Back
2018 Supreme(Mad) 2882
IN THE HIGH COURT OF JUDICATURE AT MADRAS
K. RAVICHANDRABAABU, J.
Dr. Kamakshi Memorial Hospitals Private Limited - Petitioners
Versus
The Additional Commissioner of Central Excise, Office of the Commissioner of Central Excise & Another - Respondents
W.P. No. 16968 of 2018 & W.M.P. Nos. 20211 & 28452 of 2018
Decided On : 16-11-2018
For the Petitioner:N. Viswanathan, Advocate.
For the Respondents: T. Pramod Kumar Chopda, Senior Standing Counsel.
Headnote:
Central Excise Tariff Act - Central Excise Act, 1944 - Section 35A (3) - Section 35A - Section 35E(2) - Section 11A - Sections 35 - Income Tax Act, 1961 - Section 251(1) - Section 251 - Tamil Nadu General Sales Tax Act, 1959 - Section 31(3) – Hospital – Service To Needy Patients - Petitioner is a Multi-Specialty Hospital established for providing health care service to needy patients - Petitioner has a dedicated cancer specialty ward, in which, petitioner was exclusively providing preventive and curative treatment for cancer - With a view to provide radio drugs/pharmaceuticals at door steps of PET scan centres, petitioner imported a machine called “Cyclotron”, which is an equipment primarily intended to develop/process radio pharmaceuticals - Since said machine “Cyclotron” will be inducing radio activity in course of developing and processing FDG/F18, its establishment, functioning and processing are regulated by Atomic Energy Commissioner of India - Petitioner accordingly, obtained necessary licence/permission from Atomic Energy Regulation Board and commissioned Cyclotron facility at their Hospital for purpose of processing Fluorine-18 - There are about 25 known types of radio pharmaceuticals and Flourine-18 is one among them - Petitioner was licensed to develop/ synthesis F-18- FDG - They had established a PET scan centre at premises of Adayar Cancer Institute - During period from April 2011 to March, 2013, they had been processing F-18/FDG in their facility at Pallikaranai and supplied it to various PET scan centres for use in PET scanners - However, due to compelling circumstances, they sold cyclotron equipment to a company at Bangalore - Thereafter, no further production of FDG/F18 was carried out at petitioners hospital - While so, Officers attached to Chennai-IV Commissionerate, visited petitioners hospital premises and conducted certain verification/ inquiry with regard to production/processing – Held, Court is of view that classification issue on subject matter product is to be reconsidered once again from stage of adjudication, after issuing proper notice of proposal on petitioner - Court have already pointed out that classifying subject matter product under heading 3006 3000 by Adjudicating Authority was not preceded by any show cause notice based on such heading - Therefore, any finding rendered by such authority on classification in absence of proper show cause notice cannot be sustained - Therefore, this Court is of view that in order to decide classification dispute, matter has to go back to Adjudicating Authority so as to pass a fresh order of adjudication on classification issue, after issuing proper notice to petitioner - Adjudicating Authority, for re-considering whole issue and pass a fresh order of adjudication, after putting petitioner on notice - This Court is also of view that before issuing such notice on petitioner, it is better for Adjudicating Authority to take opinion/view from experts on subject matter product and thereafter, to form an opinion and issue show cause notice to petitioner - Needless to say that earlier finding rendered by Adjudicating Authority on above classification issue, cannot stand in way of deciding matter afresh after considering objections filed by petitioner - In other words, Adjudicating Authority has to apply his independent mind on issue, uninfluenced by any of observations made in order of Adjudicating Authority as well as in order of first Appellate Authority - Whole exercise shall be done by first respondent, Adjudicating Authority, within a period of twelve weeks from date of receipt of a copy of this order – Petition Allowed.
1. The petitioner is aggrieved against the order of the second respondent dated 27.04.2018.
2. The case of the petitioner is as follows:
The petitioner is a Multi-Specialty Hospital established for providing health care service to the needy patients. The petitioner has a dedicated cancer specialty ward, in which, the petitioner was exclusively providing preventive and curative treatment for cancer. With a view to provide radio drugs/pharmaceuticals at the door steps of the PET scan centres in Chennai, the petitioner imported a machine called “Cyclotron”, which is an equipment primarily intended to develop/process radio pharmaceuticals. Since the said machine “Cyclotron” will be inducing radio activity in the course of developing and processing the FDG/F18, its establishment, functioning and processing are regulated by the Atomic Energy Commissioner of India. The petitioner accordingly, obtained necessary licence/permission from the Atomic Energy Regulation Board and commissioned the Cyclotron facility at their Hospital for the purpose of processing Fluorine-18. There are about 25 known types of radio pharmaceuticals and Flourine-18 is one among them. The petitioner was licensed to develop/ synthesis the F-18- FDG. They had established a PET scan centre at the premises of Adayar Cancer Institute. During the period from April 2011 to March, 2013, they had been processing F-18/FDG in their facility at Pallikaranai and supplied it to various PET scan centres for use in PET scanners. However, due to compelling circumstances, they sold the cyclotron equipment to a company at Bangalore on 01.03.2013. Thereafter, no further production of FDG/F18 was carried out at the petitioner's hospital. While so, the Officers attached to the Chennai-IV Commissionerate, visited the petitioner's hospital premises on 19.03.2014 and conducted certain verification/ inquiry with regard to the production/processing of FDG/F18. At the time of such visit, admittedly, the machine was already sold and not available at the hospital. Thus, the Officer could neither see the machine nor the product FDG/F-18. The Officers however, verified certain documents maintained by the petitioner in connection with the production/processing of FDG/F-18. The Officers took the view that the said product namely FDG/F-18 is classifiable under CETH 28444000 of Central Excise Tariff Act. Accordingly, a show cause notice dated 03.05.2016 was issued, proposing to classify the impugned product FDG/F-18 under CETH 28444000 of Central Excise Tariff Act and to demand the duty of Rs.78,19,339/- with applicable interest from April 2011 to March 2013, by invoking the proviso to Section 11A(4) of the Central Excise Act, besides proposing to impose equal penalty under Section 11AC of the said Act. The petitioner sent a detailed reply on 26.08.2016 opposing the proposals both on merits and on limitation. However, the first respondent passed an Order-in-Original dated 28.04.2017, wherein he admitted that the impugned goods are not classifiable under CETH 2844 4000 as originally proposed in the show cause notice. However, he held that the subject goods could be called as diagnostic reagent classifiable under CETH 3006 3000. Accordingly, the Adjudicating Authority confirmed the demand for differential duty of Rs.36,64,506/- with applicable interest and equal penalty. The Adjudicating Authority, thus, traversed beyond the scope of the show cause notice. The petitioner challenged the said order before the second respondent. Personal hearing was granted by the second respondent on 11.10.2017. However, after lapse of around 5 months, the petitioner received an intimation dated 06.03.2018 from the Superintendent, working under the second respondent, asking the petitioner to show cause as to why the subject matter goods should not be classified under CETH 28444000 in terms of the 2nd proviso appended to section 35 A(3) of the Central Excise Act. The petitioner, through letter dated 16.03.2018
