The Bombay High Court has clarified that goods requiring a mandatory license for import under the Drugs and Cosmetics Act, 1940, are classified as ‘prohibited goods’ under Section 2(33) of the Customs Act, 1962, if imported without such a license. The act of ‘import’ is complete upon the entry of goods into the territorial waters of India, and at that point, the prohibition attaches.
Since the intention to warehouse the goods and subsequently re-export them does not cure the illegality of the initial import, the Court held that such ‘prohibited goods’ are liable for seizure and confiscation under the Customs Act, and the facility of re-export under Section 69 is not available for goods that were not legally imported in the first place.
The Division Bench comprising Justice G. S. Kulkarni and Justice Aarti Sathe observed that the definition of ‘import’ under Section 2(23) of the Customs Act means bringing goods into India from a place outside India, and ‘India’ under Section 2(27) includes its territorial waters. Therefore, the import process commences when the goods enter the territorial waters of India, not upon arrival at a port or warehouse.
The Bench noted that ‘prohibited goods’ under Section 2(33) of the Customs Act are defined as goods whose import is subject to any prohibition under the Customs Act or ‘any other law for the time being in force’. This phrasing incorporates the provisions of other statutes, such as the Drugs and Cosmetics Act, 1940, and the rules framed thereunder, into the customs framework.
Further, the Bench highlighted Section 10 of the Drugs and Cosmetics Act, 1940, and Rule 12 of the Cosmetics Rules, 2020, which mandate that no cosmetic shall be imported into India without a prescribed license or registration from the Central Licensing Authority. Since the petitioner admittedly imported the goods without such a license, the Bench concluded that the goods were ‘prohibited goods’ under Section 2(33) of the Customs Act.
Consequently, the Bench found that the provisions for seizure and confiscation under the Customs Act were applicable, and dismissed the petitioner’s argument that the goods were intended only for warehousing and re-export, as an ‘afterthought’ and legally untenable, since the law does not permit the import of prohibited goods even for warehousing.
The Bench further observed that the petitioner’s reliance on Section 69 of the Customs Act, that allow re-export of warehoused goods was misplaced. It held that Section 69 applies only to goods that have been legally imported and are not prohibited. It cannot be invoked to legitimize an illegal import. The Bench also emphasized the public interest aspect of the Drugs and Cosmetics Act, which is designed to protect public health by regulating the import of such products.
Briefly, the petitioner, engaged in the business of importing and trading cosmetics and Fast-Moving Consumer Goods (FMCG), had imported three consignments of cosmetics and FMCG from the UAE and filed Warehousing Bills of Entry. As per the petitioner, these goods were never intended for home consumption as it lacked the mandatory Central Drugs Standard Control Organization (CDSCO) license, for which an application was made, but was not yet granted. The stated reason for importing the goods to India was that warehousing expenses were three times lower than in the UAE, with an intention to re-export the goods for profit.
The goods were however seized by the Directorate of Revenue Intelligence (DRI) under a Seizure Memo, pursuant to Section 110 of the Customs Act, 1962. The seizure was based on the belief that the goods were mis-declared, undervalued, and imported without the mandatory CDSCO license, making them liable for confiscation under Sections 111(d), 111(l), and 111(m) of the Customs Act. The DRI’s valuation of the goods was Rs. 10.09 Crores, significantly higher than the petitioner’s declared value of Rs. 1.64 Crores. Hence, the petitioner’s request for a No-Objection Certificate (NOC) to re-export the goods was not granted.
The respondents (DRI) argued that the filing of warehousing bills of entry was an afterthought to circumvent mandatory regulations, especially after the DRI had placed a hold on similar goods from the same supplier imported by another entity. They contended that the import of cosmetics without a CDSCO license is prohibited under the Drugs and Cosmetics Act, 1940, and the Cosmetics Rules, 2020, rendering the goods ‘prohibited goods’ under Section 2(33) of the Customs Act.
Appearances:
Advocates Dr. Sujay Kantawala, Aditya Talpade, Pratik Karande, Diksha Talpade, Prajwal Padole, Akash Sable, and Aishwarya Kantawala, for the Petitioner/ Taxpayer
Advocates Jitendra B. Mishra, Sangeeta Yadav, Ashutosh Mishra, and Rupesh Dubey, for the Respondent/ Revenue
