Import of machinery for Hospital - benefit of Notification No. 64/88 denied for non-fulfillment of conditions

PJ/Case Laws/2011-12/1452

Case: DURGABHAI DESHMUKH HOSPITAL & RESEARCH CENTRE Versus C.C., HYDERABAD

Citation: 2011 (272) E.L.T. 300 (Tri. - Bang.)

Issue: - Import of machinery for Hospital - benefit of Notification No. 64/88 denied for non-fulfillment of conditions – issue of availability of benefit under other notifications required to be considered – Matter remanded.

Redemption fine imposed on assessee to be 10% of the value and not more.

Brief Facts:- Appellants imported medical equipment without payment of duty by filing Customs Duty Entitlement Certificate (CDEC) issued by the Director General of Health Services in terms of Notification No. 64/88-Cus, dated 1-3-1988. The bills of entries filed by the appellant were assessed by extending the benefit subject to the condition that they fulfilled the requirement of the said Notification. The CDECs issued by DGHS were withdrawn/cancelled by Authorities (DGHS) as per the letter dated 2-2-2001 on the ground that appellant has failed to fulfill the conditions of the Notification i.e. (a) providing free treatment on an average to 40% of all out door patients (b) to give free treatment to all indoor patients whose family income was less than Rs. 500/- per month and to keep for the above purpose 10% of the hospital beds reserved for such patients.

The Lower Authorities were of the view that since the CDECs were cancelled by DGHS, the imported goods were liable for confiscation under Section 111(o) of the Customs Act 1962 and the appellant is also held liable to discharge the duty foregone by Revenue.

Show cause notice was issued to the appellants. The Commissioner confirmed the demand of duties and also confiscated the goods but gave an option to redeem the same on payment of redemption fine and imposed penalty.

In appeal, the Tribunal remanded the matter back to the Adjudicating Authority with a direction to consider the issue afresh keeping all the connected issues open.

The Adjudicating Authority in de-novo proceedings held that appellant is not able to satisfy the conditions of Notification No. 64/88-Cus in two ways i.e. firstly CDECs were cancelled and secondly they were not able to fulfill the condition of free treatment of 40% of outdoor patients and reserve 10% of the beds for the patients whose monthly income is less than Rs. 500/-. The Adjudicating Authority confirmed the demand, confiscated the goods with an option to redeem the same on payment of redemption fine and also imposed penalty on the appellants.

Aggrieved by such an order, appellants are before the Tribunal.

Appellant’s Contention:- Appellant, referring to earlier Order of the Tribunal, submitted that as regards the cancellation of CDECs they had filed writ petition before the High Court and the matter was pending.

With regard to the condition of free treatment of 40% of out-door patients and reserving 10% of the beds for poor patients whose monthly income is less than 500/- it was submitted that they had maintained records. The Adjudicating Authority has also held that one Multi Channel Cardioscope and spare parts of Angioscope were imported under Notification No. 64/88. It was submitted that these two instruments were never a part of the Notification No. 64/88 but were imported under Notification No. 208/81-Customs and 65/88 de horse the conditions in Notification No. 64/88.

Respondent’s Contention:- Revenue submitted that the Adjudicating Authority had verified the correctness of the claim of appellant by looking into the registers maintained by them i.e. in-patient registers and number of patients treated free. That the judgment of Tribunal in Final Order No. 1240/2010, dated 23-10-2010 in an identical issue will cover the case of Revenue and the appellant has to justify the benefit claimed by it under Notification No. 64/88. It was submitted that having not complied with both the conditions i.e. holding CDECs and the condition of treatment of 40% of the patients freely and reserve 10% of the beds for the poor patients with less than Rs. 500/- income, the appellants are liable to discharge the duty liability which has been foregone by Revenue.

Reasoning of Judgment:- At the outset, the Tribunal found that the claim of appellants in respect of the multi channel cardioscope and spare parts of angioscope being eligible for benefit of Notification No. 208/81-Cus and 65/88-Cus respectively has not been addressed by the Adjudicating Authority in the order-in-original. The Appellant’s claim for benefit of alternative Notification needs to be addressed by the Adjudicating Authority. In view of the claim of the appellant for exemption for these two items, under other notifications needs to be addressed and that can be done only by the Adjudicating Authority looking at the records.

It was found from the impugned order that the Adjudicating Authority has not considered the submissions of appellant only on the ground that the de novo order does not direct the authority to do so. On perusal of the earlier order of the Tribunal, it was found that in paragraph-2, it was clearly directed that all the connected issues to be kept open.

The Tribunal held that appellant was right in claiming the benefit of Notification which if available to them cannot be denied. Hence, as regards the demand of duty and the confiscation and penalty imposed on these two items, the Tribunal found that the impugned order is unsustainable. The impugned order to the extent it confirms the demand of duty and order of confiscation of such goods without considering the plea of appellant for eligibility under Notification 208/81-Cus and 65/88-Cus is incorrect and is set aside and matter is remanded to the Adjudicating Authority to reconsider this issue afresh in the light of the Notifications and other records that may be produced by the appellant.

As regards the availability of benefit of Notification No. 64/88-Cus and all other items, the Tribunal found that the Adjudicating Authority has verified the correctness of appellant’s claim as to fulfilling of the conditions of Notification and recorded a finding that appellants have not fulfilled them. It is undisputed that the CDECs which were given to appellants for import of such machinery were cancelled by the DGS&D.

The Tribunal noted that no stay was granted in the writ petition filed by appellant, this would indicate that as on today the cancellation of CDECs is in force. The second condition to be satisfied by the appellant regarding free treatment of 40% of patients out-door patients and reserving of 1.0% of beds for poor people whose monthly income is less than Rs. 500/-, the verification done by the Adjudicating Authority does indicate that the appellant has not been doing it so. In the absence of fulfillment of the conditions of the said Notification No. 64/88-Cus, the appellant is not eligible for benefit of the Notification. Therefore, the hospital equipment imported claiming benefit of Notification No. 64/88-Cus are liable for confiscation. Duty liability is also to be discharged. The Tribunal found that this issue is now squarely settled by various decisions. Reliance placed on Mediwell Hospital & Health Care Pvt. Ltd v. U0I [1997 (89) E.L.T. 425 (S.C.)].

Further, the Tribunal found that the Adjudicating Authority while confiscating the imported medical equipment has allowed redeeming of multi-channel cardio scope and spare parts of angio scope on payment of redemption fine for which appellant is claiming benefit under different Notifications.

The Tribunal also found that the demand of duty is also combined, as the impugned order confirming the demand of duty on multi-channel cardio scope and spare parts of angioscopeis set aside, the Adjudication order needs re-quantification based upon further findings of the Adjudicating Authority on the eligibility of Notifications No. 208/81-Cus and 65/88-Cus of the said equipment.

It was also noted that in the first order, the Adjudicating Authority has imposed redemption fine of Rs. 3,00,000/- which was increased to Rs. 8,00,000/- in denovo proceedings, which is not in accordance with settled principles of law. In a recent judgment in the case of CC, Cochin v. Little Flower Hospital [Final Order No. 1240/2010 dated 23.10.2010], it has been held that redemption fine in lieu of confiscation should be 10% of the value. Direction given to the Adjudicating Authority to consider this decision while imposing redemption fine as well as decide on imposition of penalties.

Decision:- Appeal disposed of by way of Remand.

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PJ/Case Laws/2011-12/1452

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