Cus - Notfn 64/88-Cus - obligation cast on appellant is continuing obligation and does not get discharged by rescinding of notification: CESTAT
By TIOL News Service
MUMBAI, DEC 05, 2016: A PIL No. 409/96 was filed in the Delhi High Court seeking quashing of illegal Custom Duty Exemption Certificates (CDEC) issued by DGHS under Notification Number 64/88-Cus dated 1.3.88 in respect of medical equipment, alleged to have caused huge loss to the Public exchequer. The High Court directed an inquiry to be conducted by Sh. K. Chandramouli, the then Joint Secretary, Min. of Health & Family Welfare. Sh. Chandramouli submitted the report on 29.8.96 wherein 23 institutions were scrutinized as test cases.
On consideration of the above report, Delhi High Court vide its order dated 18.10.96 constituted another committee headed by Mr. Padma Rosha, Rtd. Director General (Security) J & K and comprising Officers from various Ministry/Department of Government of India.
The Committee completed scrutiny of 401 cases out of which it was found that 123 institutions (including diagnostic centers) were not entitled for exemption and 217 institutions failed to fulfill post importation conditions.
Based on the Rosha Committee report, according to which the appellant had not fulfilled the condition of the notification 64/88-Cus during year 1994-1995, a SCN dated 22/3/2002 was issued proposing to demand custom duty and to confiscate the medical equipment.
Incidentally, this notification 64/88-Cus. was rescinded by notification 99/94-Cus dated 01.03.1994.
By an order dated July 2004, the Commissioner of Customs (Import) in de novo adjudication [Refer - 2003-TIOL-191-CESTAT-MUM] held that the importer had not satisfied the conditions of the Notfn. No. 64/88-Cus and, therefore, denied the benefit of the notification & confirmed duty demand of Rs.4.59 lakhs along with ordering confiscation and imposition of penalty.
The Division Bench opined that the matter needs to be resolved by the Larger Bench. [Refer - 2015-TIOL-2380-CESTAT-MUM].
The Larger Bench observed -
"4. …On a specific question from the Bench as to the facts of the case, it was informed to us that Customs Duty Exemption Certificate (CDEC) issued by the DGHS authorities in appellant's case stood withdrawn by the authorities. This factual position was not brought to the knowledge of the Bench which referred the issue to Larger Bench due to which this reference was made. On this factual matrix the entire case can be decided by the Division Bench without going into the question of as to effect of rescission of Notification No. 64/88. In view of the foregoing, we decline to answer the reference made to us and remit the matter back to the Division Bench to decide the issue on the facts and circumstances of the case."
Please refer 2016-TIOL-2603-CESTAT-MUM-LB.
The matter is, therefore, before the Division bench and the matter was heard recently.
The appellant inter alia submitted that the amount of duty confirmed u/s 125(2) of the Customs Act and the redemption fine cannot be recovered if the appellant do not exercise the option of redemption fine. [Fortis Hospital Ltd. - 2015-TIOL-57-SC-CUS refers]; that the condition of Notification cannot be invoked after the said notification was rescinded/superseded; that in the remand proceedings the enhanced penalty cannot be imposed.
The AR submitted that the conditions of notification are applicable for all times after the imports are made under this notification. [Bombay Hospital Trust - 2005-TIOL-996-CESTAT-MUM, 2006-TIOL-170-HC-MUM-CUS, Jagdish Cancer & Research Centre - 2002-TIOL-119-SC-CUS-LB]; that penalty can be enhanced in the denovo proceedings and there is no provision not to bar the Assistant Commissioner from imposing appropriate penalty [Madras HC in Mehta Fine Arts].
Relying on the apex court decision in Mediwell Hospital and Health Care Pvt. Ltd. - 2002-TIOL-69-SC-CUS, the CESTAT observed that the obligation cast on the appellant is a continuing obligation and does not get discharged by rescinding of notification; that Rosha Committee has found that the appellant have not fulfilled the conditions of the notification for the period 1994-95 and in view of that, the benefit of notification cannot be enjoyed by the appellant;that as a result, the goods becomes liable to confiscation under Section 111(o) of the Customs Act.
In the matter of the submission of the appellant that no duty or redemption fine can be imposed on them if they refused to redeem the confiscated goods, the Bench placed reliance on the apex Court decision in Fortis Hospital (supra) and observed -
"6. …, confiscation and imposition of redemption fine is upheld. However, the recovery of duty under Section 125 (2) or payment of redemption fine are subject to the appellant exercising their option to redeem."
As regards enhancement of penalty, the CESTAT held that as the appellants had failed to fulfill the conditions of the notification, the penalty of Rs.10,000/- is sufficient.
The appeal was disposed of.
(See 2016-TIOL-3139-CESTAT-MUM)
