2001 (10) TMI 927 - AT - Customs

Exemption with post importation condition - Hospital equipments - Exemption subject to post importation condition

Summary

Issues Involved:
1. Whether the demand for customs duty was barred by time.
2. Whether the department was justified in denying the benefit of exemption under Notification No. 64/88-Cus due to non-fulfillment of post-importation conditions, and thereby raising a demand as well as imposing fines and penalties.

Issue-wise Detailed Analysis:

1. Whether the demand for customs duty was barred by time:

The appellants argued that the demand was barred by time as the imports were made in 1990 and 1991, but the show cause notice was issued only in 2000, nearly a decade later. They relied on Section 28 of the Customs Act, which stipulates a normal period of six months for raising a demand, extendable to five years in cases of suppression of facts. The appellants cited several Supreme Court decisions, including *Miles India Ltd.*, *Doaba Cooperative Sugar Mills*, and *Raghuvar India Ltd.*, to support their contention that statutory authorities must act within the prescribed limitation periods. They also referenced the *Hope Textiles Ltd.* case, which held that no court can direct a statutory authority to ignore the period of limitation prescribed under a statute.

The department, however, relied on the Karnataka High Court's decision in *Medical Relief Society of South Kanara v. U.O.I.*, which held that proceedings for recovery of exempted customs duty or confiscation of equipment do not fall foul of Section 28 if post-import conditions are not fulfilled. The Supreme Court's decision in *Mediwell Hospital and Health Care Pvt. Ltd. v. U.O.I.* was also cited, emphasizing the continuing obligation to provide free treatment to indigent patients as a condition for the exemption.

The Tribunal majority concluded that the demand was not barred by time, aligning with the Karnataka High Court and Supreme Court's interpretations that the obligation to comply with the exemption conditions is continuous. The Tribunal noted that the demand under Section 125(2) of the Customs Act, related to confiscation and duty recovery, does not have a prescribed limitation period.

2. Whether the department was justified in denying the benefit of exemption under Notification No. 64/88-Cus due to non-fulfillment of post-importation conditions:

The appellants contended that the temporary removal of equipment to Manav Charitable Hospital due to ongoing civil work did not constitute a misuse of the exemption. They argued that the notification did not prescribe any procedure for obtaining permission for such temporary removals and that free treatment was provided during the period the equipment was at Manav Charitable Hospital. They also disputed the Commissioner's finding that they failed to maintain accounts in the prescribed format, asserting that no specific format was mandated by the notification.

The department maintained that the appellants failed to fulfill the post-importation conditions, justifying the denial of the exemption and the subsequent demand for duty, fines, and penalties. The Karnataka High Court's decision in *Medical Relief Society of South Kanara v. U.O.I.* was cited to support the view that non-compliance with the conditions warranted recovery of the exempted duty and possible confiscation of the equipment.

The Tribunal found that there was no clear finding on whether the appellants failed to provide the required free treatment to patients, as specified in the notification. The Tribunal noted that if there was any irregularity in not taking permission for the temporary removal of equipment, it might warrant a penalty but not necessarily the denial of the exemption. Given the lack of detailed examination and findings on whether the conditions of the notification were met, the Tribunal decided to remand the matter for reconsideration on merits.

Final Order:

By majority, the Tribunal held that the demand for customs duty was not barred by time. The appeal was allowed by way of remand for de novo adjudication on merits to determine whether the appellants fulfilled the conditions specified in the exemption notification.