| SooperKanoon Citation | sooperkanoon.com/37535 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Calcutta |
| Decided On | Dec-28-2004 |
| Judge | A Wadhwa, R K Jeet, M Bohra |
| Reported in | (2006)(197)ELT120Tri(Kol.)kata |
| Appellant | Belle Vue Clinic |
| Respondent | Commissioner of Customs |
2. Shri S.K. Bagaria, Id. Advocate appearing for the appellants submits that the appellant is Charitable Society duly registered under the West Bengal Societies Registration Act, 1961. The C.T. Scanner and its spares were imported by the appellants during the years 1989 to 1992 and assessments were originally provisional. However, the provisional assessments were subsequently finalised. After a prolonged use for a period of 7 years, as the said CT Scanner had outlived its utility and since technological advancements had also taken place in the meantime, bringing in the latest model which was highly sophisticated and advanced, the appellant decided to discard the said old CT Scanner and donate it to another hospital of a Charitable Society.
3. He submits that the proceedings were initiated against the appellants on the ground that as they had failed to fulfill the condition of Notification 64/88-Cus under which the goods were imported, the same are liable to confiscation and the appellants are liable to pay duty. He submits that though the continuous obligation placed under the said Notification was being fulfilled by them during all the relevant years but he fairly concedes on the point that the appellant is not in a position to substantiate its above stand. As such he restricts his arguments only on two grounds. First, submits the Id.
Advocate that the appellant is liable to pay duty only when he chooses to redeem the same and not otherwise and subsequently, such duty which became payable by the appellants after redemption of the goods, is on the depreciated value of the Scanner and not on the initial full valuation of the same. He also submits that the redemption fine and penalty imposed upon the appellants be reduced in the facts and circumstances of the case.
4. Shri T.K. Kar, Id. SDR appearing for the Revenue supports the impugned order.
5. After considering the submissions made from both sides, we find that the Hon'ble Supreme Court in the case of M/s. Jagdish Cancer & Research Institute has held that the condition provided under Notification 64/88-Cus, is continues obligation on the importer and if any of the condition is violated at any point of time, the goods are liable to confiscation and there is no limitation for taking action under the provisions of Section 125 of the Customs Act. The said provisions are being reproduced below for ready reference : 125. Option to pay fine in lieu of confiscation. - (1) Whenever confiscation of any goods is authorised by this Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods or, where such owner is not known, the person from whose possession or custody such goods have been seized, an option to pay in lieu of confiscation such fine as the said officer thinks fit: Provided that, without prejudice to the provisions of the proviso to Sub-section (2) of Section 115, such fine shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon.
(2) Where any fine in lieu of confiscation of goods is imposed under Sub-section (1) the owner of such goods or the person referred to in Sub-section (1) shall, in addition, be liable to any duty and charges payable in respect of such goods.
6. The appellants are not challenging the order on merits but submits that their duty liability would arise only when they choose to exercise their option to redeem the same, which stands confiscated by the order of the Commissioner. For the above proposition, they rely on the Tribunal's decision in the case of M/s. Indsu v. Commissioner of Customs . Para 2 of the said decision 2. We are unable to see how the liability to duty arises if the goods have been ordered to be confiscated and they were not redeemed after such confiscation. Liability to duty of goods confiscated would be governed by the provision of Section 125. Sub-section (2) of this section makes it clear that where any fine in lieu of confiscation of goods is imposed the owner of such goods shall, in addition, be liable to pay duty and other charges. The logical corollary should be that if the goods are not redeemed, the liability to duty payment of duty will not arise. On confiscation the goods become the property of the Central Government. A notification issued under Section 25 of the Act cannot take precedence over the provision of this Section. Duty is therefore not leviable.
7. We find that the demand of duty has been confirmed by the Commissioner under Section 17(2) of the Customs Act read with 125(2).
The appellants have contended that the assessments were finalised in the years 1990 to 1993 and there was no question of again making the said assessments under Section 17(2) for the second time. There was no provision of any proposal in the show cause notice for finalisation of any provisional assessments. As such, we are of the view that the demand of duty would rest upon them only if they choose to redeem the same as observed by the Tribunal in the above referred case of M/s.
Indsu. The provisions of Section 125(2) are very clear and are to the effect that the liability to duty would arise, in addition, to the fine to be paid in lieu of confiscation. As such it is clear that the duty liability is not an independent liability and would arise only if the appellants exercise his option to get the goods redeemed on payment of redemption fine. We hold accordingly.
8. As regards the quantum of duty, the appellants have contended that the same would not be in respect of original assessable value of the scanner and would be leviable on the depreciated value at the time of demand of duty. For all the period in between, the appellants had complied with the condition and as such no cotravention was found to be there. Subsequently, when the scanner was dismantled by the appellants and donated to another charitable institution, contraventions, if any, were held to be committed. This itself shows that at this stage that the appellants became liable to pay duty. As such, the same should be demanded on the depreciated value and not on the original import value.
Reference is being placed on the Tribunal's Order No. A-395/Kol/2003, dated 11-6-2003 in the case of M/s. Diascans (India) Ltd. v.Commissioner of Customs, Kolkata - . We find force in the above contention of the Id. Advocate, that the duty is not being demanded as not levied, not paid, short levied or short paid but the duty had arisen in terms of provisions of Section 125(2) of the Customs Act. The said Section would come into play at a time when the goods stands confiscated with an option to the appellants and the appellants exercises his option to pay duty. As such duty payment would relate to the value of the goods at the time of its confiscation and exercise of his option and not at the original import value of the same. We find that the Tribunal in the above referred case of M/s. Diascans (India) Ltd. has held as under :- 13. As far as the duty demand is concerned, in the absence of any specific provision under the Notification for demand of duty in such cases on depreciated value, we order that the duty be re-calculated allowing abatement on account of depreciation in value of the impugned scanner. We also order that the duty on RF Shield should also be re-calculated on its depreciated value.
Following the ratio of the above decision, we direct the Revenue Authorities to re-quantify the duty demand on the depreciated value of the goods in question.
9. In the instant case, we see no reason to reduce the quantum of redemption fine or of penalty inasmuch as the Commissioner has already taken into account the fact that the subject goods have become old and their value has considerably fallen and as such he has fixed the fine and penalty on the lower side. No further interference is called for by the Tribunal.
11. [Contra per : Jeet Ram Kait, Member (T)]. -I have perused the order recorded by learned Member (J) Smt Archana Wadhwa and I am not able to persuade myself to agree with the findings reached by her on the following point.
That the duty on the goods viz. CT Scanner imported free of duty in terms of Notification No. 64/88-Cus should be demanded on the depreciated value i.e. at the time when the goods stood confiscated and riot at the original import value of the goods.
12. Identical case came up for consideration in a batch of appeals in the case of Lady Amphthil Nurses Instns. v. CC and Ors. before the South Zonal Bench, Chennai and there was difference of opinion between learned Member (Judicial) Shri S.L. Peeran and learned Member (Technical) Shri Lajja Ram and the matter was referred to third Member (undersigned) and the majority view emerged was that the matter need to be referred to a Larger Bench and accordingly the matter was referred to the Larger Bench and the Larger Bench rendered their decision as reported in 2002 (150) E.L.T. 776 (Tribunal - LB.). The Larger Bench after detailed analysis of the various issues involved, after referring and relying upon a large number of judgments of the Tribunal/Hon'ble High Courts and the Hon'ble Apex Court have decided the following issues : (1) Customs Authorities have jurisdiction to initiate action against the importers for demanding duty, confiscating the goods, imposition of penalty in case there is violation of provision of Customs Notification. In support of their decision, the Larger Bench has extracted the relevant portion of their judgment in the case of Sheshank Sea Foods Pvt. Ltd. v. UOI We do not find in the provisions of Import-Export Policy or the Handbook of Procedures issued by the Ministry of Commerce, Government of India, anything even remotedly 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.
(2) Demand for recovery of customs duty could be enforced at any time during the availment of the exemption and there could be no time limit to be counted from the date of clearance of the hospital equipment, as held by the Hon'ble High Court of Karnataka in the case of Medical Relief Society of South Kanara as wherein it was held as under : 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.
13. In the instant case CT scanner imported by the appellants was confiscated and a duty of Rs. 65,06,775/- under Section 17(2) of the Customs Act, 1962 read with Section 125(2) thereto was demanded with an option to redeem the same on payment of redemption fine of Rs. 5,00,000/- in terms of Section 125(1) of the Act. The appellants were also imposed with a penalty of Rs. 200,000/- under Section 112(a) of the Act. The appellants have fairly conceded that they have not fulfilled the terms of the Notification as they are not in a position to substantiate their contention that the continuous obligation cast on them have been fulfilled by them. However, they do not challenge the durability and confiscability of the goods in question, but their argument is that: (a) the question of payment of duty comes only if the appellants want to redeem the goods, and (b) such duty would become payable on the depreciated value of the goods after redemption of the goods and not at the original value of the goods.
14. Learned Member (J) has agreed to the arguments of the party that the duty should be calculated on the depreciated value of the goods and for that purpose the matter is required to be remanded Examining this point, I note that the importation took place during the period from 1989 (5-12-89) to 1992. The importation was allowed duty free on the condition that the importer shall comply with the terms of the Customs Notification No. 64/88-Cus., dated 1-3-1988 which stipulate among other things : (a) that all such hospitals which may be certified by the 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, but also free on average to at least 40% of all their outdoor patients; and (b) free to all indoor patients belonging to families with an income of less than Rs. 500/- per month, and keeping for this purpose at least 10% of all the hospital beds reserved for such patients.
15. It is an admitted fact that the above conditions have not been fulfilled by appellants-importers. When the appellants have not fulfilled the conditions of the Notification, the importer have become an ordinary importer requiring to pay duty as applicable at the relevant time. In terms of Section 17 of the Act, after an importer has entered any imported goods the goods shall be examined and tested by the proper officer and after examination and testing, the duty if any, leviable on such goods shall be assessed. It is, therefore clear that duty on the imported goods is always relevant with the date of importation and not on a later date. Consequently, the duty payable by the importer in the present case has to be at the rate applicable on the date of importation. Further, the obligation of the importer under the Notification is a continuous obligation and the obligation started the date on which the importation took place, and it is this obligation which the importer has not fulfilled. As regards liability of the goods to confiscation, the relevant Section 111(o) of the Act which reads as under : Any goods exempted subject to any condition from duty or any prohibition in respect of the import thereof under this Act or any other 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 India shall be liable to confiscation.
The Hon'ble High Court of Karnataka in the case of Medical Relief Society of South Kanara v. UOI as relied a plain reading of the provisions of Section 111(o) (supra) 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 there is sanctioned by proper officer. It was also further held by the Hon'ble High Court that failure to discharge that obligation was liable to expose the equipment to confiscation besides entitling this respondents to recover duty.
16. Neither the provisions of the Customs Act, nor the Notification stipulates anything regarding duty on depreciated value. Learned Member (J) has proposed remand of the matter to re-quantify the duty demand on depreciated value following the ratio of an order passed by CEGAT, Kolkata in order No. A-395/Kol/2003, dated 11-6-2003 wherein the Tribunal had held as under: 13. As far as the duty demand is concerned, in the absence of any specific provision under the Notification for demand of duty in such cases on deprecated value, we order that the duty be re-calculated allowing abatement on account of depreciation in value of the impugned scanner. We also order that duty on RF Shield should also be re-calculated on its depreciated value.
It is clear that the Bench has noted that there is absence of any provision for demand of duty on depreciated value. Therefore, when there is total absence of any provision under the Notification for demand of duty on depreciated value (empahsis supplied by me) the question of re-calculation of duty on the depreciated value does not arise. Further, it is well settled proposition of law that a Notification is required to be construed strictly and no word which is not there can be prescribed to be there and it is the language of the notification is required to be construed as it is.
17. Further, even if there was any short fall in any one period in regard to the fulfillment of the conditions in the Notification in question, I take note of the fact that the Hon'ble Supreme Court in the case of Jagdish Cancer & Research Centre , It should generally be all through the period, it being at least 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.
Therefore, it follows that to avail of the benefit of the Notification, the appellants-importers have to fulfill the conditions of the Notification in toto, and the obligation is a continuous one.
18. So far as the view taken by the learned Member (J) that the duty liability is not an independent liability and would arise only if the appellants exercise their option to get the goods redeemed on payment of fine, I agree with the view taken by the learned Member (J) that inasmuch as in the present case, the goods have been confiscated and if the appellants do not want to exercise the option of redemption of the goods, no duty can be demanded from the importer-appellants. While the appellants are liable to penalty for breach of the conditions of the Notification, I agree with the view taken by the learned Member (J) that so far as the quantum of penalty is concerned, the same is already on the lower side and no reduction is called for. In the result, the appeal is disposed of in the following terms: (a) Liability to duty on the goods arises on the full c.i.f. value at the time of importation and not on depreciated value.
(b) Liability to duty arises only if the appellants-importers want to exercise the option to redeem the goods on payment of redemption fine.
(c) Penalty confirmed under the impugned order is sustained. Ordered accordingly.
Whether in the facts and circumstances of the case, duty to be demanded on the imported goods is on the depreciated value, as held by Member (Judicial) for the reasons recorded in her order Whether in the facts and circumstances of the case, duty is demandable on the full c.i.f. value at the time of importation and not at the depreciated value, as held by Member (Technical) for the reasons recorded in his order.
19. [Order per : M.P. Bohra, Member (J)]. -1 have perused the records and the orders of the Id. Member (Judicial) and the Id. Member (Technical). I have also heard both sides.
20. Ld. Sr. Advocate, Shri S.K. Bagaria, for the appellants, submits that in the present case admittedly the C.T. Scanner and its spares in question were imported by the appellants during 1989 to 1992. The said Scanner was used at the appellants' Hospital for a period of about seven (7) years. The spares of the said Scanner were also used for replacing the old/defective parts after their import and the last import of spares was made in March, 1992. After being used for about 7 years, the Scanner more or less out-lived its utility. So the appellants decided to discard the said old CT Scanner and denote it to another Hospital of a Charitable Society in Satna, Madhya Pradesh. The Scanner was dismantled in the year 1998 and packed awaiting permission of DGHS for its donation. In the mean time, the said Notification No.64/88-Cus., was rescinded during the year 1994 Budget. During the entire period, no objection of any nature was raised either by the Customs Authorities or by DGHS. The show-cause notice was issued several years thereafter, i.e. on 12-4-2001, i.e. after about 10 years.
The order as regards confiscation of the goods was passed on 13-9-2001 and in accordance with Section 125, an option was given to the appellants to redeem the goods on payment of redemption fine. In such circumstances, the value of the goods on the date of confiscation and on the date of giving the redemption option alone would be relevant and not the original import value about more than one decade back. He submits that any other view will lead to totally absurd results. He submits that if the duty is required to be paid on the original import value, it would be several times more than the depreciated value and it would virtually mean no option at all. Therefore, he submits that in such circumstances, the depreciated value of the goods at the time of confiscation and exercise of option would be the relevant one and not the original import value as held by the ld. Member (Judicial).
21. In reply, Shri T.K. Kar, ld. SDR for the Revenue, supports the views expressed by the ld. Member (Technical).
22. The basic question involved in this appeal is whether in the facts and circumstances of the case, duty to be demanded on the imported goods is on the depreciated value, as held by Member (Judicial) or duty is demandable on the full CIF value at the time of importation and not at the depreciated value, as held by Member (Technical).
23. To determine the above question, it is to be seen what is the nature of the licence. The licence is merely in leave to do a thing which enables licencee to do lawfully what he could not otherwise do except unlawfully. Licence is a contract. It is held in the case of R.M. ARAR. RM, AR, Arunachalam Chetiar v. Union of India reported in 1972 (2) MLJ 439-442 that "the licence, being one and indivisible, is granted for a particular thing envisaged under statute or contract, the benefit of licence therein is not severable simply because it is granted to more than one individual." In the present case, one of the condition of the licence has been violated. We have to see what are the consequences of such violation when any of the terms and conditions of a contract is violated. Contract will become inoperative and the party are liable to give back whatever he received under Rule 64/65 of Contract Act. The benefit, however, to be restored must be the benefit received under the contract. In the present case, the appellants have received the benefit in the form of the Customs duty exemption on the machinery and the parts imported under the licence. I find that the Hon'ble Supreme Court in the case of Commissioner of Customs (Import), Mumbai v. Jagdish Cancer & Research Centre reported in 2001 (46) RLT 121 (S.C.), has held that "a perusal of the condition in the Notification indicates that on an average, at least 40% of all outdoor patients should be provided free treatment. It is, thus, at least 40% or may be above. It is submitted that condition nowhere indicates that within what period, the prescribed percentage is to be achieved. It is submitted that it should be during the life of the equipment imported.
The shortfall of particular years may be made good in the following year. We are not impressed by this argument. It would, not at all, be necessary to prescribe any period to achieve the given percentage of patients treated free. It should generally be all through the period." It is clear from the above, that the obligation to fulfill the condition was continuous and the appellant was under an obligation to provide free services to certain category of patients which were prescribed by the Circular under reference.
24. I also observe that the Hon'ble Supreme Court in the case of Sheshank Sea Foods Pvt. Ltd. v. Union of India , has held that "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." The Customs authorities, therefore, have clearly taken an action under the provisions of Section 111(o). In the present case, the importers-appellants, have not fulfilled the conditions laid down in the Customs Notification No.64/88-Cus., dated 1-3-88. When the appellants have failed to fulfill the condition of Notification, they have become an ordinary importer and required to pay duty as applicable at the relevant time. In the terms of Section 17 of the Customs Act, after importation of the goods, the goods shall be examined and tested by the proper officer and the duty if any, leviable on such goods shall be assessed. It is, therefore, clear that the duty is always relevant with the date of importation and not on a later date. In the present case, the obligation of the appellants was a continuous one and violation of any of the condition will render them liable for Customs duty for the imported articles. Now, what will be the rate of duty. I also observe that the Hon'ble Supreme Court in the case of Collector of Customs, Rajkot v. Sarabhai International Ltd. The obligation of the respondents must be determined solely upon the basis of the said notification dated 17th April, 1980. They were exempted from paying the "duty leviable" on the imported soda ash that they cleared into the Free Trade Zone by reason of that notification. It was a condition of that notification that they would pay on demand on the soda ash that they had not used in connection with the production of detergent powder within the Free Trade Zone an "amount equal to the duty leviable" thereon. In other words, it was clearly a condition of the said notification that the respondents would pay on the surplus soda ash the amount of the duty which had not been paid thereon when the soda ash was cleared into the Free Trade Zone. It must, therefore, be held that the respondents are liable to pay the amount of the duty that would have been leviable on the surplus soda ash had it not been cleared into the Free Trade Zone under the said notification, [paras 5, 6] It is clear from the above judgment that the appellants were-liable to pay Customs duty as due on date of import, moment they failed to comply with the condition of import licence. I also observe that the Id.
Member (Judicial) has placed a reliance on the Tribunal's decision rendered in the case of M/s. Diascans (India) Ltd. v. Commissioner of Customs, Kolkata being Order No. A-395/Kol/2003 dated 11-6-2003.1 find that the facts of M/s. Diascans (India) Ltd. are altogether different and not applicable under the present set of circumstances. I find that in the case of M/s. Diascans (India) Ltd. v. Commissioner of Customs, Kolkata It will obviously be unfair to require an importer to pay duty on the original imported value, though the value is depreciated over a period of use, and there is no allegation that during the said period of use, the conditions were not fulfilled.
But in the present case, it is admitted fact that the appellants had not complied with the terms and conditions of licence and had failed to discharge their obligation to provide medical, surgical and diagnostic treatment to at least 40% of its outdoor patients and to Indoor patients with a family in couse of less than Rs. 5 00/- per month.
Failure to discharge that the obligation liable to expose the equipment to confiscation and entitling the respondent to recover the amount of duty payable on same. Therefore, the ratio of the case M/s. Diascans (India) Ltd., is also not applicable.
25. In view of the above discussions, I am in agreement with the view taken by the Id. Member (Technical) that in the instant case, the duty is demand-able on the full CIF value at the time of importation and not at the depreciated value.
26. In view of the majority order, the appeal is disposed off in the following terms :- (a) Liability to duty arises only upon exercise of option to redeem the goods.
(b) Duty to be discharged on the full CIF value at the time of importation and not on depreciated value.
(c) Quantum of redemption fine and personal penalty confirmed.
Sd./- Sd/-