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international Meditek Pvt. Ltd. Vs. Collector of Customs - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1985)(5)LC1558Tri(Delhi)
Appellantinternational Meditek Pvt. Ltd.
RespondentCollector of Customs
.....was made in december, 1982, i.e., one and a quarter years after the arrival of the goods. the duty exemption, therefore, did not appear to be admissible and all these appear to be an after thought. as regards the undeclared bronchoscope, a letter dated 25-8-1982 was produced stating that it was being returned after having been taken from india for repairs. an invoice dated 25-8-1982 has also been submitted describing it as a 'free replacement bronchoscope". the invoice is without number and no stamp of the supplier has been affixed. no proof of the export of the said item was produced. the value of the item on the basis of market enquiries appears to be rs. 40,000/- and the item also appears to be new. a show cause notice was issued on 20-3-1983 and after granting a personal.....
1. This is an appeal under Section 129A(1)of the Customs Act, 1962, against Order No. 2/84, dated 17-1-1984, passed by the Collector of Customs, New Delhi.

2. On 25-9-1981, the Appellants filed a Bill of Entry with the Air Cargo Unit for clearance of one package, the contents of which had been described as "Electricals" and declared as Life Saving Item-Endoscopic Equipment. The commercial invoice dated 24-8-1981 of the supplier declared the contents as 'Life Saving Equipment, consisting of 10 sets of Microscopes. The clearance of the goods was sought under OGL Appendix 10(42) of the Import Policy AM-82 as Life Saving Item. On examination, the consignment was found to contain - Items (a) to (d) constituted 10 sets of Fiberlight Operating Microscopes claimed by the Importers to be Endoscopic Equipment for the purpose of clearing the same as 'Life Saving Equipment' figuring at S.No. 34 of list 2 of Appendix 10(42) (OGL) of the Import Policy AM-1982.

The last item mentioned at (e) above was found undeclared. From the catalogue as well as special enquiries, it was revealed that operating Microscopes with fibre light attachments cannot be included in the category of Endoscopes. On 28-1-1983, i.e., after one and a half years, the Appellants came up with a plea that 10 microscopes were meant for supplies to Government institutions, viz., one set for Lady Harding Medical College and Hospital, New Delhi, one set for Assam Medical College & Hospital, Dibrugarh and eight sets for Director of Medical Education, Hyderabad. Copies of the Proforma Invoices duly endorsed for exemption from duty by the Office of the Director General of Health Services in terms of Notification No. 17-Cus., dated 25th January, 1979, were submitted and a claim was also made for OGL Item No. 5 of Appendix 10 of Import Policy AM-82. Enquiries were made with the Director General of Health Services which showed that the goods were not meant for the said Hospitals/institutions. Firstly, the proforma invoices are dated much later than arrival of the goods. Secondly, two of the institutions mentioned the dates of expected arrival of the goods to be December, 1982, and March, 1983, and further it was noticed that the application for exemption certificate was made in December, 1982, i.e., one and a quarter years after the arrival of the goods. The duty exemption, therefore, did not appear to be admissible and all these appear to be an after thought. As regards the undeclared Bronchoscope, a letter dated 25-8-1982 was produced stating that it was being returned after having been taken from India for repairs. An Invoice dated 25-8-1982 has also been submitted describing it as a 'Free Replacement Bronchoscope". The invoice is without number and no stamp of the supplier has been affixed. No proof of the export of the said item was produced. The value of the item on the basis of market enquiries appears to be Rs. 40,000/- and the item also appears to be new. A show cause notice was issued on 20-3-1983 and after granting a personal hearing, the Collector came to the conclusion that the 10 Fibre Light Operating Microscopes and the flexible Bronchoscope were imported without a valid licence in contravention of the Import (Control) Order, 1955, read with Section 11 of the Customs Act, 1962, and the importers have deliberately attempted to clear the goods free of duty and without a valid licence by way of misdeclaration. He ordered confiscation of the microscopes under Section 111 (d) and (m) and confiscation of the flexible Bronchoscope under Section 111 (d), (1) and (m). An option was given to redeem the goods on payment of fine of Rs. 1,06,250/-plus the customs duty leviable. He also imposed a penalty of Rs. 20,000/-under Section 112 for the offence of attempting to clear the goods without a valid import licence and evading Customs duty payable.

(i) The order is erroneons, unreasonable, bad in law and against equity and justice.

(ii) The Collector erred in holding that the microscopes are not covered by Item No. 34, List 2, S. No. 42 of Appendix 10 which covers "endoscopic equipment of all types (Gystoscope, Laproscope, etc.)". The Suppliers' catalogue itself is titled "Endoscopes, and Accessories" and microscope 2051, which has been imported, is described in this catalogue, which makes it obvious that it falls under category of 'endoscope'.

(iii) In their letter dated 5-10-1983 to the Under Secretary, the Appellants had submitted a certificate dated 3-9-1983 from Dr. K. Madan, of Dr. Ram Manohar Lohia Hospital, that the goods come under category of endoscope of the non-invasive type.

(iv) A write-up was also submitted to the effect that an endoscope is an instrument for viewing the cavities of internal organs, and the vision could be directly through proximal end or on a screen through the various media at the distal end. Endoscopes are of two kinds - (a) invasive and (b) non-invasive. The former are those inserted into the body like bronchoscopes. The latter are not inserted but are used for examining the organs by looking from the proximal end to see the area visualised at the distal end. This category has under its purview inter alia the operating microscope.

(V) The Collector should have appreciated that the Appellants had taken up the matter with the DGHS ' and the Under Secretary, Ministry of Finance, for clarification whether the goods imported were covered by the term endoscopic equipment of all types. The Appellants were not responsible for delay in getting clarification from the DGHS and the Collector should have himself referred the matter; they are still trying to get the clarification.

(vi) Item 41 of List 2, SI. No. 42 of Appendix 10 covers "fiberoptic endoscopes (Thoracic and gastro-intestinal Genitourinary) with accessories-bulbs, fibre, cord, scope of different sizes". The fibreoptic microscope can be considered as an accessory of fibre-optic endoscopes and would be covered by SI. No. 42 and would be eligible for import under OGL.

(vii) The Collector erred in taking the value of the bronchoscope as Rs. 40,000/- CIF. (viii) The Collector erred in holding that 9 out of 10 microscopes are not eligible to exemption under Notification No. 17/79 dated 25-1-1979. Exemption Certificate had been produced for supply of one microscope to Assam Medical College and Hospital and eight to Director of Medical Education, Hyderabad. It was wrong to deny the benefit on the ground that the order dated 1-4-1981 of the Government of Andhra Pradesh stipulated supply of eight operation microscopes within one month whereas the goods had been imported only in September, 1981. The date could be extended and, in fact; has been extended, and the delay was by the Government of Andhra Pradesh not applying for duty exemption certificate in time.

(ix) The Collector erred in refusing exemption since the duty exemption certificate was applied for after arrival of the goods and the expected date of arrival was shown as December, 1982, and March, 1983, whereas the goods had already arrived. In view of these 'minor discrepancies' the certificates do not become invalid. The Notification No. 17/79 grants exemption to medical, surgical and diagnostic equipment, apparatus and appliances approved by the Ministry of Health or DGHS as essential for use in hospitals. The DGHS has approved the goods in question and nine microscopes are eligible for exemption, even though there are minor discrepancies in the dates.

(x) The Collector had no grounds for imposing any penalty. The Appellants had initially not claimed any exemption from duty when filing the Bill of Entry. So, there was no claim to clear the goods free of duty. The Duty Exemption Certificates were produced at a subsequent stage. The goods are covered by SI. No. 42 of Appendix 10 and permissible for import under OGL. So they are not liable to confiscation under Section 11 l(d) and (m). As regards the bronchoscope, it was not declared in the Bill of Entry as the Appellants were not aware that it was included in the consignment and it is worth knowing that the consignment comprised only on package and the Appellants were fully aware that it would be opened and examined before clearance by the Customs Authorities. So, it is not reasonable that they would have deliberately attempted import of the bronchoscope without payment of duty, if leviable. The Appellants are, therefore, not liable to penalty under Section 112.

For these reasons it is requested that the order be set aside, the fins in lieu of confiscation be remitted in full and the goods allowed to be released, that the penalty of Rs. 20,000/- be ordered to be refunded, that the value of the bronchoscope be re-assessed and that 9 operation microscopes be released free of duty in terms of Notification No.17/79.

4. On 30-6-1984, learned Counsel sought to file certain documents on which he intended to rely but was directed to make a formal application, in accordance with the Rules in this regard. His application dated 4-1-1974 was accordingly considered and the objection of the learned Departmental Representative, Shri Kunhikrishnan, that documonts like the affidavit of Shri Dube, which came into existence after the adjudication, should be ignored, was upheld.5. Shri Beri reiterated the earlier contentions. He pointed out that a proforma invoice was sent on 10-3-1981 and was approved by the DGHS on 16-12-1982 and returned along with recommendation of the Andhra Government dated 1-4-1981. The order for 10 F.L.O. microscopes with light power and light transmission cables was placed on 7-4-1981 and was acknowledged on 20-6-1981. The goods arrived in September 1981. The DGTD and DGHS, haying certified 8 microscopes for Director of M.E.Andhra Pradesh as entitled to exemption under Notification No. 17/79, these should be allowed clearance free of duty. Referring to the catalogue for ORL Endoscopes and Accessories which also depicts the Fiber Light Operating Microscope, imported, Shri Beri argued that it was an Endoscope or at least an accessory of an Endoscope. Appendix 10 Item 5 covered equipment, instruments and accessories under OGL and the microscopes were covered by this Notification No. 17/79 was also applicable to 8 of the 10. As regards the microscope for the Assam Hospital, Counsel had nothing to say as the application for exemption was made after import. In respect of the microscope for Lady Harding against the exemption certificate, another one has been arranged. As regards the bronchoscope, there was a contradiction regarding repairs and replacement. However, the value had been greatly exaggerated and the copy of a recent Bill of Entry shows the assessable value as Rs. 34,810/- in 1983 and in 1981 it would have been much lower. The penalty of Rs. 20,000/- was also very high.

6. Shri Kunhikrishnan defended the impugned order. The proforma invoice for 8 microscopes mentions "Operating Microscope System" whereas the catalogue specifies "Fiber Light Operating Microscope" so, the certificate does not cover these goods. Further page ix. 81 of the catalogue shows the microscope under the heading Endoscopes and accessories so it is apparently only accessory. Moreover, 'Endoscope' is an instrument for examining the interior of a hollow 'viscus' and a 'viscus' is any large interior organ in any of the four great body cavities, especially those in the abdomen. Encyclopaedia Britannica also describes Endoscopy as medical examination of the interior of the body usually through a natural body opening by the insertion of a lighted optical shaft or open tube. Instruments used are esophagoscopies, bronchoscope, thoroscope, etc., and no instrument in the nature of a fibreoptic microscope. Since it is not an endoscope, the microscope is not covered by OGL and the criterial for import cannot be satisfied after import by producing exemption certificates.

If the proforma invoice dated March 81 was genuine, it could be a case for renewal. As regards the broncboscope, the c.i.f. value had been ascertained and the Bill of Entry for a subsequent import was not relevant. The penalty was also justified as there was no evidence to justify bonafide import.

7. In reply, Shri Beri claimed that either list 2 SI. No. 34 or SI. No.41 would entitle the goods to the OGL. Even if they are not so covered, Item 5 of Appendix 10 covered them as DGHS had certified them.

8. The first question to be decided is whether the F.L.O. Microscope can be classified as an endoscope or not. Apart from an Affidavit dated 11th June, 1984, which is not admitted, there is no material to support the write up on Endoscope Definition furnished by the appellant to the lower authorities to show that the subject microscope is a non-invasive endoscope. In SI. No. 34 of List 2, Cystoscope, Laproscope are given as examples and in SI. No. 41, Thoracic, Gastrointestinal and Genitourinary Fibreoptic Endoscopes are mentioned. None of these is of the so-called non-invasive type. On the contrary, the supplier's catalogue itself does not classify the microscope as an endoscope. The other evidence adduced by Shri Kunhikrishnan is also against the arguments of the appellant. For these reasons, we are unable to grant the benefit of SI. Nos. 34 or 41 of list 2 of Appendix 10. As regards Item 5 of this Appendix, the eligible importers are, among others, hospitals recommended by a Central or a State Government. In this case, the institutions are not the importers. Nor are the certificates valid, because they purport to show that the imports were yet to be made, whereas they had already taken place and the appellants were not authorised to import the goods in anticipation and avail the OGL. In the circumstances, the import was unauthorised and the confiscation has to be upheld. As regards the bronchoscope also, its import was clearly unauthorised and its confiscation was fully justified, although there is force in the plea that it was not wilful, as there was only one package and customs examination was inevitable.

9. Considering that the importers are dealers in medical equipment, the offence is sufficiently grave, but considering all the circumstances, the fine amounting to 50% of the assessed value may need some modification. We accordingly reduce it to Rs. 50,000/- for the microscopes and Rs. 20,000/-for the bronchoscope. The penalty is also reduced to rupees ten thousand. As regards the claim for exemption from duty, under Notification No. 17/79 for the microscopes, there is nothing to dispute the fact that on 10-3-1981, the proforma invoice produced to the Collector was sent to the Director of Medical Education, Andhra at the same time, there is no cogent reason why the expected date of arrival should have been shown in the application to the DGHS as March '83, when the goods had already been imported. This clearly indicates misrepresentation and calls for denial of the exemption on the basis of the existing certificate. We, however, see no objection to these microscopes now being granted the benefit of Notification No. 17/79 provided the conditions can be fulfilled before the release on payment of the fine. We, accordingly, uphold the Collector's order except for the above modification and otherwise reject the appeal.

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