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2. The Commissioner of Customs (Airport) on the basis of investigation and recording of statements issued show cause notice dated 4/8.9.1998 bearing No. S8/321/98-ACC alleged that the appellants have not complied with the terms of the Notification in question. The show cause notice admitted about the provisional duty bonds being cancelled after the production of exemption certificates by the appellants. It referred to the investigation and verification of the registers and records in respect of out patients and noted that the registers were incomplete for the years 1991-94 and the particulars found from the registers were tabulated and the details given in the show cause notice. It was alleged that from January 1991 to June 1991 common registers were maintained for both paying out-patients and freely treated out-patients. It is alleged that neither the addresses of the patients treated freely nor the particulars of lab test/examination conducted on the individual patients freely were maintained. It further alleged that details of out-patients (payment category) treated were made available for a period of six months only from January to June 1991 and therefore, it alleged that in the absence of relevant records and bills and incomplete details available in the registers provided for verification the percentage of the free treatment given to the out-patients could not be ascertained and the genuineness of the figures as shown in the tabulated column could not be confirmed. It also alleged that there was no records to show that there was reservation of 10% of beds in terms of the Notification in question and also no register/records/vouchers were made available for verification with regard to free treatment given to indoor patients. It was alleged that no notice board/publicity has been given for such free treatment. The computerised statistics made available for the years 1990-1994 were shown in tabulated columns in the show-cause notice. On that basis it alleged that the hospital was able to give only the total number of inpatients treated and not the names and other details. With regard to inpatients treated free the particulars were given in the tabulated column shown in the show cause notice. However, it alleged the basic documents such as admission registers, discharge registers, admission slip and discharge memo issued to the individual patients etc. were not made available for verification to prove the authenticity of the statistics furnished by the hospital, hence it was alleged that statistics furnished by the hospital could not be relied upon. After narrating certain more facts ultimately, it was alleged that hospital fraudulently obtained CDEC from the DGHS to avail duty exemption and as they had not fulfilled the conditions of Notification in question, the proviso under Section 111(o) of the Customs Act gets attracted and hence they were called upon to explain as to why penal action under Section 112(a) of the Customs Act should not be initiated against them besides, confiscation of imported goods for the value of Rs. 1,40,61,310 should not be done and the benefit of the Notification in question to deny and Customs duty of Rs. 56,24,524 should not be demanded under proviso to Section 28(1) of the Customs Act, 1962.

V. Appeal No. C/1305/98 CDR Diagnostic Center This appeal arises from the Order-in-Original No. S8/193/A/98-ACC dated 6.7.98 despatched on 28.7.98 passed by the Commissioner of Customs confiscating the Ultra Mark Colour Doppler and Computerised Tread Mill valued at Rs. 51,00,640. He has noted that in view of the long passage of time and since it was stated before him that the machines are not in working condition, therefore, he took a lenient view by granting redemption on payment of fine of Rs. 25,40,256 and he has imposed a penalty of Rs. 50,000 under Section 112(a) of the Customs Act. In this order, the Commissioner noticed two Bills of Entry by which the goods were imported. He has noted that the said goods were allowed clearance free of duty under provisional duty bonds pending production of the Customs duty exemption certificate under the Notification. Subsequently, DGHS issued CDEC vide No. Z.37011/15/91-MG dated 22.1.92 and Z.37011/15/91-MG dated 24.10.91 and therefore, the respective PD bonds were cancelled by the department. However, at the instance of the direction given by the High Court of Delhi in PIL, investigation was carried out and the officers noticed that the appellants have not fulfilled the terms of the Notification. It is also noted that the DGHS vide letter No. Z-37011/15/ 91-MG dated 27.10.97 has withdrawn the two CDECs issued cited supra on the ground that diagnostic centre without indoor beds are not eligible for customs duty exemption certificate under the said Notification. It was alleged that they have not fulfilled the terms of the Notification and hence the duty was liable to be recovered. In the order impugned, the Commissioner had accepted their plea that show-cause notice is barred by time and even as per the proviso to Section 28(1) of the Customs Act, the demands were not enforceable being beyond the period stipulated therein. However, he noted that the show-cause notice proposed confiscation under Section 111(o) of the Customs Act and also imposition of penalty under Section 112(a) and hence, he took a view that these proceedings can be initiated and confiscation can be ordered besides imposition of penalty and hence passed the final order which is under challenge. The appellants' contention is that there cannot be confiscation and penalty while holding that the demands are barred by time. They contended that they have not violated the terms of the Notification and there is no wilful default in the matter to order confiscation and penalty.

VII. Appeal No. C/294/2000 Nagarjuna Hospitals Pvt. Ltd.

This appeal arises from Order-in-Original No. 13/2000 dated 29.2.2000 passed by the Commissioner of Customs, Chennai, holding that the goods imported vide Bill of Entry No. 44553 and 44555 dated 12.11.92 are liable for confiscation under Section 111(o) of the Customs Act but the order impugned does not say whether the goods have been confiscated absolutely and there is no mention of any imposition of fine in lieu of confiscation but however, the order impugned imposed penalty of Rs. 10,00 lakhs on the hospital under Section 112(a) of the Customs Act. In this case, Bills of Entry had been filed seeking clearance free of duty under the Notification. Since the CDEC was issued as category 4 of hospital, as per the Notification, the appellants were required to produce installation certificate. The appellants relied on the duty exemption certificate vide F. No. Z-37011/10/92-MG dated 19.10.92 issued by the DGHS (Medical General Section), New Delhi and claimed exemption. They asserted that they have given the benefit in terms of the Notification. The department on investigation found that the appellants had not filed installation certificate. They noticed from the said certificate issued by DGHS that they had clarified that no application for issue of installation certificate was pending with them. Therefore, proceedings were initiated on the allegation that they have failed to comply with the terms of the Notification and hence the imported goods were liable for confiscation besides duty of Rs. 7,68,445 was liable to be recovered from them. The appellants contends that they were running now the hospital as category 2 and they have approached the State Medical Director requesting them to visit the hospital to issue installation certificate; but since the said authorities did not take any action, they have addressed a letter dated 12.3.96 to the Director of Medical Education, Andhra Pradesh, that on installation of the equipment requested the authorities at Guntur to conduct necessary inspection and that they submitted list of patients treated free of cost as inpatients and outpatients. A copy of the report dated 26.4.95 submitted by Superintendent, Government General Hospital was produced, wherein it was reported that he visited and verified the records; that though installation certificate was not issued, the fact that the Superintendent, Government Hospital, Guntur visited and inspected the hospital amounts to certifying that the imported medical equipment was found installed and the same should be accepted. The Commissioner did not accept their plea and held that they have not produced installation certificate and hence they have not satisfied the terms of the Notification. He also referred to DGHS letter which had clearly stated that their hospital was considered as category 2 hospital hence they had not satisfied the terms of the Notification. The Commissioner on the basis of this has held that the DGHS vide letter dated 13.12.99 had withdrawn the CDEC issued to the hospital, inasmuch as the hospital failed to follow the conditions of the Notification in continuously discharging the post-import conditions undertaken at the time of importation. Therefore, he held that the goods impugned were liable for confiscation as during the period in question 40% of free treatment to indigent persons had not been granted. However, the Commissioner has not confirmed the duty nor given any reasons why the duty has not been confirmed. The Revenue has also not filed any cross appeal in this matter.

3. The Revenue in response to the Miscellaneous order have made the following submissions:

3. As regards the question of jurisdiction to demand duty, the following observations are made specifically with reference to the decision in the case of M/s. Willingdon Hospitals that has been challenged before CEGAT.

(i) However, all the goods were held liable for confiscation under Section 111(o) of the Customs Act, 1962, on the ground that the conditions of notification were not observed. It has been clearly established that M/s. Willingdon Hospitals have not fulfilled the conditions regarding free treatment as stipulated in the notification. Notwithstanding the fact that the CDEC issued by the DGHS has not been cancelled or withdrawn since the conditions have not been fulfilled action has been taken for demanding duty. Even under the proviso clause and confiscation of goods, as explained in the Order in Original itself, the hospital has suppressed the fact that they will not be able to fulfil the conditions of the notification and obtained the CDEC on the basis of said wilful suppression.