Pr Commissioner of Customs Air Cargo Customs (Import) v. Escorts Heart Institute & Research Centre

order by which such increase in the duty or interest takes effect : Provided also that where any penalty has been levied under this section, no penalty shall be levied under section 112 or section 114. Explanation. -For the removal of doubts, it is hereby declared that -

(i) the provisions of this section shall also apply to cases in which the order determining the duty or interest under sub-section (8) of section 28 relates to notices issued prior to the date on which the Finance Act, 2000 receives the assent of the President;

(ii) any amount paid to the credit of the Central Government prior to the date of communication of the order referred to in the first proviso or the fourth proviso shall be adjusted against the total amount due from such person."

¶11At the outset, this court is of the opinion that the question of law was inaccurately framed, because in the present case the invocation of the extended period of limitation has remained unchallenged; therefore, the Revenue's competence to demand differential duty has to follow, by virtue of Section 28. Given that penalty under Section 112 (a) cannot be imposed if penalty under Section 114A is invoked, the correct question of law therefore is whether the CESTAT erred in deleting the penalty under Section 114A in the facts and circumstances of this case.

¶12On the facts, there is no dispute that the goods were mis-declared. This aspect was clearly alleged by the show cause, which inter alia, reads as follows: "41. From the evidence gathered from tile records, brochures & manuals obtained during investigation, information gathered from various publications & articles appearing In the print media, the information obtained from various websites and from the statements of the persons connected with the lmport of "da Vinci Surgical System", it appears that the "da Vinci Surgical System" Imported by M/s Escorts Heart Institute & Research Centre and cleared vide Bill of Entry No, 389879 dated 28,10.2002 was not a "fibre optic endoscope" but was a state of the art "Robotic Surgical System" and that the said Robotic Surgical System can be used to perform complex surgeries with unprecedented control and precision. The endoscope Is just a small part of the said complex "Surgical System" and is used for viewing the inner portion of the body while the surgeon is carrying out the minimum invasive surgery

through the sophisticated robot and the programmed computer.

¶42It has also been noticed that the All India Institute of Medical Sciences (AIIMS), New Delhi had also imported the same system from the same supplier and had filed Bill of Entry No. 506592 dated 21.6.2003 for the clearance of the same equipment, It Is noticed that the AIIMS had cleared the system by correctly describing the goods as Surgical Robotic System for Cardiac Surgery". However, AIIMS had claimed the benefit of concessional rate of duty of 5% under Notification no. 51/96 and not under Notification no. 21/2002 claimed by M/s Escorts.

¶43It has been noticed that a letter EHIRC/JVIED:EQPT/IMP/098 dated 28.10.2002 signed by Dr; Naresh Trehan, Executive Director, M/s Escort Heart Institute & Research Centre Limited had been submitted to the Deputy Commissioner of Customs, Air Cargo, New Deihi for the customs clearance of equipment under Bill of Entry No. 389879 dated 28.10.2002. In this letter, Dr. Naresh Trehan had written that "I confirm and believe that the said system Imported by our Institute is a fibre optic endoscope" & "the equipment namely, Intuitive Fibre Optic Endoscope along with accessories is covered under Notification No. 21/2002 Cus dated 0.3.2002 at S. No. 363 (A) & (8), List 37, Item no. 82".

¶44Therefore, from the above discussion it is Quite evident that the "da Vinci Surgical System" imported by M/s Escorts Heart Institute & Research Centre Limited was a "Robotic Surgical System" and not a "Fibre Optic Endoscope" as declared In the Bill of Entry at the time of clearance. It Is also noticed that there is no other entry in the notification under which benefit of concessional rate of duty @ 5% is applicable to the robotic surgical system. It is noticed that in various brochures, the manufacturer had initially described the equipment as 'da Vinci Surgical System' and also in the initial correspondence between the Importer, supplier and the distributor. However, subsequently, the importer, M/s Escorts Heart Institute & Research Centre Limited changed the description of the system by adding the word "endoscopic" in their correspondence

with the suppliers. Moreover, the Importer had asked the distributor, M/s J. Mitra & Bros to obtain letters from the manufacturer, M/s Intuitive Surgical Inc, USA stating that the equipment was "Fibre Optic Endoscopic System" with the sole purpose of getting the equipment cleared from Customs at the concessional rate of customs duty @ 5% under Customs Notification no. 21/2002 - S. No. 363(A) as against the normal applicable customs duties @ 25% + 16% + 4% (effective

50.8%). Besides, the documents recovered by the Hyderabad Customs show that" the original pamphlet of the manufacturer was manipulated by the distributor, M/s J. Mitra & Bros by Interpolating the words "Endoscopic Coronary Artery Bypass System" in place of "Surgical System".

¶13These led to findings relating to mis-declaration of the goods based on the invoice and purchase order of the goods, i.e as "Endoscopic Intuitive IS 1000 da Vinci Surgical System", showing that "what was ordered by M/s Escorts was da Vinci surgical system and what had been supplied as per the invoice was also da Vinci Surgical System and not an Endoscope as defined in various dictionaries. As such, mentioning the said item as "IS 1000 Fibre Optic Endoscope Surgical System and Accessories" in the Bill of Entry was a misdeclaration. Those findings have been accepted; they were unchallenged. The only issue, therefore, is whether the penalty levied under Section 112 (a) or Section 114A could have been interfered with. In this context, it is noticed that the Show Cause Notice had proposed confiscation of goods under Section 111 (m). Besides, it also stated as follows: "(v) Why penal action should not be taken against M/s Escorts Heart Institute & Research Centre Limited, Shri Bhuvannder Kaul, M/s J. Mitra & Bros and Mis Elecon Cargo Agency under section 112(a) I 114A of tile Customs Act, 1962 for their respective active roles in the mis-declaration of tile description

of the goods in violations of the provisions of the Customs Act, 1962." These facts, clearly distinguish the present case from those in Care Foundation (supra), where the Show Cause Notice did not invoke Section 112; the penalty was therefore set aside as untenable. The CESTAT therefore, set aside the penalty. Here, the Show Cause Notice invoked both sections 114A and 112. The Order-in-Original imposed a differential duty of ` 3,47, 63531/-. That duty amount has not been contested. Given that both the penal provisions were invoked, the question of deleting penalty could not have arisen.

¶14As is noticed the precondition to impose penalty is the determination, after Show Cause Notice that non levy or short levy of customs duty was the result of mis-declaration. The Show Cause Notice was issued under the extended period, on account of the Revenue's contention that there was willful mis-declaration. The findings of the Commissioner clearly established the nature of the mis-declaration, i.e that instead of describing the products accurately, i.e. as da Vinci Surgical System it was described as an endoscopic surgical system. The Commissioner held inter alia, that: "These facts go to prove that there was a pre-mediated plan to mis-declare the goods in order to incorrectly avail the benefit of exemption under notification no. 21/2002-Cus dated 1.3.02 thereby rendering the imported goods liable to confiscation and the importer, M/s Escorts liable for penal action as proposed in the show cause notice. On the same wounds Shri Bhuvander Kaul, Deputy General Manager (Medical Materials) of M/s Escorts, who was inter-alia looking after import of the equipment is also liable for penal action under Section 112 (a) of the Customs Act, 1962 as he is found to be having knowledge

of and also part of the entire plan to mis-declare the descriptions of the imported item to wrongly avail the exemption under the aforesaid notification." In these given circumstances-and having regard to the clear terms of the Show Cause Notice, this court is of the opinion that the CESTAT could not have set aside the penalty, which is mandatory. What the Revenue could not have done (and in fairness, did not) was to impose penalty in addition, under Section 112 (a); this is because of fifth proviso to Section 114A which stipulates that "Provided also that where any penalty has been levied under this section, no penalty shall be levied under section 112 or section 114." The ratio in Amrit Foods (supra), according to this court, is distinguishable, because the Supreme Court held that in that case, the Show Cause Notice was unspecific about the provision, which dealt with several possibilities. In the present case, however the Show Cause Notice mentioned both provisions, which are clear. Moreover, the nature of the facts was made known with clarity in the Show Cause Notice.

¶15In view of the above discussion, the impugned order of CESTAT is set aside; the question of law is answered in favour of the Revenue and against the assessee/respondent. The order of the Commissioner is accordingly restored. The appeal is allowed.

S. RAVINDRA BHAT (JUDGE)

NAJMI WAZIRI FEBRUARY 14, 2016

(JUDGE)

* IN THE HIGH COURT OF DELHI AT NEW DELHI Decided on: 14.02.2017 + CUSAA 28/2016, C.M. APPL.39487-39489/2016 PR COMMISSIONER OF CUSTOMS AIR CARGO CUSTOMS (IMPORT) ..... Appellant Through : Sh. Sanjeev Narula, Sr. Standing Counsel and Sh. Abhishek Ghai, Advocate. versus ESCORTS HEART INSTITUTE & RESEARCH CENTRE ..... Respondent Through : Sh. M.P. Devnath with Sh. Abhishek Anand and Sh. Yogendra Aldak, Advocates. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE NAJMI WAZIRI MR. JUSTICE S. RAVINDRA BHAT % 1. The question of law framed in this case is whether the Customs Excise and Service Tax Appellate Tribunal (CESTAT) erred in holding that "no penalty under Section 112 (a) of the Customs Act, 1962 could have been levied in the circumstances of the case." 2. The appellant filed a Bill of Entry dated 28.10.2002 through its CHA, Elecon Cargo Agency for the goods declared as "IS 1000 Fibre-Optic Endoscope Surgical System" classifying it under Customs Tariff Heading 9018.90 and claimed the benefit of concessional rate of duty under Serial No. 363 (A) List 37 Item No. 82 of Notification No. 21/2002 Cus, dated 01.03.2002 which covered various specific types of endoscopes. It claimed concessional duty @ 5% for accessories of the equipment under Serial No. 363 (B) - List 37 - Item No. 82 of the said Notification. The assessee was issued a Show Cause Notice on 27th September 2004, to show why the goods, assessed provisionally, should not be finally assessed at the normal rate of customs duty @ 25% + 16% + 4% (effective 50.8%) by denying the benefit of claimed Customs Notification No.21/2002-S.No.363(A) and the differential duty amounting to `3,47, 63, 531 should not be recovered from M/s. Escorts Heart Institute & Research Centre Limited along with interest…..(iii) The subject goods, i.e. "da Vinci Surgical System" of the declared assessable value of `7,59,02,909 should not be confiscated under section 111 (m) of the Customs Act, 1962 for mis-declaration of description.(iv) Why penal action should not be taken against M/s. Escorts Heart Institute & Research Centre Limited, Shri Bhuvander Kaul, M/s. J. Mitra & Bros and M/s. Elecon Cargo Agency under Section 112(a)/114A of the Customs Act, 1962 for their respective active roles in the mis-declaration of the description of the goods in violations of the provisions of the Customs Act, 1962." 3. The respondent assessee replied to the Show Cause Notice, resisting the allegations. The Commissioner of Customs, i.e. the adjudicating official, held against the assessee respondent, by the Order-in-Original dated 8th June, 2007, observing that the invoice of the supplier described the goods as "Endoscopic Intuitive IS 1000 da Vinci Surgical System" and based on this and the other evidence collected held that the assessee was guilty of mis- declaration and denied the benefit of the said exemption notification and passed the order for differential duty and penalty for a like amount, i.e. `3,47,63,531/-. The adjudicating authority also held the indenting agent, M/s. J. Mitra & Bros and the CHA liable to penalty and imposed penalties. The assessee/respondent appealed to the CESTAT. During the hearing, on its behalf, it was conceded that as regards the demand of duty, and confiscation of goods under Section 111(m) of the Customs Act, 1962, the issue was in effect settled against it in similar set of circumstances by CESTAT order in the case of J. Mitra Bros Vs. CC, New Delhi [2013 (288) ELT 305 (Tri.- Del.)] and the judgment of this Court in the case of CC (I&G) Vs .Care Foundation [2014 (302) TLT 181 (Delhi)]. The assessee nevertheless argued that no interest under section 28AB was recoverable because the demand was not raised/confirmed under Section 28, urging that even if the Order-in- Original were to be construed as made during finalization of the provisional assessment under Section 18, no interest could be demanded as the provision for interest liability was introduced on 13.07.2006