2018 (3) TMI 280 - HC - Customs

Revocation of Custom Duty Exemption Certificate (CDEC) - N/N. 64/88-Cus. dated 01.03.1988 - import of certain medical equipments exempt from customs duty - Held that - Beyond a pale of doubt, the provisions relating to exemption from tax or duties have to be strictly construed and except upon satisfaction of the conditions for grant of such exemptions stricto sensu, the exemption from customs duty cannot be given by way of largesse to the beneficiaries, like Hospitals and Medical Institutions in the present case. It is all the more necessary that a strict, meticulous and complete compliance of conditions with the relevant and cogent evidence is proved beyond doubt before the concerned Authorities. A casual, cavalier or compliance by a paper formality is not enough to allow such Institutions to avail exemption under the said exemption notifications. The very purpose of such exemption will be defeated if the conditions are allowed to breached with impunity and then glossed over by a paper exercise in the name of submitting of a so-called reply furnished by the petitioner in the present case, Annexure-V dated 4.7.2014 , which does not inspire any confidence. The failure on the part of the petitioner to bring forth the said reply and the relevant data with evidence before the concerned Authority during the course of personal hearing on 5th and 6th of May 2014, speaks volumes against the petitioner-Institutions and shows the lackadaisical manner in which it sought to fortify its claim for exemption of customs duty in the aforesaid manner. The gross abuse of customs duty exemption by these Institutions and as many as 392 Institutions out of 396 given such exemption lost their CDECs, defeats the very purpose for which such exemption was given, for the avowed purpose of providing free medical aid to the poor sections of the Society. This Court does not find any illegality, perversity or arbitrariness in the impugned order passed by the respondent-Authority which could be quashed on the anvil of Article 14 of the Constitution of India - petition being devoid of merits, is dismissed.

Summary

Issues Involved:
1. Revocation of Custom Duty Exemption Certificate (CDEC).
2. Compliance with conditions under Notification No. 64/88-Cus.
3. Principles of natural justice.
4. Alternative scheme proposed by the Division Bench.
5. Burden of proof for claiming exemption.

Detailed Analysis:

1. Revocation of Custom Duty Exemption Certificate (CDEC):
The petitioners were aggrieved by the order dated 23.1.2015, which revoked the CDEC issued under Notification No. 64/88-Cus. dated 01.03.1988. This revocation led to the withdrawal of customs duty exemption and a demand for customs duty amounting to ?4,52,30,472/- was raised by the respondent-Commissioner of Customs.

2. Compliance with Conditions under Notification No. 64/88-Cus:
The exemption was subject to conditions, including providing free medical treatment to 40% of outdoor patients and 10% of indoor patients. The impugned order noted that the petitioners failed to provide evidence that they met these conditions. Despite being given opportunities, the petitioners did not submit the required affidavits or documentary proof to support their compliance.

3. Principles of Natural Justice:
The petitioners argued that the principles of natural justice were breached as their reply and explanation were not considered in the impugned order. However, the court found that the petitioners had ample opportunity to present their case but failed to provide necessary evidence during the hearings held on 5th and 6th May 2014. The court emphasized that the burden of proof was on the petitioners to demonstrate compliance with the exemption conditions.

4. Alternative Scheme Proposed by the Division Bench:
The Division Bench had previously proposed an alternative scheme, allowing hospitals to provide free services to 20% of patients for 20 years starting from 1.1.2012. This scheme was subject to approval by the Central Government, which was not obtained. The petitioners also did not file affidavits opting for this scheme. Consequently, the original conditions under Notification No. 64/88-Cus. remained applicable.

5. Burden of Proof for Claiming Exemption:
The court reiterated that exemptions from tax or duties must be strictly construed. The petitioners bore the burden of proving compliance with the exemption conditions. The failure to produce documentary proof during the hearings and the lack of subsequent follow-up with the authorities indicated non-compliance. The court noted that out of 396 institutions, 392 had their CDECs revoked due to similar non-compliance, highlighting a widespread abuse of the exemption.

Conclusion:
The court found no illegality, perversity, or arbitrariness in the impugned order. The petitioners' failure to provide evidence of compliance and the widespread abuse of customs duty exemptions justified the revocation of CDECs. The writ petitions were dismissed, and no costs were awarded.