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TMI Blog2012 (7) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant's hospitals belongs - allegation aforesaid in the SCN cannot be considered to have brought out allegations in clear terms to grant fair opportunity to the appellant to defend – Held that:- Without ascertaining the status of the appellant hospital, the Authority reached to abrupt conclusion on the allegation of not furnishing of details made in the SCN which was not the requirement of any disclosure by hospitals in terms of the Notification unless otherwise called for by Authorities under law - principles of natural justice is not followed matter to be remanded to the original authority Difference of opinion between members – regarding exemption notification No.64/88-Cus and whether basis of allegation was disclosed to assessee – Held that:- Matter referred to 3rd member for consideration of following question - Customs Appeal No.359 of 2005 - C/M/02/12-CUS - Dated:- 12-1-2012 - D N Panda, Rakesh Kumar, JJ. For Appellant Rep: Shri A C Jain, Adv. For Respondent: Shri Sumit Kumar, SDR Per: Rakesh Kumar: The facts giving rise to this appeal are, in brief, as under: 1.1 The Appellant, a unit of Ch. Aishi Ram Batra Public Charitable Trust (Regd.), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty free import of medical equipments by claiming to be in the category of hospitals covered by S.No.2 of the table to the notification, held that the obligation of a hospital for free treatment of poor patients and treatment of other patients at reasonable rates is a continuing obligation and if they fail to meet this obligation, they would not be eligible for the duty exemption. In this case, the Apex Court also held that in such cases the time limit for recovery of duty under Section 28 of Customs Act, 1962 would not apply. 1.3 In the year 2000, the customs officers checked the Appellant's records to ascertain the percentage of OPD patients treated free and percentage of economically poor indoor patients treated free and it appeared that they had not fulfilled the conditions of the exemption notification in this regard. 1.4 On the basis of the above inquiry, a show cause notice dated 16.09.2000 was issued to the Appellant for - (a) recovery of duty amounting to Rs.1,32,37,001/- forgone in respect of the duty free imports made under notification 64/88-Cus as detailed in Annexure to the show cause notice along with interest; (b) confiscation of the goods under Section 111 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... free. The words "at least 40% on an average" in the exemption notification can not be construed that strictly 40% of the OPD patients have to be treated free, as sometimes it may depend upon availability of patients. If no patient who is entitled for such free treatment comes to the hospital, the management of the hospital can not be blamed for non compliance of the condition. In this regard, reliance is placed on Hon'ble Madras High Court's judgement in case of Apollo Hospitals Enterprises Ltd. Vs. UOI reported in 2001 (133 ELT 58 (Mad.) (para-25). (4) The judgement of the Apex Court in case of Mediwell Hospital Health Care Pvt. Ltd. Vs. U.O.I reported in 1997 (89) ELT 425 (SC) , on which the show cause notice is based and in case of Commissioner of Customs Vs. Jagdish Cancer Research Centre reported in 2001 (132) ELT 257 relied upon by Commissioner in the impugned order, is not applicable to the facts of this case, as the Appellant are a hospital, not a diagnostic centre and had made the necessary arrangement for free treatment of eligible outdoor patients and poor indoor patients and had a exclusive ward for free treatment of poor indoor patients and there were Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the benefit of notification no.64/88-Cus - both the conditions - reserving at least 10% hospital beds for free treatment of poor indoor patients and free treatment of at least 40% outdoor patients must be followed and failure to follow the second condition regarding free outdoor treatment of at least 40% patients, during six out of seven years would disentitle the assessse from duty exemption. The Civil appeal to Apex Court against this judgement of the Tribunal was dismissed vide order reported in 2008 (224) ELT A 66 (SC) . Same view has been expressed by Hon'ble Bombay High Court in case of Shah Diagnostic Institute Pvt. Ltd. Vs. U.O.I, reported 2008 (222) ELT 12 (BOM.) , Hon'ble Kerala High Court in case of Maulana Hospital Vs. U.O.I. reported in 2007 (207) ELT 189 (Ker.) and in case of Central India Institute of Medical Science Vs. CC (ACE), Mumbai reported in 2008 (231) ELT 113 and by a Larger Bench of the Tribunal in case of Bombay Hospital Trust Vs. CC (Sahar) Mumbai, reported in 2005 (188) ELT 374 (Tribunal-LB) . (4) The duty demand is not time barred as the demand being in terms of the provisions of notification no.64/86-Cus for violation of post-importation condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 16.09.2000 is not based on withdrawal/cancellation of CDEC which is denied; that as noted by Hon'ble Delhi High Court in case of Sir Ganga Ram Trust Society Vs. UOI reported in 2011(268) ELT 465 (Delhi) , Sir Ganga Ram and Batra Hospital are genuinely charitable and social service institutions and that in the background of these facts, the impugned order denying the benefit of exemption under Notification No.64/88-Cus confirming the duty demand, confiscating the goods and imposing penalty on the Appellant is not correct. 3. We have carefully considered the submissions from both the sides and perused the records. The Appellant, during 1989 to 1993 period, imported 85 consignments of medical equipments free of customs duty under Notification No.64/88-Cus, the duty foregone in respect of which is Rs.1,32,37,001/-. Notification No.64/88 Cus , subject to the conditions specified in its para 2 3, exempts from whole of the basic customs duty and Additional Customs duty, the hospital equipments imported by the hospital, of the categories, as specified in the table to the notification. In terms of Explanation to this notification, the term 'hospital' includes any Institution, Centre, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when calculated on the basis of occupancy level, was always more than 10% ; and (e) decrease in percentage of OPD patients treated free during 1995 and 1996 was for the reason that more patients opted for paid treatment in spite of all the facilities for free OPD treatment being available and the notification does not contemplate fetching of free patients by the hospitals by hook or crook. 4. As regards the allegation that the poor indoor patients treated free by the Appellant have always been less than 10%, we find that this allegation has been upheld in the impugned order without any discussion and without considering the Appellant's plea that they had a separate ward for free treatment of poor indoor patients and that the information about this facility had been displayed by them at the hospital gate and other wards and thus they have satisfied the condition of reserving at least 10% beds in the hospital for free treatment of poor indoor patients. Since the Appellant's plea that they have separate indoor patient ward for free treatment of poor patient and thus meet the condition of reserving at least 10% beds for free treatment of poor indoor patients has not been refuted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree, or an average, at least 40% of all their outdoor patients". (b) The hospital must give free treatment to all indoor patients belonging to families with an income of less than Rs.500/- per month, and keeping for this purpose at least 10% of all the hospital beds reserved for such patients"; (c) The hospital must give treatment - "at reasonable rates either on the basis of the income of the patients concerned or otherwise, to patients other than specified in (a) and (b)." (d) The hospital must treat the patients without any distinction of caste, creed, race, religion or language. As held by the Hon'ble Tribunal in the case of Noida Medicine Centre Ltd. vs. CCE, New Delhi reported in 2007 (220) ELT 230 , which has been upheld by the Apex Court vide judgement reported in 2008 (224) ELT A-66 (SC) -the word - 'and' between clause (a), (b) and (c) of serial No. 2 of the table to the Notification No. 64/88-Cus cannot be read as 'or'. Thus, for being eligible for this exemption, all the conditions must be satisfied. 6.1 In this case, there is no dispute about satisfaction of condition (c) and (d). From perusal of clause (a) and (b) of serial No. 2, it will be seen that claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r satisfying this condition at least 40% of total OPD patients whether poor or otherwise must be treated free and simply making arrangement for this and putting up notice Boards about this arrangement at various places in the hospital is not enough. For free treatment of at least 40% OPD patients, there is no income criteria. 6.2.1 The appellant's plea that this condition casts an impossible obligation, that when sufficient number of OPD patients do not opt for free treatment, they can not be blamed and that the appellant in order to satisfy this condition of the notification cannot be expected to bring the patients to the hospital by hook or by crook for free OPD treatment, is difficult to accept, as treating at least 40% OPD patients free is not an impossible obligation. If as per the criteria for free OPD treatment fixed by the appellant, the sufficient number of eligible patients were not coming for free treatment, the criteria could be relaxed as, as mentioned above, unlike clause (b), for clause (a) there is no income criteria. Between the families with income of less than Rs.500/- per month and the super rich, there are a large number of people who would be happy to get fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailed the benefit of exemption under Notification No. 64/88-Cus, the arrangement for tree treatment of 40% OPD and all poor indoor patients as per the conditions of the notification must be made in that hospital only where the equipment imported free of duty is installed, (b) For meeting the obligation of treating at least 40% OPD patients free, the deficiency is one year can not be made good by excess, in other words, - in other words, every year the hospital must treat at least 40% OPD patients free; [justification for this would be that if deficiency in percentage of patients treated free in one year is allowed to be adjusted against excess in other year, the hospitals would tend to defer their obligation of free treatment while the patients requiring free medical treatment can not wait. In view of the Apex Court's judgement on this issue, the Madras High Courts judgement in the case of Apollo Hospitals Ltd. vs. UOI (supra) cited by the appellant would not help them.] (c) For recovery of duty foregone, in case a hospital failed to meet its continuing obligation, the limitation period under section 28 of Customs Act, 1962 is not applicable, as the said section covers the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be recoverable from the Appellant. The question of limitation prescribed under Section 28 of the Customs Act, 1962 does not arise as, as held by the Apex Court in the judgements mentioned above, the provisions of Section 28 are not applicable for recovery of duty for violation of post-import conditions. Therefore, the duty demand has been correctly confirmed. 7. Since one of the conditions subject to which duty free import of the medical equipment under Notification No. 64/88-Cus had been allowed, have been violated, the goods imported would become liable to confiscation under Section 111(o) of the Customs Act, 1962 and the appellant whose action has been rendered the goods liable for confiscation would become liable for penalty under Section 112(a) ibid. Therefore, we do not find any infirmity in the impugned order ordering confiscation of the goods under Section 11(o) of Customs Act, 1962 and imposing penalty on the appellant under Section 112(a) ibid. 8. In view of the above discussion the appeal is dismissed. (Order pronounced in open court on..............) (D N Panda) Member (J) (Rakesh Kumar) Member (T) Per: D N Panda: 9. I have advantage of reading of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in CCE, Nagpur V. Ballarpur Industries Ltd - 2007 (215) ELT 489 (SC) and CCE, Bangalore V. Brindavan Beverages (P) Ltd - 2007 (213) ELT 487 (SC) . 12. It has been held by Apex Count in Civil Appeal No 9489 of 2010, decided on 29.10.2010 in the case of Oryx Fisheries Private Limited V. UOI that it is no doubt true that at the stage of show cause, the person proceeded against must be told the charges against him so that he can take his defence and prove his innocence. It is obvious that at that stage the authority issuing the charge-sheet, cannot, instead of telling him the charges, confront him with definite conclusions of his alleged guilt. If that is done, the entire proceeding initiated by the show cause notice gets vitiated by unfairness and bias and the subsequent proceeding become an idle ceremony. 13. It is of course true that the show cause notice cannot be read hyper-technically and it is well settled that it is to be read reasonably. But one thing is clear that while reading a show-cause notice the person who is subject to it must get an impression that he will get an effective opportunity to rebut the allegations contained in the show cause notice and prove hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited v. Union of India, 1996 (88) E.L.T. 24]. But following of such natural justice is not patent from SCN. 17. It is noticeable fact from SCN (at page 26 of the appeal folder) and Para 2 of the Appeal Memorandum (at page 3 of the appeal folder) that since inception, the appellant is a registered charitable Trust claiming to have purely holistic approach being a charitable one. The SCN has not disputed such fact. Notification No. 64/88-Cus dated 1.3.1988 (which was rescinded by Notification No. 99/94 dated 1.3.1994) grants customs duty exemption to following 3 categories of hospitals: (1). Hospital Certified by Ministry of Health and Family Welfare (MHFW) run by charitable organizations or aided by such charitable organizations under Para 1 of the Table to the Notification. (2). Hospitals without any discrimination, certified by MHFW to have provided free OPD to at lest 40% of all their OPD patients and reserved at least 10% of the beds in the indoor for economically weaker section and charging reasonably either on the basis of the income of the patients concerned or otherwise, to patients other than above category of patients in terms of Para 2 of the Table appended to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held in the said Para that it is not possible to accept the plea that since the petitioner did not claim this earlier, it would be precluded from doing so at a later point of time. What requires to be seen is whether in fact the Petitioner's claim to be a charitable hospital is sustainable or not. When the appellant has made aforesaid claim of being run by a charitable Trust, it is essential to grant it fair opportunity to prove its stand. 21. Learned Adjudicating Authority in whole of his exercise has not at all made any effort to find out whether SCN had made allegation in precise and clear terms to find fault of appellant when specific pleading was made to provide basis of allegation. On the basis of figures submitted by appellant the Authority held that 40% of OPD patients were not treated free for which exemption was deniable. Adjudication order does not demonstrate any examination done by Adjudicating Authority to test the basis of allegation in SCN. Neither there was any speaking nor reasoned order passed which is requirement of law as has been held in the case of Asst. Commr. Of Commercial Tax Department V. Shukla Brothers - 2010 (254) ELT 6 (SC) and in the case of CC, R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts. 23. It is categorical fact stated in the appeal memorandum in Para 7 that the appellant requested the department in reply dated 5.12.200 (at page 36 of the Appeal Memorandum) to the SCN to disclose material in support of case of Revenue. But that was paid deaf ear. Reply to SCN runs into 20 paragraphs making various averments including averment of no disclosure of basis of allegation in the SCN (Para 6 at page 32 of reply to SCN) as is apparent from page 37 of the Appeal folder were not addressed in the impugned order. There was violation of natural justice. SCN was issued on 16.09.2000. It took 4 years and 4 months for completion of adjudication on 31.1.2005. Such an abnormal delay has resulted in denial of justice to the Appellant as is apparent from the cryptic order passed in the adjudication. It has been pleaded by Appellant that the Adjudicating Authority on 7.4.2004 recorded in the minute of hearing to cause enquiry from DGHS. But he was transferred in the meantime. His Successor did not disclose out come of enquiry if any made although heard the matter on 19.1.2005 as has been stated in Para 13.1, 14.1 and 14.2 of the Appeal Memo (Page 11 of Appeal folder). This cl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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