2012 (7) TMI 6 - AT - Customs

Exemption under Notification No. 64/88-Cus pre-condition Held that - Appellant during 1995 and 1996 have failed to meet their obligation of treating at least 40% OPD patients free - obligation to treat at least 40% OPD patients and all indoor poor patients free and reserving at least 10% of the beds for this purpose is a continuing obligation and an integral part of the condition subject to which the exemption under Notification No. 64/88-Cus had been granted, the appellant, on account of their failure to treat at least 40% OPD patients free during 1995 and 1996 have become ineligible for the exemption - exemption notifications have to be construed strictly and non- fulfilment of the condition, whether intentional or unintentional will result in denial of the same Post import obligation - limitation Held that - Provisions of Section 28 are not applicable for recovery of duty for violation of post-import conditions. Therefore, the duty demand has been correctly confirmed. SCN - Allegations without any basis - does not state as to which category the appellant s hospitals belongs - allegation aforesaid in the SCN cannot be considered to have brought out allegations in clear terms to grant fair opportunity to the appellant to defend Held that - Without ascertaining the status of the appellant hospital, the Authority reached to abrupt conclusion on the allegation of not furnishing of details made in the SCN which was not the requirement of any disclosure by hospitals in terms of the Notification unless otherwise called for by Authorities under law - principles of natural justice is not followed matter to be remanded to the original authority Difference of opinion between members regarding exemption notification No.64/88-Cus and whether basis of allegation was disclosed to assessee Held that - Matter referred to 3rd member for consideration of following question

Issues Involved:
1. Compliance with conditions of Notification No. 64/88-Cus.
2. Recovery of customs duty and applicability of Section 28 of the Customs Act, 1962.
3. Confiscation of goods and imposition of penalty under Sections 111(o), 112(a), and 114A of the Customs Act, 1962.
4. Natural justice and adequacy of the show cause notice.

Issue-wise Detailed Analysis:

1. Compliance with Conditions of Notification No. 64/88-Cus:
The Appellant imported medical equipment duty-free under Notification No. 64/88-Cus, which required hospitals to provide free treatment to at least 40% of outdoor patients and reserve 10% of beds for free treatment of poor indoor patients. The Appellant claimed compliance based on certificates from the Ministry of Health & Family Welfare. However, during 1995 and 1996, the percentage of free OPD patients was below 40%, leading to allegations of non-compliance. The Tribunal noted that the Appellant had arrangements for free treatment but emphasized that actual treatment of 40% OPD patients free was necessary, not just making arrangements.

2. Recovery of Customs Duty and Applicability of Section 28:
The duty foregone was Rs. 1,32,37,001/-. The Tribunal upheld the recovery of duty, citing the Supreme Court's ruling in Mediwell Hospital and other cases, which established that the obligation to provide free treatment is a continuing one. The Tribunal held that the limitation period under Section 28 of the Customs Act does not apply to violations of post-import conditions, affirming the duty demand.

3. Confiscation of Goods and Imposition of Penalty:
The Commissioner ordered the confiscation of goods under Section 111(o) with a redemption fine of Rs. 10 lakhs and imposed a penalty of Rs. 5,00,000/- under Section 112(a). The Tribunal found no infirmity in the order, stating that non-compliance with the conditions of the notification rendered the goods liable for confiscation and the Appellant liable for penalty.

4. Natural Justice and Adequacy of the Show Cause Notice:
One member of the Tribunal, D N Panda, dissented on the issue of natural justice, arguing that the show cause notice did not provide specific allegations, leading to a violation of natural justice. He emphasized that the show cause notice must clearly state the charges to allow the Appellant to defend effectively. He also highlighted that the adjudicating authority did not address all the Appellant's pleadings and failed to consider ground realities pragmatically, as required by the Supreme Court's judgment in UOI vs. Ranbaxy Laboratories Ltd. and the Madras High Court's judgment in Apollo Hospitals.

Separate Judgments:
- Majority Judgment (Rakesh Kumar): The appeal was dismissed, confirming the duty demand, confiscation of goods, and imposition of penalty, emphasizing strict compliance with the notification's conditions.
- Dissenting Judgment (D N Panda): Called for remand of the matter for fresh adjudication, highlighting procedural lapses and the need for fair opportunity and consideration of ground realities.

Conclusion:
The Tribunal, by majority, upheld the Commissioner's order, confirming the recovery of duty, confiscation of goods, and imposition of penalty due to non-compliance with the conditions of Notification No. 64/88-Cus. However, a dissenting opinion raised concerns about procedural fairness and natural justice, suggesting a remand for fresh adjudication.

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