IMPORTANT POINT
The Commissioner of Customs (Import) rightly ordered confiscation of imported equipment by respondent, redeemable by payment of penalty and import duty.

Headnote:(i) Customs Act, 1962-Section 25(1)-Notification dated 1.3.1988 exempting Hospital equipment from import custom duty-Respondent importing Teletherapy Unit-Applied for exemption-Granted-Deptt. later proposed to confiscating under Section 111(o) and levying penalty under Section 112-Show cause notice-Beyond time under Section 28(1)-Non production of Installation Certificate-Adjudicating authority holding it not necessary-But violation of two other conditions found, viz. no free treatment and required reservation of beds allowed confiscation and imposed penalty-Tribunal set aside confiscation and imposition of penalty-Import duty was held chargeable but not enforceable due to invalid show cause notice-Appeal against to Supreme Court-Whether show cause notice was beyond time? (No)-Whether it was by "Competent Officer" authorised to issue same? (Yes) (Customs Act, 1962-Sections 28 r/w 124 and 125).
       Held : Whenever an order confiscating the imported goods is passed, an option, as provided under Sub-section (1) of Section 125 of the Customs Act, is to be given to the person to pay fine in lieu of the confiscation and on such an order being passed according to Sub-section (2) of Section 125, the person "shall in addition be liable to any duty and charges payable in respect of such goods". A reading of Sub-section (1) and (2) of Section 125 together makes it clear that liability to pay duty arises under Sub-section (2) in addition to the fine under Sub-section (1). Therefore, where an order is passed for payment of customs duty along with an order of imposition of fine in lieu of confiscation of goods, it shall only be referable to Sub-section (2) of Section 125 of the Customs Act. It would not attract Section 28(1) of the Customs Act which covers the cases of duty not levied, short levied or erroneously refunded etc.. The order for payment of duty under Section 125(2) would be an integral part of proceedings relating to confiscation and consequential orders thereon, on the ground as in this case that the importer had violated the conditions of notification subject to which exemption of goods was granted, without attracting the provisions of Section 28(1) of the Customs Act. A reference may beneficially be made to a decision of this Court reported in Mohan Meakins Ltd. v. Commissioner of Central Excise, Kochi (2000) 1 S.C.C. 462 wherein it has been observed in Para 6 "...Therefore there is a mandatory requirement on the adjudicating officer before permitting the redemption of goods, firstly, to assess the market value of the goods and then to levy any duty or charge payable on such goods apart from the redemption fine that he intends to levy under sub-section (1) of that section". In this view of the matter the objection raised by the Centre that Section 28 of the Customs Act would be attracted is not sustainable. (Para 11)
       (ii) Construction of show cause notice-Whether in this case a new ground or case of free treatment and reservation for confiscation has been carved out as found by CEGAT (Customs, Excise and Gold (Control) Appellate Tribunal)? (No)-Whether short fall in free treatment is in original? (No)-Appeal allowed.
       Held : 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. (Para 12)
       Held also : It would, not at all, be necessary to prescribe any period to achieve the given percentage of patients treated free. It should generally be all through the period. It being at least 40 per cent, there is hardly any occasion to say that in case there is more than 40 per cent in a given period, that may make good the deficiency in the previous or the following year. 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 Rs.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. (Para 13)
       Held finally : The pleas raised by M/s.Jagdish Cancer & Research Centre, fail to convince us that it had been able to fulfil the conditions of the notification for providing free treatment to the patients as required therein. We find that the findings of the CEGAT on other points and the order passed are not sustainable. In the result, the appeal is allowed and the order passed by the CEGAT is set aside and the order passed by the Commissioner of Customs (Import), Mumbai is restored. There would, however, be no order as to costs. (Para 14)

JUDGMENT

Brijesh Kumar, J.-This appeal has been preferred by the Commissioner of Customs (Import), Mumbai, against the order dated 14.12.1999 passed by the Customs, Excise and Gold (Control) Appellate Tribunal, West Regional Bench, Mumbai, in appeal, setting aside the order of confiscation of the imported equipment as well as the penalty imposed. The liability of customs duty was however upheld, though found to be unforceable, as the show cause notice issued was not a valid notice.

2. M/s. Jagdish Cancer and Research Centre, Hyderabad (to be referred as Centre ) applied for duty free clearance of a consignment importing Teletherapy Unit (Theratron 780-C) for its use under Notification No.64/88 - Cus Dated 1.3.1988, issued under Section 25(1) of the Customs Act, 1962. The Central Government under the aforesaid notification exempted all apparatus and appliances etc. as hospital equipments essential for use in any hospital on being satisfied that it would be necessary in the public interest to do so. It is however subject to certain conditions which have been specified in the said notification as under:-

"2. All such hospitals which may be certified by the said Ministry of Health and Family Welfare, in each case, to be run for providing medical, surgical or diagnostic treatment not only without any distinction of caste, creed, race, religion or language but also,-

(a) free, on an average, to at least 40 per cent of all their outdoor patients; and

(b) free to all indoor patients belonging to families with an income of less than rupees five hundred per month, and keeping for this purpose at least 10 per cent of all the hospital beds reserved for such patients; and

Condition No. 4(iii) reads as under: -

"4. Any such hospital which is in the process of being established and in respect of which the said Ministry of Health and Family Welfare is of opinion-

(i) ...................................

(ii) ...................................

(iii) that such hospital would be in a position to start functioning within a period of two years, and

(iv) ..................................."

The request of the Centre was accepted and the consignment was cleared on 23.8.1989 free of duty.

3. The Department found that the Centre had failed to produce the installation certificate in terms of Condition No. 4(iii) of the Notification and had also failed to observe other conditions, so the imported goods were liable to confiscation. Consequently the imported equipment was seized by the Department on 22.1.1998. The Assistant Commissioner of Customs issued a notice to the Centre to show cause to the Adjudicating Authority, as to why customs duty amounting to Rs. 64,93.598/- be not demanded and the Teletherapy Unit be confiscated under Section 111(o) and for imposition of penalty under Section 112 of the Customs Act.

4. The Centre showed cause raising an objection that notice was not issued by the "competent officer" and was also beyond time in terms of Section 28(1) of the Customs Act. It was also pleaded that the Centre was not required to furnish any certificate in terms of condition No. 4 (iii) of the Notification since it was a running hospital. Insofar it relates to free treatment to all patients whose income was below Rs.500 per month and reservation of 10% beds in the hospital for them as indoor patients, and for providing free treatment to 40% of outdoor patients, their case is that the Centre had been providing free treatment accordingly and the shortfall was only marginal over the years. Therefore, no condition of the Notification was violated.

5. The Adjudicating Authority held that installation certificate in terms of Clause 4(iii) was not required to be submitted by the Centre but it failed to comply with other two conditions about providing free treatment as required and reservation of 10% beds in the

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2001 Supreme(SC) 1026

IMPORTANT POINTThe Commissioner of Customs (Import) rightly ordered confiscation of imported equipment by respondent, redeemable by payment of penalty and import duty.

Cases Referred (2)

IMPORTANT POINT
The Commissioner of Customs (Import) rightly ordered confiscation of imported equipment by respondent, redeemable by payment of penalty and import duty.