Custom, Excise & Service Tax Tribunal
& Research Centre vs Mumbai on 6 October, 2010
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NO: C/1468/2002
[Arising out of Order-in-Original CAO No: CC-52/2002 ADJN ACC dated 07/08/2002 passed by the Commissioner of Customs (ACC), Mumbai.]
For approval and signature:
Hon'ble Shri P.G. Chacko, Member (Judicial)
Hon'ble Shri M. Veeraiyan, Member (Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of 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 Departmental authorities?
:
Yes
Sir Harkisondas Nurrotumdas Hospital
& Research Centre
...Appellant
Vs
Commissioner of Customs (ACC)
Mumbai
...Respondent
Appearance:
Shri J.C. Patel, Advocate for the appellant.
Shri Manish Mohan, Authorised Representative (SDR) for the respondent.
CORAM:
Hon'ble Shri P.G. Chacko, Member (Judicial) Hon'ble Shri M. Veeraiyan, Member (Technical) Date of decision: 06/10/2010 ORDER NO: ____________________________ Per: P.G. Chacko:
In this appeal filed by the appellant, a hospital, the challenge is against the Commissioner's order demanding duty of over Rs. 76 lakhs on a few medical equipments which had been imported by the hospital during the period from August 1988 to August 1993, confiscating the said goods under Section 111(o) of the Customs Act with option for redemption thereof against payment of fine of Rs. 2 lakhs, and imposing a penalty of Rs. 50,000/- on the appellant under Section 112(a) of the Act. The above demand of duty is consequential to denial of exemption under Notification No. 64/88-Cus dated 01/03/1988 which was claimed by the importer in respect of the aforesaid medical equipments. The learned Commissioner's order is in adjudication of show-cause notice dated 10/09/1999 wherein it was alleged that the appellant had violated the post-importation conditions of Notification 64/88 ibid and hence liable to pay duty on the goods and be penalised for the offence of such violation. The appellant, in their reply to the show-cause notice, denied all the allegations and maintained that they had duly complied with the conditions of the above Notification. It was in adjudication of this dispute that the impugned order was passed.
2. Reiterating the grounds of the appeal, learned counsel for the appellant submits that, essentially, there were only two allegations in the show-cause notice. Firstly, it was alleged that the hospital had charged Rs. 50/- per patient towards stationery and administrative expenses during three months from 01/08/1999 in violation of one of the conditions of the above Notification. Secondly, it was alleged that some of the inpatients having income of less than Rs. 500/- per month were billed for certain categories of surgery done on them from 1996 onwards, which was allegedly in violation of a condition attached to the Notification. Learned counsel further points out, as a matter of fact, the poor inpatients who were billed by the hospital did not have to pay anything out of their pocket inasmuch as donations from philanthropists were arranged by the hospital itself for payment of the relevant bills. It is further submitted that, apart from upholding the allegations raised in the show-cause notice, the adjudicating authority also relied on an order dated 09/02/2001 of the Directorate-General of Health Services (DGHS), whereby the Customs Duty Exemption Certificates (CDEC) which had been issued by the DGHS to the hospital to facilitate duty-free clearance of the medical equipments were "withdrawn as cancelled". It is submitted that it was not open to the Commissioner to rely upon the order of DGHS which was issued after issuance of the show-cause notice, especially where the DGHS himself was a co-noticee. In this connection, the learned counsel has further contended that, though the cancellation of CDECs was not challenged by the hospital before any court of law, it is open to them to question its validity in collateral proceedings like the present one. In this context, the learned counsel has claimed support from Hon'ble Bombay High Court's judgment in Yeshwant Gajanan Joshi and Others vs. Hindustan Petroleum Corporation Ltd AIR 1988 BOMBAY 408 and the Hon'ble Madras High Court's judgment in Nuwood Private Ltd. vs. Superintendent of Central Excise 1981 (8) ELT 184 (Mad.).
3. However, the thrust of the arguments of the learned counsel today is on the effect of rescission of Notification No. 64/88-Cus by Notification No. 99/94-Cus dated 01/03/1994. It is contended that no liability can be cast on the appellant on the ground of breach of any of the conditions of Notification No. 64/88-Cus for any period post - 01/03/1994. It is pointed that, even in the show-cause notice, the allegations against the hospital pertain to 1994-1995 as also to certain years subsequent thereto and, therefore, neither the demand of duty nor the penal action of the Commissioner is sustainable in law. In this connection, learned counsel has relied on a commentary on Section 6 of the General Clauses Act, 1896 as also on the following decisions:
(i) Appollo Hospitals Enterprises Ltd. vs. Union of India 2001 (133) ELT 58 (Mad.);
(ii) Bharath Diagnostic Centre vs. Commissioner 2007 (207) ELT 113 (Tri-LB.);
Learned counsel has also referred to the provisions of Section 159A of the Customs Act in the context of discussing the effect of rescission of Notification No. 64/88-Cus. It is the contention of the learned counsel that any liability incurred by the appellant under Notification No. 64/88-Cus in relation to the medical equipments imported by them cannot extend beyond 28/02/1994 inasmuch as the above Notification was rescind on 01/03/1994, and by virtue of clauses (c) and (e) of Section 159A of the Customs Act and the aforesaid decisions, there can be no proceedings against the appellant either for demand of duty or for confiscation or for imposing penalty on the ground that any of the conditions of the Notification was violated after the rescission of the Notification. In the instant case, breach of conditions of the Notification was alleged for a period post-28/02/1994 and, therefore, the show-cause notice and further proceedings of the department against the hospital are liable to be set aside. Reverting to the facts of the case, the learned counsel points out that, during the period from the dates of imports of the medical equipments to the date of rescission of the Notification, the hospital scrupulously followed the conditions of the Notification. It is submitted that this fact, which was stated by the Medical Director of the hospital in a statement under Section 108 of the Customs Act and categorically pleaded in the reply to the show-cause notice, has not been rebutted in the impugned order. It is further submitted that the DGHS was also monitoring the conduct of the appellant periodically till the Notification was rescinded. In this connection, learned counsel has referred to the inspection reports of the Directorate-General of Health Services, Maharashtra (copies available on record), on the basis of which DGHS issued CDECs. In this scenario, it is contended, there can be no action against the appellant on the alleged ground of breach of conditions of Notification No. 64/88-Cus.
4. Learned SDR submits that the issue involved in the instant case is apparently covered in favour of the Revenue by a judgment of the Hon'ble Bombay High Court vide Shah Diagnostic Institute Pvt. Ltd. vs. Union of India 2008 (222) ELT 12 (Bom.). It is submitted that the Hon'ble High Court referred specifically to Section 159A of the Customs Act and held that the rescission of Notification No. 64/88-Cus did not affect the liability incurred by the petitioners with regard to fulfillment of Clause 2(b) of the Notification. According to the learned SDR, this view taken by a Division Bench of the High Court should be preferred to the view taken by a learned Single Judge of the Hon'ble Madras High Court in Appollo Hospitals Enterprises Ltd. (supra) case. It is argued that, if the Bombay High Court's decision in Shah Diagnostic Institute Pvt. Ltd. (supra) case is followed, the present appellant must be held to be liable to pay duty on the goods in question and be penalised on the ground of breach of conditions of Notification No. 64/88-Cus. Learned SDR has also claimed support from a decision of this Bench vide Central India Institute of Medical Science vs. Commissioner 2008 (231) ELT 113 (Tri.-Mumbai). Learned SDR has relied on this decision for two purposes. Firstly, on the question whether any cause of action would lie against the importer of medical equipments who availed the benefit of Notification No. 64/88-Cus only for a period up to the date of rescission of the Notification and not thereafter. Secondly, on the question whether the cancellation of CDECs could apply retrospectively so as to render the importer of medical equipments ineligible for the benefit of the above Notification even where such cancellation of CDECs was done subsequently in breach of principles of natural justice. Learned SDR has referred to the decision of the this Bench on both the issues. On the first issue, the Tribunal held that the liabilities incurred under Notification 64/88-Cus would continue even after the rescission of the Notification. On the second issue, the learned SDR has banked on the following observations of the Tribunal:
"We find that the appellants do admit that prior to the rescission of notification, if the conditions of the notification are violated, then duty can be demanded as unanimously held by the Madras High Court, Bombay High Court and Supreme Court in Jagdish Cancer etc. and since possession of a certificate from DGHS is one of the conditions of notification which stands violated, after it is withdrawn, the analogy has to be equally applied to the cancellation of certificates cancelled during the pendency of notification and those cancelled after the rescission of the notification."
5. We have given careful consideration to the submissions.
6. Notification No. 64/88-Cus ibid granted exemption from payment of basic customs duty and additional customs duty (CVD) on medical equipments, apparatus and appliances imported by any hospital, subject to the conditions laid down in the table annexed thereto. As per these conditions, the importer-hospital should 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 hospital should also be certified 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 treatment, on an average, to at least 40 per cent of all their out door patients; and
(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 per cent of all the hospital beds reserved for such patients; and
(c) treatment at reasonable charges, either on the basis of the income of the patient concerned or otherwise to patients other than those specified in clauses (a) and (b).
7. Appellant produced the requisite certificates to the proper officer of customs at the time of clearance of each consignment. The medical equipments imported by them were accordingly allowed to be cleared duty-free in terms of the above Notification. This happened during the period from August, 1988 to August 1993. Undisputedly, the DGHS monitored the conduct of the appellant apparently for a period up to 1994. The show-cause notice in question was issued on 10/09/1999 on the basis of the results of certain investigations which commenced with a visit of officers of customs (SIIB) to the hospital on 26/11/1998. During a subsequent visit of the officers, the medical equipments in question were physically inspected and records verified. At around the same time, copies of the relevant bills of entry and allied documents were also recovered from the hospital. A statement of the Medical Director of the hospital was recorded on 07/01/1999 under Section 108 of the Customs Act, wherein he inter alia stated that all the medical equipments were installed in the hospital except a few and that all the equipments were in use till date. The Medical Director also claimed that the hospital had given free treatment to 40% (average) to OPD patients and had also been keeping 10% of the hospital beds reserved for patients whose income was less than Rs. 500/- per month. However, the investigating officers were not satisfied and they seized the equipments on 06/03/1999 alleging that the hospital had not complied with the conditions of Notification 64/88-Cus. Further investigations were conducted to verify the authenticity of the statement given by the Medical Director and the hospital was visited again by the officers for this purpose. The Medical Director handed over certain registers / documents / files / cash vouchers / computer receipts / internal circulars of the hospital to the SIIB team and also gave another statement on 27/08/1999. The documents so handed over to the SIIB included OPD clinical receipts for Rs. 50/-, hospital internal circular dated 24/07/1999 regarding fees to be charged in casualty cases, another internal circular dated 29/03/1996, specimen bills taken from three bill folders relating to January to March, 1995 and excerpts from IPD register for the period January to March, 1995. In answer to queries from the SIIB team, Dr. Bhujang, Medical Director submitted that Rs. 50/- was being charged from OPD patients and also patients coming to casualty and that free treatment was being given to 40% of the OPD patients in terms of the Supreme Court's judgment in the case of Mediwell Hospital and Healthcare Pvt. Ltd. He submitted that the hospital started charging Rs. 50/- from 01/08/1999 so as to meet the requirements of 40% free OPD treatment. He further stated that the amount was charged to cover stationery and other expenses. In response to queries put by SIIB with reference to the aforesaid specimen bills, Dr. Bhujang claimed that, even after excluding the IPD patients to whom those bills were issued, the hospital had achieved its requirement of 10% free treatment to IPD patients. On the basis of the statements of the Medical Director and the records furnished by him, the show-cause notice alleged that the hospital had failed to fulfill the conditions of Notification 64/88-Cus and that they suppressed this fact with intent to gain undue benefit of the Notification. The show-cause notice, therefore, proposed to confiscate the goods under Section 111(o) of the Customs Act and to impose penalty on the appellant under Section 112 of the Act. It also proposed to penalise the DGHS under Section 112 of the Act for the alleged abetment of the importer's offence.
8. Before any further discussion, we should make an endeavour to discern the scope of the allegations raised in the show-cause notice. It appears from the notice that the department issued a summons in September 1998 to the hospital and, in response to that, hospital supplied certain records under cover of letter dated 14/10/1998. No copy of this letter is available on record, but the counsel has shown us a copy, from which it appears that income tax assessment orders for the period from 1989 to 1997 and details of OPD and IPD registers (for what period ?) were supplied by the hospital along with copies of the import documents. It further appears that the hospital submitted a chart indicating the percentage of IPD and OPD patients who where given free treatment for the period from 1988-89 to 1995-96, which indicated that free treatment was given to 40% to 45% of OPD patients and 14 to 28% of IPD patients. Even after examining all the records furnished by the hospital, the show-cause notice apparently proceeded to frame a case against the hospital based on their conduct for the period after 1994. As a part of this exercise, a scrutiny of the OPD clinic receipts for the amounts (Rs. 50/- per patient) collected from OPD and casualty patients towards stationery and administrative expenses was conducted and specimen bills issued to patients during the period January to March 1995 and excerpts from IPD register for the same period were also examined. Ultimately, the show-cause notice concluded that the hospital had failed to substantiate their claim for the relevant year (1994-95). It was alleged that the hospital failed to furnish all the cash vouchers for 1994-95 and that such vouchers were supplied only for 18 days. The show-cause notice further stated thus:
"The hospital has expressed inability to provide full records for the relevant period. The hospital thus appeared to have been unable to fulfill the condition of Notification 64/88 for providing free treatment to 10% IPD patients."
It was further alleged as under:
"(A) Patients having certain specific diseases are not treated free even if their income is less than Rs. 500/- as per the hospital circular and Dr. Bhujang's statement.
(B) The OPD figures of free treatment didn't include the patients for diagnostic tests, which are not free and thus the figure of percentage patients treated free in OPD given by the hospital are not correct. The hospital has expressed its inability to produce records for diagnostic tests.
(C) The available register of IPD patients until 1997 do not indicate the verifiable address of patients given free treatment."
9. These allegations raised in the show-cause notice, by and large, relates to the period 1994-95, the period described in the notice as the "relevant period". One allegation which relates to a subsequent period is the one pertaining to Rs. 50/- having been charged even from poor inpatients. In this connection, however, the show-cause notice also noted the Medical Director's statement that the hospital tried to arrange funds through social service and donors for poor patients to enable them to pay such charges. In any case, indisputably, the show-cause notice proposed to deny the benefit of Notification 64/88-Cus to the appellant on the ground that they did not fulfill the conditions of the Notification during 1994-95 and afterwards. It was this allegation which was denied by the appellant in their reply to the show-cause notice. In this scenario, we think it will be opportune for us to consider the learned counsel's argument on the effect of rescission of Notification 64/88-Cus. The Notification was rescinded on 01/03/1994 by Notification No. 99/94-Cus dated 01/03/1994. The question mooted by the learned counsel is whether the proposals in the show-cause notice can be sustained on the basis of alleged contravention of the Notification for any period after 28/02/1994. In this connection, learned counsel has referred to a commentary on Section 6 of the General Clauses Act vide "Principles of Statutory Interpretation" by Guru Prasanna Singh, Twelfth Edition, 2010'. He has invited our attention to the relevant paragraph of Chapter VII, on page 700, wherein it is said that the effect of clauses (c) to (e) of Section 6 of General Clauses Act is to prevent the obliteration of a statute in spite of its repeal to keep intact the rights acquired or accrued and liabilities incurred during its operation and permit continuance or institution of any legal proceedings or recourse to any remedy which may have been available before the repeal for enforcement of such rights and liabilities. As rightly pointed out by the learned counsel, this view is equally applicable to the corresponding clauses of Section 159A of the Customs Act. Section 159A deals with effect of amendments of rules, regulations, notifications or orders. According to this provision of law, where any notification is rescinded, then, unless a different intention appears, the rescission shall not -
"(a) .............
(b) .............
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any rule, regulation, notification or order so amended, repealed, superseded, or rescinded; or
(d) .............
(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty forfeiture or punishment as aforesaid."
We note that the provisions of Clauses (c) and (e) of Section 159A of the Customs Act are pari materia with the corresponding clauses of Section 6 of the General Clauses Act. In the case of Shah Diagnostic Institute Pvt. Ltd. (supra), the Hon'ble Bombay High Court had occasion to examine the provisions of Section 159A of the Customs Act as well as the effect of rescission of Notification No. 64/88-Cus. Their lordships held that the rescission of the Notification did not affect the liability acquired, accrued or incurred by the petitioners with regard to fulfillment of Clause 2(b) of the Notification. This has been relied on by the learned SDR. We note that Clause 2(b) of Section 159A of the Customs Act has not been relied on by the learned counsel, nor is it relevant to the issue at hand inasmuch as it is nobody's case that the rescission of exemption Notification would affect the previous operation of the Notification during the period when the Notification was in force. The Hon'ble High Court was affirming what was laid down under Clause (b) of Section 159A. It is also pertinent to note that the case considered by the Hon'ble High Court involved show-cause notices issued in 1992-93 i.e. long before the above Notification was rescinded. In the instant case, we are seized of a different issue which is apparently similar to one of the issues considered by the Hon'ble Madras High Court in Appollo Hospitals Enterprises Ltd (supra). In that case, a learned Single Judge of the High Court considered the effect of rescission of Notification No. 64/88-Cus and held as under:
"43. Having denied such exemption whether it is open to the petitioners to contend that after the rescinding of Notification No. 64/88, it is not open to the authorities to enforce the liability. The answer is simple, in view of the judgments of the Supreme Court referred to above. The petitioners those who benefited the tax exemption are bound to discharge the liability during the period when the said Notification 64/88 was in force. Hence it is always open to the authorities to enforce such obligation only during that period when the Notification No. 64/88 was in force and not for the subsequent period. So it is for the authorities to establish that the petitioners had violated the conditions imposed under Notification No. 64/88 subsequent to their availing the benefit of the exemption of Duty and before the end of February, 1994, since Notification 99/94, rescinding the Notification 64/88 came into force on 1-3-94."
Elsewhere in his judgment, his lordship made it clear that it was not open to the petitioners to contend that Notification 64/88 had been rescinded and as such their obligation also ceased. It was further observed that the rescission of Notification 64/88 was not part of the discussion by the Hon'ble Supreme Court in the case of Faridabad CT Scan Centre 1997 (95) ELT 161 (SC) nor by any other Court. In our considered view, the above ruling of the Hon'ble High Court in the case of Appollo Hospitals Enterprises Ltd (supra) would clinch the issue under consideration in the instant case. We further note that, in the case of Bharath Diagnostic Centre (supra), a Larger of this Tribunal considered the above decision of the Hon'ble High Court and rejected the contention raised by the hospital. The contention of the hospital was that, if any violation of Notification 64/88 during the period of its life was detected after rescission of the Notification, no action could be taken by the authorities. The larger Bench observed that there was nothing in the decision of the High Court in Appollo Hospital Enterprises case which warranted such inference. The larger Bench proceeded to consider the Hon'ble High Court's decision in Shah Diagnostic Institute's case and observed that the said judgment offered an answer to the question whether the rescission of Notification No. 64/88 affected the liability incurred under the said Notification prior to its rescission. This bench is liable to follow the decision of the jurisdictional High Court and accordingly we hold that rescission of Notification 64/88 did not affect the liability, if any, incurred by the appellant-hospital at any time during the period from the date of import to the date of rescission of the Notification. Further, we also observe that there is no conflict, whatsoever, between the Hon'ble Madras High Court's decision in Appollo Hospital Enterprises case (supra) and the Hon'ble Bombay High Court's decision in Shah Diagnostic Institute Pvt. Ltd. (supra). For the present case, the appropriate authority is, by all standards, the decision in Appollo Hospital Enterprises case, which is to the effect that, where a hospital which imported medical equipments free-of-duty in terms of Notification No. 64/88-Cus failed to discharge its continuing obligation under the Notification at any time during the period when the Notification was in force, it is open to the authorities to enforce such obligation for such period and not for any subsequent period. The Hon'ble High Court's further finding in Appollo Hospital Enterprises case is to the effect that it is for the authorities to establish that the hospital had violated the condition of Notification No. 64/88 subsequent to their availing of its benefits but before the end of February, 1994. These findings of the Hon'ble Madras High Court in Appollo Hospital Enterprises case are not in conflict with any decision of the Hon'ble Bombay High Court or of the Hon'ble Supreme Court in relation to Notification No. 64/88. This ruling is squarely applicable to the instant case wherein the Revenue's case is that the medical equipments in question should be confiscated and the appellant-hospital should be penalised for the reason that the hospital violated conditions of Notification No. 64/88 in 1994-95 and thereafter. This case of the Revenue is clearly unsustainable in law as it is diametrically against the ruling of the Hon'ble High Court in Appollo Hospital Enterprises case. We, therefore, hold that the proposals in the show-cause notice and the corresponding findings of the learned Commissioner are not sustainable in law.
10. Yet another issue which was been agitated before us is as to what would be the effect of withdrawal/cancellation of the CDECs issued by the DGHS. The DGHS issued CDECs at the time of the subject imports but the same came to be "withdrawn as cancelled" on 9th February, 2001. According to the learned SDR, it was a cancellation ab initio. According to the learned counsel, it was not so. He has further argued that it is open to the appellant to question the legality of the DGHS order of cancellation in the present proceedings. We do not think that this is an appropriate case to deal with this issue. We have already found to the effect that the department has no jurisdiction to proceed against the appellant-hospital in terms of Notification No. 64/88 on the ground that the hospital committed breach of conditions of the Notification post - 28/02/1994. That being so, any aspect of the withdrawal / cancellation of the CDECs is of no relevance.
11. In the result, we set aside the impugned order and allow this appeal.
(Dictated in Court) (M. Veeraiyan) Member (Technical) (P.G. Chacko) Member (Judicial) */as ??
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