2018 (8) TMI 1121 - AT - Customs

Tribunal overturns benefit disentitlement, rules confiscation and duty recovery actions unauthorized.

The tribunal found in favor of the appellant, ruling that the decision to disentitle them from the benefits of a customs notification was incorrect. The ... Benefit of exemption N/N. 64/88-Cus dated 1st March 1988 - import of ‘Theratron-Phoenix Cobalt-60 (electro therapeutic apparatus)’ - correctness on the part of the adjudicating authority to disentitle the appellant from the privilege of notification no 64/88-Cus dated 1st March 1988 - Held that:- This is an incorrect finding. The appellant had, at the time of import in February 1991, cleared the said equipment upon presentation of all documents that qualified them to the benefit of the exemption; alleged subsequent failure to comply with post-importation conditions may lead to confiscation for non-compliance without calling into question the eligibility at the time of import. Indeed, there is no allegation of non-eligibility at the point of import and this finding is without sustenance. Confiscation - failure to produce the installation certificate - Held that:- Notification do not specify any time limit within which the installation certificate was to be furnished. In paragraph 4(b), the importer is required, at the time of import, to undertake to produce the prescribed certificate within such time as specified by the Assistant Collector of Customs and in paragraph 4(c) it is enjoined that the importer shall furnish the same - It was only in the show cause notice issued more than eight years after the import that this certificate was called for. The appellant did plead before the original authority that it would be well nigh impossible to secure such a certificate after this lapse of time. Moreover, with the Director General of Health Service having withdrawn the ‘duty exemption certificate’, there was a disclaimer of being obliged to issue such a certificate. The consequence of such withdrawal is an aspect that is moot to the eligibility for import with the privileges under the notification - eligibility at the time of import is clearly distinguishable from the obligation to fulfil post- importation condition with the attendant detriment of confiscation. The certification sought for by the adjudicating authority is clearly not applicable to importer and the non-production thereof is no ground for confiscation or denial of privileges of exemption. Whether appellant was derelict in extending free treatment as prescribed or was charging unreasonable rates? - Held that:- No effort has been made by the adjudicating authority towards ascertainment of compliance of this condition and the rates charged by the appellant were not only not subjected to the test of reasonableness but, more importantly, are entirely unknown. There is no onus on the appellant to negate that which is not alleged in the notice and failure to establish reasonableness of rates cannot be held against the appellant - it is apparent that discarding of record must not be based on supposition but on hard facts. The data of patients furnished indicates that 40% of the patients have been accorded free treatment and, in the absence of contrary evidence, there is no ground to hold that appellant had failed to fulfill this condition. In the absence of evidence of non-compliance on the part of the appellant who had furnished claims of compliance, the confiscation of goods, imposition of penalty and recovery of duty is without authority of law - appeal allowed - decided in favor of appellant. Issues Involved:1. Eligibility for exemption under Notification No. 64/88-Cus dated 1st March 1988.2. Compliance with post-importation conditions.3. Validity of duty recovery under Section 125(2) of the Customs Act, 1962.4. Consequence of failure to produce installation certificates.5. Compliance with conditions of free treatment and reasonable charges.6. Impact of subsequent withdrawal of duty exemption certificate.Issue-wise Detailed Analysis:1. Eligibility for Exemption:The adjudicating authority's decision to disentitle the appellant from the benefits of Notification No. 64/88-Cus was found incorrect. The appellant had cleared the equipment upon import in February 1991 with all necessary documents, qualifying them for the exemption. Alleged failures to comply with post-importation conditions could lead to confiscation but did not affect eligibility at the time of import. There was no allegation of non-eligibility at import, making the finding unsustainable.2. Compliance with Post-Importation Conditions:The adjudicating authority cited multiple failures, including not submitting the installation certificate and not providing evidence of free treatment to patients earning less than Rs. 500 per month. The appellant argued that the conditions were met, and the tribunal found that the adjudicating authority did not provide sufficient evidence to counter the appellant's claims. The tribunal noted that the data provided by the appellant indicated compliance with the condition of providing free treatment to 40% of patients.3. Validity of Duty Recovery under Section 125(2):The tribunal referenced the Supreme Court's decision in Fortis Hospital Ltd v. Commissioner of Customs, Import, which clarified that duty under Section 125(2) becomes payable only if the importer opts to pay the fine and redeem the confiscated goods. Since the appellant did not exercise this option, duty recovery under Section 125(2) was not applicable. The tribunal found the adjudicating authority's reference to Section 12 of the Customs Act superfluous and irrelevant.4. Consequence of Failure to Produce Installation Certificates:The appellant argued that the equipment's installation was supervised by the Bhabha Atomic Research Centre, which was not disputed. The adjudicating authority's reliance on the withdrawal of the duty exemption certificate by the Director General of Health Services did not suggest non-installation. The tribunal noted the absence of a specified timeframe for submitting the installation certificate in the notification and found that the adjudicating authority's demand for the certificate eight years post-import was unreasonable.5. Compliance with Conditions of Free Treatment and Reasonable Charges:The tribunal found no evidence that the appellant charged unreasonable rates or failed to provide free treatment as required. The adjudicating authority did not ascertain the reasonableness of the rates charged or provide contrary evidence to the appellant's records. The tribunal concluded that the appellant fulfilled the condition of providing free treatment to 40% of patients.6. Impact of Subsequent Withdrawal of Duty Exemption Certificate:The tribunal held that the subsequent withdrawal of the duty exemption certificate had no bearing on the eligibility for import at the time. The eligibility for import was determined at the time of import, and the post-importation compliance issues were separate, leading only to potential confiscation, not affecting initial eligibility.Conclusion:The tribunal concluded that the confiscation of goods, imposition of penalty, and recovery of duty were without authority of law. The appeal was allowed, and the tribunal pronounced its decision in court on 14/08/2018.