TaxTMI 
TaxTMI 
2012 (9) TMI 915
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....975 subject to the conditions specified in it, the hospital equipments imported by certain categories of hospitals, as mentioned in the table annexed to this notification. The Table annexed to the notification mentioned four categories of hospitals which were eligible for exemption. The appellant, on the basis of certificates issued by the Ministry of Health & Family Welfare claimed that they are covered by S. No. 2 of the Table to the notification which reads as under :- "All such hospitals which may be certified by the said Ministry of Health and Family Welfare, in each case, to be run for providing medical, surgical or diagnostic treatment not only without any distinction of caste, creed, race, religion or language, but also - (a) free, on an average, to at least 40% of all their outdoor patients; and (b) free to all indoor patients belonging to families with an income less than rupees five hundred per month and keeping for this purpose at least 10% of all the hospital beds reserved for such patients; and (c) at reasonable charges, either on the basis of the income of the patients concerned or ot....
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....001/- was confirmed; (b) the goods imported duty free were ordered to be confiscated under Section 111(o) of Customs Act, 1962 with option to be redeemed on payment of redemption fine of Rs. 10 lakhs; and (c) penalty of Rs. 5,00,000/- was imposed on the appellant under Section 112 (a) ibid. 1.6 Against the above order of the Commissioner, this appeal has been filed. 2. Heard both the sides. 2.1 Shri A.C. Jain, Advocate, the learned Counsel for the appellant made the following submissions :- (1) The appellant had reserved at least 10% beds for indoor patients and for this purpose there was a separate indoor patients ward. Similarly there was arrangement for free treatment of eligible outdoor patients. The facility regarding free indoor treatment to poor patients i.e. patients of families with monthly income of less than Rs. 500/- and for free treatment of eligible OPD patients had been made known to the public by displaying the information about the same on the Notice Boards at the gate and other places. The number of free indoor patients as percentage of total bed occupancy duri....
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....ies of Delhi were also satisfied that the appellant are providing free OPD treatment to whosever eligible patient came to them and free treatment to poor indoor patients as per the conditions of the notification. (5) In any case, the duty demand is time-barred, as in terms of the Board's Circular No. 73/2000-Cus., dated 1-9-2000, the limitation for recovery of duty for violation of post-importation obligations which are continuing conditions would start from the last day of violation preceding the initiation of proceedings. (6) Neither any duty is recoverable from the appellant nor any penalty is imposable on them. Since there is no violation of post-import obligations, there is no question of confiscation of the goods imported duty free by the appellant under Notification No. 64/88-Customs. 2.2 Shri Sumit Kumar, the learned DR reiterating the findings of the Commissioner in the impugned order made the following submissions:- (1) The appellant have not produced any evidence that they had reserved at least 10% of the beds for free treatment of poor indoor patients. They have not denied that duri....
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....iolation of post-importation condition, the provisions of Section 28 of Customs Act are not applicable. In this regard, reliance is placed on the judgment of the Apex Court in case of CC, New Delhi v. C.T. Scan Research Centre (supra) and also the Larger Bench judgment of the Tribunal in case of Bombay Hospital Trust v. CC, Salan, Mumbai (supra) (paras 12, 21 & 22) Board's Circular No. 73/2000-Cus., dated 1-9-2000 cited by the appellant does not help them in any manner. (5) Taking note of the appellant's failure to satisfy the condition regarding reserving at least 10% of total beds for free treatment of poor indoor patients and free treatment of at least 40% of outdoor patients, the CDEC issued to the appellant was withdrawn by the DGHS vide letter dated 3-11-2000 and, therefore, the appellant are no longer entitled for the exemption under Notification No. 64/88-Cus. and the duty foregone in respect of the duty free imports is recoverable from them. 2.3 In rejoinder, Shri A.C. Jain pleaded that the judgment of the Apex Court in case of Jagdish Cancer Research Centre (supra) cannot be blindly applied to this case, as in this case the appellant had....
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....on to this notification, the term 'hospital' includes any Institution, Centre, Trust, Society, Association, Laboratory, Clinic or Maternity Home which renders medical, surgical or diagnostic treatment. Thus, the term 'hospital' in this notification, includes the diagnostic centres also. The table to this notification specifies four categories of hospitals. The appellant claims to be covered by S. No. 2 of the Table which is as under :- "All such hospitals which may be certified by the said Ministry of Health and Family Welfare, in each case, to be run for providing medical, surgical or diagnostic treatment not only without any distinction of caste, creed, race, religion or language, but also - (a) free, on an average, to at least 40% of all their outdoor patients; and (b) free to all indoor patients belonging to families with an income of less than Rs. 500/- per month and keeping for this purpose at least 10% of all hospital beds reserved for such patients; and (c) at reasonable charges, either on the basis of the income of the patients concerned or otherwise to patients, other than those specified ....
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....l for free treatment of poor indoor patients. Since the appellant's plea that they have separate indoor patient ward for free treatment of poor patient and thus meet the condition of reserving at least 10% beds for free treatment of poor indoor patients has not been refuted by the Department and even the show cause notice does not contain allegation about the beds reserved for poor indoor patients being less than 10% and only alleges that the percentage of IPD patients claimed to have been treated free has always been less than 10%", while what is required as per S. No. 2 of the Table to the Notification No. 64/88-Cus. is reserving at least 10% beds in the hospital for free indoor treatment of poor patients, in our view on this count one cannot find fault with the appellant. For satisfying the condition of clause (b) of S. No. 2 of the Table to the notification, what is required is reserving at least 10% of the total beds in the hospital for free treatment of patients from families with monthly income of less than Rs. 500/- not treating at least 10% of the total indoor patients free. 5. However, the 2nd condition for being a hospital eligible for exemption in terms of S. No....
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....pheld by the Apex Court vide judgment reported in 2008 (224) E.L.T. A66 (S.C.) the word 'and' between clause (a), (b) and (c) of Serial No. 2 of the table to the Notification No. 64/88-Cus. cannot be read as 'or'. Thus, for being eligible for this exemption, all the conditions must be satisfied. 6.1 In this case, there is no dispute about satisfaction of conditions (c) and (d). From perusal of clauses (a) and (b) of Serial No. 2, it will be seen that clause (a) is about free treatment of atleast 40% of indoor patients. These patients may be poor or may not be poor. For satisfaction of this condition, the hospital must achieve this percentage. The rationale for this condition, obviously, is to make the hospital opting to avail the duty concession under this notification share the burden of Government hospitals which are required to provide free medical treatment to all the classes of citizens. In contrast to clause (a), clause (b) of the Serial No. 2 regarding free treatment of poor indoor treatment does not prescribe the minimum percentage for free treatment of poor indoor patients. It provides for free indoor treatment for all the poor patients (i.e. patients belonging to ....
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.... least 40% OPD patients free is not an impossible obligation. If as per the criteria for free OPD treatment fixed by the appellant, the sufficient number of eligible patients were not coming for free treatment, the criteria could be relaxed as, as mentioned above, unlike clause (b), for clause (a) there is no income criteria. Between the families with income of less than Rs. 500/- per month and the super rich, there are a large number of people who would be happy to get free OPD treatment in a private hospital. It is difficult to believe that people would not welcome free OPD treatment. The appellant could have satisfied this condition if they had taken the same a little more seriously. Therefore, the principles of Lex non - cogit ad impossibilia or Nemo tenetur ad impossibilia are not applicable to this case - the obligation of clause (a) of S. No. 2 is not at all an impossible obligation. There is no dispute that during 1995 and 1996, the appellant have failed to meet this obligation. 6.3 Hon'ble Supreme Court in the case of Mediwell Hospital & Health Care Pvt. Ltd. (supra) a diagnostic centre, while directing DGHS to issue CDEC to the hospital in terms of Sl. No. 2 of th....
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....treated free in one year is allowed to be adjusted against excess in other year, the hospitals would tend to defer their obligation of free treatment while the patients requiring free medical treatment cannot wait. In view of the Apex Court's judgment on this issue, the Madras High Court's judgment in the case of Apollo Hospitals Ltd. v. U.O.I. (supra) cited by the appellant would not help them.] (c) For recovery of duty foregone, in case a hospital failed to meet its continuing obligation, the limitation period under Section 28 of Customs Act, 1962 is not applicable, as the said section covers the cases of short levy, short payment, non-levy or erroneous refund of duty. 6.3.2 There is no dispute that the appellant during 1995 and 1996 have failed to meet their obligation of treating at least 40% OPD patients free. Since the obligation to treat at least 40% OPD patients and all indoor poor patients free and reserving at least 10% of the beds for this purpose is a continuing obligation and an integral part of the condition, subject to which the exemption under Notification No. 64/88-Cus. had been granted, the appellant, on account of their failure ....
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....ds imported would become liable to confiscation under Section 111(o) of the Customs Act, 1962 and the appellant whose action has been rendered the goods liable for confiscation would become liable for penalty under Section 112(a) ibid. Therefore, we do not find any infirmity in the impugned order ordering confiscation of the goods under Section 111(o) of Customs Act, 1962 and imposing penalty on the appellant under Section 112(a) ibid. 8. In view of the above discussion the appeal is dismissed. (Order pronounced in open Court on.............) Sd/- (Rakesh Kumar) Member (Technical) 9. [Order per : D.N. Panda, Member (J)]. - I have advantage of reading of the order recorded by my learned brother. While I find no disagreement with the decision holding that there was reservation of not less than 10% of the total beds for economically weaker section and Section 28 of Customs Act, 1962 is applicable and also I concur on the proposition of law laid down by Apex Court as has been elaborately discussed in the order recorded by him. However, I am in respectful disagreement in so far as decision of not serving 40% of OPD patients free of cost is c....
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....that he can take his defence and prove his innocence. It is obvious that at that stage the authority issuing the charge-sheet, cannot, instead of telling him the charges, confront him with definite conclusions of his alleged guilt. If that is done, the entire proceeding initiated by the show cause notice gets vitiated by unfairness and bias and the subsequent proceeding become an idle ceremony. 13. It is of course true that the show cause notice cannot be read hyper-technically and it is well settled that it is to be read reasonably. But one thing is clear that while reading a show cause notice the person who is subject to it must get an impression that he will get an effective opportunity to rebut the allegations contained in the show cause notice and prove his innocence. If on a reasonable reading of a show cause notice a person of ordinary prudence gets the feeling that his reply to the show cause notice will be an empty ceremony and he will merely knock his head against the impenetrable wall of prejudged opinion, such a show cause notice does not commence a fair procedure especially when it is issued in a quasi judicial proceeding under a statutory regulation which prom....
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....CN has not disputed such fact. Notification No. 64/88-Cus., dated 1-3-1988 (which was rescinded by Notification No. 99/94, dated 1-3-1994) grants customs duty exemption to following 3 categories of hospitals : (1) Hospital Certified by Ministry of Health and Family Welfare (MHFW) run by charitable organizations or aided by such charitable organizations under Para 1 of the Table to the Notification. (2) Hospitals without any discrimination, certified by MHFW to have provided free OPD to at least 40% of all their OPD patients and reserved at least 10% of the beds in the indoor for economically weaker section and charging reasonably either on the basis of the income of the patients concerned or otherwise, to patients other than above category of patients in terms of Para 2 of the Table appended to the Notification. (3) Hospitals certified by MHFW as running on non-profit basis even though such hospital makes a charge for the treatment under Para 3 of the Table appended to the Notification. 18. Customs duty exemption Notification No. 64 of 1988, dated 1-3-1988 granted exemption to above 3 categorie....
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....le or not. When the appellant has made aforesaid claim of being run by a charitable Trust, it is essential to grant it fair opportunity to prove its stand. 21. Learned Adjudicating Authority in whole of his exercise has not at all made any effort to find out whether SCN had made allegation in precise and clear terms to find fault of appellant when specific pleading was made to provide basis of allegation. On the basis of figures submitted by appellant the Authority held that 40% of OPD patients were not treated free for which exemption was deniable. Adjudication order does not demonstrate any examination done by Adjudicating Authority to test the basis of allegation in SCN. Neither there was any speaking nor reasoned order passed which is requirement of law as has been held in the case of Asst. Commr. of Commercial Tax Department v. Shukla Brothers - 2010 (254) E.L.T. 6 (S.C.) and in the case of CC, Rajkot v. Amul Industries P. Ltd. - 2010 (260) E.L.T. 499 (S.C.). The authority without any objective examination, merely discussed certain case laws in Paras 9 to 13 of the impugned order and came to an abrupt conclusion against the appellant. Guideline has been laid down by Ap....
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....hat was paid deaf ear. Reply to SCN runs into 20 paragraphs making various averments including averment of no disclosure of basis of allegation in the SCN (Para 6 at page 32 of reply to SCN) as is apparent from page 37 of the appeal folder were not addressed in the impugned order. There was violation of natural justice. SCN was issued on 16-9-2000. It took 4 years and 4 months for completion of adjudication on 31-1-2005. Such an abnormal delay has resulted in denial of justice to the appellant as is apparent from the cryptic order passed in the adjudication. It has been pleaded by appellant that the Adjudicating Authority on 7-4-2004 recorded in the minute of hearing to cause enquiry from DGHS. But he was transferred in the meantime. His successor did not disclose outcome of enquiry if any made although heard the matter on 19-1-2005 as has been stated in Paras 13.1, 14.1 and 14.2 of the Appeal Memo (Page 11 of Appeal folder). This clearly establishes that an empty formality of hearing was followed to pass the order of denial of exemption when Para 10 of the impugned order is passed with extraneous consideration by learned Adjudicating Authority viewing that indoor patients belongin....
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.... (D.N. Panda) Member (Judicial) DIFFERENCES FOR OPINION 27. The facts recorded and reasoning given in above two recorded orders call for resolution of difference as stated below:- (1) Whether basis of allegation was disclosed to assessee and all pleadings dealt with in adjudication to ensure that natural justice was followed? (2) Whether the exemption Notification No. 64/88-Cus., dated 1-3-2008 calls for consideration of ground realities pragmatically to make that workable in the light of judgment of Apex Court in the case of U.O.I. v. M/s. Ranbaxy Laboratories Ltd. & Ors. - AIR 2008 SC 2286 and by Hon'ble High Court of Madras in the case of Apollo Hospitals - 2001 (133) E.L.T. 58 (Mad.)? 28. Registrar is directed to place the file before Hon'ble President for appropriate orders. (Pronounced in the open Court on 12-1-2012) Sd/- (Rakesh Kumar) Member (Technical) Sd/- (D.N. Panda) Member (Judicial) 29. [Order per : Mathew John, Member (T)]. - I have gone through the records of the case and the separate orders recorded by the Hon'ble Members of the Bench which originally hea....
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....ere was no need to produce a CDEC listing the goods to be imported but there was a requirement to produce a certificate from the Ministry of Health and Family Welfare or the Directorate General of Health Services that the hospital was falling under one of the categories of hospitals specified in the said Table, as may be seen from paragraph 3(ii) of the notification. There is no distinction between the two certificates in the matter of conditions to be satisfied after importation of the goods. 33. The position that the four categories are distinct and the conditions to be satisfied by each hospital under each category are distinct is very obvious from paragraph 3(ii) of the Notification and also the conditions specified under each serial number in the Table to the notification. Out of these four categories the first two categories only are relevant for the dispute at hand inasmuch as the appellant hospital appears to have been issued with certificates certifying that they were falling under category 2 for import of spares. At this stage of appeal, appellant stakes claim for category 1 as an alternate claim. So the descriptions of the first two types are given verbatim from ....
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....appellant dated 5-12-2000 it is reasonably clear that 63 certificates as required under paragraph 1 or 3 of the notification were issued to the hospital and such certificates were issued considering the hospital to be falling under category 2 specified in the Table annexed to the Notification, though there is no such explicit statement. All through the earlier proceedings, the appellant hospital has ever raised the issue that their certificates were under category 1 and not under category 2 as presented by Revenue. Category 1 has become relevant now because the hospital has raised an alternate claim that if their claim in category 2 fails, they are still eligible for exemption under category 1. 37. The case of the Revenue is that the conditions in respect of category 2 for which certificate was issued to the hospital had to be complied with by the hospital also after importation of the goods and such conditions were not complied with after importation. So the appellant hospital had to pay back the customs duty exemption availed at the time of import and goods became liable to confiscation under Section 111(o) of the Customs Act and the appellant hospital became liable to pa....
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....ority records the fact the CDEC itself was withdrawn by DGHS as recorded in para 3 of the order as under : "Whereas upon verification of the reply dated 2-8-2000 sent by the said Hospital, DGHS had found that the hospital had failed to provide free treatment to at least 40% of the OPD patients for the year 1995 and 1996 and also failed to substantiate that all the indoor patients belong to the families with income less than Rs. 500/- p.m. have been treated free. Hence it was concluded that the said hospital had not fulfilled the conditions under Notification 64/88 in letter and spirit and the CDEC was withdrawn vide letter dated 3-11-2000 by the DGHS." It is not clear whether one CDEC was withdrawn or all CDECs were withdrawn. It is not clear whether the withdrawal was effective from the date of issue of each CDEC or from the date of issue of the letter. 40. The demand is confirmed on the ground that the Hospital failed to provide free treatment to at least 40% of OPD patients for the years 1995 and 1996. There is no finding given in respect of other allegations in the show cause notice about shortages in percentage of beds reserved for poor patients in IPD or the nam....
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....obligation to comply with the requirement of the conditions is a continuing obligation. (ii) He has rejected the plea that adequate number of poor patients were not turning up for treatment free of cost and hence the condition was an impossible condition to achieve. (iii) Further he has rejected the argument of the appellant hospital that during the period 1988 to 1996 if the figures are taken together they have provided free treatment to more than 40% patients. In this matter he relies on the decision of the Apex Court in the case of Jagdish Cancer & Research Centre (para 13 of the order) and the decision of the Tribunal in the case of Noida Medicare Centre Ltd. v. CC - 2007 (220) E.L.T. 230 (Tri.-Del.) which stands affirmed by the Apex Court. (iv) He has rejected the submission of the appellant hospital that they should be considered as a hospital falling under category 1 in the Table to the notification because for claiming to be in that category they had to produce certificate from the Ministry of Health and Family Welfare, to the effect that the hospital was substantially aided by such charitable organisation as may be approve....
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....8-Cus. 43. The submissions made by the Counsel for appellant hospital are recorded below. 43.1 The adjudicating authority did not consider the following decisions : (a) Sir Ganga Ram Trust Society v. CC - 2011 (268) E.L.T. 465 (Del.); (b) R.G. Stone Urological Research Institute v. CC - 2011 (263) E.L.T. 366 (Del.); (c) Apollo Hospitals Enterprises Ltd. v. CC - 2001 (133) E.L.T. 58 (Mad.). The above decisions are to the effect that the conditions in the notification cannot be enforced after rescinding of the notification and the shortage in percentage of poor OPD patients is for years after rescinding of the notification. 43.2 The appellant hospital was being run by a charitable society and they were eligible for concession under category 1 specified in the Table to the Notification and their claim should be examined under this category in view of the decision in the case of Sir Ganga Ram Trust Society especially because in para 26 of the order there is an observation that Sir Ganga Ram Hospital and Batra Hospital were truly run on charitable basis. 43.3 The average o....
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....ened only because the appellant were not responding to the need of the poor in a sincere manner. The poor may not know about the hospital having availed the exemption and its obligation to give free treatment to the poor and the suggestion that verification may be caused with the police station to find out whether any poor patient was turned away is a ridiculous suggestion. 44.5 Rescinding of a notification can mean only that the exemption was not available for import of goods after the said date. It cannot wipe of the liability that arose due to availing of the exemption prior to that date. 44.6 The ld. AR argues that the principle that the obligation under notification was to be met not only prior to import of goods but after importation also and the matter is already decided by the Apex Court in the case of Mediwell Hospital and Jagdish Cancer and Research Centre. Such obligation will continue till the machinery is in use and till it is destroyed under customs supervision. 44.7 The Apex Court has rejected the idea that substantial compliance is enough to claim an exemption in the case of CCE v. Hari Chand Shri Gopal - 2010 (260) E.L.T. 3 (S.C.). 44.8&e....
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.... submission anywhere in the appeal memorandum filed in 2005 before the Tribunal that the hospital was falling under category 1 and not under category 2. So it appears that this submission that the appellant's case should be considered as a hospital falling under category 1 is a new submission which appears to be made after the decision of the Hon'ble Delhi High Court in the case of Sir Ganga Ram Trust Society was known. 47. It is to be noted that the decisions in the cases of Sir Ganga Ram Trust Society, Apollo Hospital and R.G. Stone Urological Research Institute were in proceedings challenging the cancellation of CDEC by DGHS where the respondent was DGHS and not customs department. The authority to issue CDEC or certificate required under paragraph 3(ii) of Notification under appropriate category of hospitals was the DGHS and not Customs Authorities. There is no case to remand the matter to Customs Authorities for de novo adjudication as to whether the appellant hospital satisfied the condition regarding issue of CDEC or certificate under category 1. 48. As per the impugned order the exemption is denied to the appellant hospital for the reason that they did not p....
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....be interpreted to mean that the conditions subject to which the exemption was availed in the past would end. According to him it would continue during the life time of the machines at least. 51. An interpretation that the condition will continue in perpetuity is prima facie meaningless. In the case of Mediwell Hospital and Jagdish Cancer and Research Centre the condition was not complied with even during the validity of the notification. So the observation that the obligation is a continuing obligation appears to be in the sense that the conditions had to be complied not only prior to import but also after import. This issue as to how long the obligations would continue is decided by the Delhi High Court in the case of Sir Ganga Ram Trust Society and R.G. Stone Urological Research Institute and by Madras High Court in the case of Apollo Hospital that the conditions survive only to the date of rescinding of the notification that is 1-3-1994. 52. Based on the above discussion I find the following infirmities in the adjudication order: (i) The certificates issued by DGHS at the time of import of the goods are not taken on record. (ii....
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....decided by the Tribunal in the case of Noida Medicare Centre Ltd. v. CC - 2007 (220) E.L.T. 230 as affirmed by Apex Court as reported at 2008 (224) E.L.T. A66 (S.C.) and in many other decisions on issues relating to similar shortfalls in other matters like charging of small fees from poor patients. 55. Further in my view the case should not be remitted back for making enquiries with the police station or for cross-examination of any official from DGHS at this late point of time because it is not the view of any individual officer that matters in such issues but of the organization as reflected in records. The case should be decided on evidence as disclosed by records. 56. I also do not agree with the contention of the appellant that treating 40% of the outdoor patients was a condition not possible to be complied with because adequate number of poor patients did not turn up. The argument is repugnant to common sense. Further the notification did not say that 40% of the patients should be poor and they should be treated free of cost. The condition was only that 40% of the outdoor patients (without mentioning any criterion) should have been treated free of cost. There ....