TaxTMI 
TaxTMI 
The Hon'ble CESTAT, Hyderabad Bench in Durgabai Deshmukh Hospital & Research Centre, Hyderabad Versus Commissioner of Customs, Hyderabad - Customs - 2026 (6) TMI 773 - CESTAT HYDERABAD held that exemptions under Notification No. 65/88-Cus. are strictly conditional, and failure to meet post-import obligations leads to loss of exemption, recovery of duty, and consequential penal action.
Facts:
- M/s. Durgabai Deshmukh Hospital & Research Centre ('the Appellant') imported various medical equipment during 1990-1993 without payment of customs duty by claiming exemption under Notification No. 65/88-Cus., based on Customs Duty Exemption Certificates (CDECs) issued by the Director General of Health Services (DGHS).
- However, the exemption was conditional upon fulfilling post-import obligations such as providing free treatment to 40% of outdoor patients and reserving 10% beds for economically weaker sections. The DGHS cancelled the CDECs (02.02.2001) due to non-fulfilment of these conditions.
- Following cancellation, customs authorities demanded duty foregone, and ordered confiscation under Section 111(o), along with imposed redemption fine and penalties. The adjudicating authority ultimately confirmed the demand and penalties through the order in original ('impugned order'). Aggrieved, the appellant filed an appeal before the Tribunal.
Issues:
- Whether the appellant is entitled to exemption under Notification No. 65/88-Cus. after cancellation of CDECs?
Held:
The Hon'ble CESTAT Hyderabad in Durgabai Deshmukh Hospital & Research Centre, Hyderabad Versus Commissioner of Customs, Hyderabad - Customs - 2026 (6) TMI 773 - CESTAT HYDERABAD held as under:
- Observed that exemption under Notification No. 65/88-Cus. is conditional, requiring strict compliance with post-import obligations intended to benefit economically weaker sections.
- Noted that DGHS cancelled the CDECs due to failure of the appellant to provide requisite free treatment, and reserve beds for poor patients. Held that once CDECs were cancelled, the appellant ceased to be eligible for exemption, as the conditions formed the foundation of the benefit.
- Relied on the Supreme Court judgment in MEDIWELL HOSPITAL AND HEALTH CARE PVT. LTD. Versus UNION OF INDIA - 1996 (12) TMI 51 - Supreme Court confirming that compliance under Notification No. 65/85-Cus with such conditions is a continuing obligation, and authorities can enforce non-compliance by recovering duty.
- Rejected the appellant's claim that substantial compliance existed, noting lack of convincing evidence demonstrating fulfilment of conditions. It was also held that exemption notifications must be strictly interpreted, and the burden lies on the claimant to clearly establish eligibility.
- Denied alternative exemption claims under Notification 65/88-Cus citing the Component parts imported separately were not covered. And under Notification 208/81-Cus. Citing Goods like cardio monitors were specifically excluded by this notification.
Hence, the impugned order demanding differential duty and confiscation along with penalty are legally sustainable.