2006 (2) TMI 481 - AT - Customs

Summary

Issues Involved:
1. Non-submission of installation certificate.
2. Non-fulfillment of conditions under Notification No. 64/88-Cus.
3. Reliance on a letter not mentioned in the show cause notice.
4. Confiscation of CT scanner under incorrect section.
5. Imposition of penalty under Section 114A.

Issue-wise Detailed Analysis:

1. Non-submission of Installation Certificate:
M/s. Hissar Medical Diagnostic & Hospitals Limited imported a Toshiba TCT 300S Whole Body CT Scanning machine under Notification No. 64/88-Cus., dated 1-3-1988, and cleared it without duty on 12-11-1992. They were required to submit an installation certificate from the Directorate General of Health Services (DGHS) within a reasonable period, which they failed to do, leading to a show cause notice dated 24-5-1997 demanding duty of Rs. 79,11,176/-.

2. Non-fulfillment of Conditions under Notification No. 64/88-Cus:
An audit conducted by the Accountant General (Audit), Haryana, revealed that the hospital did not meet several conditions of the notification:
- The percentage of outdoor patients receiving free treatment was below the required 40%.
- Indoor patient facilities started two years after the import.
- No records confirmed that indoor patients with a monthly income of less than Rs. 500/- were treated free.
- The CT scanner was deemed unnecessary for the hospital's operation.

A subsequent show cause notice dated 29-5-1997 demanded differential duty and proposed confiscation of the CT scanner and a penalty under Section 114A of the Customs Act.

3. Reliance on a Letter Not Mentioned in the Show Cause Notice:
The Commissioner relied on a letter from DGHS dated 12-12-1997, which withdrew the customs duty exemption certificate. This letter was not mentioned in the show cause notice, and the notice was not amended to include it. The appellants argued that the exemption certificate was valid at the time of import and that the Commissioner should not have relied on the letter without amending the show cause notice.

4. Confiscation of CT Scanner under Incorrect Section:
The show cause notice proposed confiscation under Section 111(d) and (m) of the Customs Act, but the Commissioner confiscated the scanner under Section 111(o). The appellants contended that there was no misdeclaration or violation of import prohibitions, making the confiscation under Section 111(o) invalid. However, the court found that the mention of Section 111(o) in the show cause notice was a typographical error and did not prejudice the appellants' defense.

5. Imposition of Penalty under Section 114A:
The penalty was imposed under Section 114A, which was introduced in 1996, while the import occurred in 1992. The appellants argued that this provision could not be applied retrospectively. The court agreed, noting that Section 114A applies to cases of collusion, willful misstatement, or suppression of facts, none of which were present. The appropriate section for penalty would have been Section 112(a), but since it was not proposed in the show cause notice, no penalty could be imposed under this section.

Judgment Summary:
The court upheld the demand for customs duty, finding that the hospital failed to meet the conditions of Notification No. 64/88-Cus., specifically the requirement to provide free treatment to 40% of outdoor patients and 10% of indoor patients. The confiscation of the CT scanner under Section 111(o) was also upheld, despite the typographical error in the show cause notice. However, the penalty under Section 114A was set aside as it was not applicable to the case. The redemption fine was reduced from Rs. 35 lakhs to Rs. 20 lakhs.

Conclusion:
The appeal was partly allowed, with the customs duty demand and confiscation upheld, but the penalty under Section 114A set aside and the redemption fine reduced.