1. This is the party's appeal against the above captioned impugned order dated 23-7-1998 praying for setting aside the same, with deemed suitable relief.
1. The facts of the case in brief are that the appellant imported a consignment of Teletherapy unit - Theratron 980C valued at Rs. 45,38,597 (assessable value) and filed Bill of Entry No. 9293/23-8-1989 claiming duty free clearance under Notification No. 64/88-Cus., dated 1-3-1988 by furnishing NMIC and CDEC No. NMI/ENGG/389/88/506, dated 23-8-1989 and Z-37011/ 16/88-MG, dated 21-10-1988. The goods were allowed clearance without payment of duty. Department found that the appellant failed to produce installation certificate in terms of para 4(iii) of the notification, and so goods were liable to confiscation under Section 111(o) of Customs Act. Jurisdictional authority was requested to seize the same. It was found by it (jurisdictional authority) that the imported goods was found in the treatment room of the Importer's premises. Under Section 110 of the Customs Act it was seized with incriminating documents on 22-1-1998 under a panchnama, and was handed over to the importer for safe custody. Statement of authorised signatory cum liaison officer Shri G. Ramu was recorded on 16/1/98. After investigation show cause was issued on 7-3-1998 to the appellant calling upon them to show cause as to why Customs duty of Rs. 64,93,598/- should not be demanded from them, and seized goods should not confiscated under Section 111(o) of Customs Act and why penalty should not be imposed under Section 112(a) of the same Act, as they have failed to comply post importation conditions of the above notification viz. (1) production of installation and hospital running certificate; (2) providing free treatment on an average to atleast 40% of their out door patients, (3) keeping at least 10% of the hospital beds reserved for indoor patients having income of less than Rs. 500/- per month. The appellant has no intention to comply and had resorted to wilful misstatement and suppression of facts with the sole intention to evade customs duty. The appellant replied on 30-4-1998. Personal hearing was held on 10-6-1998 and was attended by Shri G. Ramu, liaison officer and authorised signatory of appellant. He filed written submissions and also orally submitted the case. On considering all the material available on record impugned order was passed on 23-7-1998 demanding Customs duty of Rs. 64,93,598/- and confiscating the seized goods under Section 110(o) of Customs Act with redemption fine of Rs. 50,000/- and imposed find of Rs. 5,000/- under Section 112 of Customs Act on the appellant. Hence this appeal.
2. In support of the appeal Shri K.M. Mondal, learned Consultant filed the synopsis and submitted the arguments. His contention is show cause notice was issued on 7-3-1998 after 9 years from the date of clearance of goods on 23-8-1989. He has argued on the impugned order challenging it that Notification No. 64/88-Cus., does not specify any particular period within which free treatment to atleast 40% of the outdoor patients has to be given. From the wordings of the notification it has to be seen on an average over period of time during the life span of the imported equipment, which is 5 to 7 years in this case as per the Chartered Engineer's certificate dated 30-1-1999 of the imported product. Period considered in the impugned order is from 1989 to 1996 only, which is not the life span of the equipment imported. As per the say of liaison officer dated 16-1-1998 during that period 4753 patients were treated out of which 914 are free patients. No break up statement was given before Commissioner. Now a detailed chart showing the break up is given, showing total No. of patients, with percentage of free patients. Average of outpatient comes to 39.8% and that of tree treatment of indoor patients to 8.9%. As per notification all indoor patients with income less than Rs. 500/- per month are to be treated free. Appellant has complied it. In 1997-98 appellant has already given free treatment to more than 40% of outdoor patients. The deficiency noticed during 1989 to 1996 can be easily made out during next years from 1999 to 2003 for which a summary chart is also given. The appellant has sufficient time to fulfil the requirement of notification. So far as indoor patients are concerned, appellant centre has no such facilities. It has an arrangement with sister concern viz.
CDA Hospital providing in patient facility of reserving beds to such indoor patients belonging to the family with an income of Rs. 500/- p.m. It is located in close proximity. The said facility is always provided, whenever required. The Commissioner has not properly appreciated the true scope of notification. He has erred in taking the period only upto 1996, that too without taking into account the actual percentage of out door patients treated free. He ought to have ascertained the residual life of the equipment and given a finding whether it is possible for the appellant to comply requirements of the notification within the residual life of the equipment, which is the true scope of notification. Para 16 in 1994 (71) E.L.T. 569 in the case of M/s. Surlux Diagnostics Ltd. v. Collector of Customs interprets the scope of Notification 64/88. In 1996 (85) E.L.T. 97 in the case of Gujarat Imaging and Research Institute v. Collector of Customs, Bombay relying the above decision has held that no particular span of period has been provided in the notification, the deficiency could be made good in the subsequent period (para 9). In view of the above, denial of the benefit of notification, confiscation of equipment and imposition of penalty is unjustified. As per para 3 of notice, confiscation of equipment was sought for as installation certificate was not produced, but para 11 of the impugned order has clearly held that it is necessary only to those hospital which were in the process of establishment in terms of para 4(iv) of notification and not in this case. The demand is time barred under Section 28 of Customs Act. Customs officers are bound by this provision. Appeal has to be allowed. As per para 11 of the impugned order benefit of notification is denied to the appellant only on the ground that the appellant has no indoor patient facility and has failed to give free treatment to outdoor patients as required by the notification. The appellant has shown its compliance.
3. Shri G.B. Yadav the learned JDR for respondent has submitted his arguments that the appellant neither gave free treatment to outdoor patients, nor did they have indoor patient treatment facility as stipulated in the notification Table 2(a) and (b) and non observation of these conditions rendered the equipment liable for confiscation under Section 111(o) of Customs Act. Regarding limitation under Section 28 of Customs Act, in view of the Supreme Court decision in M/s.
Mediwell Hospital & Health Care Pvt. Ltd. v. Union of India 1997 (89) E.L.T. 425 that conditions of notification granting exemption must be obligatory on the part of all beneficiaries, competent authority making them for the equipment to be utilised to give service to outdoor patient and reserve bed for indoor patients to the family with an monthly income of Rs. 500/- and below, continuously to fulfil the conditions of notification for having availed duty free import of the equipment. This is a case of seizure of equipment with confiscation and redemption fine under Section 125(1) of Customs Act and duty payment goes on hand with redemption under Section 125(2) of Customs Act. Show cause notice was issued under Section 124 of Customs Act. Section 28 is not applicable. There is no need to provide any particular period to fulfil the post import conditions. Beneficiaries of notification will have to fulfil those conditions so long as they use equipment cleared without duty under the notification. Paras 12 and 13 of Supreme Court judgment referred above is very clear in that regard, and even has gone to the extent of calling upon all the beneficiaries should notify in the local newspapers the total No. of patients they have treated and 40% of them are the indigent patients below the stipulated income of Rs. 500/- with full particulars and address thereof which would ensure that the condition to treat 40% of the patients free of cost would continuously be fulfilled. In the event of default there should be corrective official action to perform the obligation undertaken by all such persons. Order of Apex Court should be read as a part of notification which had been interpreted to mean that there is no need to have a specific period for compliance of conditions to the said notification. It is a continuous obligation for all times to come.
4. It is further urged by JDR that the conditions of notification are not fulfilled by the appellant even as per the say of its authorised signatory and liaison officer Shri G. Ramu, which is faulty. Break statement chart now produced by appellant through their consultant was not before the Commissioner. Admittedly appellant has no indoor patient treatment facility. CDR Hospital is not a part and parcel of appellant.
It is a sister organisation. It is not relevant as the appellant alone has to fulfil the conditions of notification, and nobody else. 1997-98 figures of treatment in the chart is irrelevant on this ground. From the break up chart now produced it is seen that from 1989 to 1996, number of patients freely treated and percentage thereof has continuously reduced every year from 76.10% to 17.84%. Admitted shortfall in 1995-96 was 8.11% and 22.16% in case of outdoor patients and 1.29% and 4.55% indoor patients respectively. There is no guarantee that either conditions of free treatment or patients i.e. 40% and 10% would be complied with by the appellant. As per the strict interpretation of notification diagnostics center who can comply with the conditions of notification should as well allowed to be eligible for availing the benefit of exemption under the same failing which condition of notification becomes redundant. There is no room for intendment in the interpretation of notification. If the contention of appellant in that regard are upheld, conditions in the notification would be meaningless. The rulings dated 7-3-1994 and 6-10-1995 cited by the appellant are deemed to have been reversed by the later Supreme Court judgment dated 17-10-1996 in view of paras 12 to 14 therein.
Obiter dicta of the Supreme Court is binding under Article 147 of Constitution, which becomes law. The facts in Surlux case are different. Gujarat Imaging case is mainly based on that case. Para 14 of Surlux case judgment shows issue of misdeclaration and unauthorised import were involved, which is not so in this case. Judgment in Surlux case binds on the issue, which it decides. Both the above rulings are not applicable to this case. It is further contended that observation in para 16 of the orders in Surlux case by the Tribunal is not binding regarding the interpretation of notification holding that diagnostic centre may or may not require indoor facility and that explanation to notification is very clear, but reading of the case under notification, cannot be made in such a way as to hold that the diagnostic centre should be hospital by itself and that both indoor patient or outdoor patient's conditions should be fulfilled. It is only an obiter dicta.
The question before the Tribunal was not on interpretation of condition of the notification but whether a certificate issued by DGHS involving all the importer is sufficient in terms of the notification in question. Paras 15 to 17 of the order in that case show that the appeal was allowed in view of the clarification issued by the Office of DGHS by Dr. Vishwakarma and another Joint DHS, Bombay. In this case no such certificate is produced by the appellant. So the ratio of judgment in Surlux case cannot be applied to this case. In case of doubts benefit should go to Revenue as per the Supreme Court judgment in 1994 (73) E.L.T. 769 in the case of Novopan India and 1995 (75) E.L.T. 13 in the case of Liberty Oils Mills.
5. Point for consideration is whether the impugned order is liable to be disturbed as contended by the appellant? We answer it in the end of para 9.
6. Perused the show cause notice cum duty demand dated 9-3-1998 issued by the Assistant Commissioner of Customs VB, duty demanded under Section 28(1) of Customs Act, under Section 111(o), 112,114A of Customs Act, calling upon the appellant to show cause to the adjudicating authority viz. Commissioner of Customs (Import), Customs House, Bombay as to why (a) Customs duty of Rs. 64,93,598/- should not be demanded; (b) Teletherapy unit valued Rs. 45,38,597(AO) under seizure should not be confiscated under Section 111(o) of Customs Act; (c) Penalty should not be imposed under Section 112(a) of Customs Act, reply of appellant dated 30-4-1998, written submission dated 10-6-1998 statement of G.Ramu, Liaison Officer, Authorised Signatory of appellant, panchnama dated 22-7-1998, impugned order 23-7-1998, appeal memorandum, chart of summary for the last 10 years of the appellant with deficit of shortfall as per Customs Notification 44/88, dated 1-3-1988 for the period 1989 to 1998 and also for 1999 to 2003. Also perused Sections 24,28,123, 125, 111, 112 of Customs Act and also the notification referred above and the rulings referred by both sides.
7. The first contention of bar of limitation requires consideration.
There is a gap of 9 years in issue of show cause notice as per the appellant. As observed above show cause notice issued under Section 28(1) of Customs Act and Section 121(o)(sic) and 112 of Customs Act with specific duty demand. Para 5 of show cause notice alleges in the last two sentences "investigation revealed that appellant had no intention to fulfil or comply with the provisions laid down in the notification and they had resorted to wilful misstatement and suppression of facts with the sole intention of evading customs duty.
Thus it is clear that proviso to Section 28(1) is invoked to issue notice by Assistant Commissioner. As contended by appellant, proper officer to consider explanation to show such notice is either Commissioner of Customs or any other officer authorised by the board as per the proviso of Section 28(1) and (2) of Customs Act, which is defined in Section 2(34) of Customs Act. There is no material on record that Assistant Commissioner was assigned with that function by the Board. So as contended by the appellant, the show cause notice is not issued by the proper officer and Assistant Commissioner was not competent and show cause notice issued by him is not legal and proper and without jurisdiction as per Clause (vi) in pages 10 and 11 of appeal memorandum, wherein Board circular dated 14-5-1992 issued after the amendment of Section 28 of Customs Act restricts that power only to Commissioner of Customs. It is binding on the Assistant Commissioner, who has issued notice. 1996 (87) E.L.T. 19 (S.C.) in the case of Ranadey Micronutrients v. C.C.E. is relevant, which states as follows : Departmental clarifications - circular issued by the CBEC object and validity - Such circulars are meant for adopting uniform practice and binding on the officers of the revenue department (para 14). The learned JDR has not controversed this submission. So under these circumstances the contention of appellant has to be and is accepted.
8. Now coming to the merits of the case, the grounds for confiscation of the equipment under Section 111(o) of Customs Act, as per the show cause notice in para 3 is that "since the importers failed to produce the installation certificate in terms of para 4(iii) of the said Notification 64/88-Cus., dated 1-3-1988 and therefore subject goods are liable to confiscation under Section 111(o) of Customs Act". This is the only ground on which confiscation of the seized equipment is based, as contended by the appellant. In the impugned order of the Commissioner at para 11 it is observed that "insofar as the installation certificate is concerned, importers contention that since hospital was not category (iv) hospital mentioned in Notification No.64/88 no such installation certificate is required to be given by the importer granting that such a certificate is not required, the benefit of said notification can still not be extended to the import for the reason that they do not have inpatient facility". From this, it is clear that the contention of the appellant regarding the non-production of installation certificate of equipment as not required is conceded by the adjudicating authority. In para 13 of the impugned order it is observed that "Production of CDE and NMI certificates are but two conditions of notification. There are other conditions equally important such as number of free treatment to be accorded. These end use conditions if not satisfied the goods enjoying the benefit of notification are liable to confiscation under Section 111(o) of Customs Act. A reference to these provisions are made in show cause notice." In para 5 of show cause notice it is stated that all the conditions of notification are not satisfied. Statistics disclosed by Shri G. Ramu, Liaison officer shows only outpatient treatment target to be was only 19% as against 40%. There was no reservation of inpatient beds of 10% for the patients having income less than Rs. 500/- per month. Importers had no intention to fulfil the conditions of notification". In para 7 of show cause notice it is stated that "importers have violated and failed to observe various conditions of Notification 64/88-Cus., dated 1-3-1988 under which subject goods was cleared without payment of duty, the goods appear to be liable for confiscation under section 111(o) of Customs Act". In the reply to show cause notice, appellant has stated in page 3, in the last sentence 1st para (unnumbered)" The department has therefore already established that the imported equipment is found in the treatment room of the appellant's Premises under para 3 of show cause notice it is illogical to allege that the centre has failed to fulfil the condition of submitting installation certificate. Hence there is no violation of the provisions of notification in this case and goods are not liable to confiscation. "Section 111(o) of Customs Act states that "following goods brought from a place outside India shall be liable to confiscation (a) any goods exempted subject to any condition from duty or any prohibition in respect of import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer". From the above, material it is crystal clear that show cause notice spells out other conditions violation only for liability to pay customs duty exempted under the notification and the only ground for confiscation is non-production of installation certificate, which is conceded as not required in the impugned order, as contended by the appellant and as mentioned in para 3 of show cause notice. In the impugned order new case is made out from the show cause notice as violation of other conditions also make the goods liable for confiscation under Section 111(o) of Customs Act, which is correct as per the above notification.
But, it cannot be upheld for want of specific allegation in para 3 of show cause notice by which liability to confiscation is alleged and the resultant action of seizure by the jurisdictional Customs officers in Hyderabad.
9. Now coming to the violation of condition of notification regarding the treatment of 40% of the total number of outpatients free of cost and reservation of 10% of bed to indoor patients of the family of less than Rs. 500/- p.m. income, as held in the impugned order, and as contended by the JDR, the statement of Authorised Signatory dated 16-1-1998, and the statistics provided by him shows the violation of condition of outpatient free treatment to the extent of 40% and reservation of 10% bed to the inpatient belonging to the family of income less than Rs. 500/- per month. For the period from 1989 to 1996, it comes to 19.31% i.e. out of 4753 out patients, 914 were given free treatment. There was no facility for inpatient treatment and question of reservation of 10% of bed strength to such category of inpatient from the family having monthly income of Rs. 500/- for free treatment does not arise. But in the reply to show cause notice in page 4 it is stated that "we could not reach the prescribed percentage for the reasons that there were not many patients who come forward to avail the facility of free treatment" - "we have released advertisement in the local newspapers to the effect that appellant is offering free treatment to the cancer patients. Paper clippers from the local newspaper 'Citizen' dated 14-6-1989 are enclosed for your perusal." - In the statistics produced for the last 7 years of appellant research centre, it is seen that on an average 39.8% per year free treatments were given to outpatients and 8.9% free treatment were given to indoor patients with bed reservation to the deserving family in CDR Hospital, parent organisation. 1997 and 1998 figures are also much below. If that is added it comes to 39.5% and 12% respectively. As contended by both sides, admittedly it is a continuous obligation on the appellant to enjoy duty free benefit of the imported equipment if the condition in the notification are fulfilled, as per the Supreme Court judgment in Medizoell Hospital & Health Care Pvt. Ltd. v. U.O.I. -1997 (89) E.L.T.425 (paras 12 to 14) which is subsequent to the Tribunal's order in Surlux Diagnostic Centre dated 7-3-1994 and Gujarat Imaging and Research Institute dated 6-10-1995, and it holds good. As contended by appellant the imported equipment cannot be confiscated and no penalty can be imposed. For past violation of conditions regarding free treatment for 40% outpatients, and reservation of 10% beds to indoor patients for treatment to patients coming from the family of monthly income of Rs. 500/- per month below, duty liability has to stand in view of Supreme Court judgment referred above. Point raised is answered as follows : (b) negative regarding validity of show cause notice and confiscation of imported equipment and penalty.
For the reasons discussed above the appeal is allowed and impugned order is set aside regarding confiscation of imported equipment and penalty. Duty liability is sustainable, but cannot be enforced for want of legal and valid show cause notice. The department is at liberty to take necessary steps in that regard in the light of the observation made in the order.