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TMI Blog2015 (4) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... These conditions are 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 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) at reasonable charges, either on the basis of the income of the patients concerned or otherwise to patients other than those specified in clauses (a) and (b)." From a bare reading of the aforesaid stipulations, it is clear that these conditions are to be fulfilled not at the time of the import but in future, by the importer while utilising the imported equipment. Therefore, the conditions are continuing in nature. The Institute was not charged any import duty as it had produced requisite certificate dated 11.02.1991 issued by the Director General of Health Services, New Delhi. After ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of this order. b) I also direct that the importer shall forthwith pay the duty amounting to Rs. 1,65,24,050/-(Rs. One crore sixty five lakhs twenty four thousand and fifty only) in view of the failure to discharge the continuing obligation under notification No. 64/88 during the material period. c) I impose a penalty of Rs. 25,000 (Rs. Twenty five thousand only) on the importer under Section 112(a) of the Customs Act, 1962. d) The proceedings in respect of DGHS are dropped." As is clear from this order, after confiscation of the goods, option was given to the Institute to redeem the said goods on payment of fine of Rs. 1 lakhs. In addition, the Institute was also directed to pay the duty amounting to Rs. 1,65,24,050/- "in view of the failure to discharge the continuing obligation under notification No. 64/88 during the material period". Penalty of Rs. 25,000/- under Section 112(a) of the Act was also levied. The Institute challenged the aforesaid order by filing appeal before the Customs, Excise & Service Tax Appellate Tribunal (hereinafter referred to as 'CESTAT'). Since we are concerned with that part of the order vide which the duty was imposed, henceforth we will c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is extended by the adjudicating authority and the option could not have been exercised prior to the passing of the impugned order and, therefore, the use of the imported equipment by the appellants; in their Institute cannot amount to their having exercised the option to redeem the goods, which comes at a subsequent stage namely when the impugned order of adjudication is passed. We therefore hold that the duty demand is not sustainable and accordingly, set aside the same, however, if the absence of any challenge to the confiscation and to the imposition penalty, both are sustained." In this manner, appeal was allowed holding that demand of duty was not legally sustainable and that part of the Order-in-Original passed by the adjudicating authority was set aside. Not satisfied with the aforesaid outcome, the respondent-Revenue challenged the order by filing appeal before the High Court of Bombay. It was argued by the Department that the moment order of confiscation is passed with option given to the Institute to redeem the goods on payment of fine, the eventuality comtemplated under Section 125(2) of the Act comes into operation and therefore, in the scheme of things, it was permi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of customs not below the rank of an Assistant Commissioner of Customs, 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." "Section 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, with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are of the view that such a provision would not apply in case where option to pay fine in lieu of confiscation is not exercised by the importer. Trigger point is the exercise of a positive option to pay the fine and redeem the confiscated goods. Only when this contingency is met, the duty becomes payable. In the present case, admittedly, such an option was not exercised and the confiscated machinery was not redeemed by the Institute. As a matter of fact, thus, no fine has been paid. Mr. K. Radhakrishnan, learned senior counsel appearing for the Department, argued that even if an option was not exercised, the moment it was stated in the order of the Commissioner that fine is being "imposed", sub-section (2) would get attracted. We do not agree with the aforesaid submission of Mr. Radhakrishnan. The order confiscating the goods has already been reproduced above. Insofar as the payment of fine is concerned, only option was given (and that was only course of action which could be visualised under section 125). The order categorically states that "the importer "may" redeem the confiscated goods on payment of fine of Rs. 1,00,000 (Rs. One lakh only)" Indubitably, unless an option i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action can be taken under the said bond when the conditions contained therein are violated. Therefore, if the Department wanted the Institute to pay the duty, which may have become payable, it could have taken independent action; de hors Section 124 of the Act, for payment of duty, simultaneously with the notice under Section 124 of the Act or by issuing composite notice for such an action. No doubt, it could have waited for option to be exercised by the Institute under Section 125(1) of the Act as well and in that eventuality, duty would have automatically become payable under Section 125(2) of the Act. But when such an option was not exercised, it could have taken separate and independent action by issuing Show Cause Notice to the effect that the Institute had violated the terms of exemption notification and therefore, was liable to pay duty. What is emphasised is that when in the Show Cause Notice issued under Section 124, nothing was stated about the payment of import duty, there could not have been direction to that effect in the final order Further, insofar as Section 125(2) is concerned, the contingency contained therein did not occur in the present procedure for want of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." Obviously, the argument raised in that case predicated on Section 28(1) of the Customs Act and plea was that notice was not issued by the "competent officer" and was also beyond the time prescribed under Section 28(1). In that context, the Court dealt with the provisions of Section 125(1) as well as 125(2) and observed that order of payment of duty under Section 125(2) would be an integral part of the proceedings relating to confiscation and consequential orders thereon. This order, however, must be pursuant to a show cause notice and adjudication. The court was not dealing with the question as to whether sub-section (2) of Section 125 would be applicable even when option to pay fine in lieu of confiscation is not exercised. Accordingly, we allow the appeal and set aside the order passed by the High Court. We make it clear th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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