Customs, Excise and Gold Tribunal - Tamil Nadu
Vinodhagan Memorial Hospital vs Commissioner Of Customs on 12 February, 2007
Equivalent citations: 2007(117)ECC304, 2007ECR304(TRI.-CHENNAI)
ORDER P.G. Chacko, Member (J)
1. The appellants had imported one set of Hitachi Whole Body CT Scanner and accessories thereof and cleared the same under Bill of Entry dated 17.08.1992 without payment of duty in terms of Customs Notification No. 64/88 dated 01.03.1988. The clearance of the goods was obtained on the strength of Customs Duty Exemption Certificate (CDEC, or short) of the Director-General of Health Services (DGHS, for short).
2. The above Notification had stipulated that hospitals certified by DGHS should provide medical, surgical or diagnostic treatment -
(a) Free, on an average, to at least 40% of all their outdoor patients;
(b) 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 hospitals beds reserved for such patients; and
(c) At reasonable charges, either on the basis of the income of the patients concerned or otherwise, to patients other than those specified in Clause (a) and (b) above.
3. Later on, from the results of enquiries conducted in the year 1998, it appeared to the department that the appellant-institution was only a diagnostic centre/polyclinic and not a hospital; that they had not provided free treatment to 40% of the outdoor patients and also had not provided reservation of 10% of beds for treatment of poor inpatients. In other words, the appellants were found to have violated the conditions of Customs Notification No. 64/88 ibid. Therefore, a show-cause notice was issued to them demanding duty on the above medical equipment and proposing to confiscate the goods and impose penalty on the importer. The demand of duty and other proposals were contested. In adjudication of the dispute, the Commissioner of Customs passed the following order in view of the Hon'ble Supreme Court's judgment in Mediwell Hospital and Health Care (P) Ltd. v. Union of India :
(i) I deny the benefit of exemption notification No. 64/88 dated 1.3.88 to one number of Hitachi Whole Body CT Scanner Model 1 CT W 450 with accessories valued at Rs. 76,86,619/- and demand duty of Rs. 89,86,618/-.
(ii) The equipment is liable for confiscation under Section 111(o) of the Customs Act, 1962. However these being not available with the Department, no order for confiscation is being passed.
(iii) For rendering the goods liable for confiscation, I impose a penalty of Rs. 9,00,000/- (Rupees nine lakhs only) on the importers M/s. Vinodhagan Memorial Hospital Pvt. Ltd., under Section 112(a) of the Customs Act, 1962.
4. Heard both sides. Learned Counsel submitted that, though DGHS who had issued CDEC to the appellants in respect of the medical equipment and subsequently withdrew the certificate, such withdrawal was set aside by the Hon'ble High Court of Madras in Writ Petition No. 13924 of 2001. He submitted that, following the decision already rendered in Apollo Hospitals Enterprises Ltd. v. Union of India , the Hon'ble Court remanded the matter to DGHS for its reconsideration. Learned Counsel contended that, where CDEC issued by DGHS was in force, it was not open to the Customs authorities to demand duty on the medical equipment. Learned Counsel further submitted that, when DGHS had already recognised the appellants as a hospital, it was not open to the Customs authorities to hold that they were only a diagnostic centre/polyclinic. The Commissioner's finding that no specific register /record was maintained by the appellants was also challenged by Counsel who submitted that the Commissioner himself had found that they had furnished details of casualty register. According to learned Counsel, the Commissioner's order suffered from infirmities and hence requires to be set aside. It was particularly submitted that the quantum of penalty imposed by him on the appellants was too high.
It was argued that, in view of the decision of the High Court in Apollo Hospitals' case, the impugned order was liable to be set aside. Learned SDR, at the outset, submitted that this Bench had, in the case of Jaya Nursing Home (P) Ltd. v. Commissioner of Customs, Chennai 2004 (177) E.L.T.766 (Tri.-Chennai), distinguished Apollo Hospitals' case and held that the provisions of Section 159A of the Customs Act had overriding effect on the Hon'ble High Court's ruling. Learned SDR also reiterated the findings of the Commissioner.
5. After giving careful consideration to the submissions, we have to reject learned Counsel's plea that the demand of duty is not sustainable as long as CDEC issued by DGHS is in operation. It appears from the text of the Customs Notification that the provisions of this Notification are applicable to a hospital equipment, the import of which is approved by the DGHS as essential for use in hospital specified in the Table annexed to the Notification. As per S. No. 1 of the said Table, the hospital must be certified by the Ministry of Health and Family Welfare to be run or substantially aided by such charitable organisation as may be approved from time to time by the said Ministry. The conditions for the benefit of exemption were laid down under S.No. 2 of the said Table. It would follow that, by the mere reason of the hospital holding CDEC issued by DGHS, they cannot claim the benefit of exemption from demand of duty on any medical equipment imported by them. It was mandatory for the appellant to satisfy the conditions laid down under S.No. 2 of the Table annexed to the Notification. Learned Commissioner found that the appellants did not even have an outpatient department to provide treatment. In respect of inpatients, it was found that the minimum of 10% beds was not reserved for patients whose income was less than Rs. 500 per month. Even the Director of the hospital had admitted these facts in his statement. It was also noted by learned Commissioner that the appellants had failed to submit documents/registers to prove their claim with regard to outpatients. The casualty register produced by them did not meet the requirement of free treatment to outpatients. In these circumstances, learned Commissioner rightly held that the benefit of exemption under Notification No. 64/88 was not available to the CT Scanner with accessories imported by the appellants.
The demand of duty is therefore sustainable.
6. As held by the Hon'ble Supreme Court in Mediwell Hospitals' case, hospitals claiming the benefit of Customs Notification No. 64/88 had continuing liability to comply with the conditions therein. This liability did not come to an end even when the Notification was rescinded inasamuch as Section 159A of the Customs Act saved departmental proceedings for enforcing the liability under the Notification against the hospital as held by this Bench in the case of Jaya Nursing Home case (supra). In view of the continuing nature of the liability under the Notification, the demand of duty is not hit by the limitation prescribed under Section 28 of the Customs Act.
7. Learned Commissioner did not confiscate the goods as it was not available with the department. He, however, held it to be liable for confiscation under Section 111(o) of the Customs Act. The adjudicating authority also imposed a penalty on the appellants for rendering the goods liable for confiscation. The appellants have not succeeded in challenging the confiscation order, nor have they shown that they did not render the goods liable for confiscation. Hence a penalty under Section 112(a) of the Customs Act is irresistible. However, in the facts and circumstances of the case, we are of the view that a penalty of Rs. 9 lakhs is too much. We reduce the same to Rs. 1 lakh (Rupees One lakh only). In the result, the impugned order will stand sustained, with modification as to quantum of penalty.
8. The appeal is dismissed, but with reduction of quantum of penalty.
(Operative portion of the order was pronounced in open court on 12-02-2007)