2014 (12) TMI 446 - HC - Customs

High Court sets aside Tribunal's order for absence of duty demand, finding levy not within relevant period. Substantial questions of law answered.

M/s. Vinodhagan Memorial Hospital (P) Ltd. Versus The Commissioner of Customs

The High Court ruled in favor of the appellant, setting aside the Tribunal's order due to the absence of a duty demand by the original authority. The ... Confiscation of the goods - Imposition of redemption fine & penalty - Was the Hon'ble Tribunal correct in holding in the appeal preferred by the appellant that the duty demanded is upheld when actually the duty was not demanded even in the order in original - Held that:- Original authority did not confirm the demand though he held that it was payable, in view of the fact that show cause notice was issued after a period of five years from the relevant date. However, the original authority imposed redemption fine of ₹ 2,77,284/- and penalty of ₹ 10,000/-. It is also pertinent to note that the department did not file appeal against the order of adjudication passed by the original authority to the Commissioner (Appeals). Therefore, there is no claim before the Tribunal on the question of demand of duty. The question of the Tribunal upholding the demand of duty does not arise. Since the Department has not chosen to file any appeal before the Tribunal as well as before this Court, to that extent, the appellant appeal deserves to be given the benefit of no duty liability by modification of the order of the Tribunal, in the absence of a demand for duty by the original authority. In such view of the matter, the impugned order passed by the Tribunal deserves to be set aside. Accordingly, substantial questions of law 3 and 4 are answered in favour of the appellant/importer and against the Revenue. - Decidedin favour of assessee. Issues:1. Interpretation of Customs Notification 64/882. Overriding effect of Sec. 59A of the Customs Act3. Correctness of duty demand4. Legality of duty demandInterpretation of Customs Notification 64/88:The appellant imported medical equipment under Customs Notification No.64/88. The equipment was allowed clearance provisionally pending production of a Customs Duty Exemption Certificate (CDEC) from the Director General of Health Services. After producing the CDEC, the Provisional Duty Bond was canceled, and the duty deposit was refunded. Subsequently, a show cause notice was issued for duty recovery, confiscation, and penalty. The adjudicating authority held that the equipment was liable for confiscation and imposed a penalty, but no duty was demanded. The High Court noted that duty was not levied due to the notice being issued beyond the relevant period. However, the authority imposed a redemption fine and penalty without appealing the duty decision.Overriding effect of Sec. 59A of the Customs Act:The Tribunal referred to a similar case involving the same importer and upheld the duty demand, citing the need for compliance with Customs Notification No.64/88 conditions. It was found that the hospital did not meet the exemption conditions, and the demand of duty was deemed sustainable. The Tribunal held that hospitals claiming exemption had a continuous liability to comply with the notification conditions, even after its rescission. The demand of duty was not barred by the limitation under Section 28 of the Customs Act.Correctness of duty demand:The Tribunal confirmed the confiscation of goods and upheld the penalty, reducing the fine imposed. While the penalty was reduced, the duty demand was sustained. The Tribunal found that the appellant did not challenge the confiscation order or show that the goods were not liable for confiscation. The penalty was considered reasonable, but the fine was reduced due to the goods' age and constant use. The Tribunal's decision on penalty reduction was not appealed by the Department.Legality of duty demand:The High Court considered the appellant's grievance regarding the duty demand. It noted that the original authority did not confirm the duty demand due to the time limit for issuing the notice. As the Department did not appeal the original authority's decision, the Tribunal's decision upholding the duty demand was deemed irrelevant. The Court ruled in favor of the appellant, setting aside the Tribunal's order due to the absence of a duty demand by the original authority. Substantial questions of law 3 and 4 were answered in favor of the appellant, leading to the appeal's allowance without costs.