Lady Amphthil Nurses Instns and Vs. Cc, Chennai and Cc, Cochin - Court Judgment

SooperKanoon Citationsooperkanoon.com/28743
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided OnAug-22-2002
JudgeS T G.R., S Kang, B T K.K.
Reported in(2002)(83)ECC630
AppellantLady Amphthil Nurses Instns and
RespondentCc, Chennai and Cc, Cochin
Excerpt:
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1. this matter has been referred to the larger bench in terms of majority order reading as under: 65. in terms of majority order, all the above noted appeals are referred to hon'ble president for constituting a larger bench to decide various issues involved in these group of appeals as noted by member (technical), shri lajja ram in his differing order which has been concurred to by shri jeet ram kait, member (technical). the larger bench shall also consider the final order which is required to be passed in respect of each of the appellants noted above.2. in the majority order there is a request for deciding various issues involved in the appeals as noted by member (technical) shri lajja ram in his differing order.3. shri lajja ram in his differing order which is in para 24 at a page 108.....
Judgment:
1. This matter has been referred to the Larger Bench in terms of majority order reading as under: 65. In terms of majority order, all the above noted appeals are referred to Hon'ble President for constituting a Larger Bench to decide various issues involved in these group of appeals as noted by Member (Technical), Shri Lajja Ram in his differing order which has been concurred to by Shri Jeet Ram Kait, Member (Technical). The Larger Bench shall also consider the final order which is required to be passed in respect of each of the appellants noted above.

2. In the majority order there is a request for deciding various issues involved in the appeals as noted by Member (Technical) Shri Lajja Ram in his differing order.

3. Shri Lajja Ram in his differing order which is in para 24 at a page 108 is reproduced as under: 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 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, 1992 (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.

4. The issues framed are--(i) Whether action for recovery of customs duty for violation of the conditions of Notification No. 64/88-Cus is required to be initiated by the Ministry of Health and Family Welfare/Directorate General of Health Services or by the Commissioner of Customs, (ii) whether action initiated by the Commissioner of Customs towards payment of such duties towards levy of penalty and payment of fines in lieu of confiscation of offending goods under the Customs Act was beyond his jurisdiction in terms of Notification No.64/88, and (iii) whether the demands raised by the Commissioner of Customs were barred by time in terms of the proviso to Section 28 of the Act. For the sake of clarity Notification No. 64/88-Cus is reproduced below: 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 I, 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.

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 thought 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 purposes of receiving funds donated overseas.

4. Any such hospitai 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: Provided that-- (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 hospitai equipment that the importer shall furnish certificates from the said Ministry of Health and Family Wealth or from the Directorate General of Health Seivices, 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 hospitai 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 therefor.

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

5. The salient features of the exemption Notification No. 64/88 are as under: (a) This Notification exempts equipment, apparatus, appliance including spare parts and accessory thereof as hospital equipment.

(b) The import of these items must the approved either generally or in each case by the Government of India in the Ministry of Health (hereinafter referred to as MOH) or by the Director General of Health Services to the Government of India (hereinafter referred to as DGHS).

(c) The exemption was from the whole of the duties of Customs leviable and whole of additional duty leviable.

(d) Clause 2 of the Notification empowers the approving authority that as MOH/DGHS to certify that the hospital equipment approved is not manufactured in India and that the exemption claimed was necessary for running or maintenance of the hospital. There were certain conditions for import of spare parts also. In the Table of the Notification the hospitals were specified and were to be certified by the MOH/DGHS fulfilling certain conditions of free tratment of the patients. In Clause 4 there was a condition that such hospitals which are in the process of being established could also be granted the certificates in terms of the conditions stipulated therein.

6. Pursuant to this Notification hospitals specified in the Table of the exemption notification started importing hospital equipment and clearance of the imported hospital equipment was taken on production of the certificate issued by Ministry of Health/DGHS without payment of duty. This Notification was rescinded in 1994.

7. Hon'ble Delhi High Court on 18.10.96 while examining CWP No. 409/96 directed to enquire into the evasion of customs duty or irregularity in the import of medical equipment in terms of Notification No. 64/88. In pursuance of the Order of the Hon'ble Delhi High Court Rosha Committee was set up by the Govt. of India. One of the terms of reference of this Committee was to enquire whether the concerned institution had fulfilled the conditions subject to which the exemption from duty was granted. Following the directions of the Committee to enquire whether M/s. Willingdon Hospital, 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, then further action be taken as per the Customs Act for recovery of the duty/imposition of penalty/confiscation etc.

8. In the meantime the case of M/s. Mediwell Hospital & Healthcare Pvt.

Ltd. came up before the Hon'ble Supreme Court. The Hon'ble Supreme Court in its judgment in the case of Mediwell Hospital & Healthcare Pvt. Ltd. in paras 12 and 13 held 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 atleast to 40 per cent 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 per month. 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 obligations 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 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 per month with full particulars and address thereof which would ensure that the obligation 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 non-compliance were made by the indigent persons, on denial of such treatment in the concerned hospital or diagnostic centres, as the case may be.

9. Having regard to the directions of Rosha Committee as also the judgment of the Apex Court in the case of Mediwell Hospital and Healthcare Pvt. Ltd. some Commissioners initiated proceedings. As Customs Department had allowed duty exemption it was contended by the Customs authorities that it was open for Customs to initiate action to demand duty or to impose fine and penalty.

10. We have heard S/Shri C.A. Sundaram, Senior Advocate with Tarun Gulati, Advocate; M.S. Kumaraswamy, Consultant; N.K.R. Nair, Consultant for the appellants and Shri Vaithiyalingam, learned Senior Central Government Standing Counsel for the respondent Revenue. Counsels for the appellants broadly stated as to what the issues were for determination. It was contended by them that the issue before the Tribunal was as to the jurisdiction whether it is Ministry of Health/DGHS or the Customs to check the violation of the conditions of the Notification. The learned Counsels submitted that the second issue before he Tribunal was what was the scope of Section 111(o) and that what is the effect of violation of the condition. He posed a pertinent question whether such violation would render the import bad. For this proposition he referred to the judgment of the Apex Court in the case of UOI v. Sampat Raj Dugar stating that the Hon'ble Supreme Court held that if on the date of import the goods were covered by a valid import licence, subsequent cancellation of licence is of no relevance nor does it retrospectively render the import illegal. The contention of the Counsels for the appellants was that imports in their case started in the year 1990 and ended up in the year 1994 when Notification No. 64/88 was rescinded. It was submitted by them that at the time of import the appellants had valid certificates issued by the MOH/DGHS. Even it the certificate gets cancelled it would not render the import illegal. Learned Counsels submits that in majority of the cases even today the certificate has not been cancelled.

11. It was contended by the learned Counsels that Noftn. No. 64/88 was repealed in 1994, therefore, the question arises as to what would be the violation post 1994 and what is the scope of violation qua enforciability of condition when no mechanism is laid down for its enforcement. It was submitted that no enquiries about violation of the conditions of the certificate were conducted prior to rescinding the Notfn. No. 64/88 and since today the Notification is not in exisence, therefore, how the violation will be treated. He referred to the judgment of the Hon'ble Karnataka High Court in the case of Yellamma Dasappa v. CCE, Bangalore . He submitted that in para 9 the Hon'ble High Court held as under: 9. 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 Director General of Health Services 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 that 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.

He also referred to para 10 of this judgment which is also reproduced below: 10. Sri Veerendra Shah, learned Counsel also relied upon the judgment of the Supreme Court in Mediwell Hospital Health Care Pvt.

Ltd. v. Union of India . Even in the said judgment, the Supreme Court, after noticing has ruled as under: 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 obtained the certificate from the appropriate authority and on the basis of that to have imported equipments without payment 1 of customs duty to given free treatment atleast to 40% of the out door 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 per month. 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 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 who have availed of the benefit of exemption to pay the duty payable in respect of the equipments when have been imported without payment of customs duty. Needless to mention the Government has granted exemption from payment of customs duty with the sole subject that 40% of all outdoor patients and entire Indoor patients of the low income group whose income is less than Rs. 500 per month, would be able to receive free treatment in the institute. The 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.

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 import 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 has 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. 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.

Learned Counsels, therefore, submitted that in the event of violation of the continuing obligation the authority who issued the certificate has the right to demand payment of customs duty. They submitted that in their case though the certificate was still in existence and valid duty has been demanded by the Customs which cannot be sustained in law.

12. Learned Counsels submitted that the next question that needs to be answered in regard to jurisdiction is as to who is the competent officer to look into the violation when certification was done by the DGHS/MOH. Learned Counsels referring to the judgment of the Tribunal in the case of Overseas Cycle Co. v. C.C. submitted that the duties and functions of the licensing authorities and the Customs Authorities are clearly brought out in para 16 which reads as under: 16. In the first instance, we may observe that the functions of the licensing authorities and the Customs authorities operate in different fields though they may at time inter est so as to operate in some common area. The main function of the licensing authority is to consider whether any particular item should be allowed to be imported or not and for that purpose they will look into various circumstances such as the requirement and the item, the amount of foreign exchange involved and the permissibility for import and other relevant factors. On being satisfied of the same the licensing authority issues the licence. But the functions of the Customs authorities start after the goods are imported and brought into the territorial water of the country. The Customs authorities are concerned with the recovery of the Customs duty and to check evasion of payment of duty. Under the Customs Act, under Section 2(33), prohibitory goods means any goods the import and export of which is subject to any prohibition under that Act or any other law for the time being in force. When the licence mentions that the appellants are at liberty to import defective CRCA sheets and coils without mentioning their thickness or gauge the appellants are at liberty to export those goods. The only condition is that the Customs authorities, should look into whether the goods sought to be imported correspond to the description in the licence and whether the conditions in the licence a e required to be complied with by the importer. In this case, admittedly, the goods are covered by the licence. The Customs authorities cannot read something into the licence which was not already there. The appellants also had complied with the condition of exporting some goods to Bangladesh by manufacturing those goods from the indigenous products. The imported goods are, therefore, to be used by them by way of replenishment.

Therefore, once, if a licence is granted in respect of a particular item by the licensing authority, the Customs authorities have no jurisdiction to shift over the licence so granted by the licensing authority and they have no power to go beyond the licence and to determine as to whether the said licence related to prohibited items.

13. The emphasis of the Counsels was that what is exempted is exempted only on approval given by the MOH/DGHS; that the violations are required to be verified only by MOH/DGHS and Customs has nothing to do with it; that hospitals are certified by MOH/DGHS; that means that no other person has jurisdiction in the matter except MOH/DGHS. Learned Counsels, therefore, submitted that this clearly shows that compliance is to be seen by MOH/DGHS. In support of this contention learned Counsels relied upon the judgment of the Apex Court recorded in para 8 in the case of Mediwelh Hospital & Healthcare Pvt. Ltd. and Yellamma Dasappa cited in para 11 above. Elaborating further arguments on jurisdiction the learned Counsels emphasised that the certificate was subject to approval of MOH/DGHS and also subject to pre-conditions to be satisfied and that the pre-conditions at the time of import were to the satisfaction of MOH/DGHS which unambiguously show that jurisdiction has clearly been given to MOH/DGHS. It was contended that to see as to who is the competent authority, it is the very same authority who on being satisfied gives the certificate and hence only MOH/DGHS alone could enforce the conditions. Hence the obligation of continued discharging is to be supervised/checked and monitored by MOH/DGHS. It was also contended that the certificate issued by MOH/DGHS can be amended or cancelled only by MOH/DGHS. In support of this contention they cited and relied upon the judgment of the Hon'ble Calcutta High Court in the case of Ellenberric Steels Ltd. v. Regional Dev.Commissioner for Iron & Steel .

14. On the question whether the action initiated by the Commissioner of Customs towards payment of such duty towards levy of penalty and of payment of fine in lieu of confiscation of offending goods under the Customs Act, 1962 had jurisdiction in terms of Notification No. 64/88, Learned Counsels for the appellants submitted that duty cannot be demanded Under Section 28 of the Customs Act, 1962 as was held by this Tribunal in the case of Dewan Chand Satyapal Agarwal Imaging Research Centre, 2000 (39) RLT 1084. It was submitted by them that assessments were finalised sometimes in 1994 in majority of the cases whereas the Show-cause Notices have been issued in the year 1998 to 2000. It was contended that duty could not be demanded unless the certificate was cancelled and that certificate has not been cancelled in majority of the cases but duty had been demanded. It was also contended that there was no other authority to cancel the certificate except MOH/DGHS and since the certificate can be cancelled only by MOH/DGHS natural corollary will be that duty could not be demanded unless the certificates are cancelled after investigation by the MOH/DGHS. The contention of the Counsels for the appellants was that in no circumstances, duty could be demanded during the existence and validity of the certificate issued by the MOH/DGHS.15. In so far as confiscation of the goods is concerned it was submitted by the Counsels for the appellants that the goods cannot be confiscated as the violation of the conditions of the exemption Notification was not established by the certificate issuing authority and unless the violation is there the goods cannot be confiscated.

Another point that was made by the learned Counsels was that most of the hospital equipments imported by the appellants had become obsolete and the price had come down considerably and, therefore, in many cases the redemption fine was not commensurate with the present price of the hospital equipment imported. It was stated by them that redemption fine was very high in comparison to the present market price of the imported equipment.

16. It was submitted by the learned Counsels that in some cases though no demand of duty has been confirmed yet penalty has been imposed. They referred to the judgment in the case of HMM Ltd. by the Apex Court in which it was held that penalty cannot be sustained if demand of duty is set aside, and that imposition of penalty may be set aside.

17. The third issue was whether the demands raised by the Commissioner of Customs were barred by time in terms of the proviso to Section 28 of the Act. For the appellants it was argued that the Department of Revenue was vested with the power to issue Notification under Section 25 of the Customs Act, 1962. It was submitted that the Government in its wisdom empowered the MOH/DGHS to issue certificate and also to verify/check/monitor the compliance of the conditions of exemption in the notification in terms of the undertaking given by the hospital etc.

The Counsels argued that on investigation if the Customs Authorities prima facie found that if any of the condition of the notification was violated then they could submit a report to the nodel agency (MOH/DGHS) and request them to investigate further in terms of the undertaking given by the hospital etc. Alternatively, MOH/DGHS could cancel the certificates issued by them and thereafter the Customs on the basis of such report and cancellation of such certificate could initiate proceedings by issue of Notice. It was pointed out by the Counsels of the appellants that such process appears to have not been followed after the Rosha Committee constitution. It was argued that Customs Authorities without following such procedure took upon themselves the responsibility of investigation and initiation of recovery proceedings against the time-barred claims to impose penalty and confiscate goods which in some cases were not available, which was not legally sustainable. It was submitted that this Tribunal in the case of Dewan Chand Satyapal Agarwal Imaging Research Centre v. C.C. 2000 (39) RLT 1084 held that, "We have, therefore, to hold that since the Show-cause Notice has been issued beyond 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 was 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 Research Centre v. C.C.E. supports this contention.

18. Regarding judgment of the Apex Court in the case of Mediwell Hospital & Healthcare Pvt. Ltd. it was submitted that the issues agitated before the Apex Court in this case was whether the appellant was entitled to the certificate being a diagnostic centre run by private individual and whether in the facts and circumstances of the case more particularly in the absence of any denial of the allegations made by the appellants it is possible for the court to come to the conclusion that there has been a discriminatory treatment and whether the appellants had complied with all the pre-conditions stipulated in the exemption notification for being entitled to the issuance of a certificate. Counsels for the appellants submitted that none of the issues are relevant for the present case, therefore, the decision is clearly distinguishable.

19. Learned Counsels submitted that the Apex Court in the case of UOI v. Sampat Raj Dugar in para 21 observed as under: 21 The next question is whether the import of the said goods was contrary to law in any manner and whether the said goods are liable to be confiscated under the Customs Act. The only provisions relied upon by the appellants are Clauses (d) and (o) in Section 111 of the Customs Act which we have set out hereinabove. In our opinion none of these Clauses are attracted in the present case. Clause (d) contemplates an import which is contrary to any prohibition imposed either by the Customs Act or any other law for the time being in force. No such prohibition can be pleaded in this case since on the date of the import the said goods were covered by a valid import licence. The subsequent cancellation of licence is of no relevance nor does it retrospectively render the import illegal. [East India Commercial Co. Ltd. v. The Collector of Customs, Calcutta ]. Clause (o) contemplates confiscation of goods which are exempted from duty subject to a condition, which condition is not observed by the importer. Occasion for taking action under this clause arises only when the condition is not observed within the period prescribed, if any, or where the period is not so prescribed, within a reasonable period. It, therefore, cannot be said that the said goods were liable to be confiscated on the date of their import under Clause (o). Further, merely because the second respondent had not complied with the condition imposed with respect to three earlier consignments, it may not be possible to presume that it would not be observed even with respect to the four consignments in question. Be that as it may, it is sufficient for the present to notice that so far no action has been taken on that account either under the Customs Act or under Section 4G of the Imports and Exports (Control) Act, 1947. Section 4G of 1947 Act is also conceived to meet such a situation, as a reading thereof would disclose. It says that non-compliance with any condition of licence relating to utilisation of such goods renders the said goods liable to confiscation notwithstanding that such goods are mixed up with other goods or material. Even though a period of more than five years has passed by, no action has been taken either under the Customs Act or under Section 4G of Imports and Exports (Control) Act, though the import licence of the second respondent has been cancelled. We must presume in the circumstances that no such action was on is contemplated. In these circumstances the title of the first respondent to the said goods remains free of any cloud.

They emphasised in this case that Apex Court held, "Occasions for taking action under this clause arise only when the condition is not observed within period prescribed, if any, and where the period is not so prescribed within a reasonable period." It was argued that in the instant case there is no period prescribed and, therefore, the demand can be raised only within a reasonable period. It as submitted that therefore, the demands beyond six months were time-barred as they could not be raised.

20. The Counsels for the appellants also submitted that an exemption under a Notification is for a period of time, that if must be finite and that post-importation conditions cannot be said to be infinite; that the Notification in dispute did not contain any post-importation condition and all the conditions were pre-importation conditions and hence demand of duty cannot extend beyond the period of six months; that even in case of post-importation conditions the period should be reasonable and cannot extend beyond a period of six months.

21. The Counsels for the appellants submitted that if any post-importation conditions was there it was with regard to the certificate to be produced for de-bonding purpose only. It was also contended that there was no directive in the Notification to initiate proceedings for recovery of duty even if a slightly lesser percentage of free treatment to indigent person which could be made up during the subsequent period.

22. Referring to the observation of the Tribunal in the case of Overseas Cycle Co. v. CC 7992 (58) ELT 248 (T) the Counsels for the appellants submitted that the functions of the Customs and licensing authority are distinct and different as is evident from para 16 of the decision of this Tribunal in the case of Overseas Cycle Company cited above In the Notification, it is the MOH/DGHS who is to look after the conditions. Referring to this Tribunal's decision in the case of Arvind Mills Ltd. (Ankur Textiles) v. CCE & C, Ahmedabad , this Tribunal in para 9 of its order observed as under; 9. It is well settled that a notification is required to be construed strictly and no word which is not there cannot be prescribed to be there and it is the language of the notification which is required to be construed as it is.

It was submitted by the Counsels for the appellants that Customs has not been given any power to investigate/check or monitor the working of the undertaking given. It was only MOH/DGHS who could supervise the undertaking given and then come to the conclusion and if necessary, cancel the certificate issued and only then the Customs could take action. Further it was argued that there was no procedure set out for maintenance of records, their preservation and enforcement of the demand.

22. Referring to the judgment of the Hon'ble Calcutta High Court in the case of Ellenberic Steels Ltd. v. Regional Development Commissioner for Iron & Steel , learned Counsels submitted that Hon'ble Calcutta High Court observed that "Going by the letters of the provisions, we do not find anything to vest the Development Commissioner with any discretion to register or not to register. If any public functionary to ex facie not vested with any discretion, in respect of his public functions, it would be against all canons of construction to invest him with any power to act in his discretion on the ground of any supposed expediency or otherwise." Similar view was taken by the Tribunal in the case of Gujarat Co-operative Oil Seed Grover Federations Ltd v. CCE . It was, therefore, submitted by the Counsels for the appellants that Customs had no power to supervise/check/monitor the undertaking given.

23. Referring to the judgment of the Apex Court in the case of Hemraj Govardhandas v. UOI. 1978 (2) ELT 350 the Apex Court held, "on a true construction of the language of the notification it is clear that all that is required for claiming exemption is that the cotton fabric must be produced on powerloom owned by co-operative society. There is no other requirement under the notifications that cotton fabric must be produced by the co-operative society and powerlooms for itself. It is well established that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. If the tax-payer is within the plain terms of any exemption he cannot be denied its benefit by calling in aid any supposed intention of the exempting authority." Learned Counsels for the appellants submitted that their case strictly falls under this finding of the Apex Court and since the conditions of the notification in dispute were pre-importation and the entire power of investigation and monitoring was vested in MOH/DGHS during the validity period of the exemption certificate Customs had no authority to investigate, monitor or check or start recovery proceedings specially when the provisions did not permit demand of duty which was beyond a period of six months.

24. Learned Counsels for the appellants also argued that Section 111(o) was not applicable in their case. It was submitted that the goods were not prohibited and that the conditions if any, were pre-importation and were satisfied at the time of clearance of the goods. It was submitted that the goods were not liable to confiscation as there was no violation of the provisions of Section 111(o) of the Customs Act, 1962.

25. Another point that was raised and argued before us was that the exemption notification has since been rescinded and since the notification was rescinded in 1994 no action can be initiated for violation of the conditions, if any, under the rescinded notification as there was no saving clause. In support of this contention they cited and relied upon the judgment of Hon'ble Madras High Court in the case of Apollo Hospital Enterprise .

26. Shri Vaithiyalingam, Senior Central Government Standing Counsel and Shri R.D. Negi, learned Senior Departmental Representative for Revenue submitted that in all the appeals being agitated there is a clear violation of the terms of the undertaking given for the purpose of availing benefit of notification inasmuch as the benefit of free treatment of poor/outdoor patients to the prescribed limit was not extended by the appellants; that Customs authorities had clear jurisdiction to invoke the provision of the Customs Act, 1962 for enforcing the demand of duty.

27. It was pointed out that Section 111(o) of the Customs Act, 1962 stipulates that any goods exempted subject to any conditions 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. It was submitted by them that if the exempted goods had violated the terms of the notification, customs duty became recoverable and it is only Customs authorities who can proceed to recover the amounts in terms of Section 28 or other provisions of the Act. Senior Standing Counsel referred to the judgment of the Apex Court in the case of Mediwell Hospital & Healthcare Pvt.

Ltd. cited above, stating that this decision has clarified in para 12 of their judgment that, "We would like to observe that the very notification granting exemption must be construed to cast continuing obligation on the part of those who have obtained certificate from the appropriate authority and on the basis of that to have imported equipment without payment of customs duty to give free treatment to the people mentioned in the notification." The Apex Court further observed that "The competent authority, therefore, should continue to be vigilant and check whether undertakings given by the applicants are being duly complied with after getting the benefit of exemption notification and import of equipment 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 persons who have availed the benefit of exemption to pay the duty payable. The Hon'ble Supreme Court further observed that "Objective must be achieved in any case and the very authority who has granted the certificate of exemption would ensure that if an obligation imposed on the person availing of the exemption notification is being duly carried out." Learned Senior Standing Counsel, therefore, submitted that the Apex Court clarified that the obligation was continuous; that competent authority to be vigilant and check whether the undertakings given by applicants are being duly complied with; that on being satisfied that the obligations are not being carried out they can enforce realisation of customs duty; that in the event of default, there should be coercive official action and that the conditions of the exemption notification could be enforced by any authority.

28. Learned Senior Standing Counsel, therefore, submited that it was not necessary for Ministry of Health/DGHS to have proceeded to initiate proceedings themselves so long as there is evidence on record to show violation of the conditions then Customs authorities could issue notice for recovery of the amount and further action which has been done in these cases.

29. Learned Senior Standing Counsel for Revenue also referred to the judgment of the Apex Court in the case of Sheshank Sea Foods Pvt. Ltd. v. UOI. 1996 (88) ELI 626 wherein the Apex Court held as under: 9. Section 111(o) states that when goods are exempted from Custom 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, 13m May, 1969 refers to the breach of the condition of a license 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 appellants' 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.

It was contended by the Counsels for Revenue that the facts in the present case are similar to that in the case of Sheshank Sea Foods Pvt.

Ltd. and hence the ratio of the judgment of the Apex Court squarely covers the present case and hence it is clear that Customs had the jurisdiction.

30. He submitted that exemption Notification No. 64/88 was a conditional notification. The conditions were post-clearance depending on the use of the exempted material. He submitted that these conditions created a continuous obligation till the goods themselves were destroyed. He submits that the question of time-limit did not apply to these goods inasmuch as the goods cleared without payment of duty could be used for a number of years and could still give service and were not proposed to be destroyed under the Customs supervision. He submitted that violation of the conditions of exemption would have rendered the goods liable to duty, seizure and confiscation. He submitted that in all these cases investigations were conducted by the Customs Authorities concerned and the investigations revealed that there was violation of the conditions applicable to the goods after clearance or post-importation conditions and, therefore, only after investigations the goods were found to have become offensive by violation of the conditions of the exemption notification. He therefore, submitted that time-limit would not apply to these cases and, therefore, it can be said that the demands confirmed by the competent authority are not barred by time.

31. He referred to the judgment relied upon by the appellants in the case of Dewan Chand Satyapal Agarwal Imaging Research Centre v. CC, New Delhi and In the instant case since the Show cause Notice has been invoked beyona permissible period under Section 28, the Apex Court judgment in Mediwell case cannot be said to apply to the facts of the present case He, therefore, submitted that since the Apex Court judgment holding that the obligation was continuing in the case of Mediwell Hospital & Healthcare Pvt. Ltd. applies to the facts of the present case, therefore, it cannot be said that since the Show cause Notice has been issued beyond limitation period under Section 28 of the Act, time-bar would apply Ld. Standing Counsel argued on the other aspects also.

32. We have heard the detailed submissions made by the Counsels for the appellants as well as the arguments of the learned Senior Central Government Standing Counsel and SDR for Revenue. We find that the issues for determination before us are whether Customs Authorities have jurisdiction to initiate proceedings of demanding duty and confiscation the goods for violation of the conditions of the exemption notification during the validity of the certificate issued by the MOH/DGHS and whether the demands are time barred.

33. 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 condition (to be fulfilled before or after clearance) as may be specified in the notification, goods of any specified description, for 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 the 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 of Health or the Directorate General of Health Services (DGHS) was to issue a certificate after getting an undertaking from the specified hospital who undertook to comply with the conditions for import of hospital equipment 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 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 the 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 accoring 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 fulflled, and any continuation or concellation 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 did not arise.

34. Various arguments were adduced on these issues. It was contended for the appellants that exemption Notification No. 64/83 did not authorise Customs authorities to initiate proceedings. There was no authority given to Customs authorities to go and check the violations.

Violations of the conditions of the Notification were pre-clearance and not post-clearance. It was submitted that these conditions were applicable at the time of clearance of the goods from the Customs. It was submitted that if there was any authority to oversee/check/monitor the violations it was only the MOH/DGHS. In support of this contention the appellants relied on the judgment of the Hon'ble Karnataka High Court in the case of Yellamma Dasapp v. CC, Bangalore cited above.

35. On examination of these contentions and the submissions made by Revenue we find that the conditions were not only the pre-clearance conditions but were post-clearance also.

36. The exemption from payment of customs duty was subject of fulfilment of conditions. The conditions related to use of imported hospital equipment and violation, if any, could be only after use of the goods for prescribed free treatment also. On violation of the conditions being observed demand of customs duty became due. No doubt the Apex Court ruled that the authority to take coercive action for not complying with the undertaking given was the MOH/DGHS but the authority to demand duty was only Custom in terms of the Act under which the exemption was given.

37. Post-clearance conditions in an exemption notification can be enforced only by the Customs authorities as was held by the Tribunal in the case of Oversas Cycle Co. v. CCE . In para 16 of their judgment it has inter alia been held, "But the functions of the Customs authorities start after the goods are imported and brought into territorial water of the country. The Customs authorities are concerned with the recovery of customs duty and to check evasion of payment of customs duty under Customs Act, 1962.

38. A close reading of the above findings of the Tribunal clearly shows that the Customs authorities come into picture after clearance of the goods from the Customs. Licensing authorities' functions end with the issue of certificate and coercive action being taken for non-compliance with the undertaking given. In the instant case we note that hospital equipment was imported without payment of duty on an undertaking given by the hospital or diagnostic centre to the effect that they will be treating free poor patients up to the prescribed percentage indicated in the above Notification. Therefore, post-imporation violation of the condition of the exemption Notification would appropriately fall within the Customs jurisdiction and not within the jurisdiction of the certificate issuing authority that is MOH/DGHS.39. The Hon'ble Karnataka High Court in the case of Medical Relief Society of South Kanara in their judgment Medical equipment in the instant case was imported subject to the condition that the petitioners continuously discharge the obligation of providing a medical surgical and diagnostic treatment to at least 40% of its outdoor patients and indoor patients with a family income of less than Rs. 500 per month. Failure to discharge that obligation was liable to expose the equipment to confiscation besides entitling the respondents to recover the amount of duty payable on the same.

Proceedings for recovery of the exempted customs duty or the confiscation of the equipment in the above circumstances does not fall foul of Section 28.

40. It would thus be clear that the above decision of the Hon'ble High Court decides that (a) Customs can start recovery proceeds (b) Recovery will be of the amount which was exempted (c) equipment can be confiscated and (d) proceedings of recovery do not fall foul of Section 28 of the Customs Act, 1962.

41. The only question that remains is whether it was only MOH/DGHS to first establish the violation. This question is answered by the facts of the cases in the case of Medical Relief Society as under: 2. People's Union of Civil Liberties in a writ petition filed in public interest before the High Court of Delhi made serious allegations about what it described as a financial scam involving custom free, import of expensive medical equipment worth thousand crores on the basis of custom duty exemption certificates issued by the Directorate General of Health Sciences. These certificates were according to the petitioners, granted illegally with a view to defraud the exchequer of a huge amount recoverable on the import of such equipment by a large number of hospitals established in different parts of the Country. While the petition was pending consideration before a Division Bench of the High Court, the Government of India by an order dated 20th of May, 1996 appointed Shri K. Chandramouli, Joint Secretary, Ministry of Health and Family Welfare to conduct a preliminary enquiry as to the validity of the certificates issued by the Directorate of Health Services from time to time. The terms of reference for the enquiry entrusted to Shri Chandramouli were enlarged by the High Court by its order dated 23rd of May, 1996. The Committee was among other aspects detailed in the modified terms of reference drawn up by the Court required to examine the validity of the certificates granted to 19 different hospitals including the petitioner Manipal Hospital, Bangalore. A report was in due course, submitted by Shri Chandramouli, which prima facie found the acts of the Officers of Directorate General of Health Services and Customs Department to be irresponsible and negligent. The report did not rule out large scale corruption in the issue of the certificates. Keeping in view the report and the fact that the evasion of duty involved ran into hundreds of crores, the Court by an order dated 18th of October, 1996 constituted two Committees. The first Committee comprising Shri S.D. Mohile, Member, Central Board of Excise and Customs was required to quantify the amount of customs duty foregone in cases where requipment/machinery was released with or without production of customs exemption certificate under Notification No. 64/88, dated 1st of March, 1988 and to suggest steps to be taken for collection of the duty payable by the parties who had availed of the exemption available under the notification, to which they were not otherwise entitled. The second Committee comprising Officers of the Revenue Intelligence, Central Excise, the Directorate of Health Services and the CBI were constituted under the overall supervision and guidance of Mr. Padam Rosha (Retired) Director General, Security, J&K with the object of identifying the acts of omission and commission of the Officers of the Directorate General, Health Service/Ministry of Health and Family " Welfare/Customs Department, or any other Department which may have resulted in a loss to the Exchequer and the reasons for such acts of omission and commission and to enquire whether customs duty exemption certificate had been issued by the Ministry of Health and Family Welfare/Directorate General of Health Sciences in accordance with the terms and conditions laid down in the notification. The Committee was also to enquire into whether any such certificates had been issued to persons, who were not otherwise entitled to the same and to find out whether the concerned.

Institutions had satisfied the conditions, subject to which the exemption from duty was granted. These Committees submitted their interim reports from time to time, upon consideration whereof, the Court by an order dated 19th of December. 1996 directed all pending applications for the grant of exemption certificates to be decided in accordance with law. By another order dated 1s' of May, 1997, the Court directed the disposal of all such pending applications within a period of 3 months from the date of the said order with a direction to the Chief Secretaries of the State Governments to render all possible assistance and to furnish the necessary information in regard to the pending applications expeditiously so as to reach the Ministry of Health and Directorate General, Health Services not later than 10 days from the date of the order.

Instructions were accordingly issued by the Govt, of India to all Chief Secretaries in terms of a letter dated 30th of May, 1997 to despatch the requisite information in a proforma forwarded to them under the said letter so as to reach the Ministry within 10 days.

The following passage from the letter is in this regard relevant: In the meantime, the High Court of Delhi has directed this Ministry to ensure the disposal of the 112 applications for exemption certificates, which are pending consideration within the next three months, i.e. by 30lh of July, 1997 positively. For doing so, it is necessary to obtain the relevant information about the applicant, in the prescribed proforma, duly certified by the State Health Secretary himself/herself. This would obviate the possibility of certificates being given routinely as has happened in the past. In order to expedite the process, the High Court of Delhi has directed the State Governments through the Chief Secretaries to supply the Ministry/Directorate General of Health Services (DSHS) relevant information in respect of pending applications. The Court has further directed that instructions should be issued to the Chief Secretaries that this information shall be supplied and should reach the Ministry not later than 10 days from the receipt of request for such information. As directed by the Court, a copy of the relevant extract containing their directions are enclosed herewith so that necessary action can be taken by you personally to ensure that there is no delay in the transmission of the information.

42. Further the Apex Court in the case of Jagdish Cancer & Research Centre 2001 (132) ELT 257 in para 13 on the question whether a shortfall in one period can be adjusted against the excess during the other period held-- It should generally be all through the period. It being atleast 40%, there is hardly any occasion to say that in case there is more than 40% in a given period, that may make good the deficiency in the previous or following year.

43. We note that Notification No. 64/88 was issued by the Government of India in exercise of the powers conferred by Sub-section (1) of Section 25 of the Customs Act, 1962.

44. Under Section (2) of Section 25 provides that duty means the duty of customs leviable under the Act. The determination of the amount of duty due was to be done by the proper officer Proper officer has been defined in Section 2(34) of the Ad which reads, "Proper Officer in relation to any functions to be performed under that Act means the officer of Customs who has been assigned those functions by the Central Board or Commissioner of Customs in terms of Section 122 anything which is liable to confiscation or any person who is liable to penalty such confiscation and penalty are to be adjudged by different grade of officers depending upon their jurisdiction and value of the goods liable to confiscation.

45. Under Notification 64/88 the approval of the import of hospital equipment was vested in the MOH/DGHS. Certification of the specified hospitals/diagnostic centre was also entrusted to MOH/DGHS. Thus the role of the Ministry of Health and of the DGHS was prior to the clearance of the imported hospital equipment. On actual import the benefit of exemption was to be considered by the proper Customs Officer.

46. We have also perused the decision of the Apex Court in the case of Sheshank Sea Foods Pvt. Ltd. cited above. In para 10 the Apex Court held-- We do not find, in the provisions of Import-Export Policy or the Handbook Procedure issued by the Ministry of Commerce, Government of India, anything that even remotely suggests that the aforesaid power of the Customs authorities has 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.

On examination of Notification No. 64/88 we do not find any provision which precludes the Customs authorities.

47. Further the Apex Court in para 11 of their above judgment held as under: 11. The communication of the Central Board of Excise and Customs dated 13th May, 1969 refer 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 appellants' licences and, in that sense, a breach of the terms of the said Exemption Notification is also a breach of the terms of the licence, entitling the licensing authority to investigate But the breach is not only of the terms of the licence; 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.

Examining those rulings of the Apex Court we note that in the case before us the hospital obtained exemption from payment of customs duty and, therefore, Customs officers are competent to investigate.

48. We also note that the appellants heavily relied on the judgment of Yellamma Dasappa given by the Hon'ble Karnataka High Court. We note that in view of the Hon'ble Supreme Court judgment in the case of Sheshank Sea Foods Pvt. Ltd. the law is now setled that Customs authorities are competent to investigate violations of any exemption notification and that Customs are not precluded from taxing action. In the instant case we note that investigations were initiated following the directions of the Hon'ble Delhi High Court in the case cited above and constitution of the Rosha Committee.

49. In para 11 of their judgment in the case of Yellamma Dasappa relied upon by the appellants heavily the Hon'ble Karnataka High Court has observed, "It is clarified that this order does not come in the way of respondents initiating any proceedings against the appellants in the matter of cancellation for violation of the conditions or in demanding customs duty after following the procedure prescribed in law." Thus it would be seen that even this judgment of the Karnataka High Court does not preclude Customs from demanding customs duty after following the procedure prescribed. In the instant case the Customs have initiated proceedings of demanding customs duty after following the procedure prescribed in law.

50. Further the Hon'ble Karnataka High Court has relied on para 12 of the judgment of the Apex Court in the case of Mediwell Hospital & Healthcare Pvt. Ltd. holding that the competent authority stated in that judgment is only the certificate issuing authority that is MOH/DGHS. But a reading of the Notification does not say so. There is a distinct division of work of the various Departments of the Govt. of India whereas the authority issuing certificate on the undertaking given by the hospital/diagnostic centre is MOH/DGHS yet the enforcement of the post-importations conditions lies only with the Customs because violation of the conditions leads to demand of duty and again regarding confiscation of the goods etc. The Apex Court in their judgment in the case of Mediwell Hospital & Healthcare Pvt. Ltd. emphasised that basic objective must be achieved at any cost and that even in the event of default there should be coercive official action to perform their obligation by the all such persons. This condition becomes a part of the exemption under application and strictly be enforced by all concerned including the Police personnels when complaints of non-compliance were made by the indigent persons, on denial of such treatment in the concerned hospital or diagnostic centres, as the case may be. Thus we find that Apex Court leaves no doubt as to the action to be taken in case violation of the condition is noticed. In the instant case the violation of the conditions were noticed as adequate records were not maintained. The appellants contended that there was no requirement for maintaining records as no records were prescribed. This contention of the appellant is not tenable inasmuch as the hospital and diagnostic centre were claiming the benefit of Customs exemption Notification and since the Notification was subject to certain conditions in the form of percentage of poor patients to be treated or number of beds to be kept reserved for poor people it was necessary for them to maintain the records so that they could at any point of time justify their undertaking about their eligibility to avail themselves of the customs duty exemption.

51. Another point that was agitated was that no time-limit for maintaining of the records was prescribed in the Notification. Now there is no doubt that Notification created a continuing obligation and since the obligation was to be met by maintaining the records, therefore, there could not any time-limit as the obligation was co-terminous with the destruction of the imported material that is to say that unless the hospital equipment imported under exemption Notfn.

No. 64/88 was destroyed under the supervision of Customs liability continued and maintenance of records was essential.

52. In the case of UOI v. Kirloskar Pneumatsic Co.

the Apex Court held that Customs authorities could not be directed by the High Court to go contrary to act as the Customs authorities were creatures of the Customs Act and could not act contrary to the provisions of the Act.

53. Having regard to the above discussion we hold that the Customs authorities had the jurisdiction.

54. The second point that has been referred to us is whether demands were barred by time in terms of the proviso to Section 28 of the Act.

55. The position regarding time is to be seen in the light of the findings of the Apex Court in the case of Mediwell Hospital & Healthcare Pvt. Ltd. cited above in which the Apex Court held that obligation under Notification No. 64/88 is a continuous obligation on the part of all those who have obtained certificate from the appropriate authorities. The demand for recovery of customs duty could be enforced at any time during the availment of the exemption and hence there could be no time-limit to be counted from the date of clearance of the hospital equipment. Further the Karnataka High Court in the case of Medical Relief Society of South Kanara cited above in para 43 held, "Proceedings for recovery of the exempted customs duty or the confiscation of the equipment in the above circumstance does not fall foul of Section 28." 56. In the instant case we note that the obligation was created on the hospital equipment importer by the conditions. The conditions were based on the equipment imported when this equipment will be used for treating the particular percentage or number of patients who were poor.

Thus infringement could be only prospective from the date of clearance of the goods. Since it was a post-importation obligation, therefore, liability to pay duty or confiscation of the goods could arise only subsequent to the date of clearance of the goods. In the absence of any specific period, the liability could arise only when there is infringement of the condition and hence Section 28 did not apply.

57. At the point of import no duty was collected. Duty became payable only when infringement of the obligation was observed. Having regard to this aspect the date for raising demand cannot be counted form the date when the proper officer had made the order originally for the clearance of the goods but it should be counted only from the date of Show cause Notice when infringement is alleged. The Tribunal in the case of Dewan Chand Satyapal Agarwal Imaging Reserach Centre had not followed the judgment of the Apex Court in the case of Mediwell Hospital & Healthcare Pvt. in which the Apex Court had held, "Obligations cast on the importer was a continuing obligation. Needless to say that in a continuing obligation the date of clearance of the goods cannot be the date for determining limitation. Thus the judgment of this Tribunal in the case of Dewan Chand Satyapal Agarwal Imaging Research Centre is not correct law." Therefore, having regard to the above discussion we hold that demands are not time-barred.

58. Regarding the question of confiscation of the offending goods we note that the exemption Notification No. 64/88 was conditional Notification. Section 111(o) of the Customs Acts, 1962 reads-- (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 condition is not observed unless non-observance of the condition was sanctioned by the proper officer. Such goods brought from a place outside of India shall be liable to confiscation.

In the instant case the goods were exempted under the conditional notification. Since the notification was conditional the goods were liable to confiscation for violation of the condition of the notification.

59. In para 43 of its judgment the Hon'ble Kamataka High Court observed-- A plain reading of the above would show that the goods, which are exempted from payment of duty subject to any condition are liable to be confiscated, in case the conditions subject to which the same are exempted from duty are not satisfied unless non-observance thereof is sanctioned by proper officer.

Failure to discharge that obligation was liable to expose the equipment to confiscation besides entitling the respondents to recover duty.

60. Having regard to this position in law the Customs authorities clearly had the power to take action under the provisions of Section 111(o). The Apex Court in the case of Sheshank Sea Foods Pvt. Ltd. held-- But the breach is not only of the terms of the licence, 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.

In the instant case we note that Customs Authorities had initiated proceedings after breach of the obligation cast on the importers of the hospital equipment was noticed by following correct procedure.

Therefore, we hold that Customs Authorities has power to confiscate the equipment and allow it to be redeemed on payment of fine etc. We would not like to go into the question of how much fine should be imposed inasmuch as Section 125 of the Customs Act, 1962 is very clear about fine to be imposed. Penalty should also be commensurate with the intensity of the offence.

61. The points referred to us are answered as above. There are so many other points in the Appeals. The Appeals are, therefore, now sent to the Bench concerned for deciding each Appeal after taking the above findings into account.