MUHAMMAD ARIF MOTON (MEMBER JUDICIAL-II).--This order will dispose of Customs Appeal No, K- 366 of 2009 filed by the appellant against Order-in-Appeal No, 1721 of 2008, dated 18-4-2009, passed by the Collector of Customs, Sales Tax and Federal Excise (appeals), Karachi.
2. Brief facts of the case are that the appellant imported a consignment of "Vivioptal Capsules (Multivitamin)" declaring the description of goods as "Drugs and Medicines" and claimed assessm ent thereof under PCT code 3004.5090. On physical examination of the consignment, customs shed staff confirmed the description of imported goods as Food Supplement (Multivitamin Geriatric with H3 Capsules) and classified the same under PCT Heading 2106.
However, the appellants did not agree with the classification of their goods determined by Customs Shed Staff and requested for release of the same on the declared/claimed PCT and subsequent referral to release of the same to Classification Centre. Appraisement Collectorate, Custom House, Karachi for determination of correct classification of the goods. The goods were accordingly assessed and released on declared/claimed PCT after obtaining undertaking from the appellants to the effect that they would pay differential amount of customs duty and other taxes if it was ruled by the Classification Centre that the goods were Food Supplement and classifiable under PCT heading 2106. The ruling (No,CC-04/2003-a dated 7-5-2003) of the Classification Centre, Appraisement, Collector, Custom House Karachi held that the goods were "Dietary Food Supplements" consisting of vitamin, mineral substances and salts in the from of tablets which are used for daily requirements of the human body to restore its health. The same are used as defence against exhaustion, reduced vital force (disturbance of potency) increased nervousness and irritability, defective memory, lack of concentration, diurnal tiredness, disturbed blood supply and general weaknesses i,e, in all symptoms indicating a deficiency of vital substance. The capsules can be used without Doctor's Prescription. Therefore, the same do not qualify for classification under Chapter 30 as per explanatory notes of (3004) which read as "Further, this heading excludes food supplements containing vitamins or mineral salts which are put up for the purpose of maintaining health or well-being but have no indication as to use for the prevention or treatment of any diseases or ailment. These products which are usually in liquid form but may also be put up in powder or tablet form, are generally classified in heading 21.06 or Chapter 22.". Further as per notes of (2106), "(16) Preparations, often referred to as food supplements, based on extracts from plants, fruit concentrates, honey, fructose, etc. And containing added vitamins and sometimes minute quantities of iron compounds. These preparations are often put up on packaging with indications that they maintain general health or wellbeing. Similar preparations however, intended for the prevention or treatment of diseases or ailments are excluded (heading 30.03 or 30.04). Thus the instant goods qualify for definition of Food Supplement classifiable under PCT heading 2106. In view of the classification Centre's ruling and Customs Explanatory notes the goods were classified under PCT heading 21.06 instead of 30.04 and re-assessment thereof was carried out which indicated a short levy of duty/taxes amounting Rs,2,146,998.
3. The Appellants were served with a show-cause notice as to why action under the aforesaid provisions should not be taken against them.
4. Adjudication proceedings were initiated by the Additional Collector who after hearing the parties passed the Order-in-Original No,13 of 2008 dated 19-9-2008. The relevant extract is as follows:-- "I have considered the case record as well the detailed arguments of the respondents. From the characteristics of the imported goods as mentioned in the literate as well as on the packing it is evident that the same are multivitamin preparation referred to as food supplements in the light of Explanatory Notes of HS 2106 read with Classification Centre Ruling dated 7-5-2003 and the under reference goods were correctly classifiable under PCT heading 21.06. I, therefore, order Messrs A.G.P.
(Pvt.) Ltd., to pay the short recovered amount of Rs,2,146,998 (Rupees twenty one lac forty six thousand nine hundred ninety eight only) within 14 days of issuance of this order under section 32(2) of the Customs Act, 1969 read with section 36(1) of the Sales Tax Act, 1990."
Appeal filed against the said order-in-original met the same fate. Hence this appeal.
5. Mr. S.M. Kazimi Consultant appeared on behalf of the appellant and reiterated the arguments incorporated in his memo. Of appeal.. He mainly emphasized on the following points:---
(i) That the impugned order ignores and fails to appreciate that the Order-in-Original No,13 of 2008 dated 19-9-2008 is manifestly time-barred under the provisions of section 179(3) of the Customs Act, 1969 with reference to the show cause notice dated 21-2-2008 and is therefore, unlawful and void. The impugned order (based on and confirming such a time-barred, unlawful and void order- in-original) is also void and unlawful accordingly. The prescribed limitation of 90 days for adjunction expired on 21-5-2008 and no reasoned ordered of extension of this time limit has either been recorded in that order-in-original or communicated to the appellant. It is, therefore, construed that no valid and reasoned order of extension in adjudication period was obtained for the Collector. Even otherwise, there can be no justifiable reason for any such extension because the case was last heard by the respondent on 10-5-2008 and judgment was reserved by him. No proceedings took place after 10-5-2008 and, therefore, there could be no justification for obtaining/ allowing extension beyond the original limitation of 90 days which expired on 21-5-2008.
Section 179(3) requires that the reasons for extension, where granted, has to be specified in writing.
He referred to the judgments reported as PLD 1990 Karachi 412, 1998 MLD 650, PTCL 2003 CL 716.
(ii) That without prejudice to the aforesaid arguments, the order-in-original passed by the respondent in unlawful and void because:--
(i) It has been after the expiry of more than 3 months from the date of last hearing. In its judgment dated 19-9-1981 in I.C.A. No,110 of 1978 in the case of Crescent Sugar Mills v. C.B.R. And others (PLD 1982 Lah. 1), the honourable Lahore Court had held that 'Repeatedly, the Supreme Court has made observation that in any case where judgment is reserved and it has not been written within a period of three or four months, fresh hearing is necessary in such circumstances. Surely this principle would be attracted to the instant case as well'; and
(ii) It is time-barred under all circumstances under section 179(3). It has been held by the Hon'ble Lahore High Court in its judgment dated 7-11-2007 in Writ Petition No,13331 of 2006 (2008 PTD 60) that the limitation period for adjudication is mandatory in nature and is not directory and that 'once limitation had started to run and had come to an end the assessee had acquired a vested right of escapement of assessm ent by lapse of time.
(iii) That both the learned Collector (Appeals) and the respondent have failed to appreciate that no sales tax is leviable in terms of S.R.O. 555(1)/2002 dated 23-8-2002, now Serial No,7 of S.R.O.
555(1)/2008 dated 11-6-2008 which exempts all substances (irrespective of its PCT heading classification) from the whole of sales tax if registered as drug under the Drugs Act, 1976. Vivioptal Capsules is a registered drug under registration No,014800 dated 6-12-1993. That being so, the demand for sales tax of Rs,1,125,261 as made by the respondent in the order-in-original and also confirmed by Collector (Appeals) in the impugned order is unlawful and not sustainable and void:
(iv) That both the learned Collector (Appeals) and the respondent have also failed to appreciate that while customs is empowered to assess and collect the amount of advance income tax on imports under section 148, Division-II of Part-V, of the Income Tax Ordinance, 2001, they (Customs) are not empowered to recover the not-collected or short-collected amounts of advance income tax of the escaped assessm ents of such advance income tax. It is only the Commissioner of Income Tax, in terms of section 162 of the said Ordinance, who can pass an order to that effect and recover the amount not collected from the person from whom the advance income tax (of section 148, Division-II of part-V of the Ordinance) should have been collected. Therefore, the demand for recovery of the advance income tax of Rs,12,528 as made by the respondents is ultra vires, unlawful, not sustainable and void. At best the respondents could inform the appellant's Commissioner of Income Tax for necessary action, if lawfully under section 162 of the said Ordinance but he himself is not legally empowered to demand or recover this short levy, even if lawfully payable.
(v) That the respondents have committed a breach of the provisions of section 223 of the Customs Act, 1969 by ignoring and not adhering to the guidelines provided by the F.B.R. In the long practiced (Since 1973) para 74 of Customs General Order No,12 of 2002 dated 15-6-2002 based on the previous C.G.O No,21 of 1973 dated 26-5-1973. Vivioptal Capsules, registered as drug under the Drugs Act, 1976 has all along been assessed by the Customs Department under PCT heading 3004.5090 and this classification and assessment is a long-established uninterrupted practice since the date of registration. The appellant acquired a vested right of assessment of Vivioptal Capsules under PCT heading 3004.5090. Without prejudice to the merits of Vivioptal being classifiable under PCT heading 3004.5090, the customs are not empowered to make a sudden departure from the said established practice of assessment of Vivioptal Capsules under PCT heading 3004.5090. Without prejudice to the merits of Vivioptal being classifiable under PCT heading 3004.5090 the customs are not empowered to make a sudden departure from the said established practice of assessm ent of Vivioptal Capsules under PCT heading 3004-5090 unless they issue a Public Notice giving reasons for the new classification and even then such a public notice will be applicable and enforceable prospectively for the imports after the date of that Public Notice. Since no such Public Notice has been issued by the Customs Department or by the respondent, the classification of Vivioptal Capsules under PCT heading 3004.5090 will rule and reign in this case under appeal. The orders for change in classification of Vivioptal imported prior to the date of order is ab initio void, unlawful and non-sustainable being violative of the legal principles outlined under the provision of para 74 of the said CG No,12 of 2002 read with section 223 of the Customs Act, 1969.
(vi) That as regards the so-called Classification Centre Ruling during 7-5-2003 heavily and solely relied upon by the Collector (Appeals) and the respondent, the appellant begs to state that:--
(i) That it is not a Ruling by the Classification Centre. It is simply a letter (reply) from the Collector of Customs (Appraisement) addressed to Secretary, (STT), F.B.R. Stating that:--
(a) The case of Classification of Multivitamin Dietary Supplement was discussed in the Classification Centre in its meeting held on 9-4-2003. It does not give the details of any decision or opinion of the said Classification Centre.
(b) The Customs are already classifying such multivitamin dietary supplements under PCT heading 21.06 as food supplements. It neither gives the names of the products nor specifies its exact chemical composition and packing presentation; and
(c) Advises the Sales Tax Wing of F.B.R. To take necessary action as per law against the local suppliers.
(ii) That the methodology for issuance of Classification Rulings is given in Chapter-II of the F.B.R's C.G.O.No,12 of 2002 dated 15-6-2002 it is pertinent to say that the Note appended to para.2 of Chapter-II of C.G.O No,12 of 2002 states that 'The Classification ruling so issued by the Centre will be widely circulated in the form of public notice amongst the trade, industry and Customs organization in the country'. The Collector's letter to F.B.R (i,e, the said so-called Ruling dated 7-5- 2003) is a letter exchanged between the Sales Tax Wing of F.B.R. And the Collector (requesting further necessary action by F.B.R.) and it does not qualify to be Classification Ruling issued under Chapter-II of F.B.R's C.G.O. No,12 of 2002. Reliance upon this letter by terming it with a misnomer of 'classification Rulingis an act of mischief on the part of the respondent.
(iii) That the Collector's letter dated 7-5-2003 is neither specific to nor related to the appellant's goods (Vivioptal Capsules). This is confirmed by the fact that while the said letter states that multivitamin Dietary Supplements are already being classified by the Customs under heading 21.06, the fact remains that the customs were classifying vivioptal capsules and a similar geriatric multivitamin (Pharmation) Capsules regularly and consistently under PCT heading 3004.5090, showing that the Collector's report was not relatable to the appellant's vivioptal (imported from Germany) or its competitors Pharmaton (imported from Switzerland). Had there been a valid, applicable and lawful Ruling of 2003 or any consistent practice for assessment of Multivitamin Capsules (like Vivioptal or Pharmaton) under PCT heading 3004.5090 during 2003 or prior to 2003 or after 2003.
(iv) 'That the respondent has not given the reason that when the specific issue of PCT Classification of vivioptal Capsules was referred by him to the Classification Centre vide his letter No,UT/840/2007-AFU dated 24-5-2007, why it was not put up before the Classification Centre. The Secretary of the Classification Centre, who reportedly returned the matter vide his letter dated 31- 5-2007, is not legally empowered or authorized to decide a reference (to the Classification Centre) without obtaining a specific order/approval of the meeting of the Committee of that Classification Centre. The so-called Secretary of the Classification Centre cannot act singly or unilaterally without obtaining the written directives of the Committee of the said Centre. The said action of the so- called Secretary of the Classification Centre is arbitrary, uncalled for, unlawful and void.
(v) That the respondent has not given in the show-cause notice or his order-in-original any reason as to why he did not refer back the matter to the Classification Centre for a meeting and a specific ruling in accordance with the revisions of para 2 of Chapter-II of C.G.Q No,12 of 2002 in view of the deficiency highlighted in sub-para above.
(vi) That the respondent has also not given reason why he had to wait for 9 long months (from 31- 5-2007 to 21-2-2008) from the date of the letter dated 31-5-2007 from the Secretary of the Classification Centre to the date (21-2-2008) that he issued the shows-cause notice. It is pertinent to say that 4 such consignments of Vivioptal Capsules imported by the appellant (IGM No,15651/20-6-2007, Index No,15, C-1299/7-6-2007; IGM No,16094/20-6-2007, index No,39, 5056/25- 6-2007, IGM No,18586/5-9-2007, index No,27, C-1236/7-9-2007; and IGM No,1316/14-2-2008, index No,20, C-2376/14-2-2008) were cleared under PCT heading 3004.5090 even after the date (31-5- 2007) of the so-called Ruling and before the date (21-2-2008) of the show-cause notice. This shows that even the respondent and his subordinates had not accepted the so-called Ruling whether after the date of its issue (7-5-2003) or after the receipt of the Secretary, Classification Centre's letter dated 31-5-2007. Thus the past practice continued and para. 74 of the C.G.O. No,12 of 2002 applies in such cases.
(vii) That no Classification Ruling on Vivioptal has as yet been issued by the Classification Centre (in terms of the Note appended to para 03 of C.G.O. No,12 of 2002 or by the F.B.R whether on the basis of Collector's letter No,CC-4/2003-A dated 7-5-2003 or otherwise.
(vii) The learned Collector (Appeals) and the respondent have erred in holding that Vivioptal is a food supplement and/or is not a medicament. The printed literature available in all the packages of Vivioptal Capsules indicate that it:-
(i) has a well-balanced complex spectrum of vital substances: vitamins, lipotropic substances, mineral salts, trace elements and other bio-activators;
(ii) contains specified quantity/unit of U.S.P grades of vitamin A, vitamin B-1, Vitamin B-2, Vitamin B- 6, Vitamin B-12, Nicotinamide, D-Panthenol, Biotin, Procaine HCL, Folic Acid, Inositol, Orotic Aid, Vitamin C, Vitamin D-3, Vitamin-E, Ethyl Linoleate, Lecithin, Choline Hydrogen Tartarte, L- Lysinmonohydrocholoride, Hematoporphyrin, Adenosine, Intrinsifactor, Magnesium, Glycerophosphte, Calcium Hydroigen Phosphate, Potassium Sulphate, Ferrous Sulphate, Cupric Sulphate, Manganous Sulphae, Caboltous Sulphae, Sodium Molbdate and Zinc Oxide.
(iii) contain no food or food substitute and is not (repent) not based on extracts from plants, fruit concentrates, honey, fructose, etc. And that while the product is a Geriatric multivitamin Capsules, it is not a food with added vitamins;
(iv) is indicated for the prevention and treatment of various symptoms like Exhaustion, Reduced Vital Force, increased nervousness and irritability, defective memory, lack of concentration, diurnal tiredness, disturbed blood supply and general weakness. It improves vesicular breathing, capillary circulation exerting a regenerating and revitalizing effect supported by psycho harmonizing action of hematoporphyrin. It protects liver and prevents cholesterosis. It dilates coronaries and improves heart output by increasing blood flow through cardiac-wall. It prevents brittleness of bones and stimulates cell division particularly reticuloendothelial system. It is for the treatment and prophylaxis of geriatric complaints. It is used as auxiliary agent in the treatment of skin diseases and affections of mucosea and help rent physic sclerosis; and
(v) is administered in measured doses. Unlike food/dictary supplements which can be taken for any indefinite duration, Vivioptal is recommended as a treatment of about 3 months only (2 treatments a year being sufficient).
(viii) That the learned Collector (Appeals) and the respondent have totally ignored the General Rules of the interpretation of the Harmonized System (hereinafter called 'the Rules of Interpretation') which forms a part of the First Schedule to the Customs Act, 1969 (commonly known as 'PCT'). A. Careful reading of rules 3(a), 3(c) and 4 of the said Rules of Interpretation will show that:-
(i) Heading 3004.5090 (Medicaments containing vitamins or other products of heading 29.36) provides the most specific description of Geriatric Vivioptal Capsules and has to be preferred over heading 21.06 (Food preparations not elsewhere specified or included). The description of heading 3004.5090 answers more specifically the description of Vivioptal as compared to the general and the residuary description of heading 21.06. Therefore, Vivioptal should be classified under PCT heading 3004.5090 in terms of Rule 3(a) of the said Rules of interpretation of Tariff.
(ii) Heading 3004.5090 occurs later to heading 21.06 in numerical order. Therefore, in terms of Rule 3(b) of the Rules of Interpretation of Tariff, Vivioptal should be classified under heading 3004.5090 which occurs last in numerical order as against heading 21.06 even if meriting consideration, and
(iii) Without prejudice to the specific classification of Vivioptal under PCT heading 3004.5090 under the aforesaid rules 3(a) and 3(c) of the Rules of Interpretation of Tariff, Vivioptal still remain classifiable under heading 3004.5090 (as against the general and residuary heading 21.06) because it is a registered drug and is most akin to several other registered drugs also classified under heading 3004.5090.
(ix) That the learned Collector (Appeals) and the respondent have also ignored that the Geriatric Multivitamin Drugs (like Vivioptal, Pharmaton, etc.) are widely prescribed as medicines by the Doctor, including Government Doctors, in Pakistan and the Civil Surgeon of the Federal Government has been certifying and authenticating its medicinal use as being 'essential for the recovery and restoration of the patient'. The detailed report of the PCSIR Laboratory also supports the appellant's contention that the subject Vivioptal capsules have both therapeutic and prophylactic uses. The costs of such geriatric medicines, when purchased by patient (Government servants and their dependents) have been allowed reimbursements by the Director General of Pakistan Revenues of the Government of Pakistan. As such, the use of such Geriatric Multivitamins Drugs as drugs are disputed neither by the Doctors nor by the Government exchequer. Therefore, these are essentially medicaments containing vitamins of PCT heading 3004.5090.
6. The representatives of the respondent supported the impugned orders and mainly emphasized on the following points:--
(i) That the benefit of sales tax is available to registered drugs classifiable under Chapter 30. Since the instant goods are neither drugs nor classifiable under Chapter 30 thus does not qualify for the benefit.
(ii) That the customs is entitled to demand and recover short levied income tax as per Section 148(6) read with section 161(2) of the Income Tax Ordinance 2001.
(iii) That the classification centers decision vide order No, Ruling No,CC-04/2003-A dated 7-5-2003 has already been made public that dietary supplements containing vitamins and minerals are classifiable under heading 2106.9000 so no new public notice is required.
(iv) That the contention of the appellant in respect of opinion of Classification Centre is not correct as classification centre has given its expert opinion with regards to classification of Multivitamin Dietary Supplement under heading 2106.9000 and the same also been intimated to the F.B.R. As the literature of the impugned goods as well as information downloaded from Internet confirms that it is a Multivitamin Dietary Supplement and is not meant for any disease or illness as is required by the Chapter 30. Classification of goods has primarily been done in the light of Explanatory Notes of WCO Harmonized System in which clear guidelines are given for classifying the instant goods.
(v) That the classification centresdecision conveyed to the Board vide Letter No,CC-04/2003-A dated 7-5-2003 confirming that Multivitamin Dietary Supplements are correctly classifiable under Chapter 21 heading 2106.
(vi) That the explanatory notes of Chapter 3004 excludes the food supplements containing vitamins or mineral salts which are put up for the purpose of maintaining health or well-being but have no indication as to use for the prevention or treatment of any disease or ailment. These products which are usually in liquid form but may also be put up in powder or tablet form, are generally classified in heading 2106 or Chapter 22.
(vii) That the Explanatory Notes of Chapter 2106 under the heading at Serial No,16, the heading indicates inter alia "Preparation, often referred to as food supplements, based on extracts from plants, fruit concentrates, honey, fructose, etc. And containing added vitamins and sometimes minute quantities of iron compounds." These preparations are often put up in packaging with indications that they maintain general health or well-being. Similar preparations, intended for the prevention or treatment of diseases or ailments are excluded (heading 3003 or 3004).
(viii)That the literature clearly stated that:- Viviopotal should be taken in case of "exhaustion, reduced vital force (disturbances of potency).
Increased nervousness and irritability, defective memory, lack of concentration, diurnal tiredness.
Disturbed blood supply and General weakness". All these are old age factors and cannot be termed as disease or ailment. And Vivioptal Multivitamins are supplemented for the general well being and general health.
(ix) That the literature also confirms mode of action of Vivioptal as, "Vitamin cannot be produced in the human body and must therefore be supplied continually in sufficient quantities. Vitamins as such or biochemically changed vitamins (ferments) are organics, essential catalyst of the metabolic processes showing an impressive interaction and a close relationship to the hormones.
(x) That the Vivipotal contains the following Liportropic Nutrients, Choline, Insoital, Ovatic Acid, Ethyl-Linolete and Lecithin from soya beans along with minerals and vitamins.
(xi) That the websitesliterature confirms the following suggestions and uses of Vivioptal Multivitamins.
Insufficient consumption of vitamins and minerals. Help control diabetes type 2.
Unable to absorb vitamins and minerals in generals.
Convalescence of disease.
Convalescence of surgical operations.
Special or restricted diets.
Nutritional Intolerance to some food.
Increase of requirements in vitamins and minerals. Abnormal excretion of vitamins and minerals.
Vegetarians who need vitamin B12 in their diets. Weight loss diets with less than 1200 calories a day.
For elderly persons with a sedentary lifestyle. For athletes who perform high performance exercise.
For persons who perform heavy physical labour.
The above factors clearly narrate that it is for general well-being to maintain health.
(xii) That the website literature as well as literature with the medicine confirm, "Recommended Dose and Suggested use:-- "For adults and young people of 14 years of age and older.
For pregnant women, please consult with your doctor before taking Vivioptal Multivitamins". So, generally doctors prescription is not required.
(xiii) That a medicine is prescribed for 1 or 2 diseases, and not for 10 or more diseases.
(xiv) That Brussels Classification opinion support the point of the respondents hence multivitamin preparations, cough syrup and assessing ginseng have been classified under heading 21.06.
(xv) That in view of the above points confirming that the Vivioptal Multivitamin is a dietary supplements for the general well-being for the maintenance of Health and is not meant for any disease or ailment so correctly classifiable under heading 2106. It is further pointed that the importing firm has never declared or pointed out that it is multivitamin on the GD simply to conceal the actual description is also worth-noting.
7. Rival parties heard and case record perused. The following issues are framed for consideration by this Tribunal:--
(i) Whether the Collector of Customs (Appraisement), Custom House, Karachi's letter No,CC- 04/2003- A/S-1/Misc/181/2003- II dated 7-5-2003 addressed to the C.B.R. And/or the Deputy Collector of Customs (Appraisement Group-II), Custom House, Karachi's letter No,UT/840/07/AFU dated 31-5-2007 addressed to the respondent Additional Collector qualifies to be called a classification ruling of the appellant's goods Vivioptal Capsules in terms of Chapter-II of C.G.O.
No,12 of 2002 dated 15-6-2002?
(ii) Whether, as a general rule, the importers are entitled to the benefits of past practice as envisaged under paragraph 74 of C.G.O. No,12/2002 till such time that a proper classification ruling, negating the past practice, is issued in terms of Chapter-II of C.G.O. No,12 of 2002?
(iii) Whether in terms of para 74 of C.G.O. No,12 of 2002, a Customs officer commits a breach of the provisions of section 223 of the Customs Act, 1969 by not extending the benefits of past practice to a tax payer?
(iv) Whether the Customs officers are authorized to determine and recover the escaped assessm ents of advance income tax on imported goods?
(v) Whether substances registered under the Drugs Act, 1976, qualify for exemption of Sales Tax in terms of S.R.O. 555(1)/2002 dated 23-8-2002 if these are classified under any PCT heading other than those under Chapter 30?
(vi) Whether the appellant's goods Vivioptal Capsules are classifiable under PCT heading 2106.9090 or under PCT heading 3004.5090 or under another PCT heading?
(vii) Whether the respondent's adjudication order (Order-in-Original No,13 of 2008 dated 17-8-2008 dispatched on 19-9-2008) is time-barred under section 179(3) of the Customs Act, 1969 with reference to his show-cause notice No,UT/840/2007-AFU dated 21-2-2008?
ISSUE NO.1 - RELATING TO CLASSIFICATION RULING:
8. Chapter-II of C.G.O. No,12 of 2002 specifies the methodology for issuance of Classification Rulings.
It establishes a Classification Center to decide classification disputes as and when referred to it by the aggrieved adversaries. The said centre is to be headed by an Additional Collector and is authorised to co-opt representatives from other Collectorates and other bodies on case to case basis and it may also call specialists and experts for expert opinion in determining the classification of any item. The Centre is required to invite the importer or his representative for discussion and presentation of documents or information during the meetings of the Classification Committee in the said Center. The Classification, so determined by the Committee, is to be finally approved (or otherwise) by the Collector and such an approved classification has to be communicated in writing to the importer and all other Customs Collectorates within 10 days of such approval by the Collector. In case the Classification Center fails to decide the specific classification issue, the matter has to be referred to the F.B.R. For decision or for onward reference to the World Customs Organization (WCO) at Brussels for deciding the classification dispute. While paragraph 3 of the said C.G.O. No,12 of 2002 gives PCT classification of various specified goods, the NOTE appended to paragraph 2 thereof states that "the classification ruling so issued by the Centre will be widely circulated in the form of a public notice amongst the trade, industry and Customs organization in the country."
9. A perusal of record produced shows that on receipt of the respondent's reference No,UT- 840/2007-AFU dated 24-5-2007, the matter was never placed before the Classification Committee of the Center and instead it was returned to the respondent on 31-5-2007 with the following remarks/observations of the Deputy Collector of Customs (Appraisement Group-II) of Custom House, Karachi:- "SUBJECT: MEDICINE (VIVIOPTAL CAPSULES) BULK REG No, 014800.
Please refer to Air Freight Unit's letter No, UT/840/2007-AFU dated 24-5-2007, on the above subject.
(2) Scrutiny of the paper enclosed with the aforesaid letter dated 24-5-2007 reveals that neither legible copy of manufacturer's literature nor copy of test report of the product has been provided.
Further, the arguments of the importers in favour of their claimed classification under PCT heading 30.04 and arguments for not Collectorate for not accepting the same them are not indicated.
(3) It is interesting to note that in the reference there is a mention of PCT Committee's decision No, CC-04/2003-A dated 7-5-2003 (copy enclosed) for classification of such products under PCT heading 2106.9000 but no reason has been assigned for not implementing it. If the Preventive Collectorate feels necessary to refer the cases to PCT Committee afresh, the points require consideration may kindly be intimated keeping in view the earlier decision of the PCT Committee under PCT heading 2106.
9000.
(4) In view of the above, the AFU references vide letters No,UT/840/2007-AFU dated 4-5-2007, UT/ 1652/ 06-AFU, UT/ 200/ 07-AFU and UT/ 192/ 07-AFU are returned herewith."
10. The afore-cited letter dated 31-5-2007 shows that the respondent's reference to the Classification Centre was incomplete and it lacked in relation to the documents/information mentioned in paragraph 2 thereof. It also seeks clarification/explanation, as in paragraph 3 of the said letter, from the respondent as to why it mentions Collector's letter No,CC-04 of 2003-A dated 7-5-2003 when it did not implement it since then. It further required the respondent Additional Collector to resubmit, if necessary, the classification reference to the Classification Centre.
However, the respondent Additional Collector appears to have not resubmitted the case to the Classification Centre after making up the deficiencies stated in the aforesaid letter dated 31-5- 2007 and, instead, issued show-cause notice No,UT840 of 2007-AFU dated 21-2-2008 (more than 8 months after the aforesaid letter dated 31-5-2007) misstating that "the Secretary, Classification Centre vide his letter dated 31-5-2007, informed that the issue of classification of Multivitamin Dietary Supplement was decided in its meeting held on 9-4-2003 vide Ruling No,CC-04/2003-A dated 7-5-2003." It is interesting to note that the said letter dated 31-5-2007 had cited the letter dated 7-5-2003 simply because it was so mentioned in the respondent Additional Collector's reference dated 24-5-2007.
11. I have also perused the Collector of Customs (Appraisement), Karachi's above-referred letter No,CC-04/2003-A dated 7-5-2003 which states as hereunder:-- "No, CC-04/2003-A SI/MISC/181/2003-II Mr. Manzoor Hussain Memon, Secretary (STT), Central Board of Revenue, Revenue Division, Sales Tax Wing, Islamabad Dated 7-5-2003.
SUBJECT: LEVY OF SALES TAX ON THE SUPPLY OF MULTIVITAMIN DIETARY SUPPLEMENTS.
Please refer to Board's letter No, 1(51)STT/96 dated 19-2-2003, on the subject noted above.
(2) The case regarding classification of Multivitamin Dietary Supplement was discussed in the Classification Centre in its meeting held on 9-4-2003.
(3) The Dietary Food Supplements are consisting of Vitamins, mineral substances and salts in the form of tablets, which are used for daily requirement of the human body to restore its health. Such type of preparations are already being classified under chapter 21.06 of the first schedule to the Customs Act-1969 as food supplement @ 25% Customs duty & 15% Sales tax.
(4) Sales Tax Wing may take necessary action as per law against the local supplier.
(Abdul Waheed Khan) Collector"
12. A plain reading of the document dated 7-5-2003, as reproduced above shows that:--
(i) it relates to classification of "Multivitamin Dietary Supplements" which is a general description and is not related to the classification of any specific product/brand/goods/drugs. It also does not mention whether the said Multivitamin Dietary Supplements were registered under the Drugs Act, 1976, or not and also whether various alternative PCT headings, other than 21.06, were considered or not;
(ii) it is simply a letter from the Collector of Customs (Appraisement) addressed to the Sales Tax Wing of the F.B.R. In response to its letter No,1(51)STT/96 dated 19-2-2003 and this too does not indicate any decision/ruling by the Classification Centre but simply narrates the ongoing practice of classification of "Multivitamin Dietary Supplements" under PCT heading 21.06; and
(iii) it concludes by advising F.B.R. To take necessary action as per law against the local supplier.
13. By no stretch of imagination, the Collector's letter dated 7-5-2003 or the Deputy Collector's letter dated 31-5-2007 can be considered to be a classification ruling about the appellant's imported product Vivioptal Capsules registered as drugs under the Drugs Act, 1976. Neither the learned departmental representative produced any Public notice/C.G.O. Containing classification ruling about the appellant's goods nor there is anything on record to show that the F.B.R. Ever issued a Classification Ruling in the form of a C.G.O. Or that any Collector issued any Public Notice in pursuance of the said letter dated 7-5-2003. On the other hand, on receipt of the respondent's reference dated 24-5-2007, the Classification Centre neither associated the importer (the appellant) nor did it examine the literature of the appellant's goods (Vivioptal Capsules). Even the respondent Additional Collector's reference about Vivioptal was never placed before the Classification Committee and, for reasons better known to the respondent Additional Collector, he never re-submitted the classification dispute of Vivioptal Capsules before the said Centre after making up the deficiencies in his reference although he was advised to do so, if necessary, in the Deputy Collector's letter dated 31-5-2007.
14. For the reasons mentioned in the foregoing paragraphs, I have no hesitation in holding that the Collector's letter No,CC-4/2003-A dated 7-5-2003 and/or the Deputy Collector (Appraisement-II)'s letter dated 31-5-2007 do not qualify to be termed a Classification Ruling in terms of Chapter-II of C.G.O. No,12/2002 and the respondent Additional Collector erred in treating these letters as Classification Ruling applicable for the appellant's goods Vivioptal Capsules. The issue No,1 is decided accordingly and is answered in negative.
ISSUE NO.2 - RELATING TO BENEFITS OF PARAGRAPH 74 OF C.G.O. NO. 12/2002:
15. The F.B.R.'s instructions relating to protection of the past practice is duly incorporated in paragraph 74 of the C.G.O. No,12/2002 which obtains its past history and origin in the shape of Board's C.G.O. No,12/1973 and also in the book titled General Manual of Orders (GMO) relating to Customs and Tariff Laws (1964 edition). The relevant extracts from this GMO are also quoted in para 7 of the honourable high Court's judgment in the case of Messrs Dada Soap Factory Ltd. v.
Pakistan and 2 others (PLD 1984 Karachi 302). Besides the provisions of paragraph 74 of the said C.G.O. No,12 of 2002 being lawful and proper, I have no doubt in my mind that it is also binding on all Customs officers, subordinate to the F.B.R., in terms of section 223 of the Customs Act, 1969. The appellant has demonstrated that the respondent Customs officers have been continuously and uninterruptedly assessing, classifying and clearing the appellant's goods Vivioptal Capsules (registered under Registration No,014800 in favour of the appellant under the Drugs Act, 1976, since 6-12-1993 under the Ministry of Health, Islamabad's Drug Registration Certificate No,3-3/93-Reg.II (M105) dated 6-12-1993) under PCT heading 30.04 as medicaments containing vitamins. This classification under PCT heading 30.04 was even not changed or disturbed in 2003 onwards in terms of the Collector of Customs (Appraisement), Custom, House, Karachi's letter No,CC04/2003- A dated 7-5-2003 relied upon by the respondent as a classification ruling. Under these circumstances, the respondent Customs officers should have given due credence to and compliance of the provisions of paragraph 74 of C.G.O. No,12/2002 and should not have departed from the existing and established long-standing practice of classification of Vivioptal Capsules under PCT heading 30.04 until and unless this classification was changed through a Public Notice/C.G.O. Issued after fully complying with the provisions of Chapter-II of the said C.G.O.
No,12/2002. The aspect of adherence to the existing practice is honoured and Protected under several judgments of the Superior Courts viz. 1970 SC 453, PLD 1984 Karachi 302, 1989 SCMR 353, 2002 PTD 955, 2004 PTD 2516 and 2008 PTD 1974. This Tribunal's judgment dated 25-4-2009 in Customs Appeal No,K-09/2009 in the case of Messrs Marine. Food Industries (Pvt.) Ltd. v. The Deputy Collector, MCC, PaCCS, Karachi, is also very clear in this regard. In view of the position stated in this paragraph and in the light of the precedents contained in the aforesaid judgments of the Superior Courts and also of this Tribunal, I hold that the appellant is legally entitled to the benefits of past practice in the assessment of his goods in terms of paragraph 74 of C.G.O. No,12 of 2002 till such time that a Public Notice/C.G.O. Is issued changing or disturbing prospectively the PCT heading 30.04 classification of Vivioptal Capsules after satisfying the procedures outlined in Chapter-II of the said C.G.O. No,12 of 2002. Accordingly, the answer to the issue No,2 is given in affirmative.
ISSUE NO.3 - APPLICATION OF PROVISIONS OF SECTION 223 FOR THE CUSTOMS BREACH OF THE F.B.R.'S DIRECTIONS CONTAINED IN PARA 74 OF.C.G.O. NO.12 OF 2002:
16. While the issue of application of the provisions of para.74 of C.G.O. No,12 of 2002 is dilated upon in the forgoing paragraph in relation to Issue No,2, the non-compliance of the provisions thereof by the respondent Customs officers attracts the provisions of section 223 of the Customs Act, 1969.
Therefore, this issue is also answered in affirmative.
ISSUE NO.4 - ESCAPED ASSESSMENTS OF ADVANCE INCOME TAX: ,
17. The appellant had contended that while the Customs is empowered to collect advance income tax on imports under section 148 of Division-H, Part-V of the Income Tax Ordinance, 2001, they (Customs) are not empowered to demand or recover the not-collected or short-collected or escaped assessm ent of such advance income tax because section 162 of the said Ordinance authorizes only the Commissioner of Income Tax to recover the amount of advance income tax not collected under the said section 148. On the other hand, the respondent had argued that the Customs is authorized to recover the escaped assessments under section 161(2) of the said Ordinance. During the course of hearing, the appellant's Consultant submitted copy of a judgment dated 31-7-2009 passed by the Islamabad Bench of this Tribunal in Appeal Case No,187/CU/IB/2008 held as follows:-- "(18) The section 162(1) of the Income Tax Ordinance, 2001, is very much available and dealt with, in case of default under section 148 of the Income Tax Ordinance, 2001. To my opinion, the appropriate Income Tax officers do have the power to issue any demand for the alleged short recovery under the Income Tax Ordinance, 2001, which having contained special provisions for all short recoveries, including, under Section 148 of the Income Tax Ordinance, 2001, where the Income Tax in short collected, short levied, or not so collected, either on account of misdeclaration of the importer, or, on account or error, in advertence or mistake. The power to collect the advance Income Tax under section 148(5) of the Income Tax Ordinance, 2001 cannot have the effect of converting Income Tax into Customs Duty. Merely providing the manner of collection of tax as an advance tax under any tax enactment, the nature of the tax could not be changed, hence, the short recovery of any tax collectable under section 148(5)(6) of the Income Tax Ordinance, 2001, to a person in form of short collected, short levied, or not so collected, either on account of mis- declaration of the importer, or, on account or error, or inadvertence or under mistake, vests with the Commission of Income Tax alone under section 162(1) of the Income Tax Ordinance, 2001. Therefore it is of my considered opinion the Collector of Customs do not have the authority to go for the recovery, it is the only the Commissioner of Income Tax who can start the proceedings of recovery against the person in case of default on short collected, short levied, or not so collected, either on account of mis-declaration of the importer, or, on account or error, or inadvertence or under mistake, so the adjudication by the respondent's to the point of recovery of Income Tax against the appellant's is not legal, justifiable and not tenable in the eye of law and the exercising of jurisdiction on this point by the respondent's and also the adoption of recovery procedure by thein are hereby set aside. I am relying upon the judgments of 1994 CLC 1612, 1990 PTD 29, 2005 PTD 23 and 2007 PTD 250 titled as Collector of Sales Tax and Federal Excise v. Messrs Qasim International Container Terminal Pakistan Limited, the relevant para of the judgment is as follows:-- "That there is clear distinction between the charging provisions of statute and the machinery part thereof.
It is axiomatic that mode or manner of recovery does not alter the nature of a tax, nor a tax can be introduced or imposed by implication."
It has been held in another judgment of honourable Lahore High Court, Lahore 2008 PTD 1973 titled as Xen Shahpur Division v. Collector Sales Tax (Appeals), Collectorate of Customs, Federal Excise and Sales Tax, Faisalabad. "that fiscal law is to be applied with full authority and in its natural meanings---One has to look merely at what is clearly said and there is no room for any intendment---Neither there is equity about a tax nor presumption as to tax---Nothing is to be read in, nothing is to be implied---One can only look fairly at the language used."
18. The provisions of section 148 of the said Ordinance are very clear and this empowers the Customs to collect advance tax from the importer in the same manner and at the same time as the customs duty payable in respect of import and the provisions of the Customs Act, 1969, in so far as relevant, shall apply to collection of this advance tax. The provisions of sections 32 (relating to determination of short-levy, etc.), 179 (relating to adjudication, whether on account of short/non- levy or otherwise) and 202 (relating to recovery of government dues) of the Customs Act, 1969, are distinct as against the levy and collection procedure outlined in sections 18, 79, 80, 83 and 104 of the said 1969-Act. The procedure for recovery of escaped assessments of advance tax is given in section 162 of the said Ordinance which authorizes the Commissioner of Income Tax (and not the Customs officers) to determine and recover such short-levies and/or non-levies. Even the provisions of section 161(2) of the Ordinance, as claimed by the respondent, authorizes the Customs to recover the escaped assessments (short-levy/non-levy) of advance tax only in the event of the Commissioner of Income Tax determining or recovering this liability from the Customs officers in terms of section 161(1) of the Ordinance. There is no such event of section 161(1) in the case now under appeal before this Tribunal In view of the afore-mentioned judgment dated 31-7- 2009 passed by the Islamabad Bench of the Tribunal in Appeal Case No,187/CU/IB/2008 and also in accordance with the legal provisions of sections 148, 161 and 162 of the Income Tax Ordinance, I hold that the respondent was not authorized to determine, adjudicate, demand or recover the amount of advance tax short-levied, if any, by him. At best, he could inform the concerned Commissioner of Income Tax about such non-levy/short-levy, if any, for determination and recovery on merits.
Under section 162 of the Ordinance. Accordingly, the issue No, 4 is answered in negative.
"ISSUE: NO.5 - EXEMPTION FROM SALES TAX ON SUBSTANCES REGISTERED AS "DRUGS" IRRESPECTIVE OF PCT HEADINGS:
19. The appellant argues that without prejudice to the appellant's claim about classification of Vivioptal Capsules under PCT heading 30.04, all substances (including Vivioptal Capsules) registered as "drugs" under the Drugs Act, 1976, were eligible to exemption from the whole of sales tax under S.R.O. 555(1)/2002 dated 23-8-2002. However, the respondent claims that only such drugs are exempt from sales tax under S.R.O. 555(1)/2002 as are medicaments classifiable under PCT Chapter 30 (including heading 30.04) and that Vivioptal Capsules, being classifiable under PCT heading 21.06, shall not be eligible to exemption from sales tax even if these are registered as a "drug" under the Drugs Act, 1976.
20. The provisions of Notification No, S.R.O. 555(1)/2002 dated 23-8-2002 are unambiguously clear and in unequivocal terms extend the benefits of sales tax exemption to the "substances" registered as drugs, under the Drugs Act, 1976, and the "medicaments" as are classifiable under any heading of Chapter 30 of the Pakistan Customs Tariff (PCT), except for the exclusions mentioned in the said notification. The use of the word "substances" (without reference to headings of PCT) and also of the word "medicaments" (with reference to Chapter 30 of the PCT), in this notification, make it abundantly clear that subject to the exclusions mentioned in that notification, the benefits of sales tax exemption are available to all substances (irrespective of PCT headings) if registered as drugs under the Drugs Act, 1976 and also to all medicaments (irrespective of the registration under the Drugs Act, 1976, or not) classifiable under Chapter 30 of the PCT. The respondent has misread and misinterpreted the sales tax exemption Notification No,S.R.O. 555(I)/2002. I accordingly hold that the appellant's Vivioptal Capsules, irrespective of its PCT Classification, is entitled to the benefits of the aforesaid sales tax exemption notification in view of the undisputed fact that it is registered as a drug under the Drugs Act, 1976. The question at issue No,5 is, therefore, answered in affirmative.
ISSUE NO.6 - PCT CLASSIFICATION OF VIVIOPTAL CAPSULES:
21. The appellant claims that Vivioptal Capsules are "medicaments containing vitamins" and are, therefore, classifiable under PCT heading 3004.5090 while the respondent insists on its classification under PCT heading 2106.9090 as "Food Supplements not elsewhere specified or included."
22. Pakistan Customs Tariff and the Rules of Interpretation thereof, as legislated under the First Schedule to the Customs Act, 1969, are based on the Nomenclature of the Harmonized Commodity Description and Coding System (commonly known as "H.S. Code") developed by the World Customs Organization (WCO), Brussels, Belgium. All the signatory members (countries including Pakistan) to the said international H.S. Coding System Nomenclature adopt and adhere to the Explanatory Notes and Classification Rulings of the Nomenclature, as issued by the WCO. For purposes of determination of the appropriate PCT heading of the goods "Vivioptal Capsules", the provisions of Rules 1, 3 and 4 of the General Interpretative Rules (GIR) are most relevant which provide as hereunder: "Rule 1 The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions.
Rule 3 When by application of Rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:--
(a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.
(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential.
Character, insofar as this criterion is applicable. '
(c) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.
Rule 4 Goods which cannot be classified in accordance with the above.
Rules shall be classified under the heading appropriate to the goods to which they are most akin."
23. The description of the PCT headings 21.06 and 30.04 and its relevant sub-headings are reproduced as hereunder: "21.06 Food preparations not elsewhere specified or included. - Protein concentrates and textured protein substances: 2106.1010 --- Protein hydrolysates 2106.1090 --- Other 2106.9010 --- Concentrates for aerated beverage in all forms 2103.9020 --- Syrups and squashes 2106.9030 --- Flavouring powders for preparation of food 2106.9040 --- Emulsifying agents for food and dairy products 2106.905 --- Preparatoins including tablets consisting of saccharin, lactose 2106.9060 --- Sweet meats 2106.9090 --- Other 30.04 Medicaments (excluding goods of heading 30.02, 30.05 or 30.06) consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses (including those in the form of transdermal administration systems) or in forms or packings for retail sale. - Containing penicillins or derivatives thereof, with a penicillanic acid structure, or streptomycins or other derivatives: 3004.1010 --- Ampicillin, Amoxcillin and Cloxillin capsules/syrup 3004.1090 --- Other 3004.2000 - Containing other antibiotics - Containing hormones or other products of heading 29.37 but not containing antibiotics: 3004.3100 --- containing insulin 3004.3200 --- Containing corticosteroid hormones, their derivatives or structural analogues 3004.3900 ---other 3004.4000 - Containing alkaloids or derivative thereof but not containing hormones, other products of heading 29.37 or antibiotics - Other medicaments containing vitamins or other products of heading 29.36: 3004.5010 --- Cod liver oil.
3004.5090 ---Other - Other: 3004.9010 --- Unani ayuredic and other oriental type medicine 3004.9020 --- Homeopathic medicines 3004.9030 --- Dextrose and saline infusion solution, with infusion set 3004.9040 --- Dextrose and saline infusion solution, without saline infusion set 3004.9050 --- Eye drops 3004.9060 --- Ointments, medicinal 3004.9070 -- Aspirin, medicinal 3004.9080 --- Sulpha drugs --- Other; 3004.9091 --- Cough syrups medicinal 3004.9092 --- Paracetamol 3004.9099 --- Other"
24. It is pertinent to note that PCT heading 2106.9090 is a heading where the sub-head 9090 represents the residuary "Others" of the "Others" of PCT heading 21.06 carrying description "Food preparations not elsewhere specified or included". For consideration of classification under PCT heading 21.06, it is essential that the goods should be such "food preparations" as are not specified or included in any of the headings of the PCT. The WCO's Explanatory Notes to H.S. Code 21.06 begins with the condition that Foods Preparations may be classifiable under H.S. Code 21.06 "Provided that they are not covered by any other heading of the Nomenclature". While Chapter Note 1(f) to Chapter 21 of the Explanatory Notes excludes "Yeast put up as a medicament or other products of heading 30.03 or 30.04", the heading note (16) of Explanatory Notes to the H.S. Code 21.06 states that it includes "Preparations, often referred to as foods supplements, based on extracts from plants, fruits concentrates, honey, fructose, etc., and containing added vitamins and sometimes minute quantities of iron compounds. The preparations are often put up in packaging with indications that they maintain general health or wellbeing. Similar preparations, however, intended for prevention or treatment of diseases or ailments are excluded (heading 30.03 or 30.03)."
25. As against the aforesaid, the Explanatory Note (a) to Chapter 30 excludes "Food or beverages (such as dietic, diabetic or fortified foods, food supplements, tonic beverages and mineral waters) other than nutritional preparations for- intravenous injections". Sub-head "5000" of heading 30.04 includes "Other medicaments containing vitamins or other products of heading 29.36." The Explanatory Notes to H.S. Code 30.04 further provides that:-- "30.04 - Medicaments (excluding goods of heading 30.02, 30.05 or 30.06) consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses (including those in the form of transdermal administration systems) or in forms or packings for retail sale.
3004.10 Containing penicillins or derivatives thereof with a penicillanic acid structure, or streptomycins or their derivatives: 3004.20 - Containing other antibiotics - Containing hormones or other products of heading 29.37 but not containing antibiotics: 3004.31 --- Containing insulin 3004.32 --- Containing corticosteroid hormones, their derivatives or structural analogues 3004.39 -- Other 3004.40 - Containing alkaloids or derivatives thereof but not containing hormones, other products of heading 29.37 or antibiotics 3004.50 Other medicaments containing vitamins or other products of heading 29.36: 3004.90 - Other This heading covers medicaments consisting of mixed or unmixed products, provided they are:--
(a) Put up in measured doses or in forms such as tablets, ampoules (for example, re-distilled water, in ampoules of 1.25 to 10 cm 3, for use either for the direct treatment of certain diseases, e.g. Alcoholism, diabetic coma or as a solvent for the preparation of injectible medicinal solutions), capsules, cachets, drops or pastilles, medicaments in the form of transdermal administration systems, or small quantities of powder, ready for taking as single doses for therapeutic or prophylactic use.
The heading also includes measured doses in the form of transdermal administration systems which are generally put up in the form of self-adhesive patches (usually rectangular or round) and which are applied directly to the skin of patients. The active substance is contained in a reservoir which is closed by a porous membrane on the side entering into contact with the skin. The active substance released from the reservoir is absorbed by passive molecular diffusion through the skin and passes directly into the bloodstream. These systems should not be confused with medical adhesive plasters of heading 30.05.
The heading applies to such single doses whether in bulk, in packings for retail sale, etc.; or
(b) In packings for retail sale for therapeutic or prophylactic use. This refers to products (for example, sodium bicarbonate and tamarind powder) which, because of their packing and, in particular, the presence of appropriate indications (statement of disease or condition for which they are to be used, method of use or application, statement of dose, etc.) are clearly intended for sale directly to users (private persons, hospitals, etc.) without repacking, for the above purposes.
These indications (in any language) may be given by label, literature or otherwise. However, the mere indication of pharmaceutical or other degree of purity is not alone sufficient to justify classification in this heading.
The provisions of the heading text do not apply to foodstuffs or beverages such as dietetic, diabetic or fortified foods, tonic beverages or mineral waters (natural or artificial), which fall to be classified under their own appropriate headings. This is essentially the case as regards food preparations containing only nutritional substances. The major nutritional substances in food are proteins, carbohydrates and fats. Vitamins and mineral salts also play a part in nutrition.
Similarly foodstuffs and beverages containing medicinal substances are excluded from the heading if those substances are added solely to ensure a better dietetic balance, to increase the energy-giving or nutritional value of the product or to improve its flavour, always provided that the product retains its character of a foodstuff or a beverage.
Moreover, products consisting of a mixture of plants or parts of plants or consisting of plants or parts of plants mixed with other substances, used for making herbal infusions or herbal "teas" (e.g., those having laxative, purgative, diuretic or carminative properties), and claimed to offer relief from ailments or contribute to general health and well-being, are also excluded from this heading (heading 21.06).
Further, this heading excludes food supplements containing vitamins or mineral salts which are put up for the purpose of maintaining health or well-being but have no indication as to use for the prevention or treatment of any disease or ailment. These products which are usually in liquid form but may also be put up in powder or tablet form, are generally classified in heading 21.06 or Chapter 22.
On the other hand, the heading covers preparations in which the foodstuff or the beverage merely serves as a support, vehicle or sweetening agent for the medicinal substances (e.g., in order to facilitate ingestion)."
26. A plain reading of the text of the Explanatory Notes to H.S. Code 30.04 shows that the medicaments (even if containing vitamins) are covered by the said heading 30.04 provided that:--
(i) these are put up in measured doses in the form of tablets, ampoules, capsules, etc., and ready for taking as single doses, whether in bulk or otherwise;
(ii) these have therapeutic (curative) or prophylactic (preventive) uses; and
(iii) these are presented in packings for retail sale with appropriate indications (in any language) by label, literature or otherwise, about the disease or conditions for which they are to be used, method of use or application, statement of doses, etc.
27. The goods i,e, Vivioptal Capsules are in single doses in the form of Capsules; contains no food or food substitutes and are also not based on extracts from plants, fruit concentrates, honey, fructose, etc.; contain U.S.P. (United States Pharmacopeia) grades of several vitamins of PCT heading 29.36; contains U.S.P. Grades of several chemical ingredients; and are indicated (as per its printed literature) for the prevention (prophylactic use) and treatment (therapeutic use) of various symptoms like Exhaustion, Reduced Vital Force, increased nervousness and irritability, defective memory, lack of concentration, diurnal tiredness, disturbed blood supply and general weakness. It improves vesicular breathing, capillary circulation exerting a regenerating and revitalizing effect supported by psychoharmonizing action of hematoporphyrin. It protects liver and prevents cholcsterosis. It dilates coronaries and improves heart output by increasing blood flow through cardiac wall. It prevents brittleness of bones and stimulates cell division particularly reticuleondothelial system. It is for the treatsment and prophylaxis of geriatric complaints. It is used as auxiliary agent in the treatment of skin diseases and affections of mucosea and helps prevent physiosclerosis. During the course of hearing, the appellant has invited attention to this Tribunal's judgment dated 22-11-2008 in Customs Appeal No,K-175/ 2007-III, where a similar classification dispute about the imported Geriatric Pharmaton Capsules was decided and it was held by the Tribunal that the said Geriatric Pharmaton Capsules are classifiable under PCT heading 30.04 and not under heading 21.06. The appellant has contended that in that case, the respondent Collectorate of Customs (Appraisement), Karachi appears to have accepted the Tribunal's judgment as no reference application appears to have been filed, within the prescribed limitation, under section 196 of the Customs Act, 1969, and several consignments of Geriatric Pharmaton Capsules have been cleared by the Customs under PCT heading 3004.5090 since then. The appellant's Consultant has argued that Vivioptal Capsules are also a geriatric medicines like Pharmaton Capsules and should, therefore, not be discriminated against. In response to this, the respondent has pleaded that the Customs Appeal No,K-175/2007-III relates to a different product having different characteristics and also that the Tribunal's judgment dated 22-11-2008 is in consequence of the PCSIR Lab test report mentioned in that judgment. I do not find any merit in the respondent's arguments it this regard. Although Geriatric Pharmaton. Capsules (imported from Switzerland) and Vivioptal Capsules (imported from Germany) have different brand names but both these products have almost the same characteristics being geriatric medicines. The PCSIR Lab reported in the case of Pharmaton Capsules was obtained by the Customs (Appraisement) on their own accord but, for reasons best known to themselves, the respondent in this case of Vivioptal Capsules, has elected not to send the samples of the product to the laboratory for analysis and report. On the other hand, the appellant themselves sent a sample of packed Vivioptal Capsules of Batch No,238 (manufactured in June, 2008 and expiring in June, 2011) to the PCSIR Laboratory, Karachi, for test and analysis. Vide their Test Report No,ILD/TR-2457/09 dated 26-6-2009, the said PCSIR Lab found that, in the Vivioptal Capsules tested by them, the observed values of Vit A, Vit B-1, Vit B-2, Vit B-3, Vit B-6 and Folic Acid were much higher than the RDA, the observed values of Vit C and Vit D were within the RDA range but the observed value of Vit E was lower than the RDA range.
The test report and the technical report (appended to the said test report) of the PCSIR concludes by opining that "Based on the quantities of Vitamins in comparison to the RDA, as per Encyclopedia of Food, Science and Technology, the product Vivioptal is found to be a medicine." A copy of this test report was given to the respondent's departmental representative but he had no comments to offer except that the observed value of Vit E was lower than the RDA. However, this one deficiency (as against the RDA) does not take away the medicinal characteristics of Vivioptal Capsules, which has been confirmed in the PCSIR report. The presence of several Vitamins and Folic Acid in values higher than the RDA shows that Vivioptal Capsules are not for general maintenance of health but have therapeutic and prophylactic medicinal uses, as also indicated in the printed literature of the product. I, accordingly, hold that the Tribunal's judgment dated 22-11-2008 in Customs Appeal No,K-175/2007-III is a valid precedent applicable in the case of Vivioptal Capsules also as both the Pharmaton Capsules and Vivioptal Capsules are multivitamin products used as geriatric medicines. The appellant has undisputedly claimed that Vivioptal Capsules are sold only in the licensed (for drug purposes) drug stores, pharmacies and hospitals and are not available in general stores which sell other food 'supplements like Ensure, Glucerna, Complan, etc. Etc. The appellant also demonstrated that, unlike the ordinary food supplements, the appellant is barred from advertising his product Vivioptal Capsules through any mass media as it is a condition attached to its registration under the Drugs Act, 1976. The appellant has also submitted certificates from renowned doctors like Dr. Muhammad Farooq Mamji, Dr. Asif Qureshi, Dr. M.A. Qureshi, Dr. Yunis Soomro and Dr. Razzak Memon stating that they have been prescribing Vivioptal Capsules for their patients and it has effective therapeutic results. The appellant has also submitted a Certificate dated 3-6-2009 from Prof. Dr. Rafeeq Alam Khan of Depratment of Pharmacology of Karachi University that the contents of several minerals and other ingredients like orotic acid, magnesium and choline render the product Vivioptal Capsules to be a medicament with prophylactic and therapeutic use in various deficiency states and metabolic dysfunction. Copies of all the aforesaid specialistscertificates were given to the respondent's departmental representative but he has neither disputed nor contested these certificates except that he still claimed the Vivioptal Capsules to be a food supplement of PCT heading 2106.9090.
28. For the reasons given in the foregoing paragraphs and in view of the PCSIR test report dated 5- 9-2009, the medical specialistscertificates, the certificate from the Department of Pharmacology of Karachi University, the precedent contained in the Tribunal's judgment dated 22-11-2008 in Customs Appeal No,K-175 of 2007-III, the printed literature of Vivioptal Capsules showing its U.S.P.
Ingredients, its indications and its therapeutic and prophylactic uses and its dosage, I am satisfied that Vivioptal Capsules satisfy the conditions of the Explanatory Notes to WCO's H.S. Code 30.04 and its sub-head (WCO's 3004.50 and L PCT 3004.5090) read with Rules 1, 3 and 4 of its GIR. There is no doubt that PCT heading 3004.5090 is more specific as compared to PCT heading 2106.9090 and also appears later in numerical order as against PCT heading 2106.9090 and is, therefore, to be preferred over the residuary and general PCT heading 2106.9090. Vivioptal Capsules cannot be classified in any other PCT heading merely on the basis of the Collector (Appraisement), Karachi's letter dated 7-5-2003 sent to F.B.R., in relation to Multivitamin Dietary Supplements in general terms.
Accordingly, for the Issue No,6, the answer is that the Vivioptal Capsules are to be treated as falling under PCT heading 3004.5090.
ISSUE NO.7 - WHETHER THE ADJUDICATION ORDER NO.13/2008 DATED 19-9-2008 IS TIME-BARRED:
29. The show-cause notice (SCN) in this case was issued on 21-2-2008. The provisions of section 179(3) of the Customs Act, 1969, required that the case should be adjudicated within a period of 90 days from the date of SCN. The said period of 90 days expired on 21-5-2008. Neither the Order-in- Original No,13 of 2008 speaks of any approval of extension by the Collector in this adjudication period nor the learned departmental representative, who possessed the relevant adjudication file at the time of hearing, could show any such extension by the Collector. The Order-in-Original No,13 of 2008 shows that final hearing was concluded on 10-5-2008 but the order was made on 17-8- 2008 and issued on 19-9-2008. The learned departmental representative merely stated that the adjudication got delayed because the learned adjudicating officer was waiting for reply from the Ministry of Health. This plea, besides being not a justifiable or legal reason for the delay or for not obtaining approval of extension from the Collector, is in clear contradiction to the respondent's claim that the Ministry of Health has no lawful role or authority to decide PCT Classification issues.
The Order-in-Original No,13 of 2008 (order passed on 17-8-2008 and issued on 19-9-2008) is, manifestly time-barred with reference to the date of, show-cause notice (i,e, 21-2-2008) as no reasoned, valid and lawful extension in terms of the Proviso to section 179(3) has been produced by the respondent. Besides several judgments by the F.T.O., the President of Pakistan and this Tribunal, the honourable Lahore High Court in its judgments, dated 7-11-2007 in Writ Petition No, 13331 of 2006 (2008 PTD 60) has also held that the limitation period for adjudication is mandatory is nature and not a directory one and that "once limitation had started to run and had come to an end, the assessee had acquired a vested right of escapement of assessment by lapse of time." This view is also supported by the following decisions of the superior judicial fora reported as 2009 PTD 762, 2008 PTD 60, 2007 SCMR 1095 = 2007 PTD 1495, 2003 PTD 1797, 2003 PTD 1354, 2003 PTD (Trib.) 1361 and 2002 MLD 180, where the adjudication decision is time-barred, it becomes unlawful and void on the ground of time-bare. Accordingly, the Issue No,7 is answered in affirmative.
30. In view of the foregoing findings and observations, I set aside the impugned order and allow this appeal.