2009 (4) TMI 172 - AT - Customs

Appellate Tribunal upholds decision on confiscation and penalties for failure to meet customs duty exemption conditions.

The Appellate Tribunal CESTAT upheld the decision to confiscate medical equipment and impose penalties on M/s. Yousuf Zulaika Medical Centre for failing ... Imported medical equipments availing benefit of the Notification No. 64/88-Cus. - failed to satisfy the conditions of the Notification No. 64/88-Cus – the hospital failed to provide free treatment to an average of 40% OPD patients as required in the said Notification. - the DGHS vide their letter dated 30-11-2000 withdrew the Customs Duty Exemption Certificate (CDEC) granted to the hospital. - once the DGHS had withdrawn the CDEC, the hospital became disentitled to the benefit of the Notification as the exemption was granted to the impugned goods on their import on the basis of the CDEC. – Exemption not available Issues:Hospital's failure to satisfy conditions of Customs Notification No. 64/88-Cus. for exemption availed, withdrawal of Customs Duty Exemption Certificate (CDEC) by DGHS, demand of duty, confiscation of medical equipments, imposition of penalty, appeal against original authority's order, interpretation of Apex Court judgment in Mediwell Hospital case.Analysis:The case involved M/s. Yousuf Zulaika Medical Centre, Kilakarai, which imported medical equipments under the benefit of Notification No. 64/88-Cus. dated 1-3-1988. The hospital failed to meet the conditions of the Notification by not providing free treatment to the required percentage of OPD patients and indoor patients from low-income families as mandated by the Notification. Subsequently, the DGHS withdrew the Customs Duty Exemption Certificate (CDEC) granted to the hospital, leading to a demand for duty payment amounting to Rs. 6,46,740.The original authority confiscated the medical equipments under Section 111(o) of the Customs Act, 1962, and offered the hospital an option to redeem the items on payment of a fine of Rs. One lakh. Additionally, a penalty of Rs. 10,000 was imposed on the hospital under Section 112(a) of the Act. The Commissioner (Appeals) upheld the original authority's decision based on the judgment of the Apex Court in Mediwell Hospital and Health Care Pvt. Ltd. v. Union of India, emphasizing that once the CDEC was withdrawn, the hospital lost entitlement to the Notification's benefits.During the appeal at the Appellate Tribunal CESTAT, the bench considered the observations of the Apex Court in the Mediwell Hospital case, which highlighted the continuing obligation of entities availing customs duty exemptions to provide free treatment to specified categories of patients. The Tribunal found that the hospital failed to fulfill these obligations, thereby justifying the decision of the original authority and the Commissioner (Appeals). As a result, the Tribunal upheld the impugned order and dismissed the appeal filed by M/s. Yousuf Zulaika Medical Centre.In conclusion, the Tribunal's decision was based on the interpretation of the continuing obligations outlined in the Customs Notification and the precedent set by the Apex Court regarding the enforcement of such obligations for entities benefitting from customs duty exemptions. The case serves as a reminder of the importance of complying with the terms of such exemptions to ensure the intended objectives, such as providing free treatment to specified patient groups, are met.