed a penalty under 
Section 114A, revenue's appeal no longer survives and is 
therefore dismissed as such. 
Nidhi Jain 
Appeals disposed of. 
E