1. This appeal has been filed against the OIO No. 11/ADJ/RSS/2004 dated 22-6-2004 passed by the Commissioner of Customs AIR Cargo (Import & General), New Delhi.
2. The appellants imported certain medical equipments by availing the benefit of Notification No. 64/88-Cus., dated 1-3-1988. The benefit under the above said Notification was availed on the strength of the Customs Duty Exemption Certificate (CDEC) issued by the Director General, Health Services (DGHS). The DGHS, in his letter dated 12-12-1997 cancelled the above said CDEC issued to the appellants based on the Supreme Court's decision in "Mediwell Hospital and Health Care Pvt. Ltd. v. UOI and Ors. ". Consequent to the cancellation of the CDEC, the Revenue initiated action against the appellants by way of Show Cause Notice. The Adjudicating Authority, in his order dated 22-6-2004, confirmed a demand of duty of Rs. 30,57,789/-. Further, a redemption fine of Rs. 30,000/- and a penalty of Rs. 10,000/- were also imposed. The appellants appealed to this Tribunal. During the hearing, the learned Advocate made the point that Notification 64/1988-Cus dated 1-3-1988 was rescinded vide Notification No. 99/1994-Cus dated 1-3-1994. However, the CDEC Certificate was cancelled long after the repeal of the Notification, citing various case-laws particularly the decision of the Hon'ble High Court of Madras in the case of Apollo Hospitals Enterprises Ltd. v. UOI . It was urged that the effect of the repeal of the Notification is that after the repeal, the Notification ceased to exist and the right accrued under the Notification is unaffected by the repeal by virtue of Section 6(b) of the General Clauses Act. It was also urged that the Hon'ble Apex Court has not examined the effect of repeal of Notification 64/88 in the Mediwell case and as this is an important question, the same has to be decided by a larger bench. While acceding to the prayer of the appellants, this Bench, in the Misc.
Order made the following observations - 7. In view of the above legal position, upholding the Order of the Adjudicating Authority simply on the ground of cancellation of the CDEC may not be in the interest of justice without clarifying the important question of Interpretation of the Mediwell decision in the context of the repeal of Notification No. 64/88-Cus. Hence it would be in the fitness of things to refer this issue to a Larger bench.
We are of the considered opinion that the Hon'ble President may like to constitute a Larger Bench for referral of the above stated issue.
Thus, the appeal is disposed of in the above manner. The Registry is directed to make over this file to the Central Registry, CESTAT, New Delhi for placing before the Hon'ble President.
Accordingly, a Larger Bench was constituted to decide the matter. The hearing before the Larger Bench was held on 18-9-2006.
3. S/Shri B.V. Kumar and B. Venugopal, the learned Advocates, appeared for the appellants and Shri K. Sambi Reddy, the learned JDR, for the Revenue.
4. The short point made by the learned Advocates, is that the liabilities, if any, under Notification No. 64/88-Cus., dated 1-3-1998, could be enforced only on or before the repeal of the said Notification by Notification No. 99/94-Cus dated 1-3-1994. In the present case, the import was effected on 9-1-1992. While importing the goods under the benefit of Notification No. 64/88, the appellants undertook to comply with the conditions prescribed therein. The CDEC Certificate was issued by DGHS on the execution of an undertaking by the appellant to the effect that the goods shall not be sold disposed or dealt without prior permission. The above CDEC certificate was issued on 3-4-1992.
Afterwards, the appellants sold the goods to M/s Wipro GE Medical Systems (WGMS in short) and later, WGMS sold the goods to M/s.
Mandakini CT Centre, Bombay. On 12-12-1997 the CDEC was cancelled by the DGHS as the appellant unit is a Diagnostic Centre not having in-patient facility. The contention of the Advocates is that the Notification was rescinded on 1-3-1994. Therefore, no action could be taken against the appellant after 1-3-1994. In other words, the learned Advocates question even the cancellation of the Certificate after 1-3-1994 for the reason that Norn. No. 64/88 ceases to exist w.e.f.
1-3-1994 and the rights accrued by the appellant cannot be taken away by the repeal of the Notification.
(i) Our attention was invited to the following decisions of the Apex Court wherein the effect of repeal of an enactment has been considered.
(a) Gajraj Singh v. The State Transport Appellate Tribunal Whenever an Act is repealed, it must be considered, except as to the transactions past and closed, as if it had never existed. The effect thereof is to obliterate the Act completely from the record of the Parliament as if it had never been passed by it, it never existed except for the purpose of those actions which were commenced, prosecuted and concluded while it was existing law.
When there is a repeal and simultaneous re-enactment, Section 6 of the GC Act, would apply to such a case, unless contrary intention can be gathered from the repealing Act. The Court has to look to the provisions of the new Act only for the purpose of determining whether the new Act indicates different intention.State of Orissa and Ors. v. Titaghur Paper Mills Company Ltd. 'The word "supersession" in the Notification dtd.
29-12-1977 is used, in the same sense as the words "repeal and replacement" and, therefore, does not have the effect of wiping out the Tax liability under the previous Notifications.' A Repealed statute is obliterated is subject to the exception that it exists in respect of transactions past and closed. This means, the statute as repealed ceases to exist with effect from the date of such repeal but the repeal does not affect the previous operation of the law, which has been repealed during the period it was operative prior to the date of such repeal.
(d) P.V. Mohammad Barmay Sons v. Director of Enforcement The effect of the repealed Act by operation of Clause (e) of Section 6 of the General Clauses Act read with sub Section (2) of Section 81 is that, though the Act obliterates the operation of Act 7 of 1947, despite its repeal, the penalty, liability, forfeiture or prosecution for acts done while the repealed Act was in force were kept alive, though no action thereunder was taken when the Repealed Act was in force. The rights acquired or accrued or the liabilities incurred or any penalty, forfeiture or punishment incurred during its operation are kept alive. Investigations to be made or any remedy which may have been available before the repeal be enforced are also preserved. Such rights, liabilities, penalty, forfeiture or punishment, due to repeal "shall not lapse". The saving clause, thus, aimed to preserve the legal effect and consequences of things done though those effects and consequences projected to post repealed period. What the Court is to enquire into is whether the Act is incompatible with the repealed Act and whether it manifested any contrary intentions to the Repealed Act. Unless a different intention has been manifested in the Act, the Repealed Act would continue to be operative... the provisions of the new Act will have to be looked into to find where and how far the new Act envisages a contrary intention affecting the operation of Section 6 of the General Clauses Act.
The new Act did not evince any contrary intention. It merely reiterated the earlier law operating the field. Therefore, Clause (d) of Section 6 of GC Act gets attracted to the acts done or penalties incurred or forfeiture or punishment had already been committed before the repealed Act....Jaya Nursing Home (P) Ltd. v. CC, Chennai 2004 (177) E.L.T. 766 (Tri.-Chennai), had occasion to examine the issue in the light of the Apollo Hospitals case. In the said decision, the Tribunal has held that with reference to Section 159A of the Customs Act, the obligations under the Notification 64/88-Cus. subsisted beyond the date of its recession i.e. 1-3-1994. Further, the ruling of the Apex Court in the Mediwell Hospital case holding that the obligations under the Notification are continuing obligations has been followed.
(ii) CESTAT, Northern Bench, New Delhi, in the case of CC (I&G), New Delhi v. National Heart Center of Hypertension 2005 (191) E.L.T. 249 (Tri.-Del.), has held that action can be taken even after the rescission of the Notification 64/88 for non-fulfillment of post-import conditions. In that case also, the Tribunal has distinguished the Apollo Hospitals case, (iii) Further, it was pointed out that the Apex Court, in the Mediwell Hospital case, has held that Diagnostic Centres are not entitled for the benefit of the exemption but, since such exemptions were already allowed to other individual Diagnostic Centres not attached to any hospital, the appellant should not be discriminated.
In view of the above finding, the Apex Court allowed the benefit of exemption for Diagnostic Centre but, this ruling in Mediwell hospital case was reversed by the 3 judges Bench of the Supreme Court in Faridabad CT Scan Centre v. D.G. Health Services , holding that the benefit of Notification cannot be extended to someone on the ground that such benefit had wrongly been extended to others. Hence, it is well settled that the benefit of Notification 64/88 cannot be extended to Diagnostic Centers. The appellant in the present case is a Diagnostic Centre and they are not entitled even from the beginning for the benefit of the Notification.
(iv) Referring to the Apollo Hospitals case relied on by the appellant, it was pointed out that a careful reading of the decision would reveal that the liabilities arising out of rescinded Notn.
64/88 can be enforced for the period during which the said Notification was in existence. It does not mean that action cannot be taken against the appellants after the rescission of the Notification, when it is found that the appellants violated the obligations during the period of the Notification. In the present case, the appellants being Diagnostic Centre are not at all entitled for the benefit of the exemption Notification even from the very beginning. Therefore, it cannot be said that the appellants had acquired a right for the exemption notification, which cannot be taken away after the rescission of the Notification. Moreover, the Hon'ble High Court of Karnataka has dismissed the Writ Petition filed by the appellant with regard to the cancellation of their CDEC Certificate by DGHS. That means, the appellants are not entitled ab initio for the benefit of the exemption Notification.
6. We have gone through the records of the case carefully. The appellants imported the medical equipments under Notification No.64/88-Cus dated 1-3-1988. The Notification imposes various conditions.
In the present case, the date of import is 9-1-1992. After various investigations, it was revealed that the appellants had wrongly availed the exemption under the said Notification. In fact, the CDEC was cancelled only on 12-12-1997. The point made by the appellants is that no action can be taken against them after the rescission of the Notification 64/88 on 1-3-1994. The learned Advocates laid great emphasis on the rights acquired by the appellants by virtue of the CDEC Certificate issued to them and if at all any action had to be taken with regard to the liabilities, it should be before 1-3-1994 and not after. The appellants mainly relied on the decision of the Hon'ble Madras High Court in the case of Apollo Hospitals Enterprises P. Ltd. (cited supra). A very careful reading of the Apollo Hospitals decision does not lead us to the conclusion that favoured the appellants. We are reproducing paras 42 and 43 of the Apollo Hospitals decision.
42. However, the question remains for consideration is whether the liability arising out of such extended benefit can be enforced or not, or in other words, whether the penal action of canceling the certificate can be made or not, when the petitioners failed to discharge the obligations arising out of the rescinded notification.
43. Having derived such exemption whether it is open to the petitioners to contend that after the rescinding of Notification No. 64/88, it is not open to the authorities to enforce the liability.
The answer is simple, in view of the judgments of the Supreme Court referred to above. The petitioners those who benefited the tax exemption are bound to discharge the liability during the period when the said Notification 64/88 was in force. Hence it is always open to the authorities to enforce such obligation only during that period when the Notification No. 64/88 was in force and not for the subsequent period. So it is for the authorities to establish that the petitioners had violated the conditions imposed under Notification No. 64/88 subsequent to their availing the benefit of the exemption of Duty and before the end of February, 1994, since Notification 99/94, rescinding the Notification 64/88 came into force on 1-3-94.
6.1 A careful reading of the above paragraphs reveal that the authorities can enforce the obligations only during the period when 64/88 was in force and not for the subsequent period. How to interpret this? The life of the Notification 64/88 is the period from 1-3-1988 to 28-2-1994. In the present case, the appellants imported the goods on 9-1-1992. The point is, by virtue of import of medical equipments free of duty under Notification 64/88, the appellants are under obligation to fulfill the conditions of the Notification. The period of the obligation is from the date of import to the date of rescission of the Notification. The violation of the Notification may be noticed by the authorities either during the life of the Notification or afterwards.
It is the contention of the appellants that if the violation of the notification during the period of its life is detected after the rescission of the notification, no action can be taken by the authorities. This interpretation is not correct. There is nothing in the decision of the Apollo Hospitals case which warrants such inference. What all we can infer is that with the rescission of notification 64/88, there is no obligation on the part of the appellant after 1-3-1994. But, all the obligations under the Notification would be required to be fulfilled on the part of the appellants during the currency of the notification. There is nothing in law which states that any action for violation of Notification 64/88 should be taken on or before 1-3-1994. It may be seen that in the Customs Act/Central Excise Act, in cases of non-levy, short-levy, etc., on account of fraud, suppression, mis-statement etc. a period of 5 years has been prescribed for issue of Show Cause Notice. As far as fulfillment of exemption notification is concerned, the non-fulfillment entails confiscation of the impugned goods under Section 111(o) of the Customs Act and it is well settled that for taking action under Section 111 (o) of the Customs Act, there is no time limit. In the present case, we cannot say that the appellants had acquired a legal right for the benefit of the exemption notification, which is inviolable, and for the reason that they were in possession of a CDEC. The appellants gave an undertaking to the DGHS to the effect that they would not sell or dispose the imported goods. Thus, the exemption notification in the present case is subject to certain conditions and once those conditions are not fulfilled, the appellants would ab initio be not entitled for the benefit of the exemption Notification. Moreover, it is well settled that Diagnostic Centres would not be entitled for the benefit of the said Notification. The appellant being a Diagnostic Centre is not at all entitled for the benefit of the Notification. Recently, this issue of the effect of rescission of Notification 64/88 was considered by the Hon'ble Bombay High Court in the Writ Petition No. 2809/1991 in the case of Shah Diagnostic Institute Private Limited v. UOI and ACC. It would be worthwhile to reproduce the findings of the Hon'ble High Court with regard to the questions raised.
Para 9 Mr. Madhubiah, the learned Counsel for the petitioner raised the following contentions before us (e) That the Notification No. 64/88-Cus dated 1st March, 1988 came to an end on 1st March, 1994 and that brought to an end any liability of the petitioners in fulfilling the condition 2(b) of the said notification. According to him, Section 6 of the General Clauses Act has no application.
31. Now, we may deal with the last contention of the petitioners that the Notification No. 64/88-Cus dated 1st March, 1988 came to an end on 1st March 1994 and, therefore, the conditions imposed in the said notification came to an end an ceased to be effective. The learned Counsel submitted that Section 6 of the General Clauses Act cannot be made applicable to such notification.
32. This argument of the learned Counsel over-looks and ignores Section 159A of the Customs Act which was introduced by the Finance Act, 2001. 159A. Effect of amendments, etc. of rules, regulations, notifications or orders. - Where any rule, regulation,- notification or order made or issued under this Act or any notification or order issued under such rule or regulation, is amended, repealed, superseded or rescinded, then, unless a different intention appears, such amendment, repeal, supersession or rescinding shall not- (a) receive anything not in force or existing at the time at which the amendment, repeal, supersession or rescinding takes effect; or (b) affect the previous operation of any rule, regulation, notification or order so amended, repealed, superseded or rescinded or anything duly done or suffered thereunder; or (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any rule, regulation, notification or order so amended, repealed, superseded or rescinded; or (d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed under or in violation of any rule, regulation, notification or order so amended, repealed, superseded or rescinded; (e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced and any such penalty, forfeiture or punishment may be imposed as if the rule, regulation, notification or order, as the case may be, had not been amended, repealed, superseded or rescinded.
33. That Section 159A is deemed to have been inserted on and from 1st February, 1963 cannot be questioned. It, therefore, has to be held that Section 159A was operating on 1st April, 1944 when the Notification No. 64/88-Cus was rescinded. In other words, rescission of the Notification No. 64/88 does not affect the liability acquired, accrued or incurred by the petitioners with regard to fulfillment of clause 2(b) of the said notification.
6.2 The High Court has clearly held that by virtue of Section 159A, introduced on 1st April, 1994 with retrospective effect from 1st February, 1963, the rescission of Notification 64/88 does not affect the liability acquired, accrued or incurred by the petitioners with regard to fulfillment of Clause 2(b) of the said Notification. It may be pointed out that in all the cases relating to violation of conditions of Notification 64/88, action was taken only after the rescission of notification 64/88. If It is held that no action at all can be taken after the rescission of the Notification, such a view would invalidate the actions taken against the erring hospitals and would render it an exercise in futility. Economic offences are not immediately detected. If it is held that no action can be taken for an offence, if the same is detected when the notification in respect of which the said offence is committed is rescinded, it would indeed be a sad commentary on the prevailing legal system. When a notification is rescinded, one cannot avail the benefit conferred by the notification.
That is the common sense view. Rescission of Notification does not debar the authorities from taking action against the offenders notwithstanding the fact that detection of the offence was, long after the rescission of the notification. Therefore, we hold that even after the rescission of Notification 64/88, action can be taken against the appellants for violation of the conditions of the notification during the life period of the said notification.
6.3 Coming to the specific facts of this case, it is very clear that even from the beginning, the appellant failed to fulfill the post import conditions of the Notification such as providing free treatment to 40% of the OPD patients treated every year, free treatment to all the indoor patient belonging to the salary group of less than Rs. 500/- p.m. and reserving 10% of their beds for such category of persons. The benefit was availed by them on the basis of the CDEC certificate dated 3-4-1992 issued by DGHS. The appellant, instead of using the equipment in the Centre, sold the equipments to M/s. WGMS. This is a blatant violation of the Notification. Such a violation of the Notification came to the notice of the authorities later leading to the cancellation of the CDEC Certificate. To argue that CDEC Certificate could not have been cancelled after the rescission of the Notification would amount to legitimizing the illegal acts of the appellant. There is no disagreement on the point that the appellant is duty bound to fulfill the conditions of the Notification at least during its life period. If it is found even after the rescission of the Notification that the appellant had blatantly violated the conditions of the Notification and was not at all entitled for the benefit of the notification even from the beginning, definitely action can be taken against the appellant. If it is held that after the rescission of the Notification no action can be taken, it would be a travesty of justice and all wrong doers would go scot-free. In these circumstances, the order of the Original Authority confiscating the medical equipments and demanding duty is correct and legal. Considering the value of the goods, the amount of Redemption Fine and penalty imposed on the appellant are very nominal.
Hence, we uphold the Order-in-Original and dismiss the appeal.