Ergotamine Preparation Export Needed No NOC From Narcotics Commissioner: CESTAT Delhi Sets Aside Penalty

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) at Delhi has recently held that the export of the pharmaceutical product in question containing 1% Ergotamine did not require prior clearance from the Narcotics Commissioner, setting aside a ₹50,000 penalty imposed on customs broker Unnati Cargo.

The single-member bench of Judicial Member Binu Tamta held that the product could at best be treated as a preparation of Ergotamine and not as “Ergotamine and its salts,” the category requiring prior clearance.

“Though Ergotamine is a controlled substance under the NDPS Regulations and requires NOC from the Narcotic Commissioner, however, the product in question is not covered under the category of 'Ergotamine and its salts' and at the most can be termed as preparation of Ergotamine, which is beyond the scope of Schedule-B,” the tribunal stated.

The case arose after exporter Aprazer Healthcare Pvt. Ltd. filed a shipping bill through Unnati Cargo to export pharmaceutical medicines worth ₹14.68 lakh to Iraq. During examination, customs authorities found that one of the products, MIGRAN, contained Ergotamine Tartrate.

Officials alleged that prior clearance from the Narcotics Commissioner had not been obtained. An undeclared medicine, Ledifos, was also found in the consignment, contributing to seizure proceedings and penalty action against the customs broker.

Before the tribunal, counsel for Unnati Cargo argued that while Schedule-B covers “Ergotamine and its salts,” it does not include preparations containing the substance. The customs broker also contended that penalty under the residuary provision of the Customs Act could not be invoked because the Customs Broker Licensing Regulations already provide a specific penalty mechanism for violations by customs brokers.

The tribunal accepted the submissions, relying on an earlier CESTAT ruling involving import of products containing Methyl Ethyl Ketone, where the tribunal had held that goods containing the substance were not the same as the controlled substance itself unless specifically covered.

The tribunal also rejected the department's argument that the customs broker should have identified the regulatory issue, noting that the authorities themselves had sought clarifications from multiple agencies, including the Narcotics Commissioner, CRCL and the Indian Pharmacopoeia Commission, to determine whether the formulation qualified as a controlled substance.

“Therefore, it is argued that expecting a Customs Broker to possess such technical knowledge is unreasonable. In that view, no positive responsibility can be attributed on the Customs Broker on this issue requiring in-depth analysis and chemical testing,” the order states.

On the undeclared Ledifos medicine, the tribunal noted the exporter's explanation that it had purchased the product from another supplier and was unaware of how it was packed into the export consignment.

“In such an event, it is too much to attribute any knowledge on the Customs Broker and therefore, no penalty is justified,” the bench held.

Holding that the specific penalty mechanism applicable to customs brokers would prevail over the general penalty provision invoked by the department, the tribunal allowed the appeal and set aside the impugned order.

For Appellant: Advocate Salil Arora

For Respondent: Ram Pravesh Prasad, Authorised Representative