Court upholds revocation of Custom Duty Exemption Certificates for lack of compliance.

The court upheld the revocation of the Custom Duty Exemption Certificates (CDECs) due to the petitioners' failure to provide evidence of compliance with the conditions, leading to the withdrawal of customs duty exemption. Despite opportunities given, the petitioners did not submit required documentation, breaching principles of natural justice. The court emphasized the burden of proof on the petitioners and noted a widespread abuse of exemptions. As a result, the writ petitions were dismissed, finding no illegality in the revocation of CDECs, and no costs were awarded.

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Issues Involved:
1. Revocation of Custom Duty Exemption Certificate (CDEC).
2. Compliance with conditions under Notification No. 64/88-Cus.
3. Principles of natural justice.
4. Alternative scheme proposed by the Division Bench.
5. Burden of proof for claiming exemption.

Detailed Analysis:

1. Revocation of Custom Duty Exemption Certificate (CDEC):
The petitioners were aggrieved by the order dated 23.1.2015, which revoked the CDEC issued under Notification No. 64/88-Cus. dated 01.03.1988. This revocation led to the withdrawal of customs duty exemption and a demand for customs duty amounting to Rs. 4,52,30,472/- was raised by the respondent-Commissioner of Customs.

2. Compliance with Conditions under Notification No. 64/88-Cus:
The exemption was subject to conditions, including providing free medical treatment to 40% of outdoor patients and 10% of indoor patients. The impugned order noted that the petitioners failed to provide evidence that they met these conditions. Despite being given opportunities, the petitioners did not submit the required affidavits or documentary proof to support their compliance.

3. Principles of Natural Justice:
The petitioners argued that the principles of natural justice were breached as their reply and explanation were not considered in the impugned order. However, the court found that the petitioners had ample opportunity to present their case but failed to provide necessary evidence during the hearings held on 5th and 6th May 2014. The court emphasized that the burden of proof was on the petitioners to demonstrate compliance with the exemption conditions.

4. Alternative Scheme Proposed by the Division Bench:
The Division Bench had previously proposed an alternative scheme, allowing hospitals to provide free services to 20% of patients for 20 years starting from 1.1.2012. This scheme was subject to approval by the Central Government, which was not obtained. The petitioners also did not file affidavits opting for this scheme. Consequently, the original conditions under Notification No. 64/88-Cus. remained applicable.

5. Burden of Proof for Claiming Exemption:
The court reiterated that exemptions from tax or duties must be strictly construed. The petitioners bore the burden of proving compliance with the exemption conditions. The failure to produce documentary proof during the hearings and the lack of subsequent follow-up with the authorities indicated non-compliance. The court noted that out of 396 institutions, 392 had their CDECs revoked due to similar non-compliance, highlighting a widespread abuse of the exemption.

Conclusion:
The court found no illegality, perversity, or arbitrariness in the impugned order. The petitioners' failure to provide evidence of compliance and the widespread abuse of customs duty exemptions justified the revocation of CDECs. The writ petitions were dismissed, and no costs were awarded.

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