2008 (10) TMI 218 - AT - Customs

Tribunal Upholds Duty Demand, Reduces Redemption Fine

The Tribunal confirmed the demand for duty, upheld confiscation and penalty, but reduced the redemption fine and penalty. The appeal was disposed of ... Exemption availed under conditional notification no. 64/88 – Notification was withdrawn later – violation of post import conditions – Held that - The conditions of the Notification 64/98 cast continuing obligation which is co-terminus with the life of the equipments imported. The obligation relating to past imports under the Notification No. 64/88 cannot be wiped out by the rescinding notification - The conditions of the Notification are not fulfilled and the demand of duty for violation of the end use conditions of the notification is not subject to the period of limitation under Section 28 of the Customs Act. Confiscation is to be upheld. Penalty is also warranted. - When the goods are confiscated and allowed redemption, the duty in respect of the goods imported and used in violation of the conditions of the Notification is payable irrespective of whether the goods are redeemed or not. Duty demand is upheld. – Redemption fine and penalty reduced. Issues Involved:1. Fulfillment of conditions of Notification No. 64/88.2. Impossibility of fulfilling conditions relating to admitting poor families.3. Validity of show cause notice issued after rescission of Notification No. 64/88.4. Limitation period for the demand of duty under Section 28 of the Customs Act.Detailed Analysis:1. Fulfillment of Conditions of Notification No. 64/88:The appellant imported medical equipment under Notification No. 64/88-Cus. with conditions to provide free treatment to 40% of outdoor patients and all indoor patients with income less than Rs. 500, reserving 10% of hospital beds for such patients. The post-import conditions were found unfulfilled, leading to the detention of goods and issuance of a show cause notice proposing confiscation and demand of duty foregone.The Tribunal's earlier order upheld the non-eligibility for exemption under Notification No. 64/88, and the benefit of partial exemption under Notification 138/88-Cus. was not extended due to lack of proof of compliance. The High Court remanded the matter for fresh consideration on merits.The Tribunal reaffirmed that the conditions of Notification No. 64/88 cast a continuing obligation co-terminus with the life of the equipment. The appellant's failure to fulfill these conditions justified the demand for duty and penalty, despite the rescission of the Notification.2. Impossibility of Fulfilling Conditions Relating to Admitting Poor Families:The appellant argued that it was almost impossible to fulfill the conditions related to admitting poor families with income less than Rs. 500. The Tribunal noted that this issue was not raised before the High Court and thus did not merit fresh consideration. The Supreme Court's decision in Mediwell Hospital emphasized the continuing obligation to meet the conditions of the exemption notification.3. Validity of Show Cause Notice Issued After Rescission of Notification No. 64/88:The appellant contended that the show cause notice issued in 2000 was invalid as Notification No. 64/88 was rescinded in 1994. The High Court directed the Tribunal to reconsider this issue. The Tribunal held that the rescission of the notification did not extinguish the continuing obligations for past imports, supported by Section 159A of the Customs Act and relevant case law, including the Bombay High Court's decision in Shah Diagnostic Institute Pvt. Ltd.4. Limitation Period for the Demand of Duty Under Section 28 of the Customs Act:The appellant argued that the demand was barred by limitation under Section 28 of the Customs Act, as the show cause notice was issued long after the imports. The Tribunal clarified that the duty demand was not under Section 28 but for violation of the notification's conditions, which imposed a continuing obligation. The Supreme Court's decisions in Jagdish Cancer & Research Centre and Bombay Hospital Trust supported this view, affirming that duty is payable irrespective of redemption of confiscated goods.Conclusion:The Tribunal confirmed the demand for duty and upheld the confiscation and penalty, though it showed leniency by reducing the redemption fine from Rs. 3,00,000 to Rs. 1,50,000 and the penalty from Rs. 5,00,000 to Rs. 1,00,000. The appeal was disposed of accordingly.