TaxTMI 
TaxTMI 
2002 (8) TMI 619
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....rder which is required to be passed in respect of each of the appellants noted above." 2. In the majority order there is a request for deciding various issues involved in the appeals as noted by Member (Technical) Shri Lajja Ram in his differing order. 3. Shri Lajja Ram in his differing order which is in para 24 at page 108 is reproduced as under : 24. The main issue for consideration and decision in these group of appeals relating to alleged violations of the conditions as laid down in the Customs Exemption Notification No. 64/88-Cus., dated 1-3-1988 (hereinafter referred to as Notification No. 64/83-Cus.) is as under : "- Whether action for recovery of duty for violation of the conditions as laid down in Notification No. 64/83-Cus. is required to be initiated by the Ministry of Health and Family Welfare (hereinafter referred to as 'Ministry of Health'), in terms of that Notification; or by the Commissioner of Customs and whether the action initiated by the Commissioner of Customs towards payment of such duties, towards levy of penalties and payment of fines in lieu of confiscation of offending goods, under the powers conferred by the Customs Act, 1962 (....
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....r this Notification is not manufactured in India; and (ii) that the hospital equipment in respect of which the exemption is claimed is necessary for running or maintenance of the hospital. 3. Provided that in the case of import of spare parts, no approval as specified in paragraph 1 will be required subject to the conditions that - (i) the spare parts are imported by the hospital; (ii) the hospital will, at the time of importation, produce a certificate from the Ministry of Health and Family Welfare or the Directorate General of Health Services that the said hospital falls in one of the categories of hospitals specified in the said Table; (iii) the Head of the hospital certifies that the spare parts in question are required for the maintenance of an imported equipment in use with the hospital and such parts will not be used for any other purpose. TABLE 1. All such hospitals as may be certified by the said Ministry of Health and Family Welfare, to be run or substantially aided by such charitable organisation as may be moved from time to time, by the sa....
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....bsp; that such hospital would be in a position to start functioning within a period of two years, and (iv) that such hospital, when starts functioning would be relatable to a hospital specified in paragraphs 1, 2 or 3 of this Table, and the said Ministry of Health and Family Welfare certifies to that effect : Provided that - (a) in the case of a hospital relatable to paragraph 3 of this Table, the importer produces evidence to the Assistant Collector of Customs at the time of clearance of the said hospital equipment that the same is being imported in accordance with the conditions specified in proviso to that paragraph; (b) the importer shall give an undertaking in writing to the Assistant Collector at the time of clearance of the said hospital equipment that the importer shall furnish certificates from the said Ministry of Health and Family Welfare or from the Directorate General of Health Services, Government of India, within such period as the Assistant Collector of Customs may specify in this behalf or within such period as the Assistant Collector of Customs, on sufficient c....
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....ree treatment of the patients. In clause 4 there was a condition that such hospitals which are in the process of being established could also be granted the certificates in terms of the conditions stipulated therein. 6. Pursuant to this Notification hospitals specified in the Table of the exemption notification started importing hospital equipment and clearance of the imported hospital equipment was taken on production of the certificate issued by Ministry of Health/DGHS without payment of duty. This Notification was rescinded in 1994. 7. Hon'ble Delhi High Court on 18-10-96 while examining CWP No. 409/96 directed to enquire into the evasion of customs duty or irregularity in the import of medical equipment in terms of Notification No. 64/88. In pursuance of the Order of the Hon'ble Delhi High Court Rosha Committee was set up by the Govt. of India. One of the terms of reference of this Committee was to enquire whether the concerned institution had fulfilled the conditions subject to which the exemption from duty was granted. Following the directions of the Committee to enquire whether M/s. Willingdon Hospital, Madras had fulfilled the conditions of the Notification ....
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....e granted such certificate of exemption would ensure that the obligation imposed on the persons availing of the exemption notification are being duly carried out on being satisfied that the said obligations have not been discharged they can enforce realisation of the customs duty from them. 13. It is needless to reiterate that all the persons including the appellant who had the benefit of importing the hospital equipment with exemption of customs duty under the notification should notify in the local newspaper every month the total number of patients they have treated and the 40% of them are the indigent persons below stipulated income of Rs. 500/- per month with full particulars and address thereof which would ensure that the obligation to treat 40% of the patients free of cost would continuously be fulfilled. In the event of default, there should be coercive official action to perform their obligation undertaken by all such parsons. This condition becomes a part of the exemption order application and strictly be enforced by all concerned including the Police personnels when complaints of non-compliance were made by the indigent persons, on denial of such treatment in the ....
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..... It was submitted that no enquiries about violation of the conditions of the certificate were conducted prior to rescinding of the Notfn. No. 64/88 and since today the Notification is not in existence, therefore, how the violation will be treated. He referred to the judgment of the Hon'ble Karnataka High Court in the case of Yellamma Dasappa v. C.C.E., Bangalore reported in 2000 (120) E.L.T. 67 (Kar.). He submitted that in para 9 the Hon'ble High Court held as under : "9. A valid certificate has been issued and the said certificate, even as on date, has not been withdrawn or cancelled for any alleged violation of the condition by the appellant. Unless the said certificate is cancelled, the Customs Authorities cannot impose customs duty. The seizure of the equipment is only a consequential act that would follow the cancellation of the certificate issued in favour of the appellant. So long as the certificate is not cancelled, the respondents could not, in our opinion, have initiated seizure proceedings in the case on hand. Petitioner-appellant was sent only a questionnaire and the said questionnaire has been answered by, the appellant herein. No further action has been taken....
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....oor patients and entire indoor patients of the low income group whose income is less than Rs. 500/- per month, would be able to receive free treatment in the institute. The objective must be achieved at any cost, and the very authority who have granted such certificate of exemption would ensure that the obligation imposed on the persons availing of the exemption notification are being duly carried out and on being satisfied that the said obligations have not been discharged they can enforce realisation of the customs duty from them."(Emphasis supplied) In this para the Supreme Court has ruled the competent authority should continue to be vigilant and check whether the undertaking given are duly complied with after getting the benefit of the exemption notification and import without payment of customs duty and if on such enquiry the authorities satisfied that the continuing obligations are not being carried out, there would be fully open to the authority to ask the person to avail of the benefit of exemption to pay the duty payable in respect of the equipment which have been imported without payment of customs duty. A careful reading of the said judgment shows that in the event o....
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.... involved and the permissibility for import and other relevant factors. On being satisfied of the same the licensing authority issues the licence. But the functions of the Customs authorities start after the goods are imported and brought into the territorial water of the country. The Customs authorities are concerned with the recovery of the customs duty and to check evasion of payment of duty. Under the Customs Act, under Section 2(33), "prohibitory goods" means any goods the import and export of which is subject to any prohibition under that Act or any other law for the time being in force. When the licence mentions that the appellants are at liberty to import defective CRCA sheets and coils without mentioning their thickness or gauge the appellants are at liberty to export those goods. The only condition is that the Customs authorities should look into whether the goods sought to be imported correspond to the description in the licence and whether the conditions in the licence are required to be complied with by the importer. In this case, admittedly, the goods are covered by the licence. The Customs authorities cannot read something into the licence which was not already there....
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....iscation of offending goods under the Customs Act, 1962 had jurisdiction in terms of Notification No. 64/88. Learned Counsels for the appellants submitted that duty cannot be demanded u/s 28 of the Customs Act, 1962 as was held by this Tribunal in the case of Dewan Chand Satyapal Agarwal Imaging Research Centre [2001 (136) E.L.T. 1116 (T) = 2000 (39) RLT 1084]. It was submitted by them that assessments were finalised sometimes in 1994 in majority of the cases whereas the show cause notices have been issued in the years 1998 to 2000. It was contended that duty could not be demanded unless the certificate was cancelled and that certificate has not been cancelled in majority of the cases but duty had been demanded. It was also contended that there was no other authority to cancel the certificate except MOH/DGHS and since the certificate can be cancelled only by MOH/DGHS natural corollary will be that duty could not be demanded unless the certificates are cancelled after investigation by the MOH/DGHS. The contention of the Counsels for the appellants was that in no circumstances, duty could be demanded during the existence and validity of the certificate issued by the MOH/DGHS. 15.&....
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....t Customs Authorities without following such procedure took upon themselves the responsibility of investigation and initiation of recovery proceedings against the time-barred claims to impose penalty and confiscate goods which in some cases were not available, which was not legally sustainable. It was submitted that this Tribunal in the case of Dewan Chand Satyapal Agarwal Imaging Research Centre v. C.C. reported in 2001 (136) E.L.T. 1116 (T) = 2000 (39) RLT 1084 held that, "We have, therefore, to hold that since the show cause notice has been issued beyond limitation period under Section 28 the time-bar would apply. As regards the contention of the assessee that the show cause notice in the instant case was without jurisdiction for having been issued by the Deputy Commissioner and not by the Commissioner in terms of proviso to Section 28(1) we find that the Tribunal's decision in Jagdish Cancer Research Centre v. C.C.E. reported in 2000 (117) E.L.T. 97 supports this contention." 18. Regarding judgment of the Apex Court in the case of Mediwell Hospital & Healthcare Pvt. Ltd. - 1997 (89) E.L.T. 425 it was submitted that the issues agitated before the Apex Court in this case ....
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....respect to the four consignments in question. Be that as it may, it is sufficient for the present to notice that so far no action has been taken on that account either under the Customs Act or under Section 4G of the Imports and Exports (Control) Act, 1947. Section 4G of 1947 Act is also conceived to meet such a situation, as a reading thereof would disclose. It says that non-compliance with any condition of licence relating to utilisation of such goods renders the said goods liable to confiscation notwithstanding that such goods are mixed up with other goods or material. Even though a period of more than five years has passed by, no action has been taken either under the Customs Act or under Section 4G of Imports and Exports (Control) Act, though the import licence of the second respondent has been cancelled. We must presume in the circumstances that no such action was or is contemplated. In these circumstances the title of the first respondent to the said goods remains free of any cloud." They emphasised in this case that Apex Court held, "Occasions for taking action under this clause arise only when the condition is not observed within period prescribed, if any, and where the....
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....g given and then come to the conclusion and if necessary, cancel the certificate issued and only then the Customs could take action. Further it was argued that there was no procedure set out for maintenance of records, their preservation and enforcement of the demand. 22. Referring to the judgment of the Hon'ble Calcutta High Court in the case of Ellenberric Steels Ltd. v. Regional Development Commissioner for Iron & Steel reported in 1992 (59) E.L.T. 242, learned Counsels submitted that Hon'ble Calcutta High Court observed that "Going by the letters of the provisions, we do not find anything to vest the Development Commissioner with any discretion to register or not to register. If any public functionary ex facie not vested with any discretion, in respect of his public functions, it would be against all canons of construction to invest him with any power to act in his discretion on the ground of any supposed expediency or otherwise." Similar view was taken by the Tribunal in the case of Gujarat Co-operative Oil Seed Grover Federations Ltd. v. C.C.E. reported in 1999 (114) E.L.T. 104. It was, therefore, submitted by the Counsels for the appellants that Customs had no power ....
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....esentative for Revenue submitted that in all the appeals being agitated there is a clear violation of the terms of the undertaking given for the purpose of availing benefit of notification inasmuch as the benefit of free treatment of poor/outdoor patients to the prescribed limit was not extended by the appellants; that Customs authorities had clear jurisdiction to invoke the provision of the Customs Act, 1962 for enforcing the demands of duty. 27. It was pointed out that Section 111(o) of the Customs Act, 1962 stipulates that any goods exempted subject to any conditions from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer. It was submitted by them that if the exempted goods had violated the terms of the notification, customs duty became recoverable and it is only Customs authorities who can proceed to recover the amounts in terms of Section 28 or other provisions of the Act. Senior Standing Counsel referred to the judgment of the Apex Court in the case of Mediwell Hospital & He....
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....nder : "9. Section 111(o) states that when goods are exempted from Customs duty subject to a condition and the condition is not observed, the goods are liable to confiscation. The case of the respondents is that the goods imported by the appellants, which availed of the said exemption subject to the condition that they would not be sold, loaned, transferred or disposed of in any other manner, had been disposed of by the appellants. The Customs authorities, therefore, clearly had the power to take action under the provisions of Section 111(o). 10. We do not find in the provisions of the Import and Export Policy or the Handbook of Procedures issued by the Ministry of Commerce, Government of India, anything that even remotely suggests that the aforesaid power of the Customs authorities had been taken away or abridged or that an investigation into such alleged breach could be conducted only by the licensing authority. That the licensing authority is empowered (to) conduct such an investigation does not by itself preclude the Customs authorities from doing so. 11. The communication of the Central Board of Excise and Customs, dated 13th May, 1969 refers to the bre....
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....and submitted that in para 9 the Tribunal had observed : "In the instant case, since the show cause notice has been invoked beyond permissible period under Section 28, the Apex Court judgment in Mediwell case cannot be said to apply to the facts of the present case." He, therefore, submitted that since the Apex Court judgment holding that the obligation was continuing in the case of Mediwell Hospital & Healthcare Pvt. Ltd. applies to the facts of the present case, therefore, it cannot be said that since the show cause notice has been issued beyond limitation period under Section 28 of the Act, time-bar would apply. Ld Standing Counsel argued on the other aspects also. 32. We have heard the detailed submissions made by the Counsels for the appellants as well as the arguments of the learned Senior Central Government Standing Counsel and SDR for Revenue. We find that the issues for determination before us are whether Customs Authorities have jurisdiction to initiate proceedings of demanding duty and confiscating the goods for violation of the conditions of the exemption notification during the validity of the certificate issued by the MOH/DGHS and whether the demands are....
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....DGHS) was to issue a certificate after getting an undertaking from the specified hospital who undertook to comply with the conditions for import of hospital equipment prior to the import of the hospital equipment and their assessment and clearance by the Customs authorities, with exemption or without exemption. Such pre-import approval could be for specific imports either generally or in each case of the equipment, apparatus and appliances as essential for use in any particular hospital specified in the Table given in that Notification (hereinafter referred to as the 'Hospital Equipment'). In para 2, it was provided that in approving the import of any hospital equipment, regard was to be had to the factors specified in that para. According to the Table given in that Notification, the certification of the specified hospitals before the import of the hospital equipment was also to be done by the Ministry of Health for making them eligible for the exemption as provided in that Notification. As is seen from the Notification, the role of the Ministry of Health and of the DGHS was prior to the import. On actual import the benefit of exemption was to be considered by the proper officer....
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....ake coercive action for not complying with the undertaking given was the MOH/DGHS but the authority to demand duty was only Customs in terms of the Act under which the exemption was given. 37. Post-clearance conditions in an exemption notification can be enforced only by the Customs authorities as was held by the Tribunal in the case of Overseas Cycle Co. v. C.C.E. reported in 1992 (58) E.L.T. 248. In para 16 of their judgment it has inter alia been held, "But the functions of the Customs authorities start after the goods are imported and brought into territorial water of the country. The Customs authorities are concerned with the recovery of customs duty and to check evasion of payment of customs duty under Customs Act, 1962. 38. A close reading of the above findings of the Tribunal clearly shows that the Customs authorities come into picture after clearance of the goods from the Customs. Licensing authorities' functions end with the issue of certificate and coercive action being taken for non-compliance with the undertaking given. In the instant case we note that hospital equipment was imported without payment of duty on an undertaking given by the hospital or dia....
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....ch of the High Court, the Government of India by an order dated 20th of May, 1996 appointed Shri K. Chandramouli, Joint Secretary, Ministry of Health and Family Welfare to conduct a preliminary enquiry as to the validity of the certificates issued by the Directorate of Health Services from time to time. The terms of reference for the enquiry entrusted to Shri Chandramouli were en­larged by the High Court by its order dated 23rd of May, 1996. The Committee was among other aspects detailed in the modified terms of reference drawn up by the Court required to examine the validity of the certificates granted to 19 different hospitals including the petitioner Manipal Hospital, Bangalore. A report was in due course, submitted by Shri Chandramouli, which prima facie found the acts of the Officers of Directorate General of Health Services and Customs Department to be irresponsible and negligent. The report did not rule out large scale corruption in the issue of the certificates. Keeping in view the report and the fact that the evasion of duty involved ran into hundreds of crores, the Court by an order dated 18th of October, 1996 constituted two Committees. The first Committee comprising....
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....s in terms of a letter dated 30th of May, 1997 to despatch the requisite information in a proforma forwarded to them under the said letter so as to reach the Ministry within 10 days. The following passage from the letter is in this regard relevant :- "In the meantime, the High Court of Delhi has directed this Ministry to ensure the disposal of the 112 applications for exemption certificates, which are pending consideration within the next three months, i.e. by 30th of July, 1997 positively. For doing so, it is necessary to obtain the relevant information about the applicant, in the prescribed proforma, duly certified by the State Health Secretary himself/herself. This would obviate the possibility of certificates being given routinely as has happened in the past. In order to expedite the process, the High Court of Delhi has directed the State Governments through the Chief Secretaries to supply the Ministry/Directorate General of Health Services (DGHS) relevant information in respect of pending applica­tions. The Court has further directed that instructions should be issued to the Chief Secretaries that this information shall be supplied and should reach the Ministry not late....
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....India, anything that even remotely suggests that the aforesaid power of the Customs Authorities had been taken away or abridged or that an investigation into such alleged breach could be conducted only by the licensing authority. That the licensing authority is empowered to conduct such an investigation does not by itself preclude the Customs authorities from doing so." On examination of Notification No. 64/88 we do not find any provision which precludes the Customs authorities. 47. Further the Apex Court in para 11 of their above judgment held as under : "11. The communication of the Central Board of Excise and Customs dated 13th May, 1969 refers to the breach of the condition of a licence and suggests that it may not be possible to take action under Section 111(o) in respect thereof. It is true that the terms of the said Exemption Notification were made part of the appellants' licences and, in that sense, a breach of the terms of the said Exemption Notification is also a breach of the terms of the licence, entitling the licensing authority to investigate. But the breach is not only of the terms of the licence; it is also a breach of the condition in the Exempti....
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....egarding confiscation of the goods etc. The Apex Court in their judgment in the case of Mediwell Hospital & Healthcare Pvt. Ltd. emphasised that basic objective must be achieved at any cost and that even in the event of default there should be coercive official action to perform their obligation by all such persons. This condition becomes a part of the exemption under application and strictly be enforced by all concerned including the Police personnels when complaints of non-compliance were made by the indigent persons, on denial of such treatment in the concerned hospital or diagnostic centres, as the case may be. Thus we find that Apex Court leaves no doubt as to the action to be taken in case violation of the condition is noticed. In the instant case the violation of the conditions were noticed as adequate records were not maintained. The appellants contended that there was no requirement for maintaining records as no records were prescribed. This contention of the appellant is not tenable inasmuch as the hospital and diagnostic centre were claiming the benefit of Customs exemption Notification and since the Notification was subject to certain conditions in the form of percentag....
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....er by the conditions. The conditions were based on the equipment imported when this equipment will be used for treating the particular percentage or number of patients who were poor. Thus infringement could be only prospective from the date of clearance of the goods. Since it was a post-importation obligation, therefore, liability to pay duty or confiscation of the goods could arise only subsequent to the date of clearance of the goods. In the absence of any specific period, the liability could arise only when there is infringement of the condition and hence Section 28 did not apply. 57. At the point of import no duty was collected. Duty became payable only when infringement of the obligation was observed. Having regard to this aspect the date for raising demand cannot be counted from the date when the proper officer had made the order originally for the clearance of the goods but it should be counted only from the date of show cause notice when infringement is alleged. The Tribunal in the case of Dewan Chand Satyapal Agarwal Imaging Research Centre had not followed the judgment of the Apex Court in the case of Mediwell Hospital & Healthcare Pvt. in which the Apex Court had....