2019 (2) TMI 612 - AT - Customs

Import of spares of medical equipments - benefit of N/N. 64/88-Cus dated 01.03.1988 - Customs Duty Exemption Certificate - Held that - The issue is in relation to imports made through the port situated in the jurisdiction of Bombay High Court. Also the decision of Delhi High Court do not departs with the decision of Bombay High Court and hold that the conditions stipulated in the Notification No 64/88-Cus, cast a continuing post importation obligations on the importers. Only difference was on the issue as to the period for such continuing post import obligations. While Delhi High Court stated that it continued till the Notification was rescinded, Bombay High Court has held that it continued thereafter in view of Section 159A of the Customs Act, 1962. SCN has been issued to the respondent, demanding the duty in terms of Section 12/ Section 125 of the Customs Act, 1962. Commissioner has in his order not recorded any findings in respect of the demand made in terms of Section 12. The order of Commissioner not considering the demand under Section 12 cannot be sustained - the post import conditions stipulated in a exemption notification are not satisfied the duty becomes payable in terms of the Section 12 of the Customs Act, 1962 and it is for the respondents to come forward and pay the duty. The order of Commissioner not considering demand of the duty legitimately payable under Section 12 of Customs Act, 1962 cannot be sustained - the matter needs to be remitted back to the Commissioner for determination of the issue in respect of the various contraventions alleged in the show cause notice and for recording a specific finding in respect of the duty legitimately payable under Section 12 - appeal allowed by way of remand.

Issues Involved:
1. Confiscation of imported goods under Section 111(o) of the Customs Act, 1962.
2. Recovery of customs duty under Section 12 and/or 125(2) of the Customs Act, 1962.
3. Imposition of penalty under Section 112(a) of the Customs Act, 1962.
4. Applicability of Section 28 and Section 125 of the Customs Act, 1962 for the demand of duty.
5. Validity of post-importation conditions under Notification No. 64/88-Cus after its rescission.

Issue-wise Detailed Analysis:

1. Confiscation of Imported Goods under Section 111(o) of the Customs Act, 1962:
The respondents imported 19 consignments of medical equipment spares without paying customs duty by availing exemption under Notification No. 64/88-Cus, based on a Customs Duty Exemption Certificate (CDEC) issued by the DGHS. However, the DGHS later withdrew the CDEC, citing non-fulfillment of the conditions specified in the notification. The adjudicating authority held that the respondents did not comply with the post-import conditions, rendering the goods liable for confiscation under Section 111(o) of the Customs Act, 1962.

2. Recovery of Customs Duty under Section 12 and/or 125(2) of the Customs Act, 1962:
The adjudicating authority determined that the duty leviable on the imported goods, in terms of Notification No. 65/88-Cus, was ?24,12,000. However, it was concluded that the duty could not be demanded under Section 28 as it was time-barred. The Commissioner also found that Section 125(2) could not be invoked since the goods were neither available for confiscation nor released against a bond agreeing to pay redemption fine. The revenue challenged this, arguing that the duty demand arises due to failure to fulfill post-import conditions, and hence Section 28 has no application. The power to recover escaped duty is vested in Section 12, which has no time limitation.

3. Imposition of Penalty under Section 112(a) of the Customs Act, 1962:
The adjudicating authority imposed a penalty of ?24,00,000 under Section 112(a) for willful misstatement and suppression of facts by the respondents. The respondents contested this penalty, arguing that no duty could be demanded, and therefore, no penalty could be imposed.

4. Applicability of Section 28 and Section 125 of the Customs Act, 1962 for the Demand of Duty:
The Commissioner held that the demand under Section 28 was time-barred and that Section 125 could not be invoked as the goods were not available for confiscation. The revenue argued that the duty demand should be based on Section 12, which is not subject to any time limitation. The Tribunal agreed with the revenue, citing the larger bench decision in Bombay Hospital Trust and the Supreme Court ruling in Fortis Hospital, which support the recovery of duty under Section 12 when post-import conditions are violated.

5. Validity of Post-importation Conditions under Notification No. 64/88-Cus after its Rescission:
The respondents argued that post-import conditions could not continue after the rescission of Notification No. 64/88-Cus. However, the Tribunal referred to the Bombay High Court decision in Shah Diagnostic Institute, which held that the conditions stipulated in the notification cast a continuing obligation on the importers, even after the rescission of the notification, in view of Section 159A of the Customs Act, 1962.

Conclusion:
The Tribunal concluded that the order of the Commissioner not considering the demand of duty under Section 12 could not be sustained. The matter was remanded back to the Commissioner for reconsideration of the issue in light of Section 12 of the Customs Act, 1962, and for determining the penalty under Section 112(a) afresh. The Commissioner was directed to conclude the adjudication within four months. The appeal filed by the revenue was allowed, and the cross objections filed by the respondents were disposed of accordingly.

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