Inys Medical Research Society v. Commissioner Of Central Excise

S.S. Sekhon, Member (T)

1. The appellants, M/s INYS Medical Research Society (Hereinafter referred to as Society), had imported medical instruments and equipment under the claim of exemption vide Notfn. No. 64/88-Cus dtd. 1.3.88. The imports were as follows:

SI. No.

Description

Bill of Entry No. & Date

Value of equipments (Rs.)

Customs duty involved (Rs.)

1.

Life Saving Equipment - Aloka ultrasound scanner Model SSD-630 and Standard Convex Sector Probe Model UST-934N

031317 dt. 13.9.91

6,42,640

Imported through Madras A.C.C.

2.

Coulter T890 with printer and its accessories

015672 dtd. 7.7.91

9,52,723

13,07,971

3.

Lifescope 9 BSM 8301K Advanced monitor

009111 dtd. 4.4.90

1,21,854

1,67,290

4.

Treadmill-computer assisted system for Exercise

009112 dtd. 4.4.90

4,97,802

6,83,420

2. Consequent to certain enquiries, the officers found that the Society had transferred the imported equipment to an adjacent premises belonging to Manav Charitable Hospital (MCH for short) and even though the Society had furnished the following treatment figures of the patients treated:--



1992-93

1993-94

1994-95

1995-96

1996-97

OPD

155451

184207

188456

186040

181708

IPD

3055

3583

4325

4478

4978

Camp

-

60912

91767

71446

111728

and also that MCH also fulfils the conditions of the Notification and they were treating the patients free of cost, yet the equipment at MCH premises were seized as no permission to remove the same to close premises or their return was to be obtained from the Customs officers. Further enquiries were conducted and it appeared to the Department that the Society did not satisfy the post-importation conditions of the Notfn. No. 64/88-Cus dtd. 1.3.88 inasmuch as--

(i) The Research Society either had removed the said medical equipments outside the Research Society or installed directly at MCH, Bangalore, and also brought back the said medical equipments into the premises of Research Society. Thus there was a movement of medical equipments without taking permission and without following proper procedure as laid down under the Customs Act, 1962;

(ii) The Research Society failed to produce documentary evidence to show that they have actually provided free treatment to at least 40% of the out patients. They had also failed to produce any proof for having treated free all the in-patients whose family income is less than Rs. 500 p.m. and also for having reserved 10% of the total beds for this purpose, as stipulated in the said Notfn. No. 64/88;

(iii) The Research Society had unauthorisedly used the said medical equipments for treating the patients of MCH.

Therefore, it appeared that the said medical equipments imported under Notfn. No. 64/88-Cus by the Society totally valued at Rs. 15,72,379 (Assessable Value) were liable for confiscation, and the Customs Duty to the tune of Rs. 21,58,681 (equal to duty foregone) was also liable to be recovered from the said Society under Section 28 of the Customs Act, 1962. Ths said Society were also liable for penalty under Section 114A of the Customs Act, 1962 and proceedings by issue of Show Cause Notice dtd. 7.2.2000 were initiated.

3. The Commissioner after considering the reply adjudicated the matter demanding a duty of Rs. 21,58,681 from the society on the three equipments imported by them in Air Cargo Complex, Bangalore and also ordered the confiscation of the same under Section 111(o) of the Customs Act, 1962. However, he allowed the redemption of the same on a fine of Rs. 2,00,000 under Section 125 of the Customs Act, 1962 besides imposing a penalty of Rs. 21,58,581 under Section 114A and demanded interest under Section 28AB of the Customs Act, 1962.

4. Aggrieved by the above said order, the Society preferred an appeal before CEGAT. CBGAT by its Final Order No. C/51/2000 remanded the case back to the jurisdictional Commissioner for de novo consideration. In this Order, two major issues were discussed as under:

(i) Whether the demand is time barred, and

(ii) Whether the appellants were eligible to the exemption contained in Notfn, No. 64/88.

In view of the difference in opinion amongst the 2 Members on the above issues, the matter was referred to a third Member who after considering all the facts of the case and the case laws clearly held that the demand is not time barred, On the other question whether the appellants were eligible to the exemption contained in Notfn. No. 64/88-Cus dtd. 1.3.88 the matter was remanded back to the original authority to be decided on merits and as laid down by Supreme Court in Mediwells case.

5. Accordingly, the matter was heard again and the present order was passed by the Commissioner reiterating the findings as regards the levy of duty of Rs. 21,58,681 and similar penalties, interest orders, hence this appeal.

6. After hearing both sides and considering the material on record, it is found:

(a) The Society has stated that they had produced records maintained both by themselves as well as by MCH to the Customs Officials (Prev) but they were informed by the Officers that these records were not in the prescribed form. No findings on these records were arrived at by the Ld. Commissioner and or the officers. The Ld. Advocate has shown us that the Notification did not prescribe any specific form for maintenance of records of the free patients. However, the treatment records maintained by MCH rendering 100% free treatment to all patients were available in the form of Case sheets which contained all the relevant-details and the Department could have verified with the patients who received such treatments. The allegation of non-production of documentary evidence for having treated the patients free of charge as made in the Show Cause Notice also has an allegation that the Society did not produce any permission or intimation for removing the medical equipment to MCH and that the Society had unauthorisedly used medical equipments for treating patients in the premises of MCH. These allegations have to be considered in view of the fact that the equipment imported in question was used to treat 100% patients free without any income criteria and for that records of the case history of the patients so treated was available and brought to the notice of the Department and the adjudicator.

(b) We are impressed about this plea made before us that case records of the patients treated by this equipment in the premises of the appellant and or also MCH are available and were not considered. A perusal of the Notification reveals that imports would be available and eligible to an institute, which is so certified by the Director General at Services. It also prescribes that certain categories of patients are to be treated at these hospitals as free indoor patients. The income criteria of these patients have been prescribed. The Notification, as we read it, does not provide for the treatment to be restricted by using these machines only in the premises of the appellant who were permitted to import them. The notification only prescribes eligibility criteria for an importer and a consequential end use after import. As regards the eligibility of the importer to get these imports under the notification, there is no doubt in the minds of the Departmental officers who investigated the case and or the adjudicator. The dispute is only as regards the site at which these equipments were used viz., MCH premises adjacent to the importers premises and also the percentage of patients who have availed the benefit of the treatment by this equipment. As regards the location and use of the machines, adjacent to the premises of the Society in the premises of MCH, we find no gross-misuse of the Notification, more so when it is being urged that the patients even in MCH were granted free treatment,

(c) We are also not enthused to observe and conclude that there was any authority on part of the Customs to have granted any permission for shifting the machinery to MCH and its relocation in the Societys premises as is being made out by the Department. As regards the condition of free treatment to the patients when the machine was installed and used in the premises of MCH, records are available in the form of patients case sheets, which has been ignored by the adjudicator. These case sheets may go to prove the appellants case of 100% patients being given free treatment. Therefore, on this aspect the matter is required to be remitted back for re-examination of this vital aspect of free treatment based on the case sheets.

(d) While remanding the matter back for re-adjudication, this Bench had observed:

".....Needless to mention the Government has granted exemption from payment of Customs duty with the sole object that 40% of all outdoor patients and entire indoor patients of the low income group where income is less than Rs. 500 p.m. would be able to receive free treatment in the Institute. That objective must be achieved at any cost, and the very authority who granted such certificate of exemption would ensure that the obligation imposed on the person availing of the exemption notification are being duly carried out and on being satisfied that the said obligation have not been discharged they can enforce realization of the Customs Duty from them."

Based on the directions of the Apex Court in the case of Mediwell Hospital and Health Care Put Ltd., 1997 (57) ECC 197 (SC) : : 1997 (89) ELT 425 (SC) concerning the very said Notification No. 64/88-Cus wherein at Para 13 of the very said decision, after observing the objectives of the notification, the Apex Court had directed "coercive official action to perform the obligation undertaken" which were considered by the Honble Court to be a part of the conditions of the notifications to be strictly enforced by all concerned. We find that this directive of the Apex Court has been grossly ignored by the Ld. Adjudicator in the de novo proceedings. The adjudicator was duty bound to have brought on record the coercive official action to enforce the obligation undertaken to be brought on record and only thereafter, he should have proceeded to go into the action for causing a liability for confiscation of violation of Section 111(o) and consequent duty demands. The Tribunal in its remand order had observed that it has to be ensured that compliance of 40% free treatment is achieved as soon as possible and only on an absolute failure, as last resort, after official coercion, demands of duty could be resorted to. The Ld. Advocate has made well founded grievance by pointing out that the Tribunals remand orders to comply with the Apex Court decision have not been complied with. The order has been issued in a Mechanical pre-determined manner to impose huge duty and penalty and other liabilities which were not called for. A Chart has been prepared and presented to show total non-application of mind. Without going through the details of this chart, when we find that the Commissioner has not brought on record, coercive steps taken to ensure the 40% free treatment which was the directive of the Apex Court which was relied upon by the Tribunal in its remand order, then, we have to find that the Commissioner has grossly erred in not complying with the Tribunals directions. The other reasons pointing on part of the Commissioner to somehow form the demand and the penalties as being made out by similarities almost by comparison of para to para in the Ld. Advocates submission before us, would only reinforce our view that this order of the Commissioner passed in gross disregard to the remand directions is required to be set aside and the matter remitted back for de novo adjudication.

7. In view of our findings, the order is set aside and the matter remanded back for de novo adjudication.