Research Customs

Commr. Of Customs (Import), Mumbai v.
Jagdish Cancer and Research

Centre – (2001) 6 SCC 483
Brief background of the case -
This appeal was preferred by the Commissioner of Customs (Import), Mumbai, against the
order dated 14.12.1999 passed by the Customs, Excise and Gold (Control) Appellate
Tribunal, West Regional Bench, Mumbai, in appeal, setting aside the order of confiscation of
the imported equipment as well as the penalty imposed. The liability of customs duty was
however upheld, though found to be unforceable, as the show cause notice issued was not a
valid notice.
M/s Jagdish Cancer and Research Centre, Hyderabad (to be referred as ‘Centre) applied for
duty free clearance of a consignment importing Teletherapy Unit (Theratron780-C) for its use
under Notification No.64/88 Cus Dated 1.3.1988, issued under Section 25(1) of the Customs
Act, 1962. The Central Government under the aforesaid notification exempted all apparatus
and appliances etc. as hospital equipment essential for use in any hospital on being satisfied
that it would be necessary in the public interest to do so.
The Assistant Commissioner of Customs issued a notice to the Centre to show cause to the
Adjudicating Authority, as to why customs duty amounting to Rs.64,93,598/- be not
demanded and the Teletherapy Unit be confiscated under Section 111(o) and for imposition of
penalty under Section 112 of the Customs Act. The Centre showed cause raising an objection
that notice was not issued by the competent officer and was also beyond time in terms of
Section 28(1) of the Customs Act. It was also pleaded that the Centre was not required to
furnish any certificate in terms of condition No.4(iii) of the Notification since it was a
running hospital. Insofar it relates to free treatment to all patients whose income was below
Rs.500 per month and reservation of 10% beds in the hospital for them as indoor patients, and
for providing free treatment to 40% of outdoor patients, their case is that the Centre had been
providing free treatment accordingly and the shortfall was only marginal over the years.
Therefore, no condition of the Notification was violated.
By order of the Adjudicating Authority the goods imported were confiscated under Section
111(o) of the Customs Act with an option to the Centre to redeem the same under Section
125(2) of the Customs Act on payment of fine of Rs.50,000/-. A penalty of Rs.5,000/- was
also imposed on taking a lenient view, since it was found that full duty had become payable
by the importer.
The submission of the centre was that Sub-section (2) of Section 125 of the Customs Act
provides that where any fine in lieu of confiscation of goods is imposed, the importer shall
also, in addition, be liable to any duty and charges payable in respect of such goods. Learned
counsel for the Centre stated that the Chapter XIV of the Customs Act relates to confiscation
of goods and conveyances and imposition of fines. It does not relate to imposition or demand
of customs duty. Section 124 and 125 also fall in Chapter XIV. Section 124 provides for
issue of show cause notice before confiscation of goods and Section 125 relates to payment
of fine in lieu of confiscation. Section 28 of the Act which falls in Chapter V provides for
notice for payment of duties which has been demanded by the notice in this case. Therefore,
it was submitted on behalf of the Centre that demand of customs duty and the order for
payment of the same is relatable to only Section 28(1) of the Customs Act
Relevant para of the judgement – Para 12
Whenever an order confiscating the imported goods is passed, an option, as provided under
Sub-section (1) of Section 125 of the Customs Act, is to be given to the person to pay fine in
lieu of the confiscation and on such an order being passed according to Sub-section (2)
of Section 125, the person shall in addition be liable to any duty and charges payable in
respect of such goods. A reading of Sub-section (1) and (2) of Section 125 together makes it
clear that liability to pay duty arises under Sub-section (2) in addition to the fine under Sub-
section (1). Therefore, where an order is passed for payment of customs duty along with an
order of imposition of fine in lieu of confiscation of goods, it shall only be referable to Sub-
section (2) of Section 125 of the Customs Act. It would not attract Section 28(1) of the
Customs Act which covers the cases of duty not levied, short levied or erroneously refunded
etc. The order for payment of duty under Section 125 (2) would be an integral part of
proceedings relating to confiscation and consequential orders thereon, on the ground as in
this case that the importer had violated the conditions of notification subject to which
exemption of goods was granted, without attracting the provisions of Section 28(1) of the
Customs Act.

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Commr. Of Customs (Import), Mumbai v.

Jagdish Cancer and Research

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