2018 (3) TMI 1146 - HC - Customs

Revocation of Customs Duty Exemption Certificate (CDEC) - non-compliance with the conditions of the N/N. 64/88-Cus. dated 01.03.1988 - petitioner is a charitable institution - Held that - The said Authority has neither considered the fact that the petitioner-Institution is a Charitable Hospital nor it has considered the fact that the equipments in question were for a limited purpose and limited period. The N/N. 64/88-Cus. dated 01.03.1988 itself does not stipulate any consequence of loss of exemption in this kind of special circumstances - mere reproduction of conditions of N/N. 64/88-Cus. dated 01.03.1988 by the said Authority in the impugned order and holding that the petitioner having failed to produce the relevant records, which had been destroyed in the flood in the basement area, where such records were kept, was not enough to deny the exemption of customs duty and impose customs duty on the petitioner by withdrawing the CDEC in question. Since in the present case only one of the Authorities viz., Deputy Director General (Medical) passed the order revoking the CDEC, but the Customs Authority has not passed any order before whom the actual factual status was placed, this Court is of the opinion that the matter deserves to be sent back to these Authorities to re-decide the claim of the petitioner in the light of the aforesaid. Petition allowed by way of remand.

Issues:
1. Revocation of Customs Duty Exemption Certificate (CDEC) by Deputy Director General.
2. Alleged non-compliance with conditions of Notification No.64/88-Cus.
3. Petitioner's claim of exemption based on charitable activities and limited purpose of imported equipment.
4. Destruction of records due to flooding in basement storage.
5. Failure to consider unique circumstances of the petitioner's case.

Revocation of Customs Duty Exemption Certificate (CDEC) by Deputy Director General:
The Deputy Director General revoked the CDEC issued to the petitioner-Hospital under order Annexure-L dated 21.8.2000, citing non-compliance with conditions of Notification No.64/88-Cus. The order highlighted the inability of the hospital to provide necessary information due to records being destroyed in a flood. The revocation was based on the conclusion that the hospital failed to substantiate fulfillment of post-import conditions, rendering it ineligible to retain the CDEC.

Alleged non-compliance with conditions of Notification No.64/88-Cus:
The petitioner argued that the imported medical equipment was used for a specific research project and cardiac surgeries for the poor, not owned by the hospital but returned to the Government of India after the project's termination. The Customs Authority was urged to consider the charitable nature of the hospital's activities and the temporary nature of equipment ownership. The petitioner contended that the exemption from customs duty should not be withdrawn based on the unique circumstances of the case.

Petitioner's claim of exemption based on charitable activities and limited purpose of imported equipment:
The court acknowledged the charitable nature of the hospital's operations and the temporary use of the imported equipment for a specific research project. It emphasized that the equipment was not purchased to be owned indefinitely by the hospital but was funded by the government and later returned. The court held that these aspects were not properly considered by the Deputy Director General while passing the revocation order.

Destruction of records due to flooding in basement storage:
The petitioner's inability to produce records due to flooding in the basement storage was noted. The court recognized this challenge faced by the hospital in providing necessary documentation to support its case before the authorities. It emphasized that the loss of records should not automatically lead to the denial of customs duty exemption without considering the unique circumstances of the petitioner's situation.

Failure to consider unique circumstances of the petitioner's case:
The court found that the Deputy Director General did not adequately consider the charitable nature of the hospital, the temporary use of equipment, and the lack of stipulated consequences for loss of exemption in special circumstances. It criticized the mechanical approach of the authorities in passing orders without a proper analysis of relevant facts. The court directed the matter to be reconsidered by both the Customs Authority and the Deputy Director General in light of the petitioner's arguments and unique circumstances.

In conclusion, the court allowed the Writ Petition, quashed the impugned order Annexure-L dated 21.8.2000, and directed the petitioner to appear before both respondent authorities for a reevaluation of the case. The respondents were instructed to issue specific notices to the petitioner within two months and decide on the matter within six months, considering the observations made by the court.

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