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2005 (10) TMI 112 - AT - CustomsDemand - Confiscation of medical equipments, spares and accessories - wilful misstatements for obtaining customs duty exemption certificates - Non-fulfilment of the conditions of the Notification No. 64/88 - Exemption/Recovery - Redemption fine - HELD THAT - We note that the impugned notification has not provided for obtaining any bond or bank guarantee for recovery of duty in the event of failure to fulfil the conditions of free treatment. However, it is the prerogative of the Government to grant exemption, as has been held in Sri Sathya Sai Inst. 2003 (9) TMI 94 - SUPREME COURT , and it is for the Government to incorporate appropriate provisions. Merely because some other exemption notifications incorporate provisions regarding bond etc. by way of extra precaution and this one does not (as the Government may have valid reasons not to burden hospitals doing genuine charitable work with bonds and bank guarantees), this cannot be a valid plea by the appellants not to pay the demanded duty when the conditions of free treatment are violated. We also do not think that it is necessary for an exemption notification issued u/s 25 to contain a recovery provision when the power to recover duty can be traced to Section 12, nor any mandate to provide such a recovery provision in an exemption notification is contained in the said Section 25. Thus, we are of the view that the duty in respect the impugned goods imported by the appellants during 1988-94 and used by them in violation of the conditions of the impugned notification is payable irrespective of whether they redeem the same or not independently of Section 125(2) as the duty is recoverable u/s 12 and the impugned notification as well as in terms of the Apex Court decision in Paragraph 12 of Mediwell 1996 (12) TMI 51 - SUPREME COURT . We also find no merit in the argument of the ld. Senior Counsel that the adjudicating Commissioner could have imposed penalty equal to duty, but he has chosen to only impose a nominal penalty. We are of the view that the equal duty provision u/s 112 only provides a measure for the maximum penalty that can be imposed and it is not a provision for recovery of duty. We, however, do not agree with the observation in Lady Amphthil (supra) that the period of limitation in such cases will commence from the date of issue of notice. Since the time limit prescribed u/s 28 has been held to be not applicable to such cases, and since there is no other specific time-limit prescribed under the customs law to cover such cases, we are of the view that the notice of demand will not be subject to any limitation of time in such cases of non-fulfilment of post-importation conditions casting a continuing obligation as noted by us. Accordingly, we answer the reference as follows - i) When a post-importation condition in an exemption notification is not fulfilled, the Department has the power to recover the escaped duty in terms of Section 12 of the Customs Act, 1962. Apex Court decision in Mediwell 1996 (12) TMI 51 - SUPREME COURT also provides an authority for such recovery. (ii) Such demand notices will not be subject to any limitation of time. The case is returned to the Division Bench for deciding the Appeal on merit.
Issues Involved:
1. Jurisdiction for recovery of customs duty for violation of exemption notification conditions. 2. Applicability of Section 28 of the Customs Act, 1962, regarding time limitations for duty recovery. 3. Validity of duty demand in the absence of specific recovery provisions in the exemption notification. 4. Authority of customs to demand duty under Section 125(2) if goods are not redeemed. 5. Interpretation of the Apex Court's decision in Mediwell Hospital regarding continuous obligations and duty recovery. Issue-wise Detailed Analysis: 1. Jurisdiction for Recovery of Customs Duty: The Tribunal examined whether the Commissioner of Customs had jurisdiction to initiate recovery proceedings for violation of conditions under Notification No. 64/88-Cus. The Tribunal upheld the decision in Lady Amphthil Nurses Instns., stating that post-importation violations fall within the Customs jurisdiction and not the certificate issuing authority (MoH/DGHS). Customs can start recovery proceedings and confiscate equipment under Section 111(o) of the Customs Act, 1962. 2. Applicability of Section 28 of the Customs Act, 1962: The Tribunal considered whether the demands raised by the Commissioner of Customs were barred by time under Section 28 of the Act. It was concluded that Section 28 does not apply to cases where duty liability arises due to post-importation violations. The Tribunal emphasized that since no specific time limit is prescribed under any other provision, the notice of demand in such cases is not subject to any limitation of time. This view was supported by decisions in Prakash Cotton Mills Pvt. Ltd. v. S.K. Bhardwaj and Commissioner v. Raghuvar (India) Ltd. 3. Validity of Duty Demand Without Specific Recovery Provisions: The appellants argued that the notification lacked provisions for demanding duty in case of non-compliance. The Tribunal rejected this argument, stating that the power to recover duty can be traced to Section 12 of the Customs Act, 1962. The Tribunal also referenced the Apex Court decision in Mediwell Hospital, which interpreted the notification as casting a continuous obligation, allowing duty recovery for non-compliance. 4. Authority to Demand Duty Under Section 125(2): The appellants contended that duty is only demandable under Section 125(2) if the confiscated goods are redeemed. The Tribunal dismissed this, clarifying that duty is recoverable independently of Section 125(2) under Section 12 and the exemption notification. The Tribunal noted that the appellants continued to use the equipment, rendering their argument about non-redemption moot. 5. Interpretation of Mediwell Hospital Decision: The Tribunal addressed the appellants' argument that Paragraphs 12 and 13 of Mediwell Hospital were not binding. The Tribunal disagreed, stating that Paragraph 12, which mandates duty recovery for non-compliance, is integral to the Apex Court's order and provides binding authority. This interpretation was supported by the Karnataka High Court in Medical Relief Society. Order: The Tribunal concluded that: 1. The Department has the power to recover escaped duty under Section 12 of the Customs Act, 1962, when post-importation conditions of an exemption notification are not fulfilled. Paragraph 12 of the Apex Court decision in Mediwell Hospital also provides authority for such recovery. 2. Such demand notices are not subject to any limitation of time. The case was returned to the Division Bench for deciding the appeal on merit.
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