ORDER
T.K. Jayaraman, Member (J)
1. This appeal has been filed against Order-in-Original No.11/ADJ/RSS/2004 dated 22.6.2004 passed by the Commissioner of Customs, New Delhi.
2. The facts of the case are as follows.
Bharat Diagnostic Centre, Mysore (appellant) has been set up by a trust to provide free treatment to cancer patients belonging to economically weaker sections of the society. The appellant imported a medical equipment “Whole Body CT scanner Model CT MAX-640 with camera and accessories” under Customs Notification No. 64/88 CUS dated 1.3.88 subject to certain conditions laid down in the said notification. The impugned medical equipment was originally imported by M/s. GE Medical Systems, Asia for the purpose of displaying in an exhibition to be held at New Delhi under Notification 3/89 dated 9.1.89 which permits temporary importation and export of the goods within the time limit allocated. The impugned medical equipment was subsequently purchased by the appellant. The appellant cleared the equipment under Notification No. 84/88 CUS dated 1.3.88 on the strength of Customs Duty Exemption Certificate (CDEC) dated 3.4.1992 issued by DGHS, New Delhi. The equipment was installed at the premises of the appellant. The DGHS in their letter dated 12.12.1997 cancelled the Customs Duty Exemption Certificate issued to the appellant. The main reason for cancellation is that the DGHS came to the conclusion that the appellant are only a diagnostic center not having indoor patient treatment facility and therefore, they do not fulfill the condition for availing the benefit of Notification No. 64/88 CUS. In view of the above development, the officers of Customs Division-I Mysore detained the impugned medical equipment. It was noticed that the detained goods were totally different from the imported scanner, which was imported by the appellants under Bill of Entry No. 200 dated 19.12.1991, it was learnt that the equipment originally imported by M/s. GE Medical Systems Asia and subsequently, purchased by the appellant was sent back to M/s. Wipro GE Systems Ltd., Bangalore for the purpose of upgradation of the said equipment This fact was informed to the DGHS. Departmental enquiries revealed that the impugned medical equipment sent by the appellant for upgradation was finally traded in M/s. Wipro GE Medical Systems and Sytec 800 Model manufactured by them was sold to the appellants for a net consideration of Rs. 40 lakhs. Subsequently, the impugned item was sold to M/s. Mandakini Whose Whole Body CT Scan and Breast imaging Centre. The above purchaser being dissatisfied with the performance of the impugned equipment returned the same to M/s. Wipro GE Medical Systems, Bangalore through M/s. Patel Roadways. The said equipment and accessories contained in 8 boxes was lying in the godown of M/s. Patel Roadways. Bangalore. The Departmental officers seized the equipment as the same had been disposed of by the appellants in violation of the conditions of Customs Notification No. 64/68 CUS. The appellants filed a writ petition in the High Court of Karnataka against their DGHS letter dated 12.12.1997 cancelling the earlier CDEc Certificate and also the detention memo issued by the Superintendent of Customs, Mysore-I Division detaining the impugned equipment. The High Court issued an interim order dated 3.4.1998 directing the authorities not to take coercive proceedings pursuant to the DGHS cancellation certificate and the detention memo issued by the Superintendent of Mysore-I Division. Further, the High Court directed the Director of Family and Health Services, Bangalore to enquire the whether the appellant hospital has any indoor patient facility available with it and submit a report before 9.6.1998. Proceedings were initiated against the appellants for demand of duty foregone due to extending the benefit of Customs Notification No. 64/88 CUS. The Adjudicating Authority confirmed an amount of Rs. 30,57,789/- being the duty on the impugned medical equipment. The impugned medical equipment was confiscated under Section 111(O) of the Customs Act 1962. A redemption fine of Rs. 30,000/- was imposed. A penalty of Rs. 10,000/- was imposed on the appellant. The appellants have strongly challenged the impugned order.
3. Shri B.V. Kumar, learned Advocate appeared for the appellant and Shri K.S. Reddy, learned JDR appeared for the Revenue.
4. The learned Advocate urged the following points.
(i) The DGHS cancelled the CDEC without granting an opportunity to the appellant to explain their case and thus violated the principles of natural justice. However the Commissioner has not given any finding on this contention of the appellants. Reliance was placed on the decision in the case of Apollo Hospitals Enterprises Limited v. Union of India -.
(ii) The learned Commissioner held that the appellants are not a hospital but only a diagnostic center. It is now a settled law that for the purpose of extending the benefit of Notification No. 64/88 CUS, the word hospital includes a diagnostic center.
(iii) In the case of Gujarat imaging & Research Institute v. Collector of Customs, Bombay – , it has been held that the benefit of Notification No. 64/88 CUS is available to diagnostic center also. This decision is binding and the appellants are entitled for the benefit of the notification subject to satisfying the conditions of the Notification.
(iv) One of the grounds for denying the Notification benefit is that the appellants are a diagnostic center Without in-patient facility, This is contrary to the facts on records inasmuch as in the inspection report submitted by Dr. Sitalakshmi, Principal Govt. Medical College appointed as one person Committee by the State Government to investigate, inspect and verify the free services provided by the appellants, it has been clearly stated that the appellants are providing OPD facilities/services free of cost like CT scan, X-ray, etc.
(v) The appellants have been giving free diagnostics treatments to their patients purely in a service oriented manner and not in a commercial manner with the result that there is no question of charging low income group patients, in addition, they have been providing 10 beds free of charge to the patients who are admitted as in-patients.
(vi) Notification No. 64/88 CUS dated 1.3.88 was rescinded vide Notification No. 99/94 CUS dated 1.3.1934. The learned Advocate relied upon the decision of the Hon’ble High Court of Madras in the case of Apollo Hospitals (Supra), which deals with the effect of repeal of a Notification. As a result of repeal of a statute, the statute as repealed ceases to exist with effect from the date of such repeal but the repeal does not affect the previous operation of the law which has been repealed during the period it was operative prior to the date of such repeal. Therefore, it was submitted that the demand for duty issued after the repeal of the Notification does not survive inasmuch as during the operative period of the Notification, the CDEC issued by the DGHS was in force and was withdrawn only after Notification No. 64/88 CUS was repealed on 1.3.1994. The impugned equipment was with the appellant before 1.3.1994.
(vii) The learned Counsel prayed that since important question of interpretation of the decision of the Mediwell Hospital case is involved and also the affect of repeal of Notification No. 64/88 is involved, the bench may refer the matter to a larger bench.
5. We have gone through the records of the case carefully. The Adjudicating Authority has demanded duty from the appellants mainly for the reason that the CDEC Certificate has been cancelled. He has also followed the decision of the Hon’ble Supreme Court in the Mediwell Hospital case on the point of continuous obligation of the importer to fulfill the conditions of the Notification. As such a would be very difficult to fault with the decision of the Adjudicating Authority. However, the learned Advocate brought to our notice that Notification No. 64/88 CUS was rescinded on 1.3.1994. But the CDEC Certificate was cancelled only on 12.12.1997 i.e. long after the repeal of the Notification. Further, it was brought to our notice the decision of the Hon’ble High Court of Madras in the case of Apollo Hospitals (supra) wherein the effect of repeal of Notification No. 64/88 CUS has been elaborately dealt with in para 38, 39, 40, 41, 42, 43, 49 & 50. The CDEC Certificate was valid at the time of import of the medical equipment, as the same was not obtained fraudulently, Moreover, the appellants have approached the Karnataka High Court by way of writ petition challenging the cancellation of the CDEC. That issue has not been decided yet. Be that has it may, the Hon’ble Supreme Court in the case of State of Rajasthan v. Mangilal Pindwal has held “this means that as a result of a statute, the statute as repealed cases to exist with effect from the date of such repeal but the repeal does not affect the previous operation of the law which has been repealed during the period it was operative prior to the date of such repeal,” Section 159A of Customs Act 1962, which is para materia with the provision of Clause 6 of the general clauses act 1897 reads as follows:
Where any rule, regulation, notification or order made or issued under this Act or any notification or order issued under such rule or regulation, is amended, repealed, superseded or rescinded, then, unless a different intention appears, such amendment, repeal, supersession or rescinding shall not-
(a) revive anything not in force or existing at the time at which the amendment repeal, supersession or rescinding takes effect; or
(b) affect the previous operation of any rule, regulation, notification or order so amended, repealed, superseded or rescinded or anything duty done or suffered thereunder; or
(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) ….
A close reading of Section 159A makes it clear that the repeal of the Notification shall not revive anything not in force or existing at the time at which the repeal takes affect. It is the contention of the learned Advocate that during the operative period of the Notification, the CDEC issued by the DGHS was in force and was cancelled only after Notification No. 64/88 CUS was repealed on 1.3.1994. In these circumstances, the demand for duty issued after the repeal of the Notification does not survive. Our attention was invited to the observations of the Hon’ble Madras High Court in the case of Apollo Hospitals (supra). The following observations of the Hon’ble Madras High Court clarifies this legal point.
37. From the above principles laid down by the Apex Court, it is clear that the result of repeal of a statute, the statute as repealed ceased to exist with effect from the date of such repeal. But at the same time the repeal does not affect the previous operation of the law which has been repealed during the period it was operative prior to the date of such repeal.
38. If this principle is to be applied in this case, the Notification No. 64/88 came into effect from 13.1998 and it was in force till the end of February 1994. The Notification under which the earlier Notification 64/88 was rescinded along with several other notifications came into force on 1.3.94. Hence from 1.3.94 the Notification No. 64/88 cannot be said to be in existence or in force in the eye of law.
39. Section 6(b) of the General Clauses Act makes it clear that in respect of the matter if anything is done, under the repealed statute, the same cannot be invalidated after its repeal; but it will be rendered operative if no right was accrued or had accrued and no liability had been incurred prior to repeal. What is unaffected by the repeal of statute is a right acquired or accrued under it.
40. Similarly Sub-section (c) of Section 6 preserves rights and privileges acquired and accrued on the one side and the corresponding obligation and liability incurred on the other side so that if no right had accrued under the repeal statute, there is no question of any liability being preserved.
41. If this is taken into consideration along with the principles laid down by the Apex Court in the above cases, it is clear that the benefits acquired or accrued by the petitioners cannot be taken away such as the certificate issued already cannot be cancelled.
42. However, the question remains for consideration is whether the liability arising out of such extended benefit can be enforced or not or in other words whether the penal action of canceling the certificate can be made or not when the petitioners failed to discharge the obligations arising out of the rescinded notification.
43. Having derived 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 No. 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.
(emphasis supplied)
6. It is true that as per Mediwell Hospital decision, a continuous obligation to fulfill the conditions of Notification is cast on the importer. In view of the effect of the repeal of the Notification clarified by the Madras High Court, the question, which arises is whether there will be any obligation to fulfill the conditions of the Notification, even after the repeal of the Notification, it is further seen that the Apex Court had not discussed the question of rescinding of the Notification in the Mediwell case. Para 50 of the Apollo Hospitals decisions is as follows:
50. Neither before the Apex Court nor before any other court, the question of rescinding of the Notification had been raised and discussed. When the rescinding of the Notification makes the said notification non-existent it is a vital question to decide the rights and liabilities of the parties. Hence this Court had discussed this question, as supra and found that the liabilities arising out of the rescinded Notification 64/88 can be enforced only for the period during which the said notification was in existence. Hence, it is for the authorities to establish that the petitioners had violated the obligation only during that period. If that is established, only then it is open to the authorities to proceed further.
7. In view of the above legal position, upholding the Order of the Adjudicating Authority simply on the ground of cancellation of the CDEC may not in the interest of justice without clarifying the important question of interpretation of the Mediwell decision in the context of the repeal of Notification No. 64/88 CUS. Hence, it would be in the fitness of things to refer this issue to a larger bench. We are of the considered opinion that the Hon’ble President may like to constitute a larger bench for referral of the above stated issue. Thus, the appeal is disposed of in the above manner. The Registry is directed to make over this file to the Central Registry, CESTAT, New Delhi for placing before the Hon’ble President.