2016 (8) TMI 86 - HC - Customs

Validity of show causes notices - failure to adjudicate even after a long time - Held that - As far as the Customs Department is concerned, there appears to be no valid reason why it did not proceed with the adjudication of the Show Cause Notice issued by it, for well over 17 years now despite the specific orders of the Court permitting it to do so and to even pass a final order. They were only restrained from giving effect to such order. The only conclusion that the Court can draw from this is that the Customs Department is clearly not interested in proceeding with the Show Cause Notice issued by it. - For the aforesaid reasons, the Court quashes the two Show Cause Notices dated 3rd July 1997 and 9th July 1997 and the corresponding orders dated 4th November 1997 and 17th December, 1997 issued by the DGHS withdrawing the four CDECs issued to Petitioner No.1. The Show Cause Notice dated 3rd January, 1998 issued by the Customs Department to Petitioner No1 is also quashed. - Decided in favor of petitioners.

Summary

Issues Involved:
1. Validity of notices and orders issued by the Directorate General of Health Services (DGHS) and the Commissioner of Customs.
2. Compliance with the conditions of Customs Duty Exemption Certificates (CDECs) under Notification No. 64/88-CUSTOMS.
3. Procedural fairness in the issuance and withdrawal of CDECs.

Issue-wise Detailed Analysis:

1. Validity of Notices and Orders Issued by DGHS and the Commissioner of Customs:
The petitioners sought the quashing of notices dated 3rd and 9th July 1997, orders dated 4th November and 17th December 1997 by DGHS, and a Show Cause Notice dated 3rd January 1998 by the Commissioner of Customs. The DGHS orders were based on the premise that the petitioners did not respond to the show cause notices and failed to fulfill the conditions for availing CDECs. However, the petitioners had indeed responded to the notices, which was not acknowledged by the DGHS in its orders. The court found this to be a "complete non-application of mind" and unjustifiable, leading to the quashing of the DGHS orders and the Customs show cause notice.

2. Compliance with Conditions of CDECs under Notification No. 64/88-CUSTOMS:
The petitioners were required to provide free diagnostic and treatment services to a specified percentage of patients to retain the CDECs. They furnished detailed information and documentation showing compliance with these conditions, including providing free services to 40% of outpatients and 10% of inpatients. Despite this, the DGHS concluded that the petitioners did not fulfill the conditions, primarily because they were considered a diagnostic center without indoor treatment facilities. The court noted that the petitioners had provided sufficient evidence of compliance, and the DGHS failed to verify or address this information adequately.

3. Procedural Fairness in the Issuance and Withdrawal of CDECs:
The court emphasized that the petitioners were not given a personal hearing and that their replies to the show cause notices were not considered, leading to an unjustifiable conclusion by the DGHS. The court also highlighted the lack of action by the Customs Department in adjudicating the show cause notice issued to the petitioners, despite specific court orders permitting it. This indicated a lack of interest by the Customs Department in proceeding with the notice.

Conclusion:
The court quashed the DGHS notices and orders, as well as the Customs show cause notice, due to procedural unfairness and failure to consider the petitioners' replies and evidence of compliance with the CDEC conditions. The writ petition was allowed, but no costs were awarded.