2012 (9) TMI 915 - AT - Customs

Exemption under Notification 64/88-Cus - Assessee did not provide free treatment to 40% OPD patients during the years 1995 and 1996 - notice gives the ground that they have not disclosed the details and addresses of the patients treated free in OPD - Difference of opinion - Majority order - Held that - Appellant while replying to the notice was very much aware that percentages of patients treated free of cost had to be furnished to prove that the condition in the notification was satisfied and the same was furnished in reply. The defence replies furnished on 5-12-2000 and gist of submissions made on 19-1-2005 make this position very clear. However the appellants in replies to the adjudicating officer have furnished replies with reference to position up to 1994 only and not later. The certificates issued by DGHS at the time of import of the goods are not taken on record. - The letter dated 2-8-2000 addressed by the appellant to DGHS has not been taken on record and the letter dated 3-11-2000 from DGHS stating that the CDECs have been cancelled is not furnished to the appellant. - The issue as to the point of time up to which the continuing obligation shall continue is not examined with reference to the nature of goods imported and the decisions of various Courts on the issue - In the event of the exemption under Notification 64/88-Cus. being denied to them there is a need to examine whether the appellants were eligible for exemption under Notification 65/86 or any other alternate exemption as would have been available and where the eligibility can be determined with reasonable certainty at this point of time. Case should not be remitted back for making enquiries with the police station or for cross-examination of any official from DGHS at this late point of time because it is not the view of any individual officer that matters in such issues but of the organization as reflected in records. The case should be decided on evidence as disclosed by records. - treating 40% of the outdoor patients was a condition not possible to be complied with because adequate number of poor patients did not turn up. The argument is repugnant to common sense. Further the notification did not say that 40% of the patients should be poor and they should be treated free of cost. The condition was only that 40% of the outdoor patients (without mentioning any criterion) should have been treated free of cost. There is no impossibility in complying with this condition. Further it is strange that the appellant hospital did not face such problem before the import of goods but states that they found this condition impossible to be complied with after import of the goods. - Matter remanded back - Decided in favour of assessee.

Issues Involved:
1. Compliance with conditions of Notification No. 64/88-Cus.
2. Validity of the Show Cause Notice (SCN) and adherence to natural justice.
3. Applicability of the exemption under Notification No. 64/88-Cus. post-rescission.
4. Classification of the hospital under the appropriate category of the notification.
5. Time-bar for recovery of duty under Section 28 of the Customs Act, 1962.
6. Imposition of penalty and confiscation of goods under Sections 111(o), 112(a), and 114A of the Customs Act, 1962.

Detailed Analysis:

1. Compliance with Conditions of Notification No. 64/88-Cus.:
The appellant hospital imported medical equipment duty-free under Notification No. 64/88-Cus., which required providing free treatment to at least 40% of OPD patients and reserving 10% of beds for free treatment of poor indoor patients. The hospital admitted that in 1995 and 1996, the percentage of free OPD patients was less than 40%. The Supreme Court in Mediwell Hospital held that the obligation to provide free treatment is a continuing one. The Tribunal upheld that the hospital did not meet the condition of treating 40% of OPD patients free during 1995-1996, thus violating the notification.

2. Validity of the SCN and Adherence to Natural Justice:
The SCN issued to the hospital was challenged for not specifying the exact conditions violated. The Judicial Member noted that the SCN did not provide clear allegations, thus violating natural justice principles. It was emphasized that the SCN should allow the appellant to understand and respond effectively to the charges. The Majority Order agreed that natural justice was not followed, necessitating a remand for a fresh adjudication.

3. Applicability of Exemption Post-Rescission:
The hospital argued that the obligation to comply with the notification's conditions ended when the notification was rescinded on 1-3-1994. The Tribunal noted that the obligation is a continuing one, but the Delhi High Court in Sir Ganga Ram Trust Society held that conditions do not survive post-rescission. This aspect was not adequately addressed in the original adjudication and required reconsideration.

4. Classification Under Appropriate Category:
The hospital claimed it should be considered under Category 1 of the notification, which pertains to hospitals run or aided by charitable organizations. The Tribunal found no evidence that the hospital had a certificate for Category 1 and noted that the issue was raised late in the proceedings. The Majority Order did not support remanding for reclassification under Category 1, as the authority to issue such certificates lies with the DGHS, not the customs authorities.

5. Time-Bar for Recovery of Duty:
The hospital contended that the demand was time-barred under Section 28 of the Customs Act. The Tribunal referred to the Supreme Court's decision in Mediwell Hospital, which held that the time limit under Section 28 does not apply to violations of post-importation conditions. The duty demand was thus not time-barred.

6. Imposition of Penalty and Confiscation of Goods:
The Tribunal upheld the confiscation of goods under Section 111(o) and the imposition of penalties under Sections 112(a) and 114A, as the hospital failed to comply with the notification's conditions. The Majority Order agreed with the imposition of penalties and confiscation but remanded the case for a fresh adjudication considering the proper application of natural justice and the continuing obligation.

Conclusion:
The appeal was dismissed, but the case was remanded for fresh adjudication to address the issues of natural justice, the applicability of the exemption post-rescission, and the exact nature of continuing obligations under the notification. The Tribunal emphasized the need for a pragmatic approach in considering ground realities and ensuring fair opportunity for the appellant to present its case.

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