Customs duty and penalty demand post-rescission ruled unsustainable. Liability based on pre-rescission violations.

The Tribunal held that the demand of duty and penalty based on the alleged violation of Notification No. 64/88-Cus. for the period post-1-3-1994 was unsustainable. The Tribunal emphasized that liabilities must be based on violations that occurred before the rescission of the Notification. The Tribunal also noted that the allegations primarily pertained to a period after the rescission and ruled in favor of the appellant, setting aside the Commissioner's order and allowing the appeal.

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Issues Involved:
1. Demand of duty due to denial of exemption under Notification No. 64/88-Cus.
2. Alleged violation of post-importation conditions of Notification No. 64/88-Cus.
3. Effect of rescission of Notification No. 64/88-Cus. by Notification No. 99/94-Cus.
4. Validity of the cancellation of Customs Duty Exemption Certificates (CDECs) by the Directorate-General of Health Services (DGHS).

Detailed Analysis:

1. Demand of Duty Due to Denial of Exemption Under Notification No. 64/88-Cus.:
The Commissioner demanded duty of over Rs. 76 lakhs on medical equipment imported by the appellant hospital from August 1988 to August 1993. The demand was based on the denial of exemption under Notification No. 64/88-Cus., dated 1-3-1988, which the hospital claimed at the time of import. The Commissioner's order also included confiscation of the goods under Section 111(o) of the Customs Act with an option for redemption upon payment of a fine of Rs. 2 lakhs and imposed a penalty of Rs. 50,000/- under Section 112(a) of the Act.

2. Alleged Violation of Post-Importation Conditions of Notification No. 64/88-Cus.:
The show-cause notice alleged that the hospital violated the post-importation conditions of Notification No. 64/88-Cus. by charging Rs. 50/- per patient towards stationery and administrative expenses during three months from 1-8-1999 and billing inpatients with income less than Rs. 500/- per month for certain surgeries from 1996 onwards. The appellant contended that these charges were covered by donations from philanthropists and that they had complied with the conditions of the Notification.

3. Effect of Rescission of Notification No. 64/88-Cus. by Notification No. 99/94-Cus.:
The appellant argued that no liability could be imposed for any period after the rescission of Notification No. 64/88-Cus. on 1-3-1994. They relied on Section 6 of the General Clauses Act and Section 159A of the Customs Act, which state that the rescission of a notification does not affect any liability incurred under it. The appellant cited the judgment in Apollo Hospitals Enterprise Ltd. v. Union of India, which held that obligations under a rescinded notification could only be enforced for the period when the notification was in force.

4. Validity of the Cancellation of Customs Duty Exemption Certificates (CDECs) by the Directorate-General of Health Services (DGHS):
The DGHS issued CDECs to the hospital at the time of import, which were later "withdrawn as cancelled" on 9-2-2001. The appellant argued that the Commissioner could not rely on the DGHS's cancellation order issued after the show-cause notice, especially since the DGHS was a co-noticee. The appellant maintained that they could question the validity of the DGHS's order in the present proceedings.

Judgment:

Demand of Duty and Penalty:
The Tribunal found that the demand of duty and penalty based on the alleged violation of Notification No. 64/88-Cus. for the period post-1-3-1994 was unsustainable. The Tribunal held that the rescission of the Notification did not affect any liability incurred during its operation, but any action must be based on violations that occurred before the rescission.

Violation of Notification Conditions:
The Tribunal noted that the allegations in the show-cause notice primarily pertained to the period 1994-95 and afterwards. The Tribunal relied on the judgment in Apollo Hospitals Enterprise Ltd., which stated that obligations under Notification No. 64/88-Cus. could only be enforced for the period when the Notification was in force.

Effect of Rescission:
The Tribunal held that the rescission of Notification No. 64/88-Cus. did not affect liabilities incurred during its operation but could not be enforced for any period post-1-3-1994. The Tribunal found no conflict between the judgments in Apollo Hospitals Enterprise Ltd. and Shah Diagnostic Institute Pvt. Ltd., both of which supported the appellant's case.

Cancellation of CDECs:
The Tribunal did not find it necessary to address the issue of the cancellation of CDECs, as the primary ground for the department's action was found to be unsustainable.

Conclusion:
The Tribunal set aside the Commissioner's order, including the demand of duty, confiscation, and penalty, and allowed the appeal.

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