CHAPARRAL HEALTH SERVICES LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) A show cause notice does not by itself determine any right or obligation. It simply gives to the party receiving the same an opportunity to state its case and oppose the action proposed in the notice. The notices impugned in these Petitions also do the same. They call upon the petitioners to explain why action in terms proposed in the notices be not initiated against them. The petitioners can in response urge all such grounds on facts and in law as may be open to them and argue that the proposed action is. either impermissible in law or unwarranted on facts. There is in that view no justification for this Court to intervene at this stage and short circuit the process set in motion by the respondents in exercise of the statutory powers vested in them. Counsel for the petitioner all the same argued that the notices were without jurisdiction, inasmuch as notification No. 64/88 issued under Section 5 of the Customs Act, by which hospital equipments, apparatus and appliances including spare parts and accessories there of were exempted from the payment of customs duty upon their import from outside the Country had been repealed by a notification dated 1st of March 1994 without making any provision for recovery of customs duty or confiscation of the equipment in cases where the conditions subject to which the equipment was imported was found to have been violated. It was argued that in the absence of any saving clause in the repealing notifications the action initiated by the respondents for the confiscation of the imported equipment, recovery of the customs duty payable on the same and levy of interest and penalty was legally impermissible. Reliance in support was placed upon the decisions of the Supreme Court in M/s RAYALA corporation (P) LTD. ,and ANOTHER. vs THE DIRECTOR OF enforcement, NEW DELHI and KOLHAPUR CANESUGAR works LTD. vs UNION OF INDIA. In M/s Rayala Corporation's case, one of the questions that arose for consideration was whether a prosecution launched for the violation of Rule 132a was maintainable even after the repealing of the said provision. Answering the question in the negative, the Supreme Court held that in the absence of a specific provision permitting prosecutions for violations committed when the Rule was in force, no such prosecution could be launched after its omission from the statute book. The reasoning underlying that view is available in the following passage from that judgment :-"the argument of Mr. Sen was that, even if there was a contravention of Rule 132a (2) by the accused when that Rule was in force, the act of contravention cannot be held to be a "thing done or omitted to be done under that rule", so that, after that rule has been omitted, no prosecution in respect of that contravention can be instituted. He conceded the possibility that, if a prosecution had already been started while Rule 132a was in force that prosecution might have been competently continued. Once the Rule was omitted altogether, no new proceeding by way of prosecution could be initiated even though it might be In respect of an offence committed earlier during the period that the rule was in force. We are inclined to agree with the submission of Mr. Sen that the language obtained in Clause 2 of the Defence of India (Amendment) Rules, 1965 can only afford protection to action already taken while the rule was in force, but cannot justify initiation of a new proceedings which will not be a thing done or omitted to be done under the Rule but a new act of initiating a proceeding after the rule had ceased to exist. On this interpretation, the complaint made for the offence under Rule 132a (4) of the D. I. Rs. , after 1st April 1965 when the rule was omitted, has to be held invalid. " the ratio of the above case was followed in KOLHAPUR canesugar WORKS LTD. vs UNION OF INDIA (supra ). In that case, the effect of omission of Rules 10 and 10a of the Central excise Rules 1944 with effect from 6th of August 1977 and substitution of a new Rule in their place was being examined by the apex Court. Their lordships held that the General Clauses Act did not have any application to such omissions and since there was no saving Clause in the amending Rule, proceedings for demand under old Rules lapsed. None of the above decisions has in my opinion any application to the cases at hand. The show cause notices challenged in these petitions propose action for Confiscation of the imported equipment under Section 111 (o) of the Customs Act and recovery of the duty leviable on the said equipment under Section 28 (1) of the Customs act. The notices also propose imposition of penalty under Sections 112 and 114a of the Customs Act besides recovery of interest on the amount due under Section 28 (A) (b) of the Customs Act 1962. While it is true that the basis of the action proposed to be taken by the respondents is the violation of the condition subject to which the import of equipment was exempted from customs duty, but the source of power to recover the duty is relatable not to the repealed notification but to the provisiops of the Customs Act. The import of equipment in terms of notification 64/88 was subject among others to the condition that the hospitals importing the equipment provide medical, surgical or diagnostic treatment without any distinction of caste, creed, race, religion or language to atleast 40% of all outdoor patients belonging to families with an income of less than Rs. 500/-per month. The exemption was subject to the further condition that the hospital provides treatment at reasonable charges even to patients other than those exempted from any payment. In MEDIWELL hospital AND HEALTH CARE PVT. LTD. vs UNION OF INDIA, the Supreme Court interpreted the exemption notification to be imposing a continuing obligation on the part of those who obtained certificates of exemption for import of equipment without payment of duty to give treatment as indicated earlier to outdoor and indoor patients. More importantly, the Court held that the competent authority should be vigilant and check whether the undertakings given by the applicants were being complied with after getting the benefit of exemption notification and if on such enquiry the authorities are satisfied that the continuing obligations are not being carried out, then it would be open to the authority to ask the persons, who have availed of the benefit of exemption to pay the duty due on the equipments imported. The show cause notices issued to the petitioners in these petitions set out the circumstances, in which the respondents propose to confiscate the material and recover the duty, penalty and interest from them. A reading of the notices leaves no manner of doubt that the respondents have upon verification come to the conclusion that the conditions subject to which the petitioners had been permitted imported material without payment of duty have not been complied with. In terms of the orders made by the Supreme Court in Mediwell's case therefore, the respondents could initiate and have rightly initiated action for recovery of the duty, which the petitioners would have been liable to pay but for the exemption certificate secured by them. The power to recover duty thus does not flow from the notification so as to render any such recovery proceedings incompetent only because of the repeal of the same. The only consequence flowing from the repeal of the notification is that future imports even when made by Hospitals, who may otherwise have been eligible under the repealed notification will not be entitled to any such exemption. It was lastly contended that the show cause notice issued in WP no. 3740/2001 was not preceded by an order cancelling the exemption certificate granted in favour of the petitioner. It was submitted that since recall of any such certificate was essential for initiating any action for recovery of the duty for the proposed confiscation of the equipment, the notice was incompetent. This Court has in M/s. YELLAMMA DASAPPA HOSPITAL vs commissioner OF CUSTOMS AND ANOTHER taken the view that the recovery proceedings must be preceded by cancellation of the exemption certificate. A show cause notice could in that view be issued only after the certificate had been recalled by the authority issuing the same. It is not. disputed by Mr. Haranahalli, who was directed to appear for the respondents, that as on the date of the issue of the show cause notice to the petitioner in the said Petition, the certificate had not been recalled, it is however admitted that the certificate has since been recalled though after the issue of the notices. The question then is whether the show cause notice need be interfered with only on that ground. My answer is in the negative. Issue of the show cause notice may not have been preceded by the cancellation of the exemption certificate but the fact that the certificate has as on date been recalled and the recall order is not assailed by the petitioner in these proceedings should be enough for the notice to remain good and effective. That is particularly so because even if the show cause notice is quashed on the ground urged before me, nothing prevents the respondents from issuing a fresh notice the very next day. It would in any such case be only a futile exercise to set aside the show cause notice which this Court need not undertake. In the result, there is no merit in this Petitions, which fail and are hereby dismissed, but in the circumstances without any orders as to costs.