JUDGMENT
P.G. Chacko, Member (J)
1. These are two appeals before us, one filed by the Childs Trust Hospital and the other by M/s Jaya Nursing Home (P) Ltd. In both the appeals, there are applications from the Department seeking early posting of the appeals for hearing. Since we are disposing of the appeals today, the applications are infructuous. In Jaya Nursing Home’s appeal, there is also a stay application filed by the appellant. After allowing this application, we take up the appeals for final disposal with the consent of both the sides.
2. In the case of M/s Jaya Nursing Home (P) Ltd., the facts are that they had imported a Whole Body CT Scanner (valued at over Rs. 61 lakhs) and cleared the same under a Bill of Entry dated 23.4.93 without payment of Customs duty in terms of Notification No. 64/88-Cus. dated 1.3.88; that, at the time of clearance, the importers had produced a certificate from the Directorate General of Health Services (DGHS) certifying that the equipment was necessary for running/maintenance of the hospital in terms of Notification No. 64/88 and that the hospital fell in Category 4 specified in the Notification; that later on the importers approached the DGHS with a request for a change from Category 4 to Category 2 under the Notification claiming that they had already set up the hospital; that the DGHS did not issue any fresh certificate; that the Customs authorities, on their part, made enquiries as to whether the post-importation conditions of the Notification had been fulfilled by the importer whereupon it was found that the hospital had not fulfilled the free treatment conditions (in respect of outdoor patients) of the Notification during 1993-1994 and 1994-1995 and that they did not reserve 10% of the total number of beds of indoor patients with family income less than Rs. 500 p.m. as required under the Notification; and that, on the basis of the investigative results, the department issued a show-cause notice (SCN) to the hospital on 14.7.98, alleging that they had not fulfilled the conditions of the Notification, and proposing that the imported equipment be confiscated under Section 111(o) of the Customs Act and the importer be penalised under Sections 112(a) and 114A of the Act. The SCN also proposed to recover Customs duty of Rs. 75 lakhs on the imported goods under the proviso to Section 28(1) of the Act. Jaya Nursing Home contested the proposals, but the Commissioner of Customs, who adjudicated on the dispute, upheld the SCN allegations and —
(1) confirmed the demand of duty;
(2) confiscated the imported goods under Section 111(o) with option for redemption thereof on payment of fine of Rs. 10 lakhs under Section 125; and
(3) imposed a penalty of Rs. 5 lakhs on the importer under Section 112(a). Hence the appeal of M/s. Jaya Narsing Home (P) Ltd.
3. The facts of the appeal filed by the Childs Trust Hospital are as follows:
M/s Childs Trust Medical Research Foundation, under which the appellant-hospital was set up, imported one unit of “CO2 Surgical Laser System” (valued at Rs. 6,62,164) and cleared the same under a Bill of Entry dated 11.10.88 without payment of Customs duty in terms of Notification No. 64/88-Cus dated 1.3.88. The clearance was obtained on production of a Customs Duty Exemption Certificate issued by the DGHS, wherein the hospital was shown as falling in Category No. 2 specified in the Notification. A Category 2 hospital had to discharge certain free treatment obligations under the Notification. Enquiries conducted by the Customs authorities disclosed that, after 1990, the hospital had not given free treatment to outdoor patients to the minimum extent of 40% stipulated in the Notification and further that, after
1994, the percentage of free treatment to indoor patients was below the minimum limit of 10%. Having found violation of these post-importation conditions of the Notification, SCN dated 14.12.99 was issued to the hospital.
As in the case of Jaya Nursing Home, this SCN proposed recovery of customs duty, confiscation of the imported goods and imposition of penalty. Though no reply was given to the SCN, written submissions were filed by the hospital through their counsel at the time-of personal hearing by the adjudicating authority. The Commissioner of Customs, who adjudicated the matter, dropped the demand of duty as time-barred but confiscated the goods under Section 111(o) of the Customs Act with option for redemption thereof on payment of fine of Rs. 9,10,000 under Section 125 of the Act. He also imposed a penalty of Rs. 1 lakh on the hospital under Section 112(a) of the Act. Hence, the appeal of
the Childs Trust Hospital.
4. We have heard both the sides. Ld. counsel Shri Murugappan on behalf of M/s Jaya Nursing Home (P) Ltd. and Ld. counsel Smt. Maithili on behalf of the Childs Trust Hospital have argued in similar lines. At the outset, they have contended that any liabilities or obligations under Notification No. 64/88-Cus. had come to an end on 1.3.94, the date on which the Notification was rescinded by the Central Government. In the case of Jaya Nursing Home (P) Ltd., the medical equipment was imported and cleared sometime in the last week of April 1993. The counsel for this hospital submits that the main allegation in the SCN was that free treatment to outpatients had fallen below the 40% limit during 1993-94 and 1994-95, whereas during the subsequent period the required minimum was admittedly attained by the hospital. He submits that, the Notification having been rescinded on 1.3.94, any obligation to fulfil such a condition did not exist in relation to the said periods. In the case of the Childs Trust Hospital, it has been found by the Commissioner that, after 1990, the percentage of outpatients who were given free treatment was in the range of 25-31 and did not reach the required minimum of 40%. In respect of indoor patients, it was found that the percentage of free treatment fell below 10% after 1994. Ld. counsel for this hospital adopts the above argument of Shri Murugappan arid says that none of the obligations under the Notification was enforceable after 1.3.94. Both the counsel rely on the judgment of the Hon’ble High Court of Madras in the case of Apollo Hospitals Enterprises Ltd. v. Union of India and Ors., 2001 (46) RLT 249 (Mad.). In the case considered by the High Court, Notification No. 64/88-Cus., inter alia, arose for interpretation. The question arose as to whether any obligations under the Notification survived its rescission. This question was answered in the negative by the Hon’ble High Court. Ld. counsel have relied on this ruling and argued that, beyond 1.3.94, none of the obligations of the importer-hospitals survived and, therefore, there was no warrant for the impugned proceedings. Referring to the Hon’ble Supreme Court’s judgment in Mediwell Hospital and Health Care (P) Ltd. v. Union of India, 1997 (57) ECC 197 (SC) : 1997 (89) ELT (sic)5 (SC) — a decision relied on by the adjudicating authority in both the cases, counsel point out that the decision of the Apex Court was also considered by the High Court while rendering the above ruling. Yet another submission made by the counsel is that the ruling in Mediwell Hospital case was overruled by a Larger Bench of the Apex Court comprising 3 Judges in the case of Faridabad CT Scan Centre v. DGHS, 2003 (89) ECC 468 (SC) : 1997 (95) ELT 161 (SC). Adverting to the orders of confiscation, the argument is that the statutory requirement of market enquiry was not complied with by the adjudicating authority in the matter of determining the quantum of redemption fine. In this connection, reliance is placed on the Supreme Court’s judgment in Mohan Meakin Ltd. v. CCE, Kochi, 2000 (67) ECC 428 (SC) : 2000 (115) ELT 3 (SC), wherein it was held that the proviso to Section 125(1) made it obligatory for the adjudicating authority to evaluate the fine which shall not exceed the market price of the goods confiscated. It is also claimed that the quantum of fine imposed on the appellants is unreasonably high, having been worked out without regard to the bona fides of the transactions. Ld. counsel for Jaya Nursing Home (P) Ltd., referring further to the facts of his case, submits that the hospital’s application for a fresh Duty Exemption Certificate is pending with the DGHS and therefore it was premature on the part of the adjudicating authority to decide the matter in spite of the appellant’s plea of pendency of the DGHS proceedings. Ld. counsel for the Childs Trust Hospital, on her part, submits that the hospital was set up as a wholly charitable institution and has ever continued as such. It is pointed out that one of the objectives of the Childs Trust is to provide free medical treatment to poor children.
5. Ld. SDR seeks to rely on the Apex Court’s decision in Mediwell Hospital case and the Tribunal’s Larger Bench decision in the caseof Lady Amphthil Nurses Instns. v. CC, Chennai, 2002 (83) ECC 630 (LB) : 2002 (150) ELT 776. Ld. SDR submits that, on the facts found by the adjudicating authority, none of the appellants has fulfilled the obligations under the Notification. While the Childs Trust Hospital was recognized by the DGHS as a Category 2 hospital in the Customs Duty Exemption Certificate, the Jaya Nursing Home was specified as a Category 4 hospital in the respective certificate. An application by Jaya Nursing Home for a change of category from 4 to 2 was rejected by the DGHS vide letter dated 21.8.2000 of the Dy. Director General (Medical) and their request for review of the decision is yet to be entertained by that authority. The Duty Exemption Certificate which was issued earlier to Jaya Nursing Home was also withdrawn by the DGHS. In the case of both the hospitals, Ld. SDR points out, for a certain period the free treatment requirements in respect of outpatients and in-patients were not fulfilled. It is further submitted that the finding of facts relating to free treatment in respect of outpatients and in-patients, recorded by the Commissioner, is not under challenge. In the circumstances, DR submits, violation of post-importation conditions of the Notification is a concluded finding of fact, which would attract confiscation and penalty respectively under Sections 111(o) and 112(a) of the Customs Act. The decision taken by the Commissioner, therefore, cannot be faulted on any ground whatsoever. Referring to the demand of duty confirmed against Jaya Nursing Home, it is contended that the demand cannot be challenged even on the ground of limitation in view of the Apex Court’s decision in the case of CC v. Jagdish Cancer and Research Centre, 2001 (77) ECC 12 (SC) : 2001 (132) ELT 257 (SC).
6. As against the reliance placed by the counsel on the High Court’s decision in the Apollo Hospitals case, SDR refers to Section 159A of the Customs Act and submits that, by virtue of the said Section, all obligations incurred under Notification 64/88-Cus. would continue to operate beyond the date of its rescindment as if the Notification had not been rescinded. Section 159A has been given retrospective effect by Parliament under Section 114 of the Finance Act, 2001 and accordingly the provisions of Section 159A operate from the 1st day of February, 1963, notwithstanding the High Court’s judgment in Apollo Hospitals case or any other judgment or order of any court or tribunal or other authority. In answer to counsel’s arguments on the quantum of redemption fine, Ld. SDR submits that, in both these cases, the medical equipment imported were, at the material time, not available in the Indian market and, therefore, any market enquiry would have yielded no result. In such a situation, one could only take into reckoning the assessable value plus the duty payable thereon in the matter of determining the quantum of redemption fine. At this stage, counsel for the appellants point out, with reference to the facts of the case considered by the Supreme Court in Commissioner of Customs Mumbai v. Jagdish Cancer & Research Centre (supra); that the redemption fine of Rs. 50,000 imposed by the Commissioner in that case, wherein even the duty demanded on the goods was over Rs. 64 lacs, was affirmed by the Apex Court.
7. We have examined these submissions carefully. We shall first address the arguments advanced by both the sides with reference to the rescission of the Notification. The subject notification was rescinded on 1.3.94. It is stated that, in the successor Notification, there was no provision or saving clause to keep alive any provision of the rescinded Notification. In this connection, we should immediately refer to Section 159A of the Customs Act. That Section was enacted on 11.5.01 with retrospective effect from the date of commencement of the Customs Act vide Sections 113 and 114 of the Finance Act, 2001. The Section 159A is reproduced below.
Section 159A: Effect of amendments, etc., of rules, regulations, notifications or orders. — 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 take effect; or
(b) affect the previous operation of any rule, regulation, notification or order so amended, repealed, superseded or rescinded or anything duly 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) affect any penalty, forfeiture or punishment incurred in respect of any offence committed under or in violation of any rule, regulation, notification or order so amended, repealed, superseded or rescinded, or
(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid.
and any such investigation, legal proceeding or remedy may be instituted, continued or enforced and any such penalty, forfeiture or punishment may be imposed as if the rule, regulation, notification or order, as the case may be, had not been amended, repealed, superseded or rescinded.”
It is clear from the above provision of law that, notwithstanding the rescission of a Notification, the obligation or liability already incurred under the Notification would remain unaffected and would continue to operate beyond the date of rescission as if the Notification had not been rescinded at all. Section 114 of the Finance Act, 2001 gave retrospective effect to Section 159A of the Customs Act so as to cover rules, notifications, regulations etc. issued under the Customs Act right from the 1st day of February 1963. The cumulative effect of these provisions is that the obligations incurred by the appellant-hospitals under Notification No. 64/88-Cus subsisted beyond 1.3.94. We further find that Section 114 of the Finance Act, 2001 accorded to Section 159A of the Customs Act overriding effect on judgments/orders/decrees of court/tribunal contrary to the purport of the said Section 159A. In the result, the provisions of Section 159A override the Hon’ble High Court’s ruling in Apollo Hospitals case. Therefore, the learned counsel’s plea of cessation of operation of obligations under the Notification cannot be accepted. The learned SDR’s argument that such obligations continued to operate beyond the date (1.3.94) of rescission of the Notification is well-founded. The question, now, is whether the appellants fulfilled their obligations under the Notification. To decide on this question, we shall have to examine the facts of the case. In both these appeals, there is no contest of the facts recorded by the adjudicating authority. In the case of Jaya Nursing Home (P) Ltd., it is stated that, during 93-94 and 94-95, free treatment was given by the hospital only to the extent of less than 40% indigent outpatients per year, which amounted to violation of one of the crucial conditions of the Notification, which had required that at least 40% of the outdoor patients should be given free medical treatment. In regard to the free treatment condition relating to inpatients, it has been found by the adjudicating authority that such treatment was given only to the extent of below 10%, violating yet another condition of the Notification. In the case of the Childs Trust Hospital, the finding is that, since 1991, the outpatient free treatment is far below the minimum of 40% specified in the Notification. Again, with regard to inpatient free treatment requirement, there is a finding that this requirement has never been fulfilled after 1994. We have already held, with reference to Section 159A of the Customs Act, that the obligations under the Notification subsisted beyond the date of its rescission (1.3.94). It has also been held by the Apex Court in the Mediwell Hospital case that the obligations under the Notification are continuing obligations. The ruling of the Apex Court has been carefully considered and followed by the Tribunal’s Larger Bench in Lady Amphthil Nurses Instns. (supra). Following the settled law, we uphold the finding of the Commissioner that these hospitals violated the conditions of the Notification, thereby disentitling themselves to the benefit of exemption, rendering the imported goods liable to confiscation under Section 111(o) of the Customs Act and rendering themselves liable to penalty under Section 112(a) of the Act.
8. In the case of Jaya Nursing Home (P) Ltd., a demand of Customs duty also has been confirmed by the adjudicating authority. It has been held by the Apex Court in the case of Jagdish Cancer & Research Centre (supra) that such a demand could be raised under Section 125(2) of the Act, alongwith confiscation of imported goods and imposition of penalty on the importer, without reference to, or attracting the provisions of, Section 28 of the Act. In the instant cases, we find that the SCN was issued under Section 124 of the Act and the redemption fines in lieu of confiscation were imposed under Sections 125 of the Act. The demand of duty is, therefore, in order.
9. Now, we come to the arguments in relation to quantum of redemption fine. Reliance was placed by the counsel on the Supreme Court’s decision in Mohan Meakin case (supra). The Supreme Court in that case held that the proviso to Section 125(1) obligated the adjudicating authority to evaluate the fine which shall not exceed the market price of the goods confiscated. Their Lordships were considering imported goods covered by Clauses (d) and (m) of Section 111 of the Customs Act. Before us are cases involving imported goods which attracted Clause (o) of the Section 111 of the Act. This provision of law renders such goods liable to confiscation, which are imported and cleared free of duty in terms of an Exemption Notification and in respect of which the importer subsequently violates the post-importation conditions of the Notification. As rightly pointed out by the SDR, one of the conditions of Notification No. 64/88-Cus. was that the medical equipment to be imported thereunder should be one not manufactured in India. If that be so, the medical equipment cleared duty-free in terms of the notification is one which is hard to find in the domestic market, leaving no scope of market enquiry in India. Such a situation, apparently, had not arisen in the case of Mohan Meakin. Nevertheless, the principle embodied in the proviso to Section 125(1) has to be taken into account by the adjudicating authority while confiscating such goods as well. In our view, the Commissioner’s order has to be tested for its correctness with this yardstick. In the case of Jaya Nursing Home (P) Ltd., the assessable value is over Rs. 61 lakhs and the Customs duty payable thereon is to the extent of over Rs. 24 lakhs. No importer of such a medical equipment can be expected to sell it in the Indian market at a price below the assessable value plus duty plus reasonable profit. The market price of the goods will not be less than Rs. 85 lakhs plus profit. This amount less the duty comes to around Rs. 61 lakhs plus profit. It follows that the redemption fine imposable in this case cannot exceed Rs. 61 lakhs plus profit margin by virtue of the proviso to Section 125(1). The fine imposed by the Commissioner is Rs. 10 lakhs. Of course, as submitted by the counsel relying on the Tribunal’s decision in the case of Ashwin Vanaspati Industries (P) Ltd. v. Collector of Customs, Ahmedabad, 1987 (29) ELT 991, the limit laid down under the proviso is the maximum, and the adjudicating authority has discretion to determine a lesser fine to be imposed on the party in the facts and circumstances of the particular case. Having regard to the facts and circumstances of this case, we are of the view that a fine of Rs. 7.5 lakhs will be fair in this case. Proportionately we reduce the penalty on the appellant from Rs. 5 lakhs to Rs. 2 lakhs. The demand of duty, however, stands confirmed vide supra. The appeal of Jaya Nursing Home is disposed of accordingly.
10. In the case of the Childs Trust Hospital, there is no demand of duty. A fine of Rs. 9,10,000 and a penalty of Rs. 1 lakh have been imposed by the Commissioner. The value of the imported equipment is Rs. 6,62,164 and the Customs duty leviable thereon is Rs. 9,09,068. Applying the yardstick which we have followed in the earlier case, we find that the redemption fine is unreasonably high. The maximum redemption fine which could have been imposed under Section 125 in this case was around Rs. 6.6 lakhs plus profit only. The Commissioner has imposed a fine of over Rs. 9 lakhs. Counsel has submitted that the hospital/was set up for catering to the medical needs of poor children. Having regard to this position and other facts and circumstances of the case which we have already discussed, we are of the view that the fine imposed on this hospital should be substantially reduced. Accordingly, we reduce the fine to Rs. 2 lakhs. Correspondingly, the penalty will stand reduced to Rs. 25,000. The appeal of the Childs Trust Hospital is disposed of accordingly. We make it clear that in the event of the confiscated equipment being redeemed, Sub-section (2) of Section 125 of the Customs Act will be attracted.