Back
2006 Supreme(Bom) 736
IN THE HIGH COURT OF BOMBAY
Commissioner of Customs (Import)
Versus
Wockhardt Hospital and Heart institute
Decided on,April 28, 2006
The duty becomes payable on passing an order under section 125 (1) irrespective of the exercise of the option of redemption.
Headnote:
Customs Duty - Confiscation of Goods - Section 125 (2) of the Customs Act, 1962 - The duty becomes payable on passing an order under section 125 (1) irrespective of the exercise of the option of redemption. The liability to pay duty arises under section 125 (2) in addition to the fine under section 125 (1). The literal construction of section 125 (2) avoids anomaly or absurdity and if the interpretation put forth by the Tribunal is accepted, it would defeat the very purpose of enacting section 125 (2) and thereby defeating the ends of justice. The duty becomes payable on imposition of fine in lieu of confiscation and the same has to be paid on passing an order under section 125 (1). The duty on the imported goods has to be paid by the importer before seeking clearance of the goods under section 47. However, section 125 (2) provides that the duty and charges payable on goods confiscated with an option to redeem the same on payment of fine in lieu of confiscation imposed under section 125 (1), has to be paid by the owner or the person referred to in section 125 (1) of the Customs Act.
Fact of the Case:
The case involved two appeals filed by the revenue under Section 130 of the Customs Act, 1962, against the orders passed by the Customs, Excise and Service Tax Appellate tribunal, West Zonal Branch at Mumbai. The issue involved in both appeals was whether the imported goods cleared without payment of duty under a conditional exemption notification are confiscated with an option to pay fine in lieu of confiscation and if the option is not exercised by the owner, whether the revenue is entitled to recover customs duty payable on such goods.
Finding of the Court:
The court found that the duty becomes payable on passing an order under section 125 (1) irrespective of the exercise of the option of redemption. The literal construction of section 125 (2) avoids anomaly or absurdity and if the interpretation put forth by the Tribunal is accepted, it would defeat the very purpose of enacting section 125 (2) and thereby defeating the ends of justice.
Issues: The main issue was whether the duty becomes payable on passing an order under section 125 (1) irrespective of the exercise of the option of redemption.
Ratio Decidendi: The duty becomes payable on imposition of fine in lieu of confiscation and the same has to be paid on passing an order under section 125 (1). The duty on the imported goods has to be paid by the importer before seeking clearance of the goods under section 47. However, section 125 (2) provides that the duty and charges payable on goods confiscated with an option to redeem the same on payment of fine in lieu of confiscation imposed under section 125 (1), has to be paid by the owner or the person referred to in section 125 (1) of the Customs Act.
Final Decision: The court held that the duty becomes payable on passing an order under section 125 (1) irrespective of the exercise of the option of redemption. The literal construction of section 125 (2) avoids anomaly or absurdity and if the interpretation put forth by the Tribunal is accepted, it would defeat the very purpose of enacting section 125 (2) and thereby defeating the ends of justice.
J. P. DEVADHAR, J.
( 1 ) THESE two appeals are filed by the revenue under Section 130 of the Customs Act, 1962. Since the issue involved in these appeals are common, both these appeals are heard together and disposed of by this common Judgment.
( 2 ) THESE appeals are filed against the orders passed by the Customs, Excise and Service Tax Appellate tribunal, West Zonal Branch at Mumbai (the Tribunal for short) on 13/2/04 and 13/8/04 respectively. The question before the Tribunal was, where the imported goods cleared without payment of duty under a conditional exemption notification are confiscated with an option to pay fine in lieu of confiscation and if the option is not exercised by the owner, whether the revenue is entitled to recover customs duty payable on such goods ? The Tribunal held that on confiscation, the goods vest in the government and the liability to pay duty under section 125 (2) of the Customs Act, 1962 would arise only if the owner opts to redeem the goods by paying the redemption fine. As the owners in these two cases have not opted to redeem the goods, the tribunal held that the customs duty is not payable. Challenging the aforesaid orders, the revenue has filed these appeals.
( 3 ) UNDISPUTED facts in Customs Appeal No. 22 of 2004 are that M/s. Wockhardt Hospital and Heart institute (institute for short) runs a hospital at bangalore. Some time in the year 1990, the Institute imported a Cardiac Catherization Laboratory (known as angiography system) with its spares / accessories valued at Rs. 1,14,23,471/- and sought duty free clearance under notification NO. 64/88-cus. dated 1/3/1988.
( 4 ) NOTIFICATION No. 64/88-cus dated 1/3/1988 issued under section 25 of the Customs Act, 1962 provided that the hospital equipments imported by the charitable Hospitals certified by the Director General of Health Services, New Delhi (dghs for short) will be exempt from payment of whole of the basic customs duty as well as whole of the additional duty subject to the condition that the Hospitals : (a) shall give free treatment, on an average, to at least 40% of all their outdoor patients. (b) shall give free treatment to all indoor patients belonging to families with an income of less than Rs. 500/- per month and to keep for this purpose at least 10% of all the hospital beds reserved for such patients and, (c) shall give treatment at reasonable charges, either on the basis of the income of all the patients concerned or otherwise, to patients other than those specified in clause (a) and (b) above.
( 5 ) THE Institute obtained the requisite Customs duty Exemption Certificate (cdec for short) from the dghs to the effect that it is a specified charitable hospital entitled to seek duty free clearance of the medical equipments under the above notification. Accordingly, the equipments imported by the Institute valued at Rs. 1,14,23,471/- were assessed and cleared without payment of duty subject to the conditions set out in exemption notification No. 64/88.
( 6 ) SUBSEQUENTLY, on finding that the Institute has failed to fulfill the conditions of the notification No. 64/88-cus dated 1/3/88, a show cause notice was issued to the Institute on 12/1/2000 under section 124 of the Customs Act, calling upon them to show cause as to why the above goods should not be confiscated under Section 111 (o) and penalty under section 112 (a) of the Customs Act, 1962 should not be levied. The Institute filed its reply to the show cause notice. On adjudication, the Commissioner of customs, by an order-in-original dated 11/7/2002 confiscated the goods under Section 111 (o) with an option to redeem the said goods on payment of fine of rs. 1,00,000/- within 30 days of the said order. The commissioner further directed the Institute to pay forthwith the customs duty amounting to rs. 1,65,24,050/- as the institute failed to discharge the continuing obligation under the notification no. 64/88-cus during the material period. The commissioner imposed pe
