Lady Amphthil Nurses Instn. and Vs. Cc and ors. - Court Judgment

Excerpt:
1. in all these batch of appeals, [numbering 25 appeals] common questions of law and facts are involved, hence they are all taken up together for disposal, as per law. the questions that arise for consideration in these appeals are as follows:-- (1) as to whether the contemplated action for recovery of duty for violation of the notification is required to be initiated by the ministry of health & family welfare in terms of the notification or by the commissioner of customs? (2) as to whether the action initiated in all the appeals by the commissioner of customs is beyond his jurisdiction of the notification? (3) as to whether the appellants who are the importing hospitals (charitable) have committed violation of notification no. 64/88-cus. dated 1.3.88? (4) as to whether the demands.....

Judgment:
1. In all these batch of appeals, [numbering 25 appeals] common questions of law and facts are involved, hence they are all taken up together for disposal, as per law. The questions that arise for consideration in these appeals are as follows:-- (1) As to whether the contemplated action for recovery of duty for violation of the Notification is required to be initiated by the Ministry of Health & Family Welfare in terms of the Notification or by the Commissioner of Customs? (2) As to whether the action initiated in all the appeals by the Commissioner of Customs is beyond his jurisdiction of the Notification? (3) As to whether the appellants who are the importing hospitals (charitable) have committed violation of Notification No. 64/88-Cus.

dated 1.3.88? (4) As to whether the demands raised by the Commissioner of Customs is barred by time in terms of the proviso to Section 28 of the Customs Act, 1962? (5) As to whether confiscation and grant of redemption on imposition of fine and penalty is justified in the facts and circumstances of each case? 2. For the purpose of easier understanding of the case, it is appropriate to extract the entire Notification No. 64/88-Cus. dated 1.3.88 hereinbelow:-- Exemption to hospital equipments imported by specified category of hospitals (charitable) subject to certification from DGHS etc.--In exercise of the powers conferred by Sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), The Central Govt. being satisfied that it is necessary in the public interest to do so, hereby exempts all equipment, apparatus and appliances, including spare parts and accessories thereof, but excluding consumable items (hereinafter referred to as the 'hospital equipment'), the import of which is approved either generally or in each case by the Govt. of India in the Ministry of Health and Family Welfare, or by the Directorate General of Health Services to the Govt. of India, as essential for use in any hospital specified in the Table below, from-- (i) the whole of the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975); and (ii) the whole of the additional duty leviable thereon under Section 3 of the said Customs Tariff Act, 2. In approving the import of any hospital equipment under paragraph 1, regard shall be had to the following factors namely-- (i) that the hospital equipment in respect of which the exemption is claimed under this Notification is not manufactured in India; and (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-- (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.

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, 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).

3. Any such hospital in respect of which the said Ministry of Health and Family Welfare, may, having regard to the type of medical, surgical or diagnostic treatment available there, or the geographical situation thereof, or the class of patients for whom the medical, surgical or diagnostic treatment is being provided, certify either generally or in each case, that the hospital, even though it makes a charge for the said treatment, nevertheless run on non-profit basis and is deserving of exemption from the payment of duty on the said hospital equipment under this notification: Provided that the hospital equipment in respect of which the exemption is claimed, is imported by such hospital by way of free gift from donor abroad or has been purchased out of donations received abroad in foreign exchange: Provided further that where the said hospital equipment has been purchased out of donations received abroad in foreign exchange, the hospital has been permitted to maintain an account abroad by the Reserve Bank of India for the purpose of receiving funds donated overseas.

4. Any such hospital which is in the process of being established and in respect of which the said Ministry of Health and Family Welfare is of opinion-- (i) that there is an appropriate programme for establishment of the hospital, (ii) that there are sufficient funds and other resources required for such establishment of the hospital, (iii) that such hospital would be in a position to start functioning within a period of two years, and (iv) that such hospital, when starts functioning would be relatable to a hospital specified in paragraphs 1, 2 or 3 of this Table, and the said Ministry of Health and Family Welfare certifies to that effect: (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 (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 by the Assistant Collector of Customs binding himself to pay, on demand, an amount equal to the duty leviable on the said hospital equipment,- (i) if such hospital starts functioning within the period specified there for, as is not proved to the satisfaction of the Assistant Collector of Customs to have been installed in such hospital, or (ii) if such hospital does not start functioning within the period specified there for.

Explanation--For the purposes of this notification, the expression "Hospital" includes any Institution, Center, Trust, Society, Association, Laboratory, Clinic and Maternity Home which enders medical, surgical or diagnostic treatment.

3. For further understanding of the facts of the case, it is appropriate to bring out the facts of each of the appeals and the gist of the defence taken by the appellants and the orders passed by the respective authorities.

The appellants claimed to be a non-profit making medical institution covering by Section 25 of the Companies Act, 1956 and established in the year 1921. They stated that under the Memorandum of Association of the appellant company any profits earned by the hospital operation should be ploughed back for further improvement and services and members are not eligible for any dividend. It is stated that it is a hospital funded by corporate bodies as a social service to the community and the institution is therefore exempted from Income Tax. They stated that at the relevant time, the hospital had 27 beds and also provided outdoor patient treatment to a sizeable number of persons. The appellants stated that they wish to avail benefit of Notification in question and hence approached the Director General of Health Service (DGHS), Ministry of Health, Govt.

of India for issuance of a certificate as required under the above-said Notification. After complying with all the formalities prescribed therein, they were permitted to import 12 consignments between August 1990 and November 1992 and the goods were permitted to be cleared free of duty on provisional assessment basis on execution of a bond. Upon production of the necessary certificates, the PD assessments were finalised and the bonds executed by the appellants were discharged. Two other imports made by them were assessed to NIL duty and permitted to be cleared without payment of duty. They submitted the certificates to the Customs department under a cover of a letter dated 11.9.92 and acknowledged by the department on 17.10.92. The provisional assessment was completed by the end of 1992. It is their case that Superintendent of the Government (RSRM) lying in hospital, Madras, who was the Designated Supervisory Authority in terms of the Notification had visited the hospital and after verification of the records had issued a certificate regarding the correctness of the free patients treated.

They stated that officers of the department conducted an inquiry on 28.5.98. During such inspection, the appellant's representative pointed out that they had been complying with the conditions stipulated in the Notification namely to provide free treatment to the indoor patients and outdoor patients as contemplated in the relevant Notification. They submitted the registers maintained by the hospital for the period 1991-1994, which disclose the number of persons treated on payment of charges and those treated free. They claimed to have been running two units one at Chemmancherry Kuppam and the other at Raj Nagar, Chennai. However, the old files were destroyed following the transfer of hospital and therefore, the data for the years 1995,1996 and 1997 were not available. The department investigating officers recorded the statement of one Sri V. Muthusamy, General Manager (Admn.) on 10.8.98. On 3.9.98, the medical equipments imported by the appellants were seized by the investigating officers under Section 110 of the Customs Act under the reasonable belief that the goods were liable for confiscation under Section 111 of the Customs Act.

2. The Commissioner of Customs (Airport) on the basis of investigation and recording of statements issued show cause notice dated 4/8.9.1998 bearing No. S8/321/98-ACC alleged that the appellants have not complied with the terms of the Notification in question. The show cause notice admitted about the provisional duty bonds being cancelled after the production of exemption certificates by the appellants. It referred to the investigation and verification of the registers and records in respect of out patients and noted that the registers were incomplete for the years 1991-94 and the particulars found from the registers were tabulated and the details given in the show cause notice. It was alleged that from January 1991 to June 1991 common registers were maintained for both paying out-patients and freely treated out-patients. It is alleged that neither the addresses of the patients treated freely nor the particulars of lab test/examination conducted on the individual patients freely were maintained. It further alleged that details of out-patients (payment category) treated were made available for a period of six months only from January to June 1991 and therefore, it alleged that in the absence of relevant records and bills and incomplete details available in the registers provided for verification the percentage of the free treatment given to the out-patients could not be ascertained and the genuineness of the figures as shown in the tabulated column could not be confirmed. It also alleged that there was no records to show that there was reservation of 10% of beds in terms of the Notification in question and also no register/records/vouchers were made available for verification with regard to free treatment given to indoor patients.

It was alleged that no notice board/publicity has been given for such free treatment. The computerised statistics made available for the years 1990-1994 were shown in tabulated columns in the show-cause notice. On that basis it alleged that the hospital was able to give only the total number of inpatients treated and not the names and other details. With regard to inpatients treated free the particulars were given in the tabulated column shown in the show cause notice. However, it alleged the basic documents such as admission registers, discharge registers, admission slip and discharge memo issued to the individual patients etc. were not made available for verification to prove the authenticity of the statistics furnished by the hospital, hence it was alleged that statistics furnished by the hospital could not be relied upon. After narrating certain more facts ultimately, it was alleged that hospital fraudulently obtained CDEC from the DGHS to avail duty exemption and as they had not fulfilled the conditions of Notification in question, the proviso under Section 111(o) of the Customs Act gets attracted and hence they were called upon to explain as to why penal action under Section 112(a) of the Customs Act should not be initiated against them besides, confiscation of imported goods for the value of Rs. 1,40,61,310 should not be done and the benefit of the Notification in question to deny and Customs duty of Rs. 56,24,524 should not be demanded under proviso to Section 28(1) of the Customs Act, 1962.

3. By their reply dated 4.10.98, the appellants pleaded the same facts as narrated above that their institution is in existence from 1921 and that they are non-profit earning medical institution governed by the Companies Act, 1956. The main substance of their plea in the reply to the show cause notice is that on production of such certificate from the DGHS, the bond came to be cancelled. This action took place between October 1991 and July 1992. Thus, the goods were passed out of Customs control on assessment free of duty between August 1990 and November 1992 and as there was no provisional assessment, the demands were all barred by time and they pleaded that even the proviso to Section 28(1) could not be invoked, as even maximum period of five years under the proviso had expired, as the show-cause notice had issued on 8.9.98. Even relying on the judgment of Hon'ble Apex Court in the case of Mediwell Hospital Health Care Put. Ltd. as reported in 1997 (89) ELT 425, they contended that the initiation of action by the Customs authorities is without jurisdiction and in terms of the Notification and judgment of the Apex Court decision, Ministry of Health and Family Welfare, who have been delegated the powers to initiate action. They contended that the Ministry had not initiated any action and there is no complaint against them that they are violating the conditions of Notification either from the Ministry of Health or from DGHS. Therefore, they stated that no material fact that was relevant for assessment of the goods at the time of importation or for finalisation of the provisional assessment had been suppressed, much less wilfully suppressed from the department at that time. Further they stated that certain conditions attached to the Schedule to Notification allegedly had not been complied with, subsequent to the importation and passing of goods out of Customs control, does not result in any suppression of any valid or necessary information required for the purpose of assessment which can lead to invocation of the proviso to Section 28(1) of the Customs Act and hence they pleaded that extended time limit was not available to the Customs authorities for recovery of the demands or for initiating penal action in the matter. They denied the allegation that they had not treated the indigent persons in terms of the Notification and contended that the entire service given to outpatients was free and it is more than 40% as stipulated in the Notification. They filed affidavits of Dr. N. Manickavel and Dr. Fabiola Usha Kumari, who were in-charge of the units during the period 1991. They stated that they treated more than 200 to 320 patients free per month and it satisfy the terms of the Notification. They contended that confiscation of the goods cannot be done as there was no violation of the conditions of the Notification. They further pleaded that the equipment had been in use for about seven years and they have become old in design/model and the consignment value is not more than Rs. 27,04,000 as against valued at Rs. 1,40,61,310 and they challenged the valuation arrived at by the department. They relied on the judgment of Hon'ble Apex Court rendered in the case of Hindustan Steels Ltd. v. State of Orissa as reported in 1978 ELT 159(SC), wherein it was laid down that there cannot be imposition of penalty and they stated that there is no deliberate contumacious or dishonest conduct or action deliberately in defiance of law; as their organisation is a non-profit making one and is genuinely interested in and actively engaged in helping the poor. Hence, they prayed for dropping the proceedings.

5. The Commissioner in the impugned order did not agree with their contentions that there was no violation of the terms of the said Notification and that there was no case for confiscation and imposition of penalty. He has proceeded on the basis of the statements of Sri V. Muthuswamy, General Manager (Admn.) of the hospital, who in his statements dated 10.8.98 has inter-alia admitted that he has not seen any register as required to substantiate the fulfilment of the conditions of the Notification and that he had joined the institution in 1995 and that he had not maintained any such records. On the basis of his statement, the Commissioner concluded the allegation that the appellants had not maintained records for the years 1991-1994, not having been produced and maintained incomplete, therefore, it was not possible to work out the percentage of the out-patients treated free. He noted that even during the period January to June 1991 only a common register had been maintained for outpatients treated free and patients charged and no other details were found. Similarly, as per the computerized statistics made available for the years 1990-94 as noted in the show-cause notice excepting for the year 1990 in all the other years 1991-1994, the percentage of inpatients treated free was less than 10%. There was no details available regarding free treatment of inpatients, therefore, he did not accept the affidavits of two Doctors which had been produced in the case. The Commissioner further observed in the order impugned as under: It is no doubt true that the show cause notice has been issued beyond the period of five years in respect of all the clearances.

However, the P.D. bonds in respect of the goods imported against Bill of Entry No. 23359 and 23360 were finalised on 5.12.94. In respect of the remaining cases the P.D. bonds were finalised in the years 1991 and 1992. Accordingly, excepting in respect of the two Bills of Entry where the provisional assessment were finalised on 5.12.94 in respect of all other cases, the show cause notice is beyond even the extended period under proviso to Section 28(1) of the Customs Act, 1962. It is an admitted fact that the hospital authorities made a request to recommend their case for import of medical equipment so that they could get the same free of duty under Notification 64/88-Cus. The conditions attached to the said notification are too well known. That being the case, even at the time of making the application. the hospital should have understood the implications and their obligations. Whereas it is also an admitted fact that the hospital has not maintained any records or at least produced any such records to show that they have fulfilled the post-importation conditions of the notification in question. Even though the team constituted by the Directorate of Medical Education, Madras-5, has recommended their case, such recommendation is prior to the import of the goods. Whereas, the hospital has failed to comply with the conditions of the Notification. They have naturally suppressed the fact that they will not be able to comply with the conditions of the notification. The ruling of the Supreme Court in Mediwell Hospital and Health Care Put. Ltd., clearly settles the issue in that the hospitals availing the benefit will have to render the services and fulfil the conditions of the notification and that it is a continuing obligation. It is for the hospital to have established that they have so complied with the post-importation conditions. Admittedly, the have failed in this. The plea that the hospital has run into administrative difficulties and that the efforts are now being made for selling the same are only mitigating factors which may at best influence the quantum of penalty imposable.

Both these appeals arise from a common Order-in-Original No. SIB/3/98-Cus dated 26.3.98 confirming duty demand of Rs. 3,96,660 under Sub-section (2) of Section 28. A penalty of Rs. 4,00,000 has been imposed on the hospital under Section 112(a) of the Customs Act and Rs. 1,00,000 on Dr. P.K. Rajiv, Medical Director under the same proviso. The allegation in these appeals is that the appellants filed a Bill of Entry No. 3483 dated 15.12.93 in respect of computerized gas electrolyte analyser system imported from M/s.

Radiometer International A/S. Copennagen, Denmark. The value was declared as Rs. 8,43,958 and goods were permitted clearance duty free under the Notification in question against bond and bank guarantee on the condition that Customs duty exemption certificate would be produced. Subsequently, CDEC No. Z 37022/5/93-MG dated 2.6.94 was issued by the DGHS and therefore, the bond was cancelled and the bank guarantee also released. In view of the investigation conducted and in terms of the High Court of Delhi's direction to the Customs department, the Revenue department checked all the records of the appellants and they found that they had given the benefit on an average of 32% of outpatients as free treatment. The details of inpatients were also noticed and statement of Sri P.K. Rajiv, Medical Director, Sri P. Jayagovind, Financial Controller and Sri K. Bhupesh, Assistant Manager (Accounts) were also recorded. On the basis of these, show-cause notice was issued invoking larger period under provisions of Section 28(1) of the Act, alleging violation of the provisions of the Notification and that there is an act of deliberate misstatement of facts and non-compliance of the conditions of Notification liable for recovery of duty and for imposition of penalty under Section 112(a) of the Act and also asking them to explain as to why the goods should not be confiscated. The appellants denied that the benefit was taken wrongly in terms of the Notification and they contended that the provisional assessment had been finalised and therefore, there was no question of invoking larger period in the matter and the demands were time barred. However, the Commissioner did not accept their pleas and confirmed the duty and penalty as noted.

The appellants contend that in these appeals all the post-importation conditions were fulfilled by them and that all the conditions of the Notification have been adhered to. They have given the benefit to the inpatients and outpatients in terms of the Notification and that they had satisfied the terms of the Notification and they were given certificate. It is pleaded that there is no condition stipulated in the Notification for fulfilment subsequent to the grant of Notification and the Customs department has no jurisdiction to initiate the proceedings and the demands are barred by time as the duty has been assessed finally.

Appeal No. C/531/98 is filed by Medical Trust Hospital on whom there is a confirmation of duty demand of Rs. 1,08,826 and penalty of Rs. 1,00,000 arising from Order-in-Original No. SIB/1/98 dated 26.3.98 issued on 30th March, 1998 by the Commissioner of Customs, Cochin.

By the same order penalty of Rs. 25,000 has been imposed on Dr. PA. Varghese, Dr. Louis Pulikkal and Sri P.V Antony, who have also filed individual appeals whose numbers are C/534 & 538/98, C/535 & 537/98 and C/533 & 536/98. Appeal No. C/532/98 has been filed by the Medical Trust Hospital against the Order-in-Original No. SIB/l/98-Cus (Part-I) dated 31.3.98 despatched on 15.4.98 imposing penalty of Rs. 18.00 lakhs under Section 112(4) of the Customs Act.

There is a penalty of Rs. 1,00,000 on each of the Directors Dr. P.A. Varghese, Dr. Louis Pulikkal and P.V. Antony under Section 112(a) of the Customs Act, who have filed separate appeals, whose numbers are C/534 & 538/98, C/535 & 537/98 and C/533 & 536/98. In this order, there is a reference to 9 Bills of Entry by which the description of 9 items have been shown and the total assessable value is Rs. 31,92,411 and duty involvement was Rs. 15,00,433. The allegation in this order impugned also pertaining to violation of the terms of the Notification on the same grounds as noted in the other order. The order impugned is identical, however, the Commissioner in this order impugned has not confirmed the duty amounts except ordering for imposition of penalties. No finding has been given on non-confirmation of duty demand in this order and the Revenue has not preferred any cross appeal. In effect, against the same appellants, there are two sets of orders one confirming the duty amount along with penalties and the other is only on penalties.

This appeal arises from Order-in-Appeal No. 1314/98 dated 6.1.99 by which the Commissioner (Appeals) in his brief order, has confirmed the Order-in-Original which held that the appellants had imported vide Bill of Entry No. 13061 dated 22.4.89 Electronic Cardiograph Computerised Trademill valued at Rs. 4,94,587 and the same had been provisionally assessed by granting the benefit of the said Notification on execution of P.D. bond No. S23/313/89 ACC dated 13.4.89 pending submission of the required installation certificate under Table IV (b) annexed to Notification within the time limit specified by the Assistant Commissioner. The Assistant Commissioner noted that they had failed to furnish the required installation certificate as contemplated in the aforesaid Notification and therefore, in terms of the provisional duty bond executed the proceedings were initiated for recovery of the amounts. He has also noted that DGHS vide their letter No. Z37011/89MG dated 11.11.97 has withdrawn the CDEC issued to the said Cardiac unit for the said medical equipment on the ground that the said cardiac unit is only a diagnostic centre and not having indoor patient treatment facilities and hence did not fulfil the stipulated conditions of the Notification. On this ground, the Assistant Commissioner has confirmed the duty demand of Rs. 1,97,835 under the provisions of Section 28(2) of the Act. However, there is no imposition of penalty in the matter. The appellants' contention in this case is that the demands are barred by time, notwithstanding the provisional assessment in the matter. They also stated that the equipment was out of use and the unit was closed in 1996 after rendering the services as laid down under the Notification. They contended that the respondents have not made any enquiry as to the fulfilment or otherwise the conditions of the Notification but has gone by the withdrawal certificate of DGHS, which by itself has not ground to confirm the demands. They contended that enough time was not granted to them to gather/find records of unit that was closed in 1996 and hence the impugned order is not sustainable.

This appeal arises from the Order-in-Original No. S8/193/A/98-ACC dated 6.7.98 despatched on 28.7.98 passed by the Commissioner of Customs confiscating the Ultra Mark Colour Doppler and Computerised Tread Mill valued at Rs. 51,00,640. He has noted that in view of the long passage of time and since it was stated before him that the machines are not in working condition, therefore, he took a lenient view by granting redemption on payment of fine of Rs. 25,40,256 and he has imposed a penalty of Rs. 50,000 under Section 112(a) of the Customs Act. In this order, the Commissioner noticed two Bills of Entry by which the goods were imported. He has noted that the said goods were allowed clearance free of duty under provisional duty bonds pending production of the Customs duty exemption certificate under the Notification. Subsequently, DGHS issued CDEC vide No. Z.37011/15/91-MG dated 22.1.92 and Z.37011/15/91-MG dated 24.10.91 and therefore, the respective PD bonds were cancelled by the department. However, at the instance of the direction given by the High Court of Delhi in PIL, investigation was carried out and the officers noticed that the appellants have not fulfilled the terms of the Notification. It is also noted that the DGHS vide letter No. Z-37011/15/ 91-MG dated 27.10.97 has withdrawn the two CDECs issued cited supra on the ground that diagnostic centre without indoor beds are not eligible for customs duty exemption certificate under the said Notification. It was alleged that they have not fulfilled the terms of the Notification and hence the duty was liable to be recovered. In the order impugned, the Commissioner had accepted their plea that show-cause notice is barred by time and even as per the proviso to Section 28(1) of the Customs Act, the demands were not enforceable being beyond the period stipulated therein. However, he noted that the show-cause notice proposed confiscation under Section 111(o) of the Customs Act and also imposition of penalty under Section 112(a) and hence, he took a view that these proceedings can be initiated and confiscation can be ordered besides imposition of penalty and hence passed the final order which is under challenge. The appellants' contention is that there cannot be confiscation and penalty while holding that the demands are barred by time. They contended that they have not violated the terms of the Notification and there is no wilful default in the matter to order confiscation and penalty.

These appeals arise from Order-in-Original No. 2/99 dated 18.2.99 despatched on 24.2.99 passed by the Commissioner of Customs, Cochin.

The show-cause notice dated 30th September, 1998 was issued to the appellants under Section 124 of the Customs Act alleging that the appellants had imported one Stress Test System under the said Notification and had filed Bill of Entry No. 14 dated 3.6.91 claiming benefit of Notification. The allegations were brought out in the show-cause notice that verification was done to see whether compliance of post-importation condition has been done by the appellants and hence they were called upon to produce the documents to show free/concessional treatment to outpatients or inpatients. On scrutiny of documents, it was seen that they have not fully complied with the terms of the Notification of giving free treatment as per the Notification. Statements of Directors and Managers were recorded, thereafter they were called upon to explain why the imported equipment valued at Rs. 5,23,407 should not be confiscated and penalty be imposed. No proceedings for recovery of duty has been initiated. The appellants took the view that there cannot be proceedings initiated after the lapse of several years and the proceedings itself are bad in law and the Customs authorities had no powers to initiate the proceedings, as even post-importation conditions are required to be mandatory by the Ministry of Health and not by the Customs authorities. They stated that they had fulfilled the terms of the Notification and had given free treatment to the required number of persons. However, the Commissioner in the impugned order noted that although the appellant is a charitable institution but they have not complied with the terms of the Notification by maintaining separate registers showing the benefit granted to the poor patients as per the Notification. He also noted that no documentary evidence has been produced to establish that 40% of the indoor patients were treated hence on that basis, he proceeded to order for confiscation under Section 111(o) of the Customs Act and however, granted redemption on payment of fine of Rs. 8,00,000 and he also imposed a penalty of Rs. 3,00,000 on the hospital and Rs. 1,00,000 on the Director Sri Abraham J. Karedan, hence both the hospital and Director have filed these appeals.

This appeal arises from Order-in-Original No. 13/2000 dated 29.2.2000 passed by the Commissioner of Customs, Chennai, holding that the goods imported vide Bill of Entry No. 44553 and 44555 dated 12.11.92 are liable for confiscation under Section 111(o) of the Customs Act but the order impugned does not say whether the goods have been confiscated absolutely and there is no mention of any imposition of fine in lieu of confiscation but however, the order impugned imposed penalty of Rs. 10,00 lakhs on the hospital under Section 112(a) of the Customs Act. In this case, Bills of Entry had been filed seeking clearance free of duty under the Notification.

Since the CDEC was issued as category 4 of hospital, as per the Notification, the appellants were required to produce installation certificate. The appellants relied on the duty exemption certificate vide F. No. Z-37011/10/92-MG dated 19.10.92 issued by the DGHS (Medical General Section), New Delhi and claimed exemption. They asserted that they have given the benefit in terms of the Notification. The department on investigation found that the appellants had not filed installation certificate. They noticed from the said certificate issued by DGHS that they had clarified that no application for issue of installation certificate was pending with them. Therefore, proceedings were initiated on the allegation that they have failed to comply with the terms of the Notification and hence the imported goods were liable for confiscation besides duty of Rs. 7,68,445 was liable to be recovered from them. The appellants contends that they were running now the hospital as category 2 and they have approached the State Medical Director requesting them to visit the hospital to issue installation certificate; but since the said authorities did not take any action, they have addressed a letter dated 12.3.96 to the Director of Medical Education, Andhra Pradesh, that on installation of the equipment requested the authorities at Guntur to conduct necessary inspection and that they submitted list of patients treated free of cost as inpatients and outpatients. A copy of the report dated 26.4.95 submitted by Superintendent, Government General Hospital was produced, wherein it was reported that he visited and verified the records; that though installation certificate was not issued, the fact that the Superintendent, Government Hospital, Guntur visited and inspected the hospital amounts to certifying that the imported medical equipment was found installed and the same should be accepted. The Commissioner did not accept their plea and held that they have not produced installation certificate and hence they have not satisfied the terms of the Notification. He also referred to DGHS letter which had clearly stated that their hospital was considered as category 2 hospital hence they had not satisfied the terms of the Notification.

The Commissioner on the basis of this has held that the DGHS vide letter dated 13.12.99 had withdrawn the CDEC issued to the hospital, inasmuch as the hospital failed to follow the conditions of the Notification in continuously discharging the post-import conditions undertaken at the time of importation. Therefore, he held that the goods impugned were liable for confiscation as during the period in question 40% of free treatment to indigent persons had not been granted. However, the Commissioner has not confirmed the duty nor given any reasons why the duty has not been confirmed. The Revenue has also not filed any cross appeal in this matter.

2. Initially after the hearing of the stay applications, the matter had been addressed before the Bench comprising of Sri S.L. Peeran, Member (J) and Late Sri V.K. Ashtana, Member (T). The Bench had passed a Miscellaneous Order No. 995/99 dated 3.11.99 after hearing the arguments from both sides on the initial issue of maintainability of proceedings. The said order is a detailed one and final operative portion of para 9 is reproduced herein below: 9. We have carefully considered the rival submissions and records of the case. In view of the submissions of the DR for time to seek further instructions in the matter from the Custom Houses concerned and because on a prima-facie consideration, we find substantial force in the submission of Ld. Sr. Advocate on the question of jurisdiction of the Custom Houses concerned to issue the notices in question, we feel that it would be useful for us to receive the details (sic) comments of the learned Commissioner of Customs who have passed the orders impugned in this matter. Their comments would necessarily be limited to the question raised by Ld. Sr. Advocate on the basis of jurisdiction to demand duty when the certificates issued by the competent authorities in the Ministry of Health, Govt.

of India were still not revoked but were in force. We expect these responses to reach this Tribunal within the next three months and the matter is to be listed for mention on 31st January, 2000.

In the Miscellaneous Order the arguments of the senior counsel had been clearly recorded. His argument was that the Custom House has no cause of action and has no jurisdiction to issue the impugned order, if investigation carried out by the Government, with the aid of Customs official, had revealed to the Government that these conditions were probably not fulfilled, the correct procedure under law would have been to make the competent authorities in the Ministry of Health aware of the investigation. His argument was that it was for the Competent Authority to commence action in the matter vis-a-vis the certifications concerned already issued by them.

Learned DR pointed out that the initiation of action was in terms of the High Court of Delhi's direction in the PIL petition and under the aegis of the ROSHA Committee was constituted by the Government only after the direction received from the High Court.

3. The Revenue in response to the Miscellaneous order have made the following submissions: 3. As regards the question of jurisdiction to demand duty, the following observations are made specifically with reference to the decision in the case of M/s. Willingdon Hospitals that has been challenged before CEGAT. (i) However, all the goods were held liable for confiscation under Section 111(o) of the Customs Act, 1962, on the ground that the conditions of notification were not observed. It has been clearly established that M/s. Willingdon Hospitals have not fulfilled the conditions regarding free treatment as stipulated in the notification. Notwithstanding the fact that the CDEC issued by the DGHS has not been cancelled or withdrawn since the conditions have not been fulfilled action has been taken for demanding duty. Even under the proviso clause and confiscation of goods, as explained in the Order in Original itself, the hospital has suppressed the fact that they will not be able to fulfil the conditions of the notification and obtained the CDEC on the basis of said wilful suppression.

(ii) Notification No. 64/88-Cus. Dated 1.3.88 contains certain Pre-importation and Post-importation conditions. The import of the equipments has to be approved by the Govt. of India, Ministry of Health and Family Welfare or by the Directorate General of Health Service as essential for use in the hospitals mentioned in the table annexed to the notification. It has also to be certified that the equipments to be imported are not manufactured in India and the same is needed for running or maintenance of the hospital where the DGHS has issued certificate, exemption from Customs duty was allowed.

(iii) As regards the post-importation conditions, in terms of SI. No. 2 of the table annexed to the notification, the hospital in question are to be certified by the Ministry of Health and Family Welfare to be run for providing medical, surgical or diagnostic treatment without any distinction to caste, creed etc. and further to provide free treatment on an average of 40% of the outdoor patients and free to all indoor patients with family income of less than Rs. 500 per month and atleast reserve 10% of all the hospital beds for such patients. The charges have to be reasonable otherwise.

(iv) DGHS had certified the equipments in question and certified the hospital under category 2. As already stated, this was done on the basis of the application made by the importer.

(v) The Rosha Committee was set up to inquire into the evasion of Customs duty or irregularity in the import of medical equipments in pursuance of the Order of the Hon'ble Delhi High Court dated 18.10.96 in CWP No. 409/96. The committee was set up by the Govt. of India, Ministry of Finance. One of the terms of reference of this committee is to enquire whether the concerned institution had fulfilled the conditions subject to which the exemption from duty was granted. Following the direction of the committee to enquire whether M/s. Willingdon Hospitals, 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 of notification, then further action be taken as per the Customs Act for recovery of duty/imposition of penalties/confiscation, etc. The procedure for initiating such action has been approved by the Order of the Hon'ble Delhi High Court in hearing on 18.2.98 in CWP No. 409/96.

(vi) It is seen from the above that the proceedings initiated by the Commissioner of Customs, Air Cargo Complex, Chennai are as per the specific direction of the Committee drawing its power on the basis of the orders of the Delhi High Court. Notwithstanding the above, attention is also invited to the order of the Supreme Court in the case of M/s. Mediwell Hospital and Health Care (P) Ltd. Though in that case the respondents were DGHS, the Court has specifically observed in Para 13 that the condition of extending free treatment, etc., as part of the exemption was to be enforced by all concerned including the police personnel. As Customs department has allowed duty exemption and if the condition of the notification, post-import, has not been fulfilled, it is open for Customs to initiate action to demand duty or to impose fine or penalty. It is not necessary that in all such cases the CDECs issued have to be cancelled. The right of monitoring the fulfilment of the condition, though not specifically stated in the notification, however, follows from the provisions of Section 111(o) of the Customs Act, 1962 as per which, all such goods where conditions are not observed, can be confiscated.

(vii) As already stated above, as action initiated in the Willingdon case is on account of specific directive of the Rosha Committee, read with Delhi High Court's order, there is no dispute about jurisdiction in the matter, It is requested that the above points may be kept in mind while arguing the case before Hon'ble CEGAT.4. The above cited objections were taken on record and the matter was heard in great detail. On behalf of the appellants learned Senior Counsel Sri C.A. Sundaram addressed the arguments assisted by all the other learned Counsels on record namely S/Sri Thomas Vellapally, N.K.R.Nair, Venkateswara Rao, K.R. Natarajan, S.S. Radhakrishnan and Ms. C.J.Shyamala. The Revenue's case was represented by Sri V. Vaithiyalingam, learned Senior Standing Counsel assisted by Sri S. Sudarsan, learned DR.5. Sri Thomas Vellapally, learned Counsel appeared for M/s. Little Flower Hospital contended that the certificate issued by the DGHS was still in force and the same had not been revoked in their case. They have also not referred the matter to the Customs authorities for investigation and that recovery of duty on the violation of the Notification. Therefore, the Customs authorities directly initiating the proceedings was ab initio void. He also referred to the text of the Notification, which clearly exempts the equipment, apparatus etc. which was approved by the DGHS as essential for use in any hospital and so long as this was condition was satisfied, then the authorities have no bar to recall the certificate and for recovery of duty. He contended that all other conditions were not mandatory or substantive conditions even the conditions of granting the benefit of 40% is not a subjective condition and there was no time limit fixed nor it was laid down as to from which percentage 40% was to be taken. Therefore, the condition itself was unenforceable, so long as the appellant had reserved their services for poor people, then they are deemed to have satisfied. It is his contention that they have done services to poor indigent persons in terms of the Notification. He submits that the demands were all barred by time and in this regard the Karnataka High Court has already given its finding on the question of jurisdiction in the case of Yellamma Dasappa v. CC as . He also pointed out that the Tribunal also has already given a finding on the same issue holding that larger period cannot be invoked to demand duties for the period even beyond five years as held in the case of Dewan Chand Satyapal Agarwal Imaging Research Centre v. CC as reported in 2000 (39) RLT 1084 (CEGAT). He contends that penalty proceedings are also bad as there was no intention to evade duty and no such intention has been brought out and mens rea for evading duty has been done. So long as the certificate has been accepted to be genuine and the benefit being available, the question of imposition of penalty on supposed, presumptuous and imaginary charge of evasion of duty is not sustainable.

6. Sri K.R. Natarajan, learned advocate appeared for the case M/s.

Sumana Cardiac Care Unit pointed out that assessments are still provisional and hence the question of initiating the proceedings under Section 28(2) was not maintainable. He points out that DGHS in their case had withdrawn the certificate solely on the ground that their unit is a diagnostic centre only. They had not challenged the appeal on any other grounds. Therefore, invocation of larger period without any ingredients of provisions of Section 28 by Customs authorities was not sustainable and the demands were time barred.

7. Heard learned consultant Sri N.K.R. Nair appearing for the case of PVS Memorial Hospital pointed out that in their case also the assessments were initially provisional and they were finalised during the year 1994. Therefore, the demands were all time barred and the department has not brought out any ingredients for invocation of larger period. There was no evidence on the Revenue side to invoke penalty proceedings. He submits that the demands were not only time barred but also the Customs authorities did not have jurisdiction to initiate proceedings. He contended that the Notification cannot be recalled merely because there was some certain percentage of benefit given to indigent persons. There is no time limit prescribed or percentage of patients to be treated and it was not a substantive clause for recalling the benefit granted and hence prayed for setting aside the order.

8. Shri S.S. Radhakrishnan, learned advocate appeared for the case of Medical Trust Hospital and pointed out that in his case also penalty proceedings cannot be initiated without bringing out the ingredients of Section 112(a) of the customs Act. Learned Counsel pointed out that penalty of Rs. 18.00.000 cannot be imposed in their case as there was no duty liability. He submitted that unless duty is computed, no penalty can be imposed as held by the Hon'ble Apex Count in the case of HMM Ltd. as . He submits that ratio of this judgment which is rendered under the Central Excise Act would apply to the provisions of Section 112(a) of the Customs Act, as they are pari materia sections. He submitted that all the conditions of the Notification had been fulfilled before the issue of certificate. They had given the free treatment beyond 40% during the years 1989,1990 and 1991 and the certificate has been issued only after inspection.

9. Shri Venkateswara Rao, learned advocate appeared for the case of M/s. Nagarjuna Hospital P. Ltd. contended that in their case also only penalty has been imposed and no demand has been confirmed with regard to the import made on 12.9.92 and the show- cause notice was issued on 1.11.99. The DGHS certificate has been cancelled on 13.12.99 and it cannot have retrospective effect as they had completely satisfied the terms of the Notification during the period. He contended that the show-cause notice was also issued much before the issue of cancelled certificate and as such the show-cause notice itself is bad in law. He further submitted that penalties cannot be imposed in the absence of any duty computation, which is bad in law. He also referred to the judgment of Hon'ble Apex Court rendered in the case of HMM Ltd. as .

10. All the above mentioned advocates also adopted the same arguments as argued by learned Sr. advocate Sri C.A. Sundaram appeared for M/s.

Lady Amphthil Nurses Institution.

11. Senior advocate Sri C.A. Sundaram extensively argued the matter and was at pains to explain that the Tribunal has passed the Miscellaneous order on his preliminary objection that the Customs authorities do not have jurisdiction to initiate the proceedings and the Tribunal had called for report of the Commissioner and he has filed the same. He pointed out that the report is not conclusive and does not answer the Tribunal's query. He pointed out that in their case or any other cases heard as a batch, there was no inquiry conducted and there was also no direction from the DGHS or Ministry of Health to the Customs authorities informing them about the violation of the Notification and calling upon the Customs authorities to initiate recovery proceedings.

He, therefore, contends that the Notification being self-contained and the Government had in their wisdom pointed out the Ministry of Health to monitor the Notification and the DGHS was to give certificate as Competent Authority. Therefore, the entire Notification was to be supervised only by Ministry of Health and in case if there was any violation, they can ensure its applicability through the department and for violation of Notification for recovery of duty purpose, the matter has to be referred to them after due investigation to the Customs authorities, who were initiating the proceedings under Section 28 of the Act. Ingredients of Section 28 can be invoked by the department only when there was evidence of fraud, mis-statement and suppression for which the Ministry of Health is the authority to discover facts supportive of this allegation and not the Customs authorities. The Customs authorities do not have any jurisdiction under the Notification to initiate proceedings even under Section 28 of the Act. He pointed out that in their case bonds had been cancelled and the show-cause notice has been issued on 8,9.2000, after the demands have been finalised on 5.1.1994, therefore, the show-cause notice itself was beyond five years and it was not sustainable. He pointed out that the appellants were registered under sub-provisions of Section 25 of the Companies Act and to be treated as charitable organisation. The entire work was carried out on non-profit basis. There was no direction in the Notification to the hospital authorities to retain the records for years together. Even the monitoring authority cannot look into the records beyond specific period and after the audit of accounts the records are destroyed. It was not expected of the hospital should retain the records after a long period of time and the Customs authorities cannot presume that no such treatment was given in terms of the Notification. He pointed out that the jurisdictional fact for exemption under Notification is the existence of valid certificate at the time of clearance of goods or cancellation of bond and not the question of fact of 40% free treatment to be given to the indigent persons. He also placed the same arguments as other counsels that jurisdiction was with the Ministry of Health and the Customs authorities cannot proceed to revoke the certificate as the certificate has not been issued by them. He pointed out from the Notification that pre-installation and post-installation conditions were to be scrutinized only by the Ministry of Health and Family Welfare and they have to be the monitoring authority and not the Customs authorities with regard to all the conditions of Notification. He pointed out the contemporaneous records show that Ministry of Health checked the records. He pointed out that ROSHA committee was also constituted by the Ministry of Health to check the fulfilment of the conditions of Notification and it was not the Customs authorities, who had taken up the matter for consideration.

12. On a specific query from the Bench as to whether the Health Ministry can revoke the certification and issue show-cause notice for recovery of duty, as the counsel was submitting that the Customs authorities have no jurisdiction to initiate proceedings. On this query, the learned senior advocate contended that the Department of Revenue has the power to issue Notification under Section 25 of the Customs Act. They had empowered the Ministry of Health & Family Welfare to issue a certificate and also to verify/check/monitor the details of the Notification. Therefore, it is his contention that on investigation carried out by the officers of Customs and prima-facie, if they find any violation, then they have to call upon the nodule agency to whom the task is assigned i.e. Ministry of Health to investigate further on the information supplied by the Customs authorities and file their report or in the alternative to cancel their certificate issued to them and only thereafter the authority under the Customs Act on the basis of such report and cancellation of certificate can initiate, the proceedings by issue of notice. He pointed out that such procedure has now been followed after the ROSHA committee was constituted. In all the present matters no such procedure was followed and, therefore, the Customs authorities have directly taken up themselves to proceed to investigate and initiate recovery proceedings against the time barred claim and to impose penalty and confiscate the goods, which were also not available in some cases, in lieu of imposition of fine, which is not at all in terms of law as laid down by several judgments of Tribunal and Hon'ble Supreme Court. In this connection, he relied upon the decision of Tribunal rendered in the cases of Devan Chand Satyapal Agarawal Imaging Research Centre v. CC as reported in 2000 (39) RLT 1084, wherein it was held that Section 28 has to be satisfied for the purpose of invoking the demands and if the same has not been satisfied, then the demands are barred by time. He also relied upon the judgment of Karnataka High Court rendered in the case of Medical Relief Society of South Kanara v. UOI as , wherein the High Court has held in this very issue that the demands are not maintainable by invoking the larger period. He submits that this judgments clearly covers the present issue in all fours, besides the judgment of the Hon'ble Apex Court rendered in the case of HMM Ltd. (supra), wherein very categorically the Hon'ble Apex Court laid down that no penalty proceedings can be initiated without demands having been confirmed.

13. Pointing out to the judgment of Hon'ble Apex Court rendered in the case of Medical Hospital & Health Care Pvt. Ltd. v. UOI (supra), the senior counsel submitted that the facts therein were that the appellants had sought for issue of certificate from the Ministry of Health i.e. nodule agency, which has been denied to them, therefore, they have filed a Writ petition before the High Court of Punjab & Haryana and not succeedings there, they have proceeded to Hon'ble Supreme Court. Therefore, before the Hon'ble Apex Court the issue was only with regard to non-grant of the certificate for the purpose of importing the medical equipment. The Apex Court therefore, had laid down that Ministry of Health can ensure its compliance if the terms of the Notification are not observed by the Hospital authorities.

Therefore, senior counsel pointed out that the facts of the case itself clearly indicated that it was the Ministry of Health who should ensure its compliance. Even if this is taken as ratio, the Customs authorities cannot initiate proceedings for recovery of duty or for imposition of penalty by issuing show-cause notice and it is the Ministry of Health, who should first intimate the process of investigation and file their report to the Customs authorities, who should proceed under Section 28 of the Act. He pointed out that the Hon'ble Apex Court in the case of UOI v. Sampat Raj Dugar as has clearly held in para 21 of the order that there has to be a responsible limit for initiating the proceedings. He pointed out that any exemption under the Notification is for a period of time and the post-importation conditions cannot be said to be indefinite in any event. He pointed out that the Notification did not contain any post-importation conditions and all the conditions were pre-importation. The post-importation conditions, if at all it existed then it was with regard to the certificates to be produced for debonding purpose only, but there is no directive in the Notification to initiate proceedings for recovery of duty on failure in giving lesser percentage of free treatment to indigent persons. He pointed out that there was a clear distinction between the licensing authorities and Customs authorities and the matter had been discussed by the Calcutta High Court in the case of Ellenberric Steels Ltd. v. Regional Dev. Commr. for Iron & Steel as and in the case of Overseas Cycle Co. v.Arvind Mills Ltd. (Ankur Textiles) v. CCE as , wherein in para 9 it had been laid down that the Notification has to be strictly interpreted and words cannot be incorporated or added for the purpose of reading the Notification.

He also relied on the judgment rendered in the case of Gujarat Co-op.

Oil Seed Grower Fedn. Ltd. v. CCE as besides relying on the judgment of the Apex Court in the case of Hemraj Govardhandas v. UOI as reported in 1978(2) ELT 350. He further relied on the judgment of the Hon'ble Apex Court in the case of Baidyanath Ayurved Bhawan (Pvt.) Ltd. v. The Excise Commissioner UP and Ors. as .

14. Sri V. Vaithiyalingam, Senior Standing Counsel argued for the Revenue pointed out that in all the cases there is a clear violation of the terms of the Notification, inasmuch as that clause pertaining to extending free service to 40% of indigent persons has not been extended by the appellants. This is a grave violation of the Notification and the Customs authorities have clear jurisdiction to invoke the provision of the Customs Act for enforcing the demands. He pointed out to Section 111(o) of the Customs Act, which clearly lays down that "any goods exempted subject to any conditions 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 conditions is not observed unless the non-observance of the condition was sanctioned by the proper officer". He submitted that so longer as the exempted goods had violated the terms of the Notification, the duty was recoverable, Customs authorities are the authorities who should proceed to recover the amounts in terms of Section 28 of the Act. He submitted that the Hon'ble Apex Court in the case of Mediwell Hospital Health Care (P) Ltd. (supra) have clearly laid down that Ministry of Health can ensure the compliance of the Notification. Therefore, it was not necessary for the Ministry of Health to have proceeded to initiate the proceedings themselves. So long as there was evidence on record with regard to violation, then the Customs authorities can issue show-cause notice for recovery of the amounts. He submitted that it was not necessary to lay down in the Notification as to which authority should enforce the Notification. He pointed out that all the judgments relied upon by the appellants are clearly distinguishable.

15. Learned DR Sri S. Sudarsan also supported the arguments of the Central Govt. Senior Standing Counsel. He pointed out that Section 111(o) is an independent of Section 28 and proceedings for recovery of duty can be initiated under this proviso also. He pointed out that for the purpose of redemption fine market value was required to have been taken into consideration. On a specific query as to whether market value on the date of import has to be taken or from the date of violation, the learned DR pointed out that there was no specific proviso regarding this aspect in the matter. On a further query as to whether before imposing fine and penalty, the valuation of the machines had been done or not, he pointed out that in each of the case no such finding has been recorded except the noting of value at the time of import has been recorded. He pointed out that for violation of Section 125(2), there has to be an imposition of mandatory fine on an option of redemption granted by the officer. He pointed out that the value has to be in terms of the date of importation only for the purpose of computing the fine in terms of Section 125 of the Act. He pointed out that provision of Section 28 is applicable only when short levy is noticed and for the purpose of violation of Notification only Section 111(o) is applicable and in such circumstances, the duty as well as penalty and fine can be imposed. He pointed out that each of the terms laid down under the Notification is a substantive one. He pointed out that fine and penalty can be imposed, even when the goods were not available and even when no duty has been confirmed.

16. In counter, Sri Thomas Vellapally learned advocate relied on the judgment rendered in the case of Gem Electro Mechanical Put. Ltd. v. CC as , wherein it had been laid down that only the authority who can issue the certificate can recall the same for the purpose of initiation of the proceedings.

17. We have carefully considered these submissions made by both sides and have perused the respective orders passed by the respective Commissioner's in these cases. We have drawn the questions that are required to be considered in these appeals.

(1) As to whether the contemplated action for recovery of duty for violation of the Notification is required to be initiated by the Ministry of Health & Family Welfare in terms of the Notification or by the Commissioner of Customs? (2) As to whether the action initiated in all the appeals by the Commissioner of Customs is beyond his jurisdiction of the Notification? (a) The first two questions which have been drawn for determination can be taken up together for answering the same. The Notification No. 64/88-Cus dated 1.3.88 is a special exemption notification which has been issued for granting exemption to all equipments, apparatus and appliances including spare parts and accessories thereof but excluding consumable items and they are referred to in the Notification as "Hospital Equipments" on two conditions which are indicated in para 2 of the Notification. The Central Government under Section 25 of the Customs Act have carved out the jurisdiction to monitor the Notification in each of the cases by the Government of India in the Ministry of Health & Family Welfare or by the Directorate General of Health Services to the Govt. of India. As can be seen from the first para of the Notification, there is a clear direction in the Notification to these authorities to approve either generally or in each case with regard to the hospital equipment being essential for use in the respective hospital. The certificate has to be issued by these authorities for the purpose of grant of exemption of the whole of duty of customs leviable thereon under the First Schedule to the Customs Traffic Act, 1975 and (2), the whole of the additional duty leviable thereon under Section 3 of the said Customs Traffic Act.

(b) The Notification in para 2 lays down that the authorities named in para 1 while approving the import of hospital equipment are required to take into consideration the factors laid down therein i.e. (i) that they are required to approve that the hospital equipment which is under import as claimed is not manufactured in India; and (ii) that the bill of entry in respect of which the exemption is claimed is necessary for running or maintenance of the hospital.

(c) The 3rd paragraph of the notification lays down the criteria of the Notification for granting approval in respect of spare parts.

(d) On a plain reading of the first three paragraphs of the Notification it is explicitly and crystal clear that the delegation of powers has been made to the Ministry of Health & Family Welfare, Govt. of India or to the DGHS, Govt. of India in respect of any hospital specified in the table to the Notification.

(e) Now it is to be seen as to whether the certification which has been done by the authorities named in the Notification is absolute and whether the Customs authorities can revoke the said certificates suo motu without any reference to the said Ministry and initiate proceedings. As has been noted, it is the first three paragraphs of the Notification, which lay down the criteria for exempting the import of hospital equiptments and issue of certificate by the noted Ministry, while granting the certificates, certain norms had been laid down to the noted Ministry for the purpose of approval and grant of certificate. Such a delegated power has been performed by the respective Ministry and after due and thorough examination and having satisfied itself have issued the certificate to the appellants hereinabove and on such issue of certificate the import has been regularised and in all the appeals except to the one mentioned hereinbelow wherein the Bills of Entry which had kept provisional were also finalised and no fault was taken up by the Customs authorities with regard to the authenticity or otherwise of the certificate issued by the noted Ministry. Even in these proceedings, there is no challenge to the correctness or otherwise of the issue of the certificates granted to the respective appellants.

(f) A perusal of the show-cause notice clearly indicates that the cause for initiating the proceedings is the delivery of judgment by the Hon'ble Apex Court in the case of Mediwell Hospital & Health Care Put. Ltd. (supra). We are required to examine this particular judgment and see as to whether any direction was given to the Customs authorities to start initiation of proceedings in respect of all the importers in the country irrespective of time as laid down under Section 28 of the Act and whether any such direction was given after the scrutiny of the terms of the Notification. As can be seen from a perusal of the show-cause notices that the Commissioner of Customs have initiated proceedings on the plea that the Apex Court has given a direction to the Customs authorities to re-open the matter, investigate and examine the conditions laid down in the table to the Notification were satisfied and if they had not been satisfied then they would issue show-cause notice, even after lapse of more than a decade and confirm the demands or in the alternative confiscate the goods and impose penalty.

(g) On a plain reading of the notification, it is clear that the conditions laid down in the Table to Notification were required to be examined by the noted Ministry in the Notification before the issue of certificate and after the certificate has been issued the terms laid down in the Table do not come to ply either as they are not post-condition Notification for the purpose of monitoring its term by the Ministry noted in the Notification. We shall examine the same and come to a precise conclusion as to whether the terms in the table to the Notification were post-importation for the purpose of issue of certificate or whether they were to be monitored by the said Ministry, even after the import for indefinite period and to initiate proceedings either themselves or through the Customs authorities? (i) As we have seen the terms of the Notification, the exemption is to the hospital equipment on being certified by the Ministry noted in the Notification. Para 1 clearly indicates that "the import of which is approved either generally or in each by the Government of India in the Ministry of Health & Family Welfare or by the Directorate General of Health Services to the Govt. of India, as essential for use in any hospital specified in the table below" Therefore, the conditions given in the table were to be examined before approval is granted in the form of issue of certificate. On examination of the terms of the table, it is seen that the noted Ministry while certifying shall examine as to whether the said hospitals are to be run or substantially aided by such charitable organisation as may be moved from time to time by the said Ministry of Health & Family Welfare.

(ii) The 2rd para to the Table indicates that all such hospitals which may be certified by the said Ministry, 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-- (1) free, on an average to at least 40 percent of all their outdoor patients; (2) free to all indoor patients belonging to families with an income of less than Rupees five hundred per month, and at least 10% of all the hospital beds reserved for such patients; and (3) at reasonable charges, either on the basis of the income of the patients concerned or otherwise to patients other than those specified in Clauses (1) and (2).

Therefore, on a reading of the above two paragraphs of the Table, it is clear that these clauses are to by examined before the certification is done. They cannot be said to be post-importation conditions as there is no such indication of monitoring these conditions by the ministry noted above or by any other authorities and they are only required to verify and certify that such a provision has been made. There is no indication as to the period for which the benefit of at least 40% of free service is to be given to outdoor patients. The term "at least" does not indicate that it is "shall" and it only refers to a minimum guideline and not a mandatory and substantive condition of "shall". There is no indication as to from what period of time the percentage has to be chosen i.e. from which period 40% of the patients are to be worked out and for what length of time the condition is required to be fulfilled. Is it endlessly till the equipments become obsolete or for a specific period of time. It is also not indicated to who shall monitor this provision of the Notification and whether such a monitoring is to be done by the Health Ministry or any other authority. In the absence of any such clear indications in the Notification and on a clear reading of the first para of the table it only leads to a conclusion that it is only Ministry of Health & Family Welfare or DGHS who could verify these conditions. The Notification directs these authorities to issue certificate i.e.

while examining the features of the hospital, it has to be seen as to whether the hospital is to be run or substantially aided by Charitable organisation. So long as the Ministry is satisfied that it is running or substantially aided by Charitable organisation and that there is a proviso for providing help to persons without any distinction of caste, creed, race, religion or language and that there is a minimum free service of at least 40% of outdoor patients and that 10% for hospital beds reserved for such patients, whose income is less than Rs. 500 per month, then they can be granted the certificate. There is no indication that unless para 1 and 2 of the Table to the notification have satisfied the benefit is to be granted; that the hospital has to be a composite of medical, surgical or diagnostic treatment and also it should have both the facilities for treatment of indoor and outdoor patients. A diagnostic treatment hospital may not have indoor treatment facility and it can only provide 40% of treatment to outdoor patients on free service.

(h) The terms of the Table in the Notification cannot be said to be in clear terms for its application and enforcement for post-importation period. They can be at best said to be salient features to be considered before certification. There is no clear cut direction to the hospital authorities for maintaining of any registers and getting it verified or for reporting to the Ministry of Health and Family Welfare about the service granted free of cost to the extent for any period of time.

I) Therefore, it can be reasonably presumed that these terms which were laid down as the guidelines to the Ministry of Health for certification purpose. There is no indication of free of service to indoor or outdoor patients to be made in a particular period and ratio of 40% drawn from a total quantum of service rendered to the patients. There should have been clear terms in the Notification to draw the percentage from the total number of patients treated for a particular period of time either for indoor or outdoor patients.

Therefore, in a Notification where terms are very vague, ambiguous and not in clear terms and on such reading it gives an indication that the terms were to be scrutinized only by Ministry of Health & Family Welfare before grant of certificate, then it has to be read strictly in that way only i.e. the terms laid down in para 2 of the Table were only guidelines before issue of certificate and there was no condition laying down to its implementation, scrutiny and for cancellation of certificates for non-performing of those conditions.

Therefore, the terms laid down in para 2 of the Table cannot be considered as a post-importation condition to be scrutinized by the Customs authorities and to carry out investigation thereon and find the same to be inadequate to revoke the certificates by issue of show-cause notice that too after much lapse of time and to hold that larger period can be invoked to confirm the demands. Further it cannot be a ground to hold violation of Notification and for ordering confiscation and in the absence of machinery being made available them to impose high fines and penalties.

(j) Further we notice that reading of Para 4 also leads to the same conclusion. Para 4 lays down the condition under which a certificate can be issued even before an hospital has been established. The proviso to Para 4 lays down the condition where importer can seek clearance giving an undertaking to produce certificate from the said Ministry. Proviso (b, c and d) deal with the said condition of seeking clearance on executing an undertaking in writing to the Assistant Commissioner at the time of clearance of such hospital equipments undertaking to produce a certificate from the Ministry of Health or DGHS, Government of India. The Assistant Commissioner is empowered on being satisfied and on sufficient cause being shown, to allow clearance of equipments without charging duty on execution of undertaking produced. Proviso (d) lays down the execution of bond in such a form and for such sum as may be specified by the Assistant Commissioner binding himself to pay the amount of equal to duty leviable on the said hospital equipment-- (i) if such hospital starts functioning within the period specified therefore, as is not proved to the satisfaction of the Assistant Commissioner to have been installed in such hospital, or (ii) if such hospital does not start functioning within the period specified there for.

Therefore, on a reading of the proviso to para 4, it is very clear that the bond and undertaking has to be executed only on the above two conditions. The Commissioner in most of the present cases has already cancelled the bonds and undertaking on the equipments having been installed and certificates having been produced to the satisfaction of the Assistant Commissioner. Therefore, recovery proceedings could have been initiated only on violation of proviso to para 4 of the Table to the Notification. In the present case, only in two of the appeals such an action has been taken but even in those cases there has been cancellation of certificates issued by DGHS and in one case the cancellation has taken place subsequent to the issue of show-cause notice in the case of Sumana Cardiac Care Unit in Appeal No. C-156/98, wherein provisional assessment is still pending and in that case, the matter has been challenged before the High Court. Therefore, at this stage finalisation cannot be said to be proper and Appeal No. C/156/98 is required to be remanded for de novo consideration.

(k) It was argued by the Revenue that the Commissioner has powers to initiate proceedings on finding any of the terms of the notification not having been complied and the investigation initiated by them without any reference of the Ministry of Health or DGHS is proper.

(l) We have considered this plea and we are not in a position to accept this, proposition. The Revenue contended that the Hon'ble Apex Court itself had given such a direction in the case of Mediwell Hospital & Health Care (supra). We notice from the said judgment that the facts were that, the appellants therein had sought for grant of necessary certificate form the DGHS, Ministry of Health for importing certain Hospital equipments without payment of duty in terms of the said Notification. The same had been refused, therefore, they have filed a writ petition before the High Court of Punjab & Haryana, which was dismissed and hence they have filed an appeal before the Supreme Court. Before the Apex Court, the Revenue took up the contention that the appellant is running diagnostic centre and not a hospital and as such exemption Notification will not cover the case of the appellants. They also argued about the discriminatory treatment to another appellant. Therefore, the Hon'ble Apex Court was considering these two pleas and held that the appellants cannot be denied the certificate for importing the equipment. In the conclusion vide paras 12 & 13, the Hon'ble Apex Court while accepting the plea of the appellant that they are entitled to get the certificate from the respondent to enable them to import the equipment without payment of duty, made an observation as under:-- 12. While, therefore, we accept the contentions of Mr. Jaitley learned senior counsel appearing for the appellant that the appellant was entitled to get the certificate from Respondent No. 2 which would enable the appellant to import the equipment without payment of Customs duty but at the same time we would like to observe that the very notification granting exemption must be construed to cast continuing obligation on the part of all those who have obtained the certificate from the appropriate authority and on the basis of that to have imported equipments without payment of customs duty to give free treatment at least to 40% of the outdoor patients as well as would give free treatment to all the indoor patients belonging to the families with an income of less than Rs. 500 pm. The competent authority, therefore, should continue to be vigilant and check whether the undertakings given by the applicants are being duly complied with after getting the benefit of the exemption notification and importing the equipment without payment of customs duty and if on such enquiry the authorities are satisfied that the continuing obligation are not being carried out then it would be fully open to the authority to ask the person who have availed of the benefit of exemption to pay the duty payable in respect of the equipments which have been imported without payment of customs duty. Needless to mention the Government has granted exemption from payment of customs duty with the sole object that 40% of all outdoor patients and entire indoor patients of the low income group whose income is less than Rs. 500 p.m. would be able to receive free treatment in the Institute. That objective must be achieved at any cost and the very authority who have granted such certificate of exemption would ensure that the obligation imposed on the persons availing of the exemption notification are being duly carried out and on being satisfied that the said obligations have not been discharged they can enforce realisation of the Customs duty from them.

13. It is needless to reiterate that all the persons including the appellant who had the benefit of importing the hospital equipment with exemption of customs duty under the Notification should notify in the local newspaper every month the total number of patients they have treated and the 40% of them are the indigent persons below stipulated income of Rs. 500 pm with full particulars and address thereof which would ensure that the application 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 persons. This condition becomes a part of the exemption order application and strictly be enforced by all concerned including the police personnels when complaints of noncompliance were made by the indigent persons, on denial of such treatment in the concerned hospital or diagnostic centre, as the case may be.

On the above reading of the paragraphs, the Hon'ble Apex Court was only expressing its concern on the enforcement of the Notification and in the penultimate portion of para 12, as can be seen, the Hon'ble Apex Court has clearly stated therein thatthe objective must be achieved at any cost, and the very authority who have granted such certificate of exemption would ensure that the obligation imposed on the persons availing of exemption would ensure that the obligation imposed on the persons availing of the exemption notification are being duly carried out and on being satisfied that the said obligations have not been discharged they can enforce realisation of the customs duty from them. (Emphasis added by us.).

Even if this is considered as a ratio and to be enforceable, even then the Hon'ble Apex Court has clearly laid down that it is the very authority who granted such certificate of exemption would ensure that the obligation imposed on the persons availing of exemption notification are being duly carried out". In the present case, the Ministry of Health has not conducted any investigations neither there was a direction for the appellants to maintain records and produce before the same to satisfy the post-importation conditions and they have neither initiated any proceedings to ensure that the obligations imposed on the importers availing of exemption Notification were duly carried out. Therefore, it cannot be said the Customs authorities had the power under the judgment of Hon'ble Apex court cited above to initiate proceedings on their own to start recovery proceedings. Such a reading of the Apex Court judgment done by the Customs authorities is not in keeping with the terms of the Notification as analysed earlier or with the ratio of the judgment laid down by the Hon'ble Apex Court in the Mediwell Hospital & Health Care case. Our view is fortified by the Karnataka High Court in the case of Yellamma Dasappa as reported in 2000 (120) ELT 67 (Kar). In para 9 of the said judgment the High Court has noted as follows: A valid certificate has been issued and the said certificate, even as on date, has not been withdrawn or cancelled for any alleged violation of the condition by the appellant. Unless the 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 DGHS 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 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.

The High Court further analysed the paragraph extracted from the judgment of Hon'ble Apex Court and held in para 10 as follows:-- 10. In this para the Supreme Court has ruled the competent authority should continue to be vigilant and check whether the undertaking given are duly complied with after getting the benefit of the exemption notification and importing without payment of customs duty and if on such enquiry the authorities are satisfied that the continuing obligations are not being carried out, then it 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. Moreover, in identical circumstances, the very respondent has taken a stand that without withdrawing the certificate already issued no steps can be taken as seen in the judgment in W.P No. 20392/98. That being the case, we are of the view that the department having taken a definite stand in that case, cannot take different stand under any changed circumstances".

(m) Therefore, the above ruling of the Karnataka High Court would also clinch the issue in favour of the appellants and the ratio of which is required to be followed in the present case. In the result, the above questions are answered in favour of the appellants that the Customs authorities have no jurisdiction to initiate recovery proceedings by conducting enquiry which has also not resulted in any productive results of showing violation of the terms of the Notification in each of the respective cases for the reasons already analysed. Hence, the proceedings are bad in law in light of the findings rendered on the two judgments cited above.

(3) As to whether the appellants who are the importing hospitals (charitable) have committed violation of Notification No. 64/88-Cus.

dated 1.3.88? As has already been analysed, the Notification does not stipulate the appellants to maintain any records and to extend the benefit in a particular manner of free treatment from a total quantum of patients treated by them indoor or outdoor. The Notification itself used the word "at least" and which is not used the word "shall", therefore, even if there is any few lapse, it cannot be held that there was a substantive violation of the terms of the Notification. The appellants have explained that the records have been checked and they had in fact given the free treatment to indigent persons more than the required quantity. In the case of Lady Amphthil Nurses Instn. & the South Indian Nursing Assocn., which is a 100% charitable organisation and registered under Section 25 of the Companies Act. They had indicated that Customs authorities were asking for old records which had been destroyed following the transfer of hospital and therefore, the data was not available. Therefore, it is clear that the customs authorities cannot draw the conclusion that there was violation in the terms of the Notification, calling for recovery proceedings and this is the case in all the appeals. Therefore, we are of the considered opinion that in the absence of any clear cut terms in the Notification itself for maintaining any registers and granting the benefit of 40% and 10% of a particular quantum of patients, it cannot be held that there is a violation of the terms of the Notification. The Notification should have laid down the total from which the 40% and 10% was to be taken. In the absence of such criteria laid down and on our finding that it is not a post-importation condition, the benefit of doubt has to be granted to the appellants and we have to hold that there is no violation of the terms of the Notification except in the case of M/s.

Sumana Cardiac Care Unit in Appeal No. C/156/98, whose case was still under provisional assessment and whose matter is required to be remanded for de novo consideration.

(4) As to whether the demands raised by the Commissioner of Customs are barred by time in terms of the proviso to Section 28 of the Customs Act, 1962? We notice that in large in number of cases, the Commissioners themselves have taken a view that the demands are beyond the period of time as laid down under Section 28 of the Act and have dropped the proceedings but have imposed fine and penalty. In order to confirm the demands under proviso to Section 28, the concerned authority ought to have withdrawn the certificate on the allegation of fraud, collusion and suppression of facts in obtaining the certificates. They ought to have informed the customs department about the cancellation of certificate and the ground for initiation of recovery proceedings and such a procedure has not been adopted. There is no cancellation of the certificates issued and, therefore, so long as there is no allegation of fraud, collusion in obtaining the necessary certificates for importation and clearance of the equipments on duty exemption, it cannot be held that the department had grounds for invoking the larger period for recovery of the sums. The Tribunal has also considered the aspect pertaining to demands being barred by time under the very Notification in the case of Dewan Chand Satyapal Agarwal Imaging Reserch Ccentre v. CC as reported in 2000 (39) RLT 1084 (CEGAT), wherein it has been held that the demands are not enforceable under this Notification as held in para 9 to 12, which are re-produced hereinbelow: 9. We have considered the submission of both sides. As regards the scope of exemption Notification No. 64/88. we find that the Apex Court had in paras 12-13 of the judgment in Mediwell Hospital case (supra) observed that the objective contained in the said Notification and the conditions must be achieved to any cost and the authority who had given such certificate of exemption would ensure that the obligation on the persons availing of the exemption Notification carries out the said obligation and where such obligation have not been discharged, they can enforce realisation of the customs duties from them. Though the tenor of the observations made by the Apex Court is undoubtedly unequivocal, it is also a fact that the question of raising duty demand beyond the period of five years under Section 28 had not been raised or considered by the Apex Court in that case. In the instant case, since the show-cause notice has been invoked beyond the permissible period under Section 28, the Apex Court judgment in Mediwell case cannot be said to apply to the facts of the present case. We have therefore, to hold that since the show cause notice has been issued beyond the limitation period under Section 28, the time bar would apply. As regards the contention of the assessee that the show-cause notice in the instant case without jurisdiction 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 and Research case (supra) supports this contention. In the said case a notice issued by the Assistant Commissioner invoking the extended period under proviso to Section 28(1) was held to be without jurisdiction since the Board had not authorised the Assistant Commissioner to issue a show cause notice for the extended period.

10. As regards the confiscation of the equipment and the imposition of redemption fine, the appellants have not disputed the fact that the conditions relating to free treatment of persons below the prescribed monthly income had not been complied with. Since Section 111(o) makes contravention of the provisions of the Act liable to confiscation which will include also the conditions under an exemption. Notification issued under Section 25 of the Act, we do not find that there is scope for contending that liability under Section 111(o) and for penalty under Section 112 are not attracted in the instant case.

11. As regards penalty under Section 114A and the interest demanded under Section 28AB, we find that the said provisions were enacted subsequent to the imports and therefore, the said provisions will not be applicable in the facts & circumstances of the case. The penalty under Section 114A and interest demanded under Section 28AB cannot therefore sustain.

12. Since we have held that the show cause notice is hit by limitation as also beyond the jurisdiction of the authority who issued the notice, the impugned order also cannot be sustained and has to be set aside.

In that view of the matter, the demands are not enforceable as being barred by time in some of the cases as seen that recovery proceedings have been initiated much beyond five years as noted. Therefore, we hold that the demands are barred by time.

(5) As to whether confiscation and grant of redemption on imposition of fine and penalty is justified in the facts and circumstances of each case? In the cases, where confiscation and penalty imposed, we notice that the equipments were not available and it is now well laid down that when the imported goods are not available for confiscation, such confiscation is bad in law and the order requires to be set aside. This is the view expressed by the Larger Bench of the Tribunal in the case of Mazagon Dock Ltd. v. C.C. as . It has been clearly laid down in the said judgment after analysing the Section 125 that section pre-supposes the existence of the goods. It is only when the goods [are] available, then they can be confiscated and an option may be given to the owner to pay a fine instead of confiscation.

Para 12 of the said judgment is reproduced herein below: 12. Section 125 can be invoked only when the goods, confiscation of which is authorised by the Customs Act, are available for confiscation. Section 125 reads as follows: 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, without prejudice to the provisions of the proviso to Sub-section (2) of Section 115, such fine shall not exceed the market price of the goods confiscated less in the case of imported goods the duty chargeable thereon.

(2) Where any fine in lieu of confiscation of goods is imposed under Sub-section (1), the owner of such goods or the person preferred to in Sub-section (1), shall, in addition, be liable to any duty and charges payable in respect of such goods.

The section pre-supposes the existence of the goods. It is only the goods are available that they can be confiscated, and an option may be given to the owner to pay a fine instead of confiscation. Section 125 cannot come into operation in the absence of the improperly imported goods. The proper course of action in such cases, would have been to invoke the bond executed by the appellants (guaranteeing re-export of the bags as per the condition contained in the Notification No. 97/79-Cus. dated 2.5.79) and in the event of non-payment of the bond amount file a civil suit for recovery thereof, against the importers.

The above view was again reiterated in the case of CC v. Trimurti Enterprises as . Therefore, the order of confiscation of equipments which were not in existence and imposition of fine in these cases which are bad in law and the same is required to be set aside. It is also well laid down that fine cannot be imposed in each cases, unless it is shown that there is an intention to evade duty in the case of Jain Exports Put. Ltd. as , wherein the Apex Court held that while determining the question of quantum of redemption fine, it is essential to consider the facts and circumstances of the case relevant to the bona fide conduct of the importer in importing the goods and therefore, held that refusal of the Tribunal to take into account the extenuating circumstances leading to the import of disputed goods for the purposes of determining the quantum of redemption fine is incorrect. In this regard, the Apex Court relied upon the earlier judgment rendered in the case of Navin Chandra & Co. v. UOI as and that of B. Vijay As regards the imposition of penalty, the Hon'ble Apex Court in the case of Akbar Badruddin Jiwani v. CC as have clearly held that quantum of penalty and fine in lieu of confiscation are extremely harsh, excessive and unreasonable, bearing in mind the bona fides of the appellant as specifically found by the Appellate Tribunal. This observation was in the context of the finding that penalty cannot be imposed without a finding on bona fide belief has recorded. The Apex Court relied on the earlier judgments rendered in the said judgment and it is proper to extract the findings given in paragraphs 58 and 59 of the said judgment herein below: 58. In the present case, the Tribunal has itself specifically stated that the appellant has acted on the basis of bona fide belief that the goods were importable under OGL and that therefore, the appellant deserves lenient treatment. It is therefore, to be considered whether in the light of this specific finding of the CEGAT, the penalty and fine in lieu of confiscation required to be set aside and quashed. Moreover, the quantum of penalty and fine in lieu of confiscation are extremely harsh, excessive and unreasonable bearing in mind the bona fides of the appellant, as specifically found (sic) by the Appellate Tribunal.

59. We refer in this connection the decision in Merck Spares v. CC Sharma Engine Valves Ltd v. CC and Madhusudan Gordhandas & Co. v. CC wherein it has been held that in imposing penalty the requisite mens rea has to be established. It has also been observed in Hindustan Steel Ltd. v. State of Orissa The discretion to impose a penalty must be exercised judicially. A penalty will ordinarily be imposed in cases where the party acts deliberately in defiance of law, or is guilty of contumacious or dishonest conduct or acts in conscious disregard of its obligation, but not in cases where there is a technical or venial breach of the provisions of the Act or where the breach flows a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.

In the present appeals, it is noted that the certificate issued by the Ministry of Health & Family welfare or DGHS has not been cancelled. It has not been brought on record that the said certificate has been issued by playing fraud or by suppressing material on record, unless these were shown, the imposition of penalty was not warranted. A similar view was expressed by the Tribunal in the case of Bakeman's Home Products Put. Ltd. v. CC as vide 13. Only four of the decisions cited before us are relevant in the context of the dispute before us. In Northern India Woollen Mills v. Collr. of Customs , it was held that duty demand cannot be segregated from confiscation and penalty. In Commr. of Customs v. Poona Roller , while purporting to recognize the theoretical possibility of notice under Section 124 surviving even after failure of demand of duty, it was observed that both aspects are so interlinked that segregating the issues may be neither feasible nor desirable. In Manohar Bros (Capacitors), 1996 (15) RLT 581, it was held that when demand of differential duty fails, the proceeding cannot survive. The decision of the Supreme Court in CCE v. HMM Ltd. that the question of penalty would arise only if the department is able is to sustain the demand of duty has to be taken into consideration. In the cases at hand, demand was raised under the proviso to Section 28(1) of the Act on the allegation of mis-declaration of value and the demand is found to be without jurisdiction. Proposals for confiscation and imposition of penalty are also based on the framework of alleged mis-declaration of value. The demand of duty on allegation of mis-declaration of value cannot be segregated from action of confiscation and penalty based also on mis-declaration of value.

Consequently, since the demand of duty fails, action for confiscation and penalty cannot survive. We hold so on the weight of authority referred to above.

In the case of Gujarat Imaging & Research Institute v. CCE as , the Bench comprisingy of Sri G.P. Agarwal, then Member (J) and my learned Brother Sri Lajja Ram, decided this very issue on this very Notification No. 64/88-Cus and held that exemption is available to diagnostic treatment centre with no indoor patient treatment facilities. The Bench further held that non-fulfilment of the post-importation condition for free treatment of 40% of the outdoor patients is not material when there was a nominal shortfall and no span of period is provided in the Notification. It has been further held that deficiency can be made good in subsequent periods and hence duty is not demandable and denial of exemption is not sustainable, besides imposition of penalty and fine has been held to be not justified. Paras 9,10 and 11 of the said judgment is reproduced herein below: 9. As regards post-importation condition that 40% of the outdoor patients should have been treated free of cost the appellant had contended that the requirement of treating 40% of the outdoor patients free of charge was on an average and not on any particular date. They had stated that out of 4544 patients, free diagnostic treatment was provided to 1797 patients. There was a nominal shortfall. As no particular span of period was provided in the notification, they stated that the deficiency could be made goods in the subsequent period i.e. subsequent to the inquiry/checking/seizure. We do not consider that on this account, the demand for the customs duty or imposition of penalty/fine could be justified.

10. As established by the facts in this case the equipment had been installed in the diagnostic centre and the said diagnostic centre had started functioning. The patients were being regularly treated.

In any case, the Bond and bank guarantee also appear to be available for furnishing the certificates from the Ministry of Health or from DGHS in case of any deficiency in fulfilment of the post-importation conditions. In the circumstances, the case of the appellant appears to be covered by the provisions of the Notification No. 64/88 Cus.

dt. 1.3.88.

11. The adjudicating authority had imposed a penalty of Rs. 2 lakhs on each of the three Indian partners. The SCN was issued only to one of the partners. The appellants had contended that as the proceedings were not drawn against all the partners, the penalty on each of the Indian resident partners without complying with the principles of natural justice was not sustainable in law. This contention has also a force.

We are required to follow the judgments of the co-ordinate Bench in terms of judicial discipline as held by my Learned Brother on behalf of the Larger Bench in the case of Dinkar Khindria v. CC as and in that case reference to Larger Bench on a debatable point was not approved and it has been held in categorical terms that judicial propriety require that a co-ordinate Bench should not sit over judgment on the order recorded by another Bench.

In view of the above citations, more particularly the judgment rendered by my Learned Brother in the case of Gujarat Imaging & Reserach Institute v. CCE, (supra), therefore, the imposition of fine and penalty in the present appeals are required to be set aside and we order accordingly.

(i) Appeal No. C/156/98 of M/S. Sumana Cardiac Care unit is remanded as the provisional assessment is still admittedly pending and the matter is being agitated before the High Court. On re-adjudication, our findings on aspects are required to be taken into consideration for further proceedings in the matter by the authorities concerned.

The appellants shall be entitled to raise further grounds in their appeal; (ii) Appeals No. C/230-231/99-Little Flower Hospital & Sri Abraham J. Kavedan, are allowed, as the Bill of Entry has been filed on 3.6.91 and the same had been finalised, hence for the reasons stated, the appeals are required to be allowed by setting aside the imposition of fine and penalty against the Hospital and its Director. Ordered accordingly; (iii) In Appeal No. C/1440/98- Lady Amphthil Nurses Instn. & The South Indian Nursing Assocn. the import has been done in the year 1991 and hence for the reasons stated, the appeal is allowed by setting aside the imposition of duty in respect of Bill of Entry Nos. 23359 & 23360 dated 6.7.91, as the provisional assessment had been finalised on 5.12.94. The fine and penalty imposed are also set aside for the reasons recorded in the order; (iv) In Appeal No. C/1305/98- M/s CDR Diagnostic Clinic, Bills of Entry Nos. 37061 dt. 8.10.90 and 14032 dt. 22.4.91 were assessed finally and hence the fine and penalty imposed in this appeal also are set aside for the reasons recorded in the order; (v) In Appeals No. C/395 & 396/98- PVS Memorial Hospital Ltd. & Dr.

P.K. Rajiv. Medical Director. Bill of Entry No. 3488 dt. 15.4.93 had been finalised on production of the certificate issued by the DGHS and bond and bank guarantee had been cancelled and released and therefore, for the reasons staled above, the duty amount Rs. 3,96,660 imposed under Section 28(1) of the Customs Act is set aside and the penalty of Rs. 4,00,000 on the hospital and Rs. 1,00,000 on Sri P.K Rajiv, Medical Director is also set aside.

(vi) In Appeal No. C/294/2000 of Nagarjuna Hospital P. Ltd., Bells of Entry No. 44553 and 44555 dated 12.11.92 had been finalised, therefore, for the reasons recorded above, the order for confiscation of equipments, which were not available, is set aside including the penalty of Rs. 10,00,000 imposed in the matter.

(vii) In Appeals No. C/531-538/98 and C/1241-1249/98- Medical Trust Hospital, also Bills of Entry No. 2326 dt. 6.9.93 and 2437 dt.

15.9.93 had been finalised by cancellation of bonds. Therefore, for the reasons stated, penalty of Rs. 25,000 imposed vide impugned order No. SIB/1/98 dt. 26.3.98, on each of the Directors namely Dr.

P.A. Varghese, Dr. Louis Pulikkal and Sri. P.V. Antony is set aside by allowing the appeals. The order impugned No. l/98-Cus-(Pt.I). dt.

31.3.98 also pertains to nine Bills of Entry viz 373 dt. 24.11.88; 212 dt. 14.2.90; 186 dt. 14.2.91; 58 dt. 7.1.92; 158 dt. 20.1.92; 258 dt. 27.3.92; 142 dt. 22.4.92; 164 dt. 24.2.92 and 57 dt. 5.6.92.

All the above bills of entry have been finalised and bonds had been cancelled, therefore, the said proceedings are bad in law and hence penalty of Rs. 18,00,000 imposed on Medical Trust Hospital and Rs. 1,00,000 each on the three Directors namely Dr. P.A. Varghese, Dr.

Louis Pulikkal and Sri P.V. Antony are set aside by allowing the appeals for the reasons already recorded.

23. I have carefully gone through the order proposed by learned Member (J), and for the reasons discussed below, it is not possible to agree with the same.

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. 64/88-Cus) is as under: Whether action for recovery of duty for violation of the conditions as laid down in Notification No. 64/88-Cus in [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, under the powers conferred by the Customs Act, 1962 (hereinafter referred to as the 'Act'), was beyond his jurisdiction in terms of the said notification; and whether the demands raised by the Commissioner of Customs were barred by time in terms of the proviso to Section 28 of the Act.

25. 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 Section 2(34) of the Act, "proper officer" in relation to any functions to be performed under the Act means the officer of customs who is assigned those functions by the Board (Central Board of Excise & Customs), or the Commissioner of Customs. The classes of officers of customs are mentioned in Section 3 of the Act. 'Board' is defined in Section 2(6) of the Act as the Central Board of Excise & Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963).

Under Section 122 of the Act, in every case under Chapter XIV in which anything is liable to confiscation or any person is liable to a penalty, such confiscation or penalty are to be adjudged by different grade of Customs Officers, depending upon their jurisdiction and the value of the goods liable to confiscation. Under Section 124 of the Act, show cause notice was required to be issued before confiscating any goods and before imposing any penalty, and a reasonable opportunity of making a representation and of being heard, were required to be given. There are a number of other related provisions for determination of duty not paid, imposition of penalties and for ordering confiscation of goods etc. The whole scheme is towards ensuring fair decision in the matter of levy and collection of customs duties and towards enforcing various restrictions, prohibitions etc. in the matter of imports and exports to and from the country.

Under Notification No. 64/88-Cus. the role of the Ministry Health or the Directorate General of Health Services (DGHS) was to accord approval of the import, prior to the import of the hospital equipment and their assessment and clearance by the Customs authorities, with exemption or without exemption. Such pre-import approval could be for specific imports either generally or in each case of the equipment, apparatus and appliances as essential for use in any particular hospital specified in the Table given in that notification (hereinafter referred to as the 'Hospital Equipment'). In para 2, it was provided that in approving the import of any hospital equipment, regard was to be had to the factors specified in that para. According to the Table given in that notification, the certification of the specified hospitals before the import of the hospital equipment was also to be done by the Ministry of Health, for making them eligible for 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 bearing on the assessments made on the basis of such pre-import- approval. In such a situation, continuation or cancellation of the certificate issued by the Ministry of Health/DGHS, could not be a defence to plead that the non-fulfilment of the post-importation conditions could not be a subject-matter of proceedings against the importers.

26. Whether the post-importation conditions had been fulfilled or not has to be decided after following the principles of natural justice.

The decisions taken by the different grade of customs officers are appealable to the authorities as specified in the Act. No agency howsoever high can interfere in the administration of justice; and the matters are required to be adjudged by the competent authorities having jurisdiction over the subject- matter and the persons concerned with the compliance of the legal provisions, including post-importation conditions, (subject to which the benefit of exemption/concessional rate of duty had been extended at the point of assessment by the proper officer).

The Ministry of Health/DGHS had no jurisdiction under the Customs to administer justice. Their orders are not appealable to the authorities designated under the Customs Act. The appellate authorities under the Act including this Tribunal had no jurisdiction to decide the matter dealt with by the authorities other than those specified in the Act. It will lead to anomalous situation and break down of justice if a view taken by the Ministry of Health/DGHS on matters relating to the customs duties and compliance of the customs laws, could not be subjected to any scrutiny by the statutory authorities constituted under the Act. It will leave the importers without statutory remedies if a view is taken by the Ministry of Health/DGHS adverse to them. Such an interpretation had to be rejected straightaway.

27. The learned Member (J) has taken a view that when there was no challenge to the correctness or otherwise of the issue of the certificate by the Ministry of Health/DGHS, the Customs authorities could not proceed against the importers for violation of the conditions prescribed in the notification. A view has been taken that such conditions as prescribed in the Notification were not post-importation conditions. I consider that the various conditions as prescribed in the notification in respect of which the present dispute had arisen were definitely post-importation conditions. The certification was required for assessing the imported goods at the time of import. No such certification could cover a situation obtaining after the goods had been cleared but the conditions subject to which the exemption was granted at the stage of assessment, were not fulfilled after the clearance. It will not be a correct reading of the notification that the Ministry of Health/DGHS could pass any judgment prior to importation as to whether the importers are fulfilling or not fulfilling the conditions after the hospital will be becoming operational in future and will be then rendering or not rendering the services as stipulated in the said Notification. The services to be rendered after the hospital was operational at a future date could not be said anything but post-importation conditions. The Revenue sacrifice involved in the exemption notification could not be knocked off by reading down the notification in such a way that after the certification prior to import, the importers were free to violate the conditions subject to which the Revenue had been sacrificed.

28. In para (i) at page 74 of the proposed order, the notification has been termed as vague, ambiguous and not clear in terms. The very same notification No. 64/88-Cus had come up for consideration before the Hon'ble Supreme Court in the case of Mediwell Hospital and Healthcare Put. Ltd. v. UOI (SC) and no ambiguity and vagueness in that notification had been noticed by the Apex Court. The Supreme Court observed that the very notification granting exemption, must be construed to cast continuing obligation on the part of all those who have obtained the certificate from the appropriate authority. Paras 12 & 13 from that judgment had been extracted in para 18(i) of the proposed order. It is clear from the reading of the judgment of the Apex Court that if the obligations cast on the importers had not been discharged, then the realisation of the customs duties from them could be legally enforced. Whether the obligations cast had been discharged or not, could be decided only after the imports when the hospital becomes operational or the hospital equipment is put to use. Further, the customs duty could be realised only in terms of the relevant provisions of the Act by the proper officers under that Act. The Ministry of Health/DGHS had no role to play towards the realisation of customs duties.

29. I consider that the jurisdiction of the customs authorities to enforce the law when the conditions of exemption are violated had been unambiguously settled by the Hon'ble Supreme Court in their judgment rendered in the case of Shashank Sea Foods Pvt Ltd. v. UOI . In the matter before the Apex Court, the issue for consideration was whether the customs authorities had right or authority to go into questions relating to the utilization of the raw materials that had been imported by the appellants in that case under advance licences granted to them under the Duty Exemption Scheme. The relevant exemption notification had been issued as in the present case, in exercise of the powers conferred by Section 25(1) of the Act, and one of the conditions thereof was that the raw materials exempted there under would not "be sold loaned, transferred or disposed of in any other manner". The Apex Court did not agree with the contention raised that it was only the licensing authority which could investigate alleged cases of domestic sale of exempt material and that jurisdiction of the customs authorities to do so was ousted. Paras 8, 9, 10 & 11 from that judgment are extracted below: 8. Section 111(o) is the sheet-anchor of the respondents' case. It reads thus: 111. Confiscation of improperly imported goods, etc.--The following goods brought from a place outside India shall be liable to confiscation.

(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 the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer.

9. Section 111(o) states that when goods are exempted from Customs duty subject to a condition and the condition is not observed, the goods are liable to confiscation. The case of the respondents is that the goods imported by the appellants, which availed of the said exemption subject to the condition that they would not be sold, loaned, transferred or disposed of in any other manner, had been disposed of by the appellants. The Customs authorities, therefore, clearly had the power to take action under the provisions of Section 111(o).

10. We do not find in the provisions of the Import and Export Policy or the Hand Book of Procedure issued by the Ministry of Commerce, Government of India, anything that even remotely suggests that the aforesaid power of the Customs authorities had been taken away or 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 appellant's licences and, in that sense, a breach of the terms of the said Exemption Notification is also a breach of the terms of the license, entitling the licensing authority to investigate. But the breach is not only of the terms of the license; 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.

30. A reference had been made to the Karnataka High Court decision in the case of Yellamma Dasappa v. Commissioner of Customs, Bangalore to take a view that the customs authorities had no powers to initiate proceedings on their own to start recovery proceedings even when the conditions as prescribed in the exemption notification and subject to which the exemption had been availed of at the time of clearance from the customs, had been violated. I consider that such a view does not flow from the judgment of the Hon'ble High Court. In para 1, the High Court had noted that the appellant after import was using the equipment in terms of the Notification No.64/88-Cus. The matter related to the seizure of the medical equipment, and in the facts and circumstances of the case the High Court ruled that without withdrawing or cancelling the certificate, already issued, the seizure in that case could not stand. In that case there was no notice issued for violation, nor the customs duty had been demanded for violation of the exemption notification. At no stage, the Hon'ble High Court had ruled that the authority for issuing the notice for violation of the conditions of the customs duty exemption notification was not with the officers of the Customs Department but with that of the Ministry of Health/DGHS.In the case of UOI v. Kirloskar Pnumatic Co. , the Hon'ble Supreme Court had held that the Customs authorities could not be directed by the High Court to act contrary to the Act as the Customs authorities were the creatures of the Customs Act and could not act contrary to the provisions of the Act.

In these circumstances, it could not be said that the High Court had ruled that the jurisdiction for serving the notice for payment of customs duties under the provisions of the Customs Act did not rest with the Customs authorities.

31. In the light of the above position, the Customs authorities have jurisdiction to initiate recovery proceedings for violation of the terms of the Notification No. 64/88-Cus and the Customs authorities alone have the jurisdiction to determine the amount of duty due under Section 28 of the Act and to adjudge confiscation and penalties under Chapter XIV of the said Act.

32. As regards the limitation, it is clear from the express language of Notification No. 64/88-Cus. that at the time of import a certificate as prescribed was to be produced to the Customs authorities. It was only at the time when it was found that the conditions subject to which the exemption had been claimed, were not fulfilled that the cause of action for demanding duty arose. Thus to take a view that in such a case the period of limitation will be counted from the date of filing of the bill of entry/clearance etc. could not be correct. The Hon'ble Supreme Court in the case of Mediwell Hospital and Health Care Pvt. Ltd. Supra, had held that "the very notification granting exemption must be construed to cast continuing obligation on the part of all those who have obtained the certificate from the appropriate authority In case such an obligation is not fulfilled, the limitation would be counted from the date of infringement.Dewan Chand Satyapal Agarwal Imaging Research Centre v. CC. New Delhi 2000 (39) RLT 1084 (CEGAT), could not be said to reflect the correct position of law.

At the point of import, no duty was collectable but became so leviable when the conditions were not fulfilled. In such a situation, the ground for raising demand could not be the date when the proper officer had made an order originally for the clearance of the goods.

The Tribunal while noting the Supreme Court decision in the case of Mediwell Hospital and Health Care Put. Ltd. supra had not followed the said judgment when the Apex Court had held that the obligation cast on the importers was "a continuing obligation". In a case of continuing obligation, how a prior fixed date of clearance could font) the basis of limitation. Thus, this judgment is contrary to the law laid down by the Apex Court and thus could not have the force of law.

In this connection, reference may be made to the Tribunal's decision in the case of Mays Press Put. Ltd v. CC, Allahabad .

Para 4 from that decision is extracted below: 4. I have carefully considered this plea of the learned advocate for the appellants but I find myself unable to agree to it. Facts available in the case of East India Commercial Company Ltd. before the Hon'ble Supreme Court are not available in the instant case.

There the condition of not selling the goods after importation was imposed in the licence by virtue of a Public Notice. That condition in the licence, according to the Hon'ble Supreme Court, was not in terms of any statutory order issued under the Import and Export (Control) Act but by way of a Public Notice. In the instant case the position is different. Clause 10B of the Import (Control) Order, 1955 makes it mandatory that "no person shall use any imported goods received by him during allotment or distribution made by the State Trading Corporation of India or any other recognised agency in a manner and for the purpose, otherwise than as declared by him in his application for such allotment or distribution or in any document submitted by him in support of such application." It has not been denied by the appellant No. 1 that he has stated in his application, on the basis of which the allotment/distribution of newsprint was made to it that the newsprint would be utilised by him in the printing of newspapers, books or periodicals. In view of this, it is obvious that if the seized goods were not meant for printing of newspapers, books or periodicals, they are liable to confiscation under Section 111(o) of the Customs Act.

34. As regards confiscation, the matter is covered by the Supreme Court decision in the case of Weston Components Ltd. v. CC, New Delhi 2000 (88) ECR 544 (SC). The order is extracted below: 1. It is contended by the learned Counsel for the appellant that redemption fine could not be imposed because the goods were no longer in the custody of the respondent-authority. It is an admitted fact that the goods were released to the appellant on an application made by it and on the appellant executing a bond. Under these circumstances if subsequently it is found that the import was not valid or that there was any other irregularity which would entitle the Customs authorities to confiscate the said goods, then the mere fact that the goods were released on the bond being executed, would not take away the power of the Customs authorities to levy redemption fine.

Mention may also be made to the Supreme Court decision in the case of Jeevraj v. Collector of Customs 1997 (22) RLT 449 (SC), wherein the Supreme Court had held that no time limit was prescribed in Section 124 of the Act for issue of show cause notice. Para 1 from that order is extracted below: The only question that falls for consideration in these appeals by the assessee is whether a notice under Section 124 of the Customs Act, 1962 (hereinafter referred to as 'The Act') is required to be issued within the period specified under Section 110(1) as extended under the proviso, of the Act. In Harbans Lal v. Collector of Central Excise and Customs, Chandigarh it has been laid down that the period specified under Section 110 within which the notice regarding seizure can be given does not limit the power under Section 124 of the Act and that said section [Section 124] does not lay down any period within which the notice is required to be given. The said view as based on the earlier judgment of this Court in Assistant Collector of Customs v. Charan Das Malhotra . The same view has been taken in Chaganlal 35. The main consideration that appears to weigh with the learned Member (J) to propose the order as above is that the action for recovery of customs duty for violation of the conditions of Notification No. 64/88-Cus dated 1.3.1988 was required to be initiated by the Ministry of Health. I have analyzed the matter in depth and have concluded that the notice for payment of customs duties where any duty has not been levied is required to be served and the amount of duty due has to be determined by the proper officers of the Customs who had been assigned those functions under the Act [refer definition of Proper Officer, in Section 2(34) of the Act].

36. On limitation also, I have recorded that it was on the date when the obligation cast on the importers (subject to which he had claimed the benefit of exemption at the point of import) was infringed that it was to be taken that the duty had not been levied.

37. Other conclusion in the order proposed flow from these considerations.

38. The view taken in the order proposed by learned Member (J) on both these issues will have serious repercussions on the administration of a host of other exemption notifications wherein exemption was subject to fulfilment of post-importation conditions. There are a number of exemption notifications on the Central Excise side also where for fulfilment of various conditions as prescribed in the said notifications, some role had been given to other authorities of the Government, authorities other than the Central Excise authorities. This may relate to the production capacity of the unit, small scale registration certificates, distribution of excisable goods for various public purposes etc. Various end-use based exemptions are also there both in the Customs Tariff as well as in the Central Excise Tariff. The view proposed by the learned Member (J) may have a bearing on such exemption notifications also.

39. I, therefore, consider that this matter be placed before the Larger Bench to be constituted by the Hon'ble President for full consideration of the issues involved in these group of appeals.

40. Thus, while not agreeing with the views of the learned Member (J), I propose that the matter be referred to the Hon'ble President for constituting a Larger Bench to decide the various issues involved in these group of appeals.

41. In view of the difference of opinion between the Member (J) and Member (T), the following questions be referred to the Third Member-- Whether the views taken by the learned Member (J) in the order proposed by him be confirmed; The matter be referred to the Larger Bench, as proposed by the Member (T).