TMI Blog2002 (8) TMI 619X X X X Extracts X X X X X X X X Extracts X X X X ..... t, Member (Technical). The Larger Bench shall also consider the final order 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, u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (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 said Ministry of Health and Family Welfare. 2. All such hospitals which may be certified by the said Ministry of Health and Family Welfare, in each case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 cause being shown, may allow in each case, to the effect - (i) that such hospital equipment has been installed in the hospital; and (ii) that such hospital has started functioning; (c) the importer shall furnish, at the appropriate time, the certificates referred to in (b); (d) the importer executes a bond in such form and for such sum as may be specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 an enquiry was conducted. The Rosha Committee drawing upon its power from the terms of reference specifically directed that if on completion of enquiry it was found that the institution had not fulfilled the conditions, then further action be taken as per the Customs Act for recovery of the duty/imposition of penalty/confiscation etc. 8. In the meantime the case of M/s. Mediwell Hospital Healthcare Pvt. Ltd. came up before the Hon ble Supreme Court. The Hon ble Supreme Court in its judgment in the case of Mediwell Hospital Healthcare Pvt. Ltd. - 1997 (89) E.L.T. 425 in paras 12 and 13 held as under : 12. While, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come 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 concerned hospital or diagnostic centers, as the case may be. 9. Having regard to the directions of Rosha Committee as also the judgment of the Apex Court in the case of Mediwell Hospital and Healthcare Pvt. Ltd. some Commissioners initiated proceedings. As Customs Department had allowed duty exemption it was contended by the Customs authorities that it was open for Customs to initiate action to demand duty or to impose fine and penalty. 10. We have heard S/Shri C.A. Sundaram, Senior Advocate with Tarun Gulati, Advocate; M.S. Kumaraswamy, Consultant; N.K.R. Nair, Consultant for the appellants and Shri Vaithiyalingam, learned Senior Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 by the respondents. The Director General of Health Services has also not issued any cancellation of certificate as on date. In these circumstances, we are clearly of the view that without withdrawing or cancelling the certificate already issued, the present seizure cannot stand. Therefore we hold that the seizure effected by the respondents is not in accordance with law. The impugned order of the learned Single Judge, in these circumstances, requires to be set aside and accordingly the same is set aside. He also referred to para 10 of this judgment which is also reproduced below : 10. Sri Veerendra Shah, learned Counsel also relied upon the statement of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the violation of the continuing obligation, the authority who had issued the certificate, has the right to demand the payment of customs duty. Unfortunately, in the case on hand, the said authority has neither issued any notice of violation nor has administered the customs duty for violation of the exemption conditions. In these circumstances, we are of the view that the respondents have committed an error in seizing the equipments without demanding the customs duty for violation and rather without cancelling the exemption certificate granted to the appellant. The learned Judge, in our opinion, in the circumstances, has committed an error in dismissing the petition. Mor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The appellants also had complied with the condition of exporting some goods to Bangladesh by manufacturing those goods from the indigenous products. The imported goods are, therefore, to be used by them by way of replenishment. Therefore, once, if a licence is granted in respect of a particular item by the licensing authority, the Customs authorities have no jurisdiction to shift over the licence so granted by the licensing authority and they have no power to go beyond the licence and to determine as to whether the said licence related to prohibited item. 13. The emphasis of the Counsels was that what is exempted is exempted only on approval given by the MOH/DGHS; that the violations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en 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. In so far as confiscation of the goods is concerned it was submitted by the Counsels for the appellants that the goods cannot be confiscated as the violation of the conditions of the exemption Notification was not established by the certificate issuing authority and unless the violation is there the goods cannot be confiscated. Another point that was made by the learned Counsels was that most of the hospital equipments imported by the appellants had become obsolete and the price had come down considerably and therefore, in many cases the redemption fine was not commensurate with the present price of the hospital equipment imported. It was stated by them that redemption fine was very high in comparison ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urisdiction 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 was whether the appellant was entitled to the certificate being a diagnostic centre run by private individual and whether in the facts and circumstances of the case more particularly in the absence of any denial of the allegations made by the appellants it is possible for the Court to come to the conclusion that there has been a discriminatory treatment and whether the appellants had complied with all the pre-conditions stipulated in the exemption notification for being entitled to the issuance of a certificate. Counsels for the appellants submitted that none of the issues are relevant for the present case, therefore, the decision is clearly distinguishable. 19. Learned Counsels submitted that the Apex Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 period is not so prescribed within reasonable period. It was argued that in the instant case there is no period prescribed and therefore, the demand can be raised only within a reasonable period. It was submitted that therefore, the demands beyond six months were time-barred as they could not be raised. 20. The Counsels for the appellants also submitted that an exemption under a Notification is for a period of time that it must be finite and that post-importation conditions cannot be said to be infinite; that the Notification in dispute did not contain any post-importation condition and all the conditions were pre-importation conditions and hence demand of duty cannot extend beyond the period of six months; that even in case of post ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to supervise/check/monitor the undertaking given. 23. Referring to the judgment of the Apex Court in the case of Hemraj Govardhandas v. UOI reported in 1978 (2) E.L.T. J350 the Apex Court held, On a true construction of the language of the notification it is clear that all that is required for claiming exemption is that the cotton fabric must be produced on powerloom owned by co-operative society. There is no other requirement under the notifications that cotton fabric must be produced by the co-operative society and powerlooms for itself. It is well established that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. If the tax-payer is within the plain terms of any exemption he cannot be denied its be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nctioned 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 Healthcare Pvt. Ltd. cited above, stating that this decision has clarified in para 12 of their judgment that, We would like to observe that the very notification granting exemption must be construed to cast continuing obligation on the part of those who have obtained certificate from the appropriate authority and on the basis of that to have imported equipment without payment of customs duty to give free treatment to the people mentioned in the notification. The Apex Court further observed that The competent authority, therefore, should continue to be vigilant and check whether undertakings given by the applicants are being duly complied with after getting the benefit of exemption notification and import of equipment without payment of customs duty and if on such enquiry the authorities are sati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 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 Exemption Notification upon which the appellants obtained exemption from payment of Customs duty and, therefore, the terms of Section 111(o) enable the Customs authorities to investigate. It was contended by the Counsels for Revenue that the facts in the present case are similar to that in the case of Sheshank Sea Foods Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 time-barred. 33. Notification No. 64/88-Cus, was issued in exercise of the powers conferred by sub-section (1) of Section 25 of the Act. Under sub-section (1) of Section 25, if the Central Government is satisfied that it is necessary in the public interest so to do, it may by notification in the Official Gazette exempt generally either absolutely or subject to such conditions (to be fulfilled before or after clearance) as may be specified in the notification, goods of any specified description, from the whole or any part of duty of customs leviable thereon. Under Section 2(15) duty means a duty of customs leviable under the Act. Under Section 28 of the Act, the notice for payment of duties was required to be issued by the proper officer. The determination of the amount of duty due was also to be done by the proper officer. As defined in Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 officers of the Customs according to the functions assigned to each of them by the Board or the Commissioner of Customs. The Ministry of Health had no role to play in the assessment, exemption, payment, confiscation, penalty etc. It is seen from the wordings of the exemption notification that the exemption as provided therein was conditional. There were pre-importation conditions and there were post-importation conditions. The Ministry of Health/DGHS had a role in so far as pre-importation conditions were concerned. They had no role in the assessment or the demand of customs duties, seizure of the goods, proposing penalty etc. when the post-importation conditions had been found to be violated. At the imports, the purpose of the approval granted by the Ministry of Health/DGHS was fulfilled, and any continuation or cancellation of the approval will have no bearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 diagnostic centre to the effect that they will be treating free poor patients up to the prescribed percentage indicated in the above Notification. Therefore, post-importation violation of the conditions of the exemption Notification would appropriately fall within the Customs jurisdiction and not within the jurisdiction of the certificate issuing authority that is MOH/DGHS. 39. The Hon ble Karanataka High Court in the case of Medical Relief Society of South Kanara in their judgment reported in 1999 (111) E.L.T. 327 in para 43 held - Medical equipment in the instant case was imported subject to the condition that the petitioners continuously discharge the obligation of providing a medical, surgical and diagnostic treatment to atleast 40% of its outdoor patients and indoor patients with a family income of less than Rs. 500/- per month. Failure to discharge that obligation was liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Shri S.D. Mohile, Member, Central Board of Excise and Customs was required to quantify the amount of customs duty foregone in cases where equipment/machinery was released with or without production of customs exemption certificate under Notification No. 64/88, dated 1st of March, 1988 and to suggest steps to be taken for collection of the duty payable by the parties who had availed of the exemption available under the notification, to which they were not otherwise entitled. The second Committee comprising Officers of the Revenue Intelligence, Central Excise, the Directorate of Health Services and the CBI were constituted under the overall supervision and guidance of Mr. Padam Rosha (Retired) Director General, Security, J. K. with the object of identifying the acts of omission and commission of the Officers of the Directorate General, Health Services/Ministry of Health and Family Welfare/Customs Department, or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e General of Health Services (DGHS) relevant information in respect of pending applica tions. 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 later than 10 days from the receipt of request for such informa tion. As directed by the Court, a copy of the relevant extract containing their directions are enclosed herewith so that necessary action can be taken by you personally to ensure that there is no delay in the transmission of the information. 42. Further the Apex Court in the case of Jagdish Cancer Research Centre [2001 (132) E.L.T. 257] in para 13 on the question whether a shortfall in one period can be adjusted against the excess during the other period held - It should generally be all through the period. It being atleast 40%, there is hardly any occasion to say that in case there is more than 40% in a given period, that may make good the deficiency in the previous or following year. 43. We note that Notification No. 64/88 was issued by the Government of India in exercise of the powers conferred by sub-section (1) of Section 25 of the Customs Act, 1962 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification 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 Exemption Notification upon which the appellants obtained exemption from payment of Customs duty and, therefore, the terms of Section 111(o) enable the Customs authorities to investigate. Examining those rulings of the Apex Court we note that in the case before us the hospital obtained exemption from payment of customs duty and therefore, Customs officers are competent to investigate. 48. We also note that the appellants heavily relied on the judgment of Yellamma Dasappa given by the Hon ble Karanataka High Court. We note that in view of the Hon ble Supreme Court judgment in the case of Sheshank Sea Foods Pvt. Ltd. the law is now settled that Customs authorities are competent to investigate violations of any exemption notification and that Customs are not precluded from taxing action. In the instant case we note that investigations were initiated following the directions of the Hon ble Delhi High Court in the case cited above and constitution of the Rosha Committee. 49. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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 percentage of poor patients to be treated or number of beds to be kept reserved for poor people. It was necessary for them to maintain the records so that they could at any point of time justify their undertaking about their eligibility to avail themselves of the customs duty exemption. 51. Another point that was agitated was that no time-limit for maintaining of the records was prescribed in the Notification. Now there is no doubt that Notification created a continuing obligation and since the obligation was to be met by maintaining the records, therefore, there could not be any time-limit as the obligation was co-terminous with the destruction of the imported material that is to say that unless the hospital equipment imported under exemption Notfn. No. 64/88 was destroyed under the supervision of Customs liability continued and maintenance of records was essential. 52. In the case of UOI v. Kirloskar Pneumatic Company - 1996 (84) E.L.T. 401 (S.C.) the Apex Court held that Customs authorities c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 held, Obligations cast on the importer was a continuing obligation. Needless to say that in a continuing obligation the date of clearance of the goods cannot be the date for determining limitation. Thus the judgment of this Tribunal in the case of Dewan Chand Satyapal Agarwal Imaging Research Centre is not correct law. Therefore, having regard to the above discussion we hold that demands are not time-barred. 58. Regarding the question of confiscation of the offending goods we note that the exemption Notification No. 64/88 was a conditional Notification. Section 111(o) of the Customs Acts, 1962 reads - 111(o). Any goods exempted subject to any condition 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 condition is not observed unless non-observance of the condition was sanctioned by the proper officer. Such goods brought from a place outside India shall be liable to confiscation. In the instant case the goods were exempted under t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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