Choithram Hospital and Research Centre vs Union of India (UOI)

A.M. Sapre, J.—This is an appeal, filed by Assessee u/s 130 of the Customs Act against an order dated 12-10-04 passed by Central Excise and Service Tax Appellate Tribunal (for short hereinafter referred to as "Tribunal") bearing number 699/04-NR.C/in C/appeal No. 509.03/NB(C).

In order to appreciate the issue involved which arise out of Customs Act and relates to effect and interpretation of 2 notifications issued under the Customs Act and urged in this appeal, it is necessary to take note of the undisputed facts in brief infra.

The appellant is a charitable Trust registered as such under the M.P. Public Trust Act. It is running a hospital by and under the name "Choithram Hospital and Research Centre" at Indore since 1979.

On 1-3-88, the Central Government issued a notification bearing No. 64/88 (Ann. P-1) u/s 25(1) of Customs Act. By this notification, the Central Government granted exemption from payment of whole customs duty on all equipments, apparatus and appliances including spare parts and accessories excluding consumable items imported from outside the country subject to fulfilment of conditions specified in Table appended to the notification.

On 15-2-90, (Ann. A-2 to 4) the appellant applied to specified Authorities for grant of custom duty exemption certificate and custom clearance permit for importing batches of medical equipments known as "Collect 8 Haematology System" from abroad in terms of aforesaid exemption notification. The State of MP by their letters dated 10-3-89 (A-5 to 7) recommended the case of appellant as per requirement of exemption notification. Similarly the Central Govt, by their letter 15-2-90 (Ann. A-8 to 10) granted eligibility certificate in appellant''s favour so as to enable them to import the medical equipment for their Hospital as claimed by them in their applications (Ann. A-2 to 4). Accordingly on compliance, having been made, the appellant cleared four medical equipments imported from Honkong, West German and Japan on the strength of Bill of Entries dated 23-6-90, 10-9-90 and 28-2-91 (Ann. A-11 to 14) to India and installed them in their Hospital. It is not in dispute that these equipments are being used in the hospital since installation by the appellant.

On 1-3-94, the Central Government issued another Notification No. 98/94 (Ann. A-15) whereby the exemption Notification No. 64/68, dated 1-3-88 referred supra was rescinded. In other words, the exemption Notification No. 64/68, dated 1-3-88 granting exemption from payment of custom duty on medical equipment was rescinded w.e.f. 1-3-94 as being no longer available on and after 1-3-94 to any Assessees including obviously to appellant as well.

On 30-3-2000 (Ann. A-16), the Commissioner, Customs (R-4) issued a show cause notice to the appellant. This show cause was based on inspection of the records of the appellant in relation to their activities undertaken by them for running the hospital and the manner in which the medical equipments in question were being used by them in their hospital. In para 13 of the show cause notice, the Commissioner recorded his observations which according to him necessitated for issuance of show cause to the appellant. The show cause proceeded to give details of information collected by the department in their inspection in respect of the working of appellant''s hospital. The show cause then in para 21 called upon the appellant on the basis of information so collected to show cause as to why the entire custom duty amounting to Rs. 15,57,958/- payable on the medical equipments imported by the appellant in the year 1990-91 (as referred supra) be not recovered along with interest and penalty in accordance with the provisions of Customs Act from the appellant. In substance, thus, the show cause notice was founded on the allegations that appellant was not eligible to claim any exemption from payment of customs duty on these medical equipments and in any event, appellate having not complied with the conditions of exemption notification required for claiming exemption nor ensuring its continuous observance after their installation as provided in notification, they have rendered themselves liable to pay whole custom duty on the equipments.

The appellant on receipt of the show cause filed their reply (Ann. A-1). In substance, the appellant contended that they have legally and properly imported the medical equipments on the strength of exemption notification (64/88) dated 1-3-88 after following required procedure for claiming exemption from payment of custom duty and thus, they were rightly granted exemption from payment of Custom Duty as per exemption notification. The appellant also raised a plea of limitation by contending that issuance of show cause is barred by virtue of Section 28 of Customs Act as the same was not issued within the stipulated time prescribed either under Sub-sections (a) or (b) of Section 28 ibid. In sum and substance, therefore, the appellant denied their liability to pay any customs duty on the equipments which they had imported on the strength of exemption Notification No. 64/88 in the year 90-91 as demanded by Commissioner in the show cause notice.

The Commissioner by order dated 18-8-03 (Ann. A-18) upheld the show cause and confirmed the demand by rejecting the contention of the appellant. This is what the Commissioner held:

ORDER

(i) I confirm the duty amounting to Rs. 15,57,958/- (Rupees Fifteen Lakh Fifty Seven Thousand Nine Hundred Fifty Eight) demanded and payable on the imported hospital equipments as raised in the impugned SCN for reasons recorded above.

(ii) Imported hospital equipments detained u/s 110 of the Customs Act, 1962 vide Detentions Memo, dated 15-10-99 are confiscated u/s 111(o) of the Customs Act, 1962. However, I give an option to the importer to redeem the same u/s 125 of the Customs Act, 1962 on payment of fine of Rs, 3,00,000/- (Rupees Three Lakh) and on payment of duty of Rs. 15,57,958/- (Rupees Fifteen Lakh Fifty Seven Thousand Nine Hundred Fifty Eight).

(iii) I impose penalty of Rs. 5,00,000/- (Rupees Five Lakh) u/s 112(a) of the Customs Act, 1962 on M/s. Choithram Hospital & Research Centre, Indore.

The appellant felt aggrieved of aforesaid order filed appeal to Tribunal. By impugned order, Tribunal upheld the order of Corhmissioner and dismissed appellant''s appeal. In substance, the Tribunal held that appellants were not eligible to claim exemption under Notification No. 64/88 Customs Act nor they ensured its continuous compliance after effecting import and after its installation in their hospital. It is against this order, the appellant has filed this appeal u/s 130 of Customs Act. This appeal was admitted for final hearing on following 2 substantial questions of law:

Whether in the facts and circumstances of the case, after recession of earlier notification dated 1-3-88, vide Notification No. 99/Cust/94, dated 1-3-94 and whether after coming of the New Notification, the respondents were justified for issuance of show cause notice and asking the appellant for payment of customs duty?

Whether under the facts and circumstances of the case the said show cause notice was barred by limitation u/s 28 of the Customs Act.

Heard Shri G.M. Chapherkar, Sr. Advocate with Shri S. Kohli, Advocate for appellant and Shri V. Zelawat, Asstt. Solicitor General of India for respondent.

Learned Counsel for the appellant while assailing the legality and correctness of the impugned orders essentially made four submission. In the first place and rather with vehemence as one of his main contention, learned Counsel contended that the very issuance of show cause notice on 30-3-2000 (Ann. A-16) by Commissioner demanding customs duty on the medical equipments imported by the appellant on the strength of exemption notification 64/88 (Ann. 1) in the year 90-91 is without authority of law i.e. without jurisdiction. Elaborating this submission learned Counsel contended that when admittedly the exemption Notification 64/88, dated 1-3-88 was rescinded by Central Government by subsequent notification No. 98/94, on dated 1-3-94, then in such circumstances no action much less adverse action could be taken by Revenue (Custom department) against the appellant on and after 1-3-94 in respect of exemption notification (64/88). Learned Counsel submitted that in the absence of any saving Clause in the rescinding Notification No. 98/94, dated 1-3-94, the plain and simple effect of rescinding of notification would come in operation as if the exemption notification 1-3-94 remains no longer available for any purpose on the statute Book much less for initiating any adverse action against the Assessee on and after 1-3-94. It was his submission that since the impugned show cause notice was issued in the year 2000 i.e. much after the exemption notification was rescinded (1-3-94), and hence the show cause notice is totally without jurisdiction because on and after 1994, the Commissioner had no authority to issue any show cause in respect of issues relating to exemption notification. Learned Counsel placed heavy reliance on the Constitution Bench decision of Supreme Court in the case reported in Kolhapur Canesugar Works Ltd. and Another Vs. Union of India and Others, in support of this submission and in substance contended that the issue is squarely covered by this decision in appellant''s favour.

In the second place, learned Counsel contended that Commissioner had no jurisdiction to withdraw the exemption once granted and availed of by the appellant on the medical equipments imported by them on the strength of exemption notification (64/88). According to learned Counsel, looking to the tenure, requirement and object of the exemption notification, once the appellant was granted exemption from payment of customs duty on medical equipment on their fulfilling the terms/conditions stipulated therein then in such event, there is no power left with the authorities to recall/withdraw such exemption from appellant exception being that of case of fraud, which is not the case here. It is much more so as the learned Counsel contends that after the exemption notification is rescinded, the power cannot be exercised because it does not exists.

In the third place, learned Counsel contended that assuming that Commissioner had power to issue show cause notice even then the same could be issued only for the period and during the period when exemption notification was holding the field i.e. when notification was in force up to 1-3-94. In other words, the submission is that Commissioner could only examine the so called breaches of non-compliance of exemption notification from the date of installation of equipments till 1-3-94 i.e. so long as exemption notification was alive but not thereafter i.e. not after 1-3-94. Learned Counsel urged that when the exemption notification was rescinded w.e.f. 1-3-94 then it died its own death on 1-3-94 thereby not empowering the authorities to initiate any action against the appellant for the period after 1-3-94 onwards. It is, therefore, bad in law on this ground as well.

In the fourth place, learned Counsel contended that impugned show cause which was issued on 30-3-2000 is barred by limitation as provided by Section 28 of Customs Act and hence liable to be quashed on this ground also. In other words, the submission is that impugned show cause could be issued within 6 months or 1 year as the case may be from the date of clearance of goods in question as provided in Section 28 of the Customs Act but not on the expiry of 1 year from the date of clearance of goods. Since in this case, the goods were imported in the year 1990-91, whereas the impugned show cause was issued after 10 years i.e. in the year 2000 (30-3-2007) and hence it is not legally sustainable being barred and hence contravene the provisions of Section 28 of the Act.

It is these 4 submissions which were elaborated by learned Counsel for the appellant (Assessee) with reference to the provisions of Customs Act and the law laid down by Supreme Court in cases cited at the bar.

In reply, learned Counsel for the Revenue while defending the impugned orders in the first instance contended that the issues, which were not raised by the appellant before the authorities below including before the Tribunal while opposing the show cause cannot be allowed to be raised for the first time in this appeal. According to learned Counsel, the first submission of learned Counsel for the appellant viz. that whole proceedings are without jurisdiction because they were issued subsequent to rescinding of the exemption notification was not raised by appellant at any stage till Tribunal and hence in the absence of any finding on this submission by any of the authorities, such submission cannot be permitted to be raised by the appellant in appeal for the first time. Similarly, other 3 submissions of learned Counsel for the appellant too were not raised in the manner in which they are now being raised in appeal and hence in the absence of any finding on any of these submissions, they should not be entertained for the first time in appeal though otherwise arise in the case. Learned Counsel for the respondent (Revenue) then placing reliance on Section 143 of Customs Act contended that the impugned show cause was issued inconformity with the requirement of Section 143 ibid and hence it is legal and proper. Learned Counsel then placing reliance on the decisions of Supreme Court reported in Mediwell Hospital and Health Care Pvt. Ltd. Vs. Union of India and others, , M/s. Faridabad Ct. Scan center Vs. D.G. Health Services and others, ; Sri Sathya Sai Inst., High. Medi. Sciences Vs. Union of India (UOI), ; Apollo Hospitals Enterprises Ltd. Vs. Union of India (UOI), ; Kolhapur Canesugar Works Ltd. and Another Vs. Union of India and Others, and General Finance Co. and Another Vs. Assistant Commissioner of Income Tax, Punjab, Supreme Court contended that impugned action taken by Revenue against the appellant is in accord with law laid down by Supreme Court in the case of Mediwell and other cases referred supra and hence impugned action be upheld by dismissing the appeal filed by appellant.

Having heard the learned Counsel for the parties and having perused the record of the case, we are inclined to allow the appeal and in consequence while setting aside of the impugned order, remand the case to Tribunal for again deciding the appeal on merits as indicated infra.

The first question as to whether Commissioner, Customs had jurisdiction to issue impugned show cause notice on 30-3-2000 after the exemption notification was rescinded w.e.f. 1-3-94 by Notification No. 98/94 was admittedly not raised by the appellant before the Tribunal so was the case in relation not other 3 submissions taken note of supra. In our considered view, these questioning really arise for consideration and goes to the root of the case. Equally true is that since the submissions were not raised before the Tribunal and hence no finding on either way could be returned by the Tribunal on any of these issues. Same was the case in relation to other 3 submissions of appellant urged in support of the appeal. Indeed, learned Counsel for the Revenue did not dispute this position that these issues does arise and involve in the case.

Similarly we notice rather with constraint that Tribunal while deciding the appeal did not take note of any of the decided case law on the subject rendered by Supreme Court which has its application to the facts of the case and may conclude the issue either way once applies to the case in hand. Rather they were totally ignored though holding the field on the issues involved. In substance, the appeal was decided by the Tribunal in most perfunctory and casual manner without taking into account any questions and relevant case law on the subject. What is more a matter of concern is that when law laid down by Supreme Court on all relevant issues is holding the field and the same is ignored by the Tribunal as last court of appeal on fact and law then such order passed by Tribunal cannot be said to be a judicious one. In our view, it is the duty of Tribunal while hearing appeal both on facts and law to take note of all possible issues arising out of controversy and in particular legal issues and then decide them keeping in view the relevant provisions of law and decided cases on the issue involved. In the first instance, effort must be to find out whether issue involved is decided by any decision of Supreme Court in any case. If so then by virtue of Article 141 of Constitution of India, the issue must be decided strictly in accordance with law laid down by Supreme Court - it being the last word on the subject. If, there is no decision of Supreme Court on the issue then the effort must be to decide the issue either on first principle applicable to case or by any decision of High Court of our country if holding the field. Any departure from these principles renders the decision of Tribunal bad in law.

True, it is that on the request of learned Counsel for the parties and keeping in view the provisions of Section 130(6) of the Act, we heard the appeal on all points at length for deciding the appeal itself yet in the facts emerging from the record of the case and the casual manner in which the Tribunal disposed of the appeal and the fact that there has been no finding at all by any of the authorities on any of the issues urged, we consider it proper to remand the case to Tribunal for deciding the appeal filed by the appellant on merits on all the four points urged by appellant which are taken note of supra. Since, all the four points urged are involved in the case and does arise out of the controversy, it is necessary for the authorities to give finding these points. It is really unfortunate that all the four points remained answered till the stage of Tribunal though otherwise alive to the controversy involved in the case. In our view, it cannot be said to be a fair judicial trial either way for both parties. If issue whether of law or fact arise then it must be dealt with at all levels by the respective authorities by giving finding one way or other. If not raised at a proper stage but raised a later stage then also the same can be dealt with either at that stage itself or it can be remitted back for decision depending upon the discretion so exercised by the appellate court. We do not consider it proper to exercise our powers as provided in Section 130(6) of the Act in this appeal for deciding all these questions for the first time in this appeal because of peculiar nature of factual controversy raised by the parties in show cause as also in its reply and now in appeal. This requires fresh look by the Tribunal for deciding the issue as mixed question of fact and law. Had it been only issue of law, one could have invoked powers available u/s 130(6) ibid. Such does not appear to be a case of that nature when we see the whole controversy. We also feel that remand of the case to Tribunal would not cause prejudice to any of the parties. On the other hand, it will enable both the parties to present their case in proper perspective before the Tribunal both on facts and at law so as to enable the Tribunal to record definite finding on all issues relating to facts and law. Either party depending upon the out-come of the case may again approach this Court in appeal. This Court would then be in a better position to decide the appeal because of findings of Tribunal already recorded in accordance with law.

Needless to say, the issues raised by the appellant/respondent would be decided by the Tribunal in the first instance, keeping in view the law laid down by the Supreme Court in the cases reported in Kolhapur Canesugar Works Ltd. and Another Vs. Union of India and Others, , Mediwell Hospital and Health Care Pvt. Ltd. Vs. Union of India and others, - M/s. Faridabad Ct. Scan center Vs. D.G. Health Services and others, - Sri Sathya Sai Inst., High. Medi. Sciences Vs. Union of India (UOI), - Sri Sathya Sai Trust v. Union of India and Ors. decided case of various High Courts cited at the bar by learned Counsel for the parties and which are taken note of supra.

Since, we have formed an opinion to remand the case for the reason mentioned supra to Tribunal, we do not wish to express any opinion on any of the points urged on merits either on facts or at law by the parties either way except to take note of the same to show their relevancy and how it arises. Rather we have refrained from doing so else the very purpose of remand would be frustrated causing prejudice to parties.

Accordingly and in view of foregoing discussion, we allow the appeal and set aside the impugned order of Tribunal. As directed above, the case is remanded to Tribunal again for deciding the appeal on merits in the light of what is observed supra. Let it be done within 4 months. Parties to appear before the Tribunal on 24-9-07 and produce the copy of this order to enable the Tribunal to decide the appeal in accordance with law. The record of the case if requisitioned be sent back to Tribunal.

No cost. C.c. as per rule.