of Customs (Import), Mumbai Vs. M/S. Jagdish Cancer & Research Centre
 Insc 361 (2
Bharucha, Y.K. Sabharwal & Brijesh Kumar Brijesh Kumar, J.
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.
Cancer and Research Centre, Hyderabad ( to
be referred as `Centre) applied for duty free clearance of a consignment importing
Teletherapy Unit (Theratron780-C) for its use under Notification No.64/88 Cus
Dated 1.3.1988, issued under Section 25(1) of the Customs Act, 1962.
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:-
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 (c) Condition No. 4(iii) reads as under:-
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.
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.
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.
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 hospital. It was also found that the Centre did
not have inpatient facility at all . Placing reliance upon a decision of this
Court in M/s Mediwell Hospital and Healths Care Pvt. providing free treatment in terms of
the Notification is a continuing obligation, therefore, limitation as provided
under Section 28(1) of the Customs Act would not come into play. By order of
the Adjudicating Authority the goods imported were confiscated under Section
111(o) of the Customs Act with an option to the Centre to redeem the same under
Section 125(2) of the Customs Act on payment of fine of Rs.50,000/-. A penalty
of Rs.5,000/- was also imposed on taking a lenient view, since it was found
that full duty had become payable by the importer.
Centre preferred an appeal against the order passed by the Commissioner of
Customs (Import). The CEGAT in appeal, also held that conditions of the
Notification relating to providing free treatment were violated. Regarding
Condition No.4(iii), it has been found that its compliance by Centre was not
required. It has, however, been found that Section 28(1) of the Customs Act was
involved and Assistant Commissioner (Customs) was not the proper officer to
issue show cause notice. The contention of the Centre was accepted.
CEGAT further found that Para 3 of the notice relates to
confiscation of the imported goods only on the ground of non-submission of
certificate under condition No.4(iii) of the Notification. Non-compliance of
the other conditions relating to free treatment, finds mention in Para 5 of
notice saying, it appeared that the importer had no intention to fulfil the
provisions laid down in the Notification and resorted to willful mis- statement
and suppression of facts with a sole intention of evading customs duty. The
Tribunal found that a new case was made out for confiscation of the imported
goods on the ground of not providing free treatment, which was not the ground
for confiscation in Para 3 of the notice. It was also held
that providing free treatment to patients according to conditions of
notification is a continuing obligation in view of Mediwell case (supra).
CEGAT allowed the appeal holding that confiscation was not valid, the Centre
however was liable to pay the duty but that could not be enforced for want of
legal and valid show cause notice.
behalf of the appellant, it has been vehemently urged that the show cause
notice has not been issued under Section 28(1) of the Customs Act.
question of notice having not been issued by a proper officer does not arises
nor the question of limitation. It is submitted that the copy of the notice, as
annexed, does not mention Section 28(1) of the Customs Act, in any case if it
is taken to be there, as contended, that would make no difference. The
submission is that Sub-section (2) of Section 125 of the Customs Act provides
that where any fine in lieu of confiscation of goods is imposed, the importer
shall also, in addition, be liable to any duty and charges payable in respect of
counsel for the Centre draws our attention to Chapter XIV of the Customs Act
and submits that it relates to confiscation of goods and conveyances and
imposition of fines. It does not relate to imposition or demand of customs
duty. Section 124 and 125 also fall in Chapter XIV.
124 provides for issue of show cause notice before confiscation of goods and
Section 125 relates to payment of fine in lieu of confiscation.
28 of the Act which falls in Chapter V provides for notice for payment of
duties which has been demanded by the notice in this case.
it is submitted on behalf of the Centre that demand of customs duty and the
order for payment of the same is relatable to only Section 28(1) of the Customs
Act, as also found by the CEGAT. That being the position, the notice was beyond
time and not by a competent officer authorised to issue the same. The argument,
as advanced, though seems to be attractive but on scrutiny, we find no merit in
it. Section 124 reads thus :- 124. Issue of show cause notice before
confiscation of goods, etc.- No order confiscating any goods or imposing any
penalty on any person shall be made under this Chapter unless the owner of the
goods or such person- (a) is given a notice in writing informing him of the
grounds on which it is proposed to confiscate the goods or to impose a penalty;
given an opportunity of making a representation in writing within such
reasonable time as may be specified in the notice against the grounds of
confiscation or imposition of penalty mentioned therein; and (c) is given a
reasonable opportunity of being heard in the matter:
that the notice referred to in clause (a) and the representation referred to in
clause (b) may at the request of the person concerned be oral.
provides that an order for confiscation of the imported goods may be made after
giving a show cause notice to the importer of the goods. It also provides for
imposition of fine.
125 reads as under:- 125. Option to pay fine in lieu of confiscation.-(1)
Whenever confiscation of any goods is authorised by this Act, the officer
adjudging it may, in the case of any goods, the importation or exportation
whereof is prohibited under this Act or under any other law for the time being
in force, and shall, in the case of any other goods, give to the owner of the
goods or, where such owner is not known, the person from whose possession or
custody such goods have been seized, an option to pay in lieu of confiscation
such fine as the said officer thinks fit:
that, without prejudice to the provisions of the proviso to sub-section (2) of
section 115, such fine shall not exceed the market price of the goods
confiscated, less in the case of imported goods the duty chargeable thereon.
any fine in lieu of confiscation of goods is imposed under sub-section (1) the
owner of such goods or the person referred to in sub-section (1) shall, in
addition, be liable to any duty and charges payable in respect of such goods.
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.Versus
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
next question which falls for consideration is, as to whether or not a new
ground or case for confiscation has been carved out as found by the CEGAT.
According to the CEGAT, Para 3 of the notice relates to confiscation of goods
under Section 111(o) of the Customs Act on the ground of non-submission of
certificate under Condition 4(iii) of the Notification. Therefore, confiscation
could be ordered only on the ground of non-submission of certificate and on no
other ground. It is further pointed out by the CEGAT that Para 5 of the notice
relates to payment of customs duty only, on the ground of violation of
conditions relating to providing free treatment as well as on account of
non-submission of certificate under condition No.4(iii) of the Notification. In
connection with the above argument, it would be relevant to refer to para 7 of
notice, a perusal of which would indicate that confiscation of the subject
goods was intended for violation of various conditions of Notification No.64/88
dated 1.3.1988. 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.
counsel for the respondent has next urged that looking to the total picture of
the free treatment provided by the Centre, it is to be noticed that shortfall
in providing free treatment is marginal. The percentage of persons provided
free treatment cannot be precise. During certain period, it may be a little
less or a little higher. He has also drawn our attention to a chart prepared by
the respondent and filed with an affidavit before the CEGAT, showing that the
treatment provided to outdoor patients is 39.8 per cent and instead of 10 per
cent indoor patients it is 8.9 per cent. In connection with this submission, it
may be observed that this aspect of the matter has been considered by the
Commissioner as well as CEGAT in some details and ultimately it has been found
that there was a shortfall which is also not disputed by the respondent. A
perusal of the condition in the Notification indicates that on an average, at
least 40 per cent of all outdoor patients should be provided free treatment. It
is, thus, at least 40 per cent or may be above. It is submitted that condition
nowhere indicates that within what period, the prescribed percentage is to be
achieved. It is submitted that it should be during the life of the equipment
imported. Thus, shortfall of particular year may be made good in the following
year. We are not impressed by this argument. 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.
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.
Bharucha ) ..J.
Sabharwal ) ...J.