Full Judgment Text
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CASE NO.:
Appeal (civil) 2680 of 2000
PETITIONER:
COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI
Vs.
RESPONDENT:
M/S. JAGDISH CANCER & RESEARCH CENTRE
DATE OF JUDGMENT: 02/08/2001
BENCH:
S.P. Bharucha, Y.K. Sabharwal & Brijesh Kumar
JUDGMENT:
BRIJESH KUMAR, J.
This appeal has been preferred by the Commissioner of Customs
(Import), Mumbai, against the order dated 14.12.1999 passed by the
Customs, Excise and Gold (Control) Appellate Tribunal, West Regional
Bench, Mumbai, in appeal, setting aside the order of confiscation of the
imported equipment as well as the penalty imposed. The liability of customs
duty was however upheld, though found to be unforceable, as the show
cause notice issued was not a valid notice.
M/s Jagdish Cancer and Research Centre, Hyderabad ( to be referred
as ‘Centre) applied for duty free clearance of a consignment importing
Teletherapy Unit (Theratron780-C) for its use under Notification No.64/88
Cus Dated 1.3.1988, issued under Section 25(1) of the Customs Act, 1962.
The Central Government under the aforesaid notification exempted all
apparatus and appliances etc. as hospital equipments essential for use in any
hospital on being satisfied that it would be necessary in the public interest to
do so. It is however subject to certain conditions which have been specified
in the said notification as under:-
2. 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 per cent of all their
outdoor patients; and
(b) free to all indoor patients belonging to families with
an income of less than rupees five hundred per
month, and keeping for this purpose at least 10 per
cent of all the hospital beds reserved for such
patients; and
(c)
Condition No. 4(iii) reads as under:-
4. Any such hospital which is in the process of being
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established and in respect of which the said Ministry of
Health and Family Welfare is of opinion-
(i)
(ii)
(iii) that such hospital would be in a position to start
functioning within a period of two years, and
(iv)
The request of the Centre was accepted and the consignment was cleared on
23.8.1989 free of duty.
The Department found that the Centre had failed to produce the
installation certificate in terms of Condition No. 4(iii) of the Notification
and had also failed to observe other conditions, so the imported goods
were liable to confiscation. Consequently the imported equipment was
seized by the Department on 22.1.1998. The Assistant Commissioner of
Customs issued a notice to the Centre to show cause to the Adjudicating
Authority, as to why customs duty amounting to Rs.64,93,598/- be not
demanded and the Teletherapy Unit be confiscated under Section 111(o) and
for imposition of penalty under Section 112 of the Customs Act.
The Centre showed cause raising an objection that notice was not
issued by the competent officer and was also beyond time in terms of
Section 28(1) of the Customs Act. It was also pleaded that the Centre was
not required to furnish any certificate in terms of condition No.4(iii) of the
Notification since it was a running hospital. Insofar it relates to free
treatment to all patients whose income was below Rs.500 per month and
reservation of 10% beds in the hospital for them as indoor patients, and for
providing free treatment to 40% of outdoor patients, their case is that the
Centre had been providing free treatment accordingly and the shortfall was
only marginal over the years. Therefore, no condition of the Notification
was violated.
The Adjudicating Authority held that installation certificate in terms
of Clause 4(iii) was not required to be submitted by the Centre but it failed
to comply with other two conditions about providing free treatment as
required and reservation of 10% beds in the hospital. It was also found that
the Centre did not have inpatient facility at all . Placing reliance upon a
decision of this Court in M/s Mediwell Hospital and Healths Care Pvt.
Ltd. Vs. Union of India, (1997) 1 SCC 759, it has been found that
providing free treatment in terms of the Notification is a continuing
obligation, therefore, limitation as provided under Section 28(1) of the
Customs Act would not come into play. By order of the Adjudicating
Authority the goods imported were confiscated under Section 111(o) of the
Customs Act with an option to the Centre to redeem the same under Section
125(2) of the Customs Act on payment of fine of Rs.50,000/-. A penalty of
Rs.5,000/- was also imposed on taking a lenient view, since it was found
that full duty had become payable by the importer.
The Centre preferred an appeal against the order passed by the
Commissioner of Customs (Import). The CEGAT in appeal, also held that
conditions of the Notification relating to providing free treatment were
violated. Regarding Condition No.4(iii), it has been found that its
compliance by Centre was not required. It has, however, been found that
Section 28(1) of the Customs Act was involved and Assistant Commissioner
(Customs) was not the proper officer to issue show cause notice. The
contention of the Centre was accepted.
The CEGAT further found that Para 3 of the notice relates to
confiscation of the imported goods only on the ground of non-submission of
certificate under condition No.4(iii) of the Notification. Non-compliance of
the other conditions relating to free treatment, finds mention in Para 5 of
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notice saying, it appeared that the importer had no intention to fulfil the
provisions laid down in the Notification and resorted to willful mis-
statement and suppression of facts with a sole intention of evading customs
duty. The Tribunal found that a new case was made out for confiscation of
the imported goods on the ground of not providing free treatment, which
was not the ground for confiscation in Para 3 of the notice. It was also held
that providing free treatment to patients according to conditions of
notification is a continuing obligation in view of Mediwell case (supra).
The CEGAT allowed the appeal holding that confiscation was not valid, the
Centre however was liable to pay the duty but that could not be enforced for
want of legal and valid show cause notice.
On behalf of the appellant, it has been vehemently urged that the show
cause notice has not been issued under Section 28(1) of the Customs Act.
Therefore question of notice having not been issued by a proper officer
does not arises nor the question of limitation. It is submitted that the copy
of the notice, as annexed, does not mention Section 28(1) of the Customs
Act, in any case if it is taken to be there, as contended, that would make no
difference. The submission is that Sub-section (2) of Section 125 of the
Customs Act provides that where any fine in lieu of confiscation of goods is
imposed, the importer shall also, in addition, be liable to any duty and
charges payable in respect of such goods.
Learned counsel for the Centre draws our attention to Chapter XIV
of the Customs Act and submits that it relates to confiscation of goods and
conveyances and imposition of fines. It does not relate to imposition or
demand of customs duty. Section 124 and 125 also fall in Chapter XIV.
Section 124 provides for issue of show cause notice before confiscation of
goods and Section 125 relates to payment of fine in lieu of confiscation.
Section 28 of the Act which falls in Chapter V provides for notice for
payment of duties which has been demanded by the notice in this case.
Therefore, it is submitted on behalf of the Centre that demand of customs
duty and the order for payment of the same is relatable to only Section 28(1)
of the Customs Act, as also found by the CEGAT. That being the position,
the notice was beyond time and not by a competent officer authorised to
issue the same. The argument, as advanced, though seems to be attractive
but on scrutiny, we find no merit in it. Section 124 reads thus :-
124. Issue of show cause notice before confiscation of
goods, etc.- No order confiscating any goods or imposing
any penalty on any person shall be made under this
Chapter unless the owner of the goods or such person-
(a) is given a notice in writing informing him of the
grounds on which it is proposed to confiscate the
goods or to impose a penalty;
(b) is given an opportunity of making a representation
in writing within such reasonable time as may be
specified in the notice against the grounds of
confiscation or imposition of penalty mentioned
therein; and
(c) is given a reasonable opportunity of being heard in
the matter:
Provided that the notice referred to in clause (a) and
the representation referred to in clause (b) may at the
request of the person concerned be oral.
It provides that an order for confiscation of the imported goods may
be made after giving a show cause notice to the importer of the goods. It
also provides for imposition of fine.
Section 125 reads as under:-
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125. Option to pay fine in lieu of confiscation.-(1)
Whenever confiscation of any goods is authorised by this
Act, the officer adjudging it may, in the case of any
goods, the importation or exportation whereof is
prohibited under this Act or under any other law for the
time being in force, and shall, in the case of any other
goods, give to the owner of the goods or, where such
owner is not known, the person from whose possession
or custody such goods have been seized, an option to pay
in lieu of confiscation such fine as the said officer thinks
fit:
Provided that, without prejudice to the provisions
of the proviso to sub-section (2) of section 115, such fine
shall not exceed the market price of the goods
confiscated, less in the case of imported goods the duty
chargeable thereon.
(2) Where any fine in lieu of confiscation of goods is
imposed under sub-section (1) the owner of such goods
or the person referred to in sub-section (1) shall, in
addition, be liable to any duty and charges payable in
respect of such goods.
Whenever an order confiscating the imported goods is passed, an
option, as provided under Sub-section (1) of Section 125 of the Customs
Act, is to be given to the person to pay fine in lieu of the confiscation and
on such an order being passed according to Sub-section (2) of Section 125,
the person shall in addition be liable to any duty and charges payable in
respect of such goods. A reading of Sub-section (1) and (2) of Section 125
together makes it clear that liability to pay duty arises under Sub-section
(2) in addition to the fine under Sub-section(1). Therefore, where an order is
passed for payment of customs duty along with an order of imposition of
fine in lieu of confiscation of goods, it shall only be referable to Sub-section
(2) of Section 125 of the Customs Act. It would not attract Section 28(1) of
the Customs Act which covers the cases of duty not levied, short levied or
erroneously refunded etc.. The order for payment of duty under Section 125
(2) would be an integral part of proceedings relating to confiscation and
consequential orders thereon, on the ground as in this case that the importer
had violated the conditions of notification subject to which exemption of
goods was granted, without attracting the provisions of Section 28(1) of the
Customs Act. A reference may beneficially be made to a decision of this
Court reported in Mohan Meakins Ltd.Versus Commissioner of Central
Excise, Kochi (2000) 1 S.C.C. 462 wherein it has been observed in Para 6
Therefore there is a mandatory requirement on the adjudicating officer
before permitting the redemption of goods, firstly, to assess the market value
of the goods and then to levy any duty or charge payable on such goods
apart from the redemption fine that he intends to levy under sub-section (1)
of that section. In this view of the matter the objection raised by the Centre
that Section 28 of the Customs Act would be attracted is not sustainable.
The next question which falls for consideration is, as to whether or not
a new ground or case for confiscation has been carved out as found by the
CEGAT. According to the CEGAT, Para 3 of the notice relates to
confiscation of goods under Section 111(o) of the Customs Act on the
ground of non-submission of certificate under Condition 4(iii) of the
Notification. Therefore, confiscation could be ordered only on the ground of
non-submission of certificate and on no other ground. It is further pointed
out by the CEGAT that Para 5 of the notice relates to payment of customs
duty only, on the ground of violation of conditions relating to providing free
treatment as well as on account of non-submission of certificate under
condition No.4(iii) of the Notification. In connection with the above
argument, it would be relevant to refer to para 7 of notice, a perusal of
which would indicate that confiscation of the subject goods was intended for
violation of various conditions of Notification No.64/88 dated 1.3.1988. We
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find, that various conditions which were violated are indicated earlier in
paragraphs 3 and 5 of the notice. Para 3 contained only one condition not
various conditions. We, therefore, feel that reading the notice parawise and
confining it watertight within each paragraph, would not be a correct way
of construing a notice. It is to be read as a whole to find out as to whether
the person concerned is made aware of the various grounds on the basis of
which action is proposed to be taken as well as nature of the action. The
view taken by the CEGAT on the point indicated above is erroneous and
cannot be upheld.
Learned counsel for the respondent has next urged that looking to the
total picture of the free treatment provided by the Centre, it is to be noticed
that shortfall in providing free treatment is marginal. The percentage of
persons provided free treatment cannot be precise. During certain period, it
may be a little less or a little higher. He has also drawn our attention to a
chart prepared by the respondent and filed with an affidavit before the
CEGAT, showing that the treatment provided to outdoor patients is 39.8 per
cent and instead of 10 per cent indoor patients it is 8.9 per cent. In
connection with this submission, it may be observed that this aspect of the
matter has been considered by the Commissioner as well as CEGAT in some
details and ultimately it has been found that there was a shortfall which is
also not disputed by the respondent. A perusal of the condition in the
Notification indicates that on an average, at least 40 per cent of all outdoor
patients should be provided free treatment. It is, thus, at least 40 per cent or
may be above. It is submitted that condition nowhere indicates that within
what period, the prescribed percentage is to be achieved. It is submitted that
it should be during the life of the equipment imported. Thus, shortfall of
particular year may be made good in the following year. We are not
impressed by this argument. It would, not at all, be necessary to prescribe
any period to achieve the given percentage of patients treated free. It should
generally be all through the period. It being at least 40 per cent, there is
hardly any occasion to say that in case there is more than 40 per cent in a
given period, that may make good the deficiency in the previous or the
following year. In any case, over and above all, it has not been in dispute
that the Centre did not have inpatient facility. According to the condition of
notification 10% of total beds in hospital, are to be kept reserved for patients
of the families having an income of less than Rs.500/- per month. The case
of the Centre, in this connection, is that they had an arrangement with
another hospital in the proximity which is a sister concern of the Centre,
with whom the Centre had entered into an agreement for reserving 10 per
cent beds. Payments in respect of these inpatients is to be made by the
Centre. We feel that the 10 per cent of the total number of beds are
supposed to be reserved for patients of such families in the hospital where
the equipment is installed. The purpose of the Notification for grant of
exemption from payment of customs duty would not be served by making
payment of expenditure incurred on some inpatients in some other hospital
as alleged. It has also not been shown that alleged arrangements had the
approval of the concerned authority or that it was brought to their notice at
all.
The pleas raised by M/s.Jagdish Cancer & Research Centre, fail to
convince us that it had been able to fulfil the conditions of the notification
for providing free treatment to the patients as required therein. We find that
the findings of the CEGAT on other points and the order passed are not
sustainable. In the result, the appeal is allowed and the order passed by the
CEGAT is set aside and the order passed by the Commissioner of Customs
(Import), Mumbai is restored. There would, however, be no order as to
costs.
.J.
( S.P. Bharucha )
..J.
( Y.K. Sabharwal )
...J.
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( Brijesh Kumar )
August 2, 2001