2001 (8) TMI 113 - SC - Customs

Whether or not a new ground or case for confiscation has been carved out as found by the CEGAT? Looking to the total picture of the free treatment provided by the Centre it is to be noticed that shortfall in providing free treatment is marginal? Held that - According to the CEGAT Para 3 of the notice relates to confiscation of goods under Section 111(o) of the Customs Act on the ground of non-submission of certificate under Condition 4(iii) of the Notification. Therefore confiscation could be ordered only on the ground of non-submission of certificate and on no other ground. It is further pointed out by the CEGAT that Para 5 of the notice relates to payment of customs duty only on the ground of violation of conditions relating to providing free treatment as well as on account of non-submission of certificate under Condition No. 4(iii) of the Notification. In connection with the above argument it would be relevant to refer to para 7 of notice a perusal of which would indicate that confiscation of the subject goods was intended for violation of various conditions of Notification No. 64/88 dated 1-3-1988. We find that various conditions which were violated are indicated earlier in paragraphs 3 and 5 of the notice. Para 3 contained only one condition not various conditions. We therefore feel that reading the notice parawise and confining it watertight within each paragraph would not be a correct way of construing a notice. It is to be read as a whole to find out as to whether the person concerned is made aware of the various grounds on the basis of which action is proposed to be taken as well as nature of the action. The view taken by the CEGAT on the point indicated above is erroneous and cannot be upheld. In any case over and above all it has not been in dispute that the Centre did not have inpatient facility. According to the condition of notification 10% of total beds in hospital are to be kept reserved for patients of the families having an income of less than 500/- per month. The case of the Centre in this connection is that they had an arrangement with another hospital in the proximity which is a sister concern of the Centre with whom the Centre had entered into an agreement for reserving 10 per cent beds. Payments in respect of these inpatients is to be made by the Centre. We feel that the 10 per cent of the total number of beds are supposed to be reserved for patients of such families in the hospital where the equipment is installed. The purpose of the Notification for grant of exemption from payment of customs duty would not be served by making payment of expenditure incurred on some inpatients in some other hospital as alleged. It has also not been shown that alleged arrangements had the approval of the concerned authority or that it was brought to their notice at all.

Summary

Issues Involved:
1. Validity of the show cause notice issued by the Assistant Commissioner of Customs.
2. Compliance with the conditions of Notification No. 64/88-Cus., dated 1-3-1988.
3. Confiscation of the imported equipment.
4. Imposition of customs duty and penalty.

Detailed Analysis:

1. Validity of the show cause notice issued by the Assistant Commissioner of Customs:

The Centre raised an objection that the show cause notice was not issued by the "competent officer" and was beyond the time limit specified under Section 28(1) of the Customs Act. The Adjudicating Authority and the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) found that the notice was not issued by the proper officer and was time-barred. However, it was argued that the notice did not mention Section 28(1) and was related to confiscation under Section 124 and 125 of the Customs Act, which do not pertain to the imposition or demand of customs duty. The Supreme Court held that the liability to pay duty arises under Section 125(2) in addition to the fine under Section 125(1), and therefore, Section 28(1) of the Customs Act was not attracted.

2. Compliance with the conditions of Notification No. 64/88-Cus., dated 1-3-1988:

The Centre was required to comply with conditions specified in the notification, including providing free treatment to at least 40% of outdoor patients and reserving 10% of hospital beds for indoor patients from families with an income of less than Rs. 500 per month. The Centre argued that it had been providing free treatment, with only marginal shortfalls, and that it was not required to submit an installation certificate as it was a running hospital. The Supreme Court found that the Centre did not have inpatient facilities and the arrangement with another hospital for reserving 10% of beds did not meet the notification's requirements. The Centre failed to comply with the conditions for providing free treatment as required by the notification.

3. Confiscation of the imported equipment:

The Department seized the imported equipment due to non-compliance with the notification's conditions. The Adjudicating Authority ordered the confiscation of the goods under Section 111(o) of the Customs Act, with an option to redeem the goods on payment of a fine. The CEGAT held that the confiscation was based on the non-submission of the installation certificate and could not be extended to other grounds. The Supreme Court disagreed, stating that the notice should be read as a whole and found that the confiscation was intended for violation of various conditions of the notification.

4. Imposition of customs duty and penalty:

The Adjudicating Authority imposed a penalty and demanded customs duty, which the CEGAT upheld but found unenforceable due to the invalid show cause notice. The Supreme Court held that the liability to pay duty arises under Section 125(2) of the Customs Act in addition to the fine under Section 125(1) and does not attract Section 28(1). Therefore, the demand for customs duty and the penalty were valid.

Conclusion:

The Supreme Court set aside the CEGAT's order and restored the order passed by the Commissioner of Customs (Import), Mumbai, which included the confiscation of the imported equipment, imposition of a fine, and the demand for customs duty. The Centre failed to comply with the conditions of the notification and the objections regarding the show cause notice were not sustained. The appeal was allowed with no order as to costs.