JUDGMENT
C. Satapathy, Member (T)
1. Heard both sides. The impugned order dtd. 23.4.2001 (despatched on 15.6.2001) holds the MRI equipment imported duty free under Notification No. 64/88-Cus dtd. 1.3.1988 liable to confiscation under Section 111(o) of the Customs Act, 1962 and allows redemption of the same on payment of a fine of Rs. 50 lakhs in addition to levying custom duty amounting to Rs. 63,02,542. The order also directs finalization of provisional assessment in regard to RF Shield imported subsequently denying the exemption under the said Notification No. 64/88. Further, a penalty of Rs. 20 Lakhs has been imposed on the appellant company. The other noticees being the Directors of the appellant company and Director of the company that purchased the MRI equipment from the appellant have not been penalized taking a lenient view.
2. Initially there was a dispute in regard to grant of exemption under Notification No. 64/88 to the MRI scanner imported against CDEC No. Z-37036/5/90/MG dtd. 14.5.1990 issued by DGHS. The dispute had reached the Apex Court where it was settled accepting the affidavit of the appellant who undertook as follows:
(a) 40% of the outdoor patients will be treated as free of costs;
(b) The Superintendent of Chittaranjan Cancer Hospital, Calcutta, may refer the indoor patients having monthly income of less than Rs. 500 per month and also not exceeding 10% of the total beds in the said hospital, every year for free diagnostic treatment and the respondent shall provide such treatment to such patient free of charge; and
(c) That the equipments imported and forming subject-matter of the present appeal shall not be disposed of by the respondent, without 30 days clear notice in writing, to the Collector of Customs, Calcutta.
3. It is the case of the appellant that they have complied with the aforesaid undertaking while the impugned scanner was installed at Woodlands Nursing Home with whom they had an agreement for the purpose, but subsequently the appellants suffered a loss of Rs. 97.16 lakhs till 31.3.1995 and, therefore, they decided to sell the said scanner. It is their contention that they informed Collector of Customs through a letter dtd. 10.11.1995 that they are considering to dispose of the machine. Thereafter, they sold the said scanner to M/s. Florence Medical-cum-Diagnostic Centre Pvt. Ltd., Siliguri by an agreement dtd. 8.10.1996 for an amount of Rs. 85 Lakhs. The appellants claim that they are not liable to pay the duty on the impugned scanner nor they are liable to pay any penalty, since they have complied with the Apex Court Orders.
4. It is the case of the Department that the appellants never intimated the customs authorities regarding sale of the impugned scanners and they have violated the conditions of Notification No. 64/88 as well as the undertaking given to the Apex Court. The Department further contends that the CDEC dtd. 14.5.1990 issued by DGHS has been subsequently withdrawn under orders of the Delhi High Court by DGHS on 20.11.1997. Hence, the Department has held the impugned scanner as well as RF Shield imported subsequently to be ineligible for exemption under the said Notification No. 64/88, the impugned scanner has also been held liable to confiscation under Section 111(o) of the Customs Act, 1962.
5. We have heard rival submissions and perused the case records. We find that Notification No. 64/88 has been issued under Section 25 of the Customs Act, 1962 granting exemption in public interest to certain medical equipments. Such exemption is subject to approval from the Ministry of Health and Family Welfare or DGHS. The exemption is also subject to the conditions that free treatment would be given to 40% of outdoor patients as well as free treatment to indoor patients of poorer class. We note that the exemption granted under this very Notification No. 64/88 has been considered by the Apex Court in the case of Mediwell Hospital and Health Care Pvt. Ltd. v. UOI, 1997 (57) ECC 197 (SC) : 1997 (89) ELT 425 (SC). In Para 13 of its order, the Apex Court has observed as follows:
“It is needless to reiterate that all the persons including the appellant who had the benefit of importing the hospital equipment with exemption of customs duty under the notification should notify in the local newspaper every month the total number of patients they have treated and that 40% of them are the indigent persons below stipulated income of Rs. 500 per month with full particulars and address thereof which would ensure that the application to treat 40% of the patients free of cost would continuously be fulfilled. In the event of default, there should be coercive official action to perform their obligation undertaken by all such persons. This condition becomes a part of the exemption order application and strictly be enforced by all concerned including the Police personnels when complaints of non-compliance were made by the indigent persons, on denial of such treatment in the concerned hospital or diagnostic centers, as the case may be.”
6. It is clear from the above that the obligation under the said notification requires to be continuously fulfilled subsequent to the import. The Apex Court also observed that the conditions in the Notification are required to be strictly enforced by all concerned including the police personnel and that coercive official action is required to be taken in the event of default. The same notification has again been considered by the Apex Court in the case of Commr. of Cus. (Import), Mumbai v. Jagdish Cancer & Research Centre, 2001 (77) ECC 12 (SC) : 2001 (132) ELT 257 (SC). In this case, the Apex Court observed in para 13 of its order that the exemption is subject to conditions of free treatment and that a percentage of free treatment given in a particular year would not make good the deficiency in the previous or the following year.
7. It is, therefore, very clear from these judgments of the Apex Court in regard to the exemption Notification Mo. 64/88 that it casts a continuing obligation on the importers with regard to fulfilment of various conditions including conditions of free treatment subsequent to the import of the machinery without payment of duty. The Apex Court has also very emphatically directed coercive official action for continuous fulfilment of the conditions attached to the exemption notification.
8. It is, therefore, difficult to accept the arguments of the appellants that they have no continuing obligation of free treatment etc. in regard to the impugned scanner imported duty free under the said Notification 64/88. They have urged that they are only bound by the undertaking they have given before the Apex Court. However, we find that even in terms of the undertaking in Para 2 (a) and (b), there are certain obligations of free treatment cast upon them and these are in the nature of continuing obligation since no time limit has been specified therein. As regards, the undertaking in para 2(c), the appellants have contended that they were free to dispose of the machines having given a notice t:o the Collector of Customs. Firstly, this undertaking given to the Apex Court cannot be construed as an empty formality. There has to be a purpose behind giving such a notice. Since the Notification itself has a continuing obligation, such a notice is obviously required for the purpose of alerting the customs authorities to take steps for securing revenue in the event of the importers wanting to sale the impugned goods on which duty exemption has been availed subject to fulfilment of post-import conditions. It has also been disputed by the customs department that such a notice was ever given. They have no record of having received the letter from the appellants in their office records. The appellants have not produced any proof of receipt except stating that the acknowledgement of the letter dtd. 10,11.1995 was stolen on 5.8.2000 from the briefcase of one of the Directors in the appellant company for which an F.I.R. was filed. It is seen from the copy of the letter dtd. 10.11.1995 at Page 220 of the paper book that the appellants have informed the Collector of Customs that the management was considering to dispose of the impugned machine as it was serving no purpose. The last sentence in the letter reads, “This is for your kind information and please advice us accordingly”. It is significant that the appellants have proceeded to dispose of the machine without waiting for any advice from the customs authorities or without reminding them or consulting them. It is only after the impugned scanner was seized at Siliguri from the buyers and Show Cause Notice was issued that the appellants have come up with the plea that they had sent the said letter dtd. 10.11.1995 to the Collector of Customs and that the acknowledgement for the same was stolen on 5.8.2000. The conduct of the appellant in disposing of the machine does not show that they had taken enough care to apprise the custom authorities regarding the sale or take their advice or approval in the matter. We are of the opinion that even if they had sent the letter to the Collector of Customs, which is being disputed by the Customs authorities, the continuing obligation to render free treatment under the exemption Notification No. 64/88 as well as under para 2(a) and (b) of the undertaking given to the Apex Court does not get extinguished.
9. The exemption under the said Notification 64/88 is also subject to certificate from DGHS. The certificate dtd. 14.5.1990 has been subsequently withdrawn on 20.11.1997. This is an additional reason for disallowing the exemption in addition to the failure to discharge the continuing obligations regarding free treatment. The appellants have contended that they were not initially allowed exemption with reference to the DGHS certificate dtd. 14.5.1990 but under another certificate issued as per directions of High Court in 1991. It is their contention that withdrawal of the certificate dtd. 14.5.1990 on 20.11.1997 is irrelevant. To a query from the Bench, the appellants were not able to submit a copy of the second certificate stating that the same has been stolen alongwith the case file. The Departmental representative was also not in a position to submit a copy of the same. Under the circumstances, we presume that the subsequent certificate issued in 1991 was perhaps in the nature of an amendment to the certificate issued in 1990. Otherwise, while withdrawing the certificate in 1997 in DGHS would not have referred to the certificate issued in 1990 if that was replaced by a certificate in 1991.
10. In view of the foregoing, we are of the view that the importer who avails of the exemption under Notification No. 64/88 has continuing obligation regarding free treatment etc. and if he sells the equipment to another person, the machine becomes liable to confiscation under 111 (o) of the Customs Act, 1962 and the importer becomes liable to penal under Section 112 of the Customs Act, 1962.
11. An issue was raised in the course of hearing of the appeal that the buyers of the impugned scanner namely M/s. Florence Medical-cum-Diagnostic Centre Pvt. Ltd. are the owners of the same after sale has been effected and they should have been issued a Show Cause Notice in terms of Section 124 of the Custom Act, 1962. We find that the copy of the Show Cause Notice which proposed confiscation of the impugned goods has been sent to Shri Subir Majumdar, Director of the M/s Florence Medical-cum-Diagnostic Centre Pvt. Ltd. and the Show Cause Notice proposed penal action against him. However, as noted above, no penalty has been imposed on him under the impugned order. The said M/s. Florence Medical-cum-Diagnostic Centre Pvt. Ltd. have also not filed any appeal against the confiscation of the goods before us. It is clear that M/s. Florence Medical-cum-Diagnostic Centre Pvt. Ltd. have neither represented before the Adjudicating Commissioner nor before this Tribunal regarding the alleged breach of Section 124 despite a copy of the Show Cause Notice issued to them and a copy of the adjudication order sent to them. Having sold the impugned scanner, the appellants are no longer the owner of the same by their own reasoning and, therefore, they cannot invoke the provision of Section 124 which applies to the owner.
12. We have considered the appropriateness of the quantum of fine, duty and penalty determined under the impugned order. No doubt, the Notification No. 64/88 has continuing obligation and failure to fulfill the same by selling the scanner disentitles the importer to the exemption apart from attracting confiscation and penalty. One has to consider a situation where the Notification benefit has been availed on imported machine for several years and the conditions have been fulfilled during this period. Yet a situation may arise where the importer wants to sell the machine after such use. Unfortunately, the notification does not prescribe a time period for which the obligation would continue or a period after which a machine can be disposed of. It will obviously be unfair to require an importer to pay duty on the original imported value, though the value is depreciated over a period of use and there is no allegation that during the said period of use, the conditions were not fulfilled. In our view, the fine and penalty imposed appears to be excessive apart from the fact that the duty has been ordered to be levied on the original import value. We are of the opinion that ends of justice would be met if the redemption fine is reduced from Rs. 50 lakhs to Rs. 5 lakhs and penalty is reduced from Rs. 20 lakhs to Rs. 1 lakh. We order accordingly.
13. As far as the duty demand is concerned, in the absence of any specific provision under the Notification for demand of duty in such cases on depreciated value, we order that the duty be re-calculated allowing abatement on account of depreciation in value of the impugned scanner. We also order that the duty on RF Shield should also be re-calculated on its depreciated value.
14. The case is remanded to the Commissioner of Customs for determining the depreciated value of the impugned scanner and RF Shield and for quantifying the duty payable thereon denying the benefit of Notification No. 64/88-Cus dtd. 1.3.1988. The appellants as well as M/s. Florence Medical-cum-Diagnostic Centre Pvt. Ltd. may be heard before such re-determination.
15. Appeal is disposed of in the above terms.