Custom, Excise & Service Tax Tribunal
M/S J. Mitra & Bros vs Cc, New Delhi on 3 July, 2012
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi 110 066.
Date of Hearing : 3.7.2012
Date of Pronouncement : .2012
For Approval & signature :
Honble Shri D.N. Panda, Judicial Member
Honble Shri Mathew John, Technical Member
1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? Yes
2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes
3. Whether their Lordships wish to see the fair copy of the order? Seen
4. Whether order is to be circulated to the Department Authorities? Yes
Custom Appeal No. 606 of 2007
[Arising out of the Order-in-Original No. VIII(HQ)10/ADJ/Commr/15/05/1557 dated 11.7.2007 passed by the Commissioner of Customs, New Delhi]
M/s J. Mitra & Bros. Appellant
Vs.
CC, New Delhi Respondent
Custom Appeal No. 677 of 2007
(Arising out of Order-in-Original No. 19/MDS/07 dated 11.7.2007 passed by the Commissioner of Customs (I&G), New Delhi)
M/s CARE Foundation Appellant
Vs.
CC, New Delhi Respondent
Custom Appeal No. 680 of 2007
(Arising out of Order-in-Original No. 19/MDS/07 dated 11.7.2007 passed by the Commissioner of Customs (I&G), New Delhi)
Arun K. Tiwari, Secretary Appellant
Vs.
CC, New Delhi Respondent
Appearance:
Appeared for Appellant : Shri Inderjeet Singh Kapoor, Advocate
Shri V.J. Sankaran, Advocate
Appeared for Respondent : Shri Amresh Jain, A.R.
CORAM: Honble Shri D.N. Panda, Judicial Member
Honble Shri Mathew John, Technical Member
Order No.dated.
Per Mathew John:
The main appellant in this proceeding, namely, Care Foundation, Hyderabad, imported a medical equipment and declared it as Da Vinci Surgical System (Endoscope System) claiming classification of goods under Customs Tariff Item 90189011 and claiming benefit of concessional rate of duty under S. No. 363(A) (List 37-Item No. 82) in Notification 21/2002-Cus dated 01-03-2002 which covered fiber optic endoscopes of different kinds. For accessories of equipment, concessional rate of duty under S. No. 363(B) (List 37 Item No. 82) in the notification was claimed. The said item reads as under:
(82) Fibre optic endoscopes including, Paediatric resectoscope/audit resectoscope, Peritoneos,copes, Arthoscope, Microlaryngoscope, Fibreoptic Flexible Nasal Pharyngo Bronchoscope, Fibreoptic Flexible Laryngo Brochoscope, Video Laryngo Brochoscope and Video Oesophago Gastroscope, Stroboscope, Fibreoptic Flexible Oesophago Gastroscope.
2. The Commercial Invoice from the supplier showed the description as IS 1200 Da Vinci Surgical System. Literature published by J. Mitra & Bros, the sole indenting agent of the supplier, who is also an appellant in this proceeding, described the goods as Endoscopic Artery Bypass System.
3. The Bill of Entry was assessed for Customs Duty of Rs.29,03,750/- and such amount of duty was paid. Before release of the goods the Special Intelligence and Investigation Unit of the Customs Department seized the goods making out a case that the description of the equipment was mis-declared to avail customs exemption for endoscopes whereas the goods were actually surgical robotic system with endoscopy only as an aid. While the matter was under dispute the appellant paid an amount of Rs. 2,05,58,550/- in addition to the amount initially paid and took provisional clearance of the goods. Thereafter Show Cause Notice was issued for adjudicating the disputed issue as also for imposition of penalties on the parties involved. The Show Cause Notice has been adjudicated by the impugned order. The impugned order dated 11-07-2007 read with corrigendum dated 20-07-2007 resulted in orders as below:
(i) the benefit of exemption under notification 21/2002-Cus was denied and duty payable was confirmed to be paid as Rs. 2,34,62,300/-;
(ii) the equipment was confiscated under section 111 (m) of Customs Act and a fine of Rs. 50 lakhs was imposed in lieu of confiscation;
(iii) a penalty of Rs. 2,34,62,300/- was imposed on M/s Care Foundation under section 114A of the Customs Act;
(iv) a penalty of Rs. 5 lakhs was imposed on Shri Arun K. Tiwari Secretary of Care Foundation under section 112 (a) of the Customs Act;
(v) a penalty of Rs. 5 lakhs was imposed on Shri Krishna Kumar Bio-Medical Engineer of CARE Foundation; and
(vi) a penalty of Rs. 25 lakhs was imposed on on M/s J. Mitra & Bros who was the indenting agent.
4. Aggrieved by the above orders the appellants have filed this appeal. No appeal of Krishna Kumar is before us.
5. The appellant submits that the equipment functions using an endoscope and that is why they claimed the exemption for endoscopes. They relied on letter dated 20-01-2003 from Dr. A. K. Hairt, Chief Medical Officer (AKH), Directorate General of Health Services, Ministry of Health and Family Welfare, GOI, as reproduced in page 34 of the order in original reading as under:
Please refer to your letter number dated C.No. VIII/12/ACU/PD/195/Ch-902002/15580 dated 12.11.2002 seeking clarification on the Endoscopic coronary artery bypass system as to whether this equipment is entitled to benefit of Customs notification 21 of 2002 dated 1.3.02 under serial no. 363, Entry number 82 of list 37 which reads as under :-
.
(a) Fibre optic endoscopes including, Paediatric resectoscope/audit resectoscope, Peritoneos-copes, Arthoscope, Microlaryngoscope, Fibreoptic Flexible Nasal Pharyngo Bronchoscope, Fibreoptic Flexible Laryngo Brochoscope, Video Laryngo Brochoscope and Video Oesophago Gastroscope, Stroboscope, Fibreoptic Flexible Oesophago Gastroscope.
(b) endoscopic coronary artery bypass system is an advanced version of fibre-optic endoscope which is robotic controlled and has vast field of application. Though it is not in the listed category of fibre-optic endoscopes, the basic equipment is the same. It carries out all the functions performed by the listed endoscopes.
The main functions of this equipment are already listed in the catalogue provided. Its use is not only in the field of coronary artery bypass surgery but also for vascular heart diseases and congenital heart diseases. Its application is not only in the field of cardiothoracic and vascular surgery but also in Urology, general surgery, obstetrics and gynaecology.
6. They also rely on the opinions of the following experts:
(i) Dr. Gopichand Mannam of M/s Care Hospital, Hyderabad;
(ii) Dr. Rajan Santhosham of Indian Association of Cardiovascular-Thoracic Surgeons;
(iii) Prof D Prasad Rao, Director, Nizam Institute of Medical Sciences Hyderabad.
7. The position that emerges from the opinions of the above experts is that the equipment was a surgical system using endoscope as one of the critical component without which the equipment could not function. They were of the view that the item can be called as an endoscopic system with auxiliary functions.
8. Further the appellants argue that the goods were assessed provisionally and in such a situation, cargo could not be seized. Further before finalizing provisional assessment no demand could be issued under section 28 of the Customs Act. In this matter he relies on the decision of the Tribunal in ITC Ltd Vs. CC -2004 (170) ELT 33 (Tri-LB). It was also argued that there could be no demand for duty under provisions of section 28 of Customs Act, 1962 and penalty under section 114A could not have been imposed. Accordingly the seizure and confiscation of goods are bad in law and penalty imposed are not maintainable in law.
9. Opposing the prayer of the Appellants, Ld. A.R. for Revenue submits that the equipment was for doing coronary bypass surgery. Endoscope was used as a means to see the part of the body being operated upon. It consisted of a surgeon console, surgical arm cart which include two instrument arms, endoscope arm and an image processing equipment. Endoscope is only for the function of visualization for dissection. Seeing cannot be taken as the function of the equipment and the equipment classified as endoscope.
10. He relies on the opinion of the following doctors in support of his submissions:
(i) Dr. Venugopal, Director AIIMS, new Delhi;
(ii) Dr. G.L.N. Malleswara Rao Superintendent of Osmania General Hospital , a leading Government Hospital of Andhra Pradesh;
11. The text of these opinions are re-produced below:
Opinion of Dr. Venugopal, Director, AIIMS, New Delhi as communicated vide his letter dated 21.11.03:
The Fibre Optic Endoscope is a part of Da Vinci Robotic Surgical System for Coronary Bypass Surgery. The system consists of a surgeon console and surgical arm Cart which include two arms, Endoscope arm and the Image Processing Equipment. The endoscope is essential for visualization and dissection. This equipment is used in various Cardiac-thoracic and Vascular Surgical procedures and other specialties like Urology, Gynaecology and Obst. and General Surgery Opinion of Dr. G.L.N. Malleshwara Rao, Superintendent of Osmania General Hospital, a leading Government Hospital of Andhra Pradesh, communicated vide his letter dated 19.11.03.
The da Vinci Surgical System is not a fiber Optic Endoscope. It is a Robotic Surgical System with a rigid Thorocoscope integrated with a highly sophisticated computerized Robotic System. With this system, Surgery can be done without opening the chest and only by seeing in the monitor. From the images captured by the Thorososcope, a Robot will do the actual surgery. The C.T. Surgeon only controls the robot.
12. Ld. A.R. further argues that the manufacturers catalogue or invoice nowhere describes the equipment as an endoscope. Such description was added by the importer just to claim the exemption for endoscope with the help of brochures prepared by the indenting agent. The indenting agent only gave the advice in this regard. The other persons on whom penalty was imposed also played an active role in such mis-declaration and therefore the penalties imposed are perfectly justified.
13. Specific roles of each of the persons were explained by Revenue as under:
13.1 Role of Care Foundation As the importer of the goods which were mis-declared for availing a customs duty exemption they are liable to penalty under section 114A of the Customs Act.
13.2 Role of M/s J. Mitra and Sons M/s J. Mitra and Sons as indenting agent submitted to M/s CARE a brochure published by them describing the imported equipment as an endoscope whereas the manufacturer, M/s Intuitive Surgical Inc. USAs literature and documents, described the product as Da Vinci Surgical System. It was on the basis of the said brochure and on the advice M/s J. Mitra & Bros. that M/s CARE had claimed concessional rate of duty @ 5% under notification no. 21/2002-Cus. dated 1.3.02. The fact that the bill of entry was filed as per their advice was confirmed by Shri Arun K. Tiwari, Secretary M/s CARE and by Shri C. Krishna Kumar, Bio-Medical Engineer, M/s CARE in their statements dated 7.10.03 under Section 108 of the Customs Act 1962. M/s J. Mitra & Bros. had suggested to add Endoscopic system added in bracket to the description Da Vinci Surgical System in the Bill of Entry. Further, Shri C. Krishna Kumar, Bio-Medical Engineer, M/s CARE stated that M/s J. Mitra & Bros forwarded a brochure to them in which Da Vinci Surgical System was described as Endoscopic Coronary Artery Bypass system and that their CHA, M/s Hansa Services filed the Bill of Entry on the basis of the documents received from M/s J. Mitra & Bros.
13.3 Role of Shri Arun K. Tiwari Secretary of M/s CARE Shri Arun K. Tiwari in his statement dated 7.10.2003, admitted that the Da Vinci Surgical System imported was used for laparoscopic surgery and it was too complex to be used only as an endoscope and that the description Endoscopic system added in bracket to Da Vinci Surgical System in the bill of entry was not correct. Dr. Gopichand Mannam, Chief Cardio Thoracic Surgeon of M/s CARE Hospital in his statement dated 10.10.2003 had also stated that Shri Arun K. Tiwari had brought a brochure to him in which the said system was described as Da Vinci Endoscopic Coronary Artery Bypass System and he requested him to prepare a write up giving the description accordingly. All the above facts leads to the conclusion that Shri Arun K. Tiwari, Secretary, M/s CARE, in spite of being aware of the fact that the system under import was not an endoscope, declared the same as an endoscope in the bill of entry and later on tried to justify the same with the brochure supplied by M/s J. Mitra & Bros and with the opinion of Dr. Gopichand Mannam, Chief Cardio Thoracic Surgeon of M/s CARE Hospital.
14. We have considered the arguments of both sides.
15. In the matter of eligibility for the exemption we find that the opinion of the two medical experts in super specialty is fairly clear that the instrument is not a fiber optic endoscope for which exemption was made available. It is true that the Chief Medical Officer of DGHS has opined that though the equipment is not in the listed category of fiber optic endoscopes the exemption could be extended to this equipment also.
16. No doubt that few private doctors had opined that the item could be called an endoscope. Their opinion do not weigh heavily in in the context of opinion of Dr. Venu Gopal, Director of AIIMS who himself is a cardiac surgeon heading a National Institute during material period. The other doctor from Osmania General Hospital was also an authority whose opinion also is not controverted. These Authorities of National Institutes are guardians of public interest and health policy of the State.
17. The manufacturers invoice nowhere gives the description of the equipment as an endoscope. The literature clearly shows it is a robotic surgical system which uses an endoscope as a means for viewing. It is surgical system with endoscope as one of the components. So we are clearly of the view that this equipment could not have been considered as a fiber optic endoscope eligible for exemption under Notification 21/2002-Cus at S. No.363A. Actually this matter was not pressed hard by the appellants during hearing hence we are not dwelling on the issue in greater detail. The issue argued vociferously was about penalties imposed on the appellants.
18. One of the legal issue raised is that in this case the assessment was provisional and full duty was paid before clearance of goods. So there was no demand under section 28 of the Customs Act, 1962 for duty short levied. When there is no such demand no penalty can be imposed under section 114A of the Customs Act. The opening part of the said section reads as under:
SECTION 114A. Penalty for short-levy or non-levy of duty in certain cases. - Where the duty has not been levied or has been short-levied or the interest has not been charged or paid or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any willful mis-statement or suppression of facts, the person who is liable to pay the duty or interest, as the case may be, as determined under sub-section (8) of section 28 shall also be liable to pay a penalty equal to the duty or interest so determined :
19. We find that there was no demand under section 28(8) of the Customs Act, for duty short levied and hence no penalty could have been imposed under this section. So the penalty imposed on M/s Care Foundation under section 114A is not legally sustainable. There might have been a case for imposing penalty under section 112 on Care Foundation also. Since such penalty is not imposed by the adjudicating authority, we refrain from imposing such penalty.
20. The appellants argue that the goods could not have been confiscated because the assessment was provisional. This argument is legally not tenable. Under section 111 (m) of Customs Act, 1962 any goods which do not correspond in respect of value or in any other particular with the entry made under the Act is liable to confiscation. In this, a deliberate action to declare the goods as an endoscopic system, with an intention to claim the exemption, is evident even though there was no such description in the invoice or literature of the manufacturer. The additional description was purposely added. Such mis-declaration made would make the goods liable to confiscation. So we are not able to agree with the argument that the goods were not liable to confiscation. The confiscation is thus upheld. However considering the nature of the equipment to be one used in medical care and also the nature of mis-declaration involved and the letter issued by a public authority like the Chief Medical Officer DGHS, we reduce the redemption fine to Rs. 25 lakhs.
21. Once the goods are liable to confiscation any person who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 111 is liable to penalty under section 112 of the Customs Act. The part played by Shri. Arun K. Tiwari is obvious and there is no case for fully absolving them from the penalty imposed on him. However considering that the persons concerned were not doing it for any personal gain we reduce the penalty to Rs.2.5 lakhs.
22. However we are of the view that the indenting agent who prepared documents was to enable the importer to claim the exemption. They gave shelter to mis-declaration by their ill-design and manipulation. So we do not find any reason to grant relief from penalty imposed on M/s Mitra and Brothers.
23. In view of discussions above the appeal filed by Care Foundation and Shri. Arun Tiwari are allowed partially and the appeal by M/s J. Mitra and Brothers is dismissed.
(Pronounced in open Court on..) Mathew John D. N. Panda (Technical Member) (Judicial Member) RM