FORTIS HOSPITAL LTD.versusCOMMISSIONER OF CUSTOMS, IMPORT

                        [2015] 4 S.C.R. 456


A                    FORTIS HOSPITAL LTD.

                                 v.

            COMMISSIONER OF CUSTOMS, IMPORT
B                (Civil Appeal No. 1049 of 2008)

                        MARCH 24, 2015.

            [ A.K. SIKRI AND R. F. NARIMAN, JJ. ]
c      Customs Act, 1962 - ss. 124, 125(1) - Import of
  medical equipments - Exemption from payment of import
  duty under the Notification - However, failure to fulfill post
  import conditions - Issuance of show cause notice u/s.
   124, proposing to confiscate the equipment and impose
0
  penalty - Commissioner confiscated the equipment but
  allowed the imported to redeem the goods on payment of
  fine and also demanded duty of 1. 65 crores, though duty
  not demanded in the notice - Appeal by importer
E challenging the demand of duty since the option to
  redeem the goods was not exercised - Appeal allowed by
  the tribunal - However, the High Court set aside order
  passed by the tribunal holding that u/s. 125(2), the duty
  payable on the confiscated goods has to be paid on
F imposition of fine in lieu of confiscation and it is
  immaterial whether such option is exercised or not - On
  appeal, held: When in the Show Cause Notice issued ul
  s. 124, nothing was stated about the payment of import
  duty, there could not have been direction to that effect in
G the final order - Contingency contained in s. 125(2) did
  not occur in the present procedure for want of exercise of
  option to pay fine - Thus, the view taken by the tribunal
  is correct and the view taken by the High Court is not

H                              456
 FORTIS HOSPITAL LTD. v. COMMNR. OF CUSTOMS, 457
                    IMPORT

warranted on the interpretation of s. 125(2) - Department to A
take appropriate independent action against importer for
payment of import duty - Notification No. 64188 dated
01.03.1988.

    Allowing the appeal, the Court                           B

      HELD: 1.1 Section 124 of the Customs Act, 1962
deals with confiscation of goods and penalty and
does not deal with payment of import duty. No doubt,
such a payment of import duty becomes payable by             c
virtue of sub- section (2) of Section 125 but only
when condition stipulated in the said provision is
fulfilled, namely, fine is paid in lieu of confiscation of
goods. When the Department chose to take action
under Section 124 of the Act, it should have been            o
alive of the situation that the Noticee may not
exercise the option and in such case, duty would not
be payable automatically. [Para 18] [471-B-C]

    1.2 The Department is taking shelter under the E
provisions of sub-section (2) of Section 125 of the
Act. However, on a plain reading of the said provision,
such a provision would not apply in case where
option to pay fine in lieu of confiscation is not
exercised by the importer. Trigger point is the F
exercise of a positive option to pay the fine and
redeem the confiscated goods. Only when this
contingency is met, the duty becomes payable. [Para
14] [469-E-G]
                                                             G
    1.3 Insofar as the payment of fine is concerned,
only option was given (and that was only course of
action which could be visualised under section 125).
The order categorically states that "the importer "may"
redeem the confiscated goods on payment of fine of H
458        SUPREME COURT REPORTS           [2015] 4 S.C.R.


A  Rs.1,00,000 (Rs. One lakh only)". Indubitably, unless
   an option is exercised, fine does not become payable.
   It cannot be said that fine was imposed. The
   stipulation contained in the adjudicating order was
   only contingent in nature which contingency would
 B have arisen only on exercising the option by the
   importer to pay fine in lieu of confiscation and to
   redeem the goods. [Paras 15, 16, 17] (470-C-D,H; 471-
      A]
C         Black law dictionary Tenth Edn.; Oxford English
      Dictionary - referred to.
      1.4 It is not that the Department is without any
  remedy. If the Department wanted the Institute to pay
  the duty, which may have become payable, it could
D have taken independent action; de hors Section 124
  for payment of duty, simultaneously with the notice
  under Section 124 of the Act or by issuing composite
  notice for such an action. No doubt, it could have
  waited for option to be exercised by the Institute
E under Section 125(1) of the Act as well and in that
  eventuality, duty would have automatically become
  payable under Section 125(2) of the Act. But when
  such an option was not exercised, it could have
  taken separate and independent action by issuing
F Show Cause Notice to the effect that the Institute had
  violated the terms of exemption notification and
  therefore, was liable to pay duty. [Para 19) (471-D, H;
  472-A-D]
      1.5 It is emphasized that when in the Show Cause
G Notice issued under Section 124, nothing was stated
  about the payment of import duty, there could not
  have been direction to that effect in the final order
  Further, insofar as Section 125(2) is concerned, the
  contingency contained therein did not occur in the
H present procedure for want of exercise of option to
 FORTIS HOSPITAL LTD. v. COMMNR. OF CUSTOMS, 459
                   IMPORT

pay fine. The view taken by the CESTAT is correct and A
the contrary view taken by the High Court in the
impugned judgment is not warranted on the
interpretation of Section 1~.5(2) of the Act. High Court
was not correct in observing that it is immaterial
whether option under Section 125(2) is exercised or B
not. [Paras 20, 21) [472-D-G]

    Commissioner of Customs (Import) Mumbai v.
Jagdish Cancer & Research Centre 2001 (6) SCC 483:
2001 (1) Suppl. SCR 245 - distinguished.                      C

                  Case Law Reference

  2001 (1) Suppl. SCR 245 Distinguished          Para 21

     CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1049      D
of 2008.

     From the Judgment and Order dated 28.04.2006 of the
High Court of Judicature at Bombay in Customs Appeal No. 22
of 2004.                                                      E

    Parag P. Tripathi, Pratyush Panjwani, Anish Chawla,
Mahima Gupta, E. C. Agrawala for the Appellant.·

    K. Radhakrishnan, Nisha Bagchi, Binu Tamta, Pooja         F
Sharma, B. Krishna Prasad for the Respondent.

    The Judgment of the Court was delivered by

     A. K. SIKRI, J. 1. The appellant herein, which is the
successor of M/s.Wockhardt Hospital and Heart Institute G
(referred to as the 'Institute' hereinafter) had a hospital at
Bangalore. Sometime in the year 1990, the said Institute
imported a Cardiac Catherization Laboratory (known as
Angiography system) with its spares/accessories valued at H
460         SUPREME COURT REPORTS                  [2015] 4 S.C.R.


A     Rs.1, 14,23,471/-. The said Institute applied for exemption
      from payment of import duty taking shelter under the
      Notification No. 64/88-cus dated 01.03.1988. This
      notification provides for exemption on medical equipment
 8    imported against Custom Duty ExemptionCertificate issued
      by the Director General of Health Services. Apart from the
      said certificate, there are certain other conditions which
      arementioned in the notification that need to be satisfied to
      avail theexemption. These conditions are as under: -
c
           "All such hospitals which may be certified by the said
           Ministry of Health and Family Welfare, in each case,
           to be run for providing medical surgical or diagnostic
           treatment not, only without any distinction of caste,
D
           creed, race, religion or language but also: -

           (a) free, on an·average, to at least 40 per cent of all
           their outdoor patients; and
E          (b) free to all indoor patients belonging to families with
           an income of less than rupees five hundred per
           month, and keeping for this purpose at least 10 per
           cent of all the hospital beds reserved for such
 F         patients; and
           (c) at reasonable charges, either on the basis of the
           income of the patients concerned or otherwise to
           patients other than those specified in clauses (a) and
G          (b)."
        2. From a bare reading of the aforesaid stipulations, it
  is clear that these conditions are to be fulfilled not at the
  time of the import but in future, by the importer while
H utilising the imported equipment. Therefore, the conditions
 FORTIS HOSPITAL LTD. v. COMMNR. OF CUSTOMS, 461
            IMPORT [A K. SIKRI, J.]

are continuing in nature.                                      A

     3. The Institute was not charged any import duty as it
had produced requisite certificate dated 11.02.1991 issued
by the Director General of Health Services, New Delhi. After
sometime, the Revenue authorities/respondent herein came       B
to know that the Institute was committing breach of the
aforesaid conditions, as it had not been providing free
diagnostic treatment to at least 40 per cent of all its
outdoor patients and it was also not giving free treatment     c
to indoor patients having income of less than Rs.500 per
month and for this purpose, it had not got 10 per cent
hospital beds reserved for such patients. It resulted in
issuance of show cause notice to the Institute. Pertinently, D
this show cause notice dated 12.01.2000 was issued under
Section 124 of the Customs Act, 1962 (hereinafter referred
to as Act) and after stating that the aforesaid breach was
allegedly committed by the appellant, in the show cause
notice, it was proposed as under: -                          E

     "16. Therefore, M/s. Wockhardt Hospital & Heart
     Institute, Bangalore are called upon to show cause to
     the Commissioner of Customs, Air Cargo Complex,
     Sahar, Andheri (E), Mumbai-99 as to why: -                F

     (a) the medical equipments/spares and accessories
     as detailed in Annexure of the Show Cause Notice
     and valued at Rs.1, 14,23,471/- should not be
                                                               G
     confiscated under Section 111(0) of the Customs Act,
     1962.

     (b) Penalty should not be imposed under Section 112
     of the Customs Act, 1962 for the omission and             H
462         SUPREME COURT REPORTS                   [2015] 4 S.C.R.


A          commission committed by the Wockhardt Hospital &
           Heart Institute Bangalore."

           4. In para 17 of the Show Cause Notice, the Noticee
      was also asked to show as to why penalty under Section
 8    112 of the Act should not be imposed. The Institute replied
      to the said Show Cause Notice and also desired to be
      heard in person. Personal hearing was accorded to the
      Institute. It had filed written submissions which were also
c     considered. However, the plea of the Institute in the reply
      filed to the Show Cause Notice was not accepted. Orders
      dated 11.07.2002 were passed by the adjudicating authority
      holding that the Institute had, in fact, committed the breach
      of the Notification No. 64/88 dated 01.03.1988. Accordingly,
0
      the goods, viz., the aforesaid medical equipment was
      confiscated. The operative portion of order of the
      confiscation and penalty reads as under: -"

 E         a) I order, the confiscation of the goods valued at
           Rs.1, 14,23,471/- mentioned in the show cause notice,
           under Section 111(0) of the Customs Act, 1962. The
           importer may redeem them on payment of a fine of
           Rs.1,00,000 (Rs. One lakh only), within thirty days of
F          this order.

           b) I also direct that the importer shall forthwith pay the
           duty amounting to Rs.1,65,24,050/-(Rs. One crore sixty
           five lakhs twenty four thousand and fifty only) in view
G
           of the failure to discharge the continuing obligation
           under notification No. 64/88 during the material period.
           c) I impose a penalty of Rs.25,000 (Rs. Twenty five
           thousand only) on the importer under Section 112(a)
H          of the Customs Act, 1962.
  FORTIS HOSPITAL LTD. v. COMMNR. OF CUSTOMS, 463
             IMPORT [A. K. SIKRI, J.]

     d) The proceedings in respect of DGHS are                 A
     dropped."

      5. As is clear from this order, after confiscation of the
goods, option was given to the Institute to redeem the said
goods on payment of fine of Rs.1 lakhs. In addition, the 8
Institute was also directed to pay the duty amounting to Rs.
1,65,24,050/- "in view of the failure to discharge the
continuing obligation under notification No. 64/88 during the
material period". Penalty of Rs. 25,000/- under Section c
112(a) of the Act was also levied. The Institute challenged
the aforesaid order by filing appeal before the Customs,
Excise & Service Tax Appellate Tribunal (hereinafter
referred to as 'CESTAT'). Since we are concerned with that
                                                                0
part of the order vide which the duty was imposed,
henceforth we will confine our discussion to this aspect
alone.

     6. Before the CESTAT, submission of the Institute was E
that in the Show Cause Notice nothing was stated about
the payment of duty and as the Show Cause Notice was
conspicuously absent in this behalf, in the final order, the
duty could not have been demanded. It was argued that
such an order would be violative of the principle of nature F
justice. The Institute also referred to the provisions of
Section 125 of the Act which gives an option to pay fine in
lieu of confiscation. It was argued that as per this provision,
option is to be given to the importer and it is left to the G
importer who has to exercise the same. It would imply that
if no such option is exercised, the goods are not to be
redeemed and they would remain the property of the
Government. In that case, when such an option is not H
464      SUPREME COURT REPORTS                 [2015] 4 S.C.R.


A exercised, no fine is payable and when no such fine is
  payable, duty could not be demanded by relying on the
  provisions of Sub-section (2) of Section 125 of the Act, as
  such an eventuality has not arisen in the present case
8 because of the reason that the Institute had not exercised
  the option and had not paid the fine. This contention found
  favour with the CESTAT and while accepting the same,
  CESTAT discussed the legal position in the following
  words:
c
        "We have carefully considered the rival submissions.
        We have also perused the case law cited before us
        as well as the judgment of the Hon'ble Supreme Court
        in the case of CC, Mumbai v. Jagdish Cancer &
D
        Research Centre 2001 (132)ELT 257 (SC). It is no
        doubt true that under Section 125(2) of the Customs
        Act, 1962 when goods are redeemed, duty will have
        to be paid in addition to the fine imposed in view of
 E      confiscation. However, the argument before us is not
        that only fine is required to be paid for redemption of
        the imported goods. The question before us is
        whether duty is pc.yable even in the event of the option
 F      not being exercised. The decision of the Supreme
        Court in Jagdish Cancer & Research Ceritm cited
        supra does not address itself to this issue. No such
        argument was ever raised before the Apex Court. The
        contention of the learned DR that the conduct of the
G       appellants in use of the imported equipment after
        import is tantamount to their having exercised the
        option of redemption and, therefore, they are liable to
        pay duty, is not tenable as it is only on adjudication
H       that the option is extended by the adjudicating
 FORTIS HOSPITAL LTD. v. COMMNR. OF CUSTOMS, 465
            IMPORT [A. K. SIKRI, J.]
                                                            '
     authority and the option could not have been A
     exercised prior to the passing of the impugned order
     and, therefore, the use of the imported equipment by
     the appellants; in their Institute cannot amount to their
     having exercised the option to redeem the goods, 8
     which comes at a subsequent stage namely when the
     impugned order of adjudication is passed. We
     therefore hold that the duty demand is not sustainable
     and accordingly, set aside the same, however, if the
     absence of any challenge to the confiscation and to C
     the imposition penalty, both are sustained."

    7. In this manner, appeal was allowed holding that
demand of duty was not legally sustainable and that part of D
the Order-in-Original passed by the adjudicating authority
was set aside.

     8. Not satisfied with the aforesaid outcome, the
respondent- Revenue challenged the order by filing appeal E
before the High Court of Bombay. It was argued by the
Department that the moment order of confiscation is
passed with option given to the Institute to redeem the
goods on payment of fine, the eventuality comtemplated
under Section 125(2) of the Act comes into operation and F
therefore, in the scheme of things, it was permissible for
the Department to charge duty as well. It was also argued
that when it is found that the Institute had violated the
conditions stipulated in Notification No. 64/83 dated G
01.03.1988, the only conclusion would be. that duty was
payable by the Institute and therefore, the Department was
well within its right to demand the duty.

    9. The High Court, after discussing th,e respective     H
466~        SUPREME COURT REPORTS                   [2015] 4 S.C.R.


 A contentions in detail, accepted the submissions of the
   Department and set aside the order of the CESTAT. The
   rational given by the High Court is contained in Para 41 of
   the impugned judgment which interprets the provisions of
 B Sub-section (2) of Section 125 of the Act as well reflects
   the reasoning adopted by the High Court in support of its
   view. We deem it appropriate to reproduce the same
   hereinbelow:-

             "41. We find it difficult to accept the above
             interpretation of Section 125 (2). It is well established
             in law that the taxing statutes have to be construed
             strictly and unless the literal meaning leads to anomaly
             or absurdity, the golden rule of literal interpretation
 b           should be adhered to. Literal meaning of Section
             125(2) is th.at, whenever the goods liable to be
             confiscated under the Customs Act are allowed to be
             redeemed by giving an option to pay fine in lieu of
             confiscation imposed under Section 125(1), the owner
             of such goods or the person referred to in section
             125(1) shall, in addition to the fine be liable to any
             duty and charges payable in respect of such goods .
            .1.n other words, under Section 125(2), the duty payable
            on the confiscated goods has to be paid on
             imposition of fine in lieu of confiscation and it is
             immaterial whether such option is exercised or not."
,...
(3         10.As is clear from the above, according to the High
       Court, whether option under Section 125(2) of the Act is
       exercised· or not, is immaterial.'            r   '




        11. In order to find out as to whether the High Court is
1
 H right or CESTAT's interpretation of the provisions of Section
 FORTIS HOSPITAL LTD. v. COMMNR. OF CUSTOMS, 467
            IMPORT [A K. SIKRI, J.] .

125(2) of the Act is correct, it would be necessary to peep. A
into the said provision along with Section 124 of the Act.
These two Sections are worded as follows:

     "Section 124. Issue of show cause notice before
     confiscation of goods, etc. - No order confiscating B
     any goods or imposing any penalty on any person
     shall be made under this Chapter unless the owner of
     the goods or such person-
                                                                   C
     (a) is given a notice in writing with the prior approval
     of the officer of customs not below the rank of an
     Assistant Commissioner of Customs, informing him of
     the grounds on which it is proposed to confiscate the
     goods or to impose a penalty;                            D

     (b) is given an opportunity of making a representation
     in writing within such reasonable time as may be
     specified in the notice against the grounds of
     confiscation or imposition of penalty mentioned E
     therein; and

     (c) is given a reasonable opportunity of being heard
     in the matter:
                                                                   F
     Provided that the notice referred to in clause (a) and
     the representation referred to in clause (b) may at the
     request of the person concerned be oral."

     "Section 125. Option to pay fine in lieu of G
     confiscation.- (1) Whenever confiscation of any goods
     is authorised by this Act, the officer adjudging it may,
     in the case of any goods, the importation or
     expo~a!ion iVJh:_reJ'?f }~ Pf~hibi~ed. u.~de~ thjs f:c__t 1o( ~·
468      SUPREME COURT REPORTS                  [2015] 4 S.C.R.


A       under any other law for the time being in force, and
        shall, in the case of any other goods, give to the
        owner of the goods or, where such owner is not
        known, the person from whose possession or custody
 8      such goods have been seized, an option to pay in lieu
        of confiscation such fine as the said officer thinks fit:

        Provided that, without prejudice to the provisions of
        the proviso to sub-section (2) of section 115, such fine
c       shall not exceed the market price of the goods
        confiscated, less in the case of imported goods the
        duty chargeable thereon.

        (2)Where any fine in lieu of confiscation of goods is
D       imposed under sub- section (1) the owner of such
        _goods or the person referred to in sub- section (1)
        shall, in addition, be liable to any duty and charges
        payable in respect of such goods."
E      12. It may be seen from the bare reading of the
  aforesaid Section that under Section 125( 1) of the Act,
  option is given to the importer whose goods are
  confiscated, to pay the fine in lieu of confiscation and
F redeem the confiscated goods. Before this action is taken,
  Show Cause Notice is to be issued under the provision of
  Section 124 of the said Act. This provision pertains to
  confiscation of goods and provides procedural safeguards
G inasmuch as there cannot be any order of confiscating any
  goods or imposing any penalty on any person without
  complying with the procedure contained in Section 124.
  Section 124 mandates issuance of the Show Cause Notice
  before passing any such order and contemplates two
H actions: first, relating to confiscating of the goods and
 FORTIS HOSPITAL LTD. v. COMMNR. OF CUSTOMS, 469
             IMPORT [A. K. SIKRI, J.]

second, pertaining to imposition of penalty. Pertinently, this A
action does not deal with payment of import duty at all.

     13. It is not in dispute that Show Cause Notice in the
instant case was issued under Section 124 of the Act.
Once such a Show Cause Notice was issued and as can B
be seen from the proposed action which was contemplated
in this provision (as has been taken note of above), it was
also confined to confiscation of the imported machinery and
imposition of penalty. Nothing was stated about the c
payment of duty. However, in spite of the fact that Show
Cause Notice was limited to confiscation of the goods and
imposition of penalty, the final order which was passed
included the direction to pay the customs duty as well. It is D
clear that when such an action was not contemplated, which
even otherwise could not be done while exercising the
powers under Section 124 of the Act, in the final order
there could not have been direction to pay the duty.
                                                              E
     14. Notwithstanding the aforesaid position, as pointed
out above, the Department is taking shelter under the
provisions of sub-section (2) of Section 125 of the Act.
However, on a plain reading of the said provision, we are
of the view that such a provision would not apply in case F
where option to pay fine in lieu of confiscation is not
exercised by the importer. Trigger point is the exercise of
a positive option to pay the fine and redeem the
confiscated goods. Only when this contingency is met, the G
duty becomes payable. In the present case, admittedly,
such an option was not exercised and the confiscated
machinery was not redeemed by the Institute. As a matter
of fact, thus, no fine has been paid.
                                                              H
470        SUPREME COURT REPORTS                   [2015] 4 S.C.R.


A      15. Mr. K. Radhakrishnan, learned senior counsel
  appearing for the Department, argued that even if an option
  was not exercised, the moment it was stated in the order
  of the Commissioner that fine is being "imposed", sub-
B section (2) would get attracted. We do not agree with the
  aforesaid submission of Mr. Radhakrishnan. The order
  confiscating the goods has already been reproduced
  above. Insofar as the payment of fine is concerned, only
  option was given (and that was only course of action which
C could be visualised under section 125). The order
  cate·gorically states that "the importer "may" redeem the
  confiscated goods on payment of fine of Rs.1,00,000 (Rs.
  One lakh only)"
D
        16. Indubitably, unless an option is exercised, fine does
   not become payable. Sub-section (2) of Section 125 uses
   the expression "imposed" by stating "where any fine in lieu
   of confiscation of goods is imposed". In Black law
 E dictionary (Tenth edition), the word 'impose' is defined as
   "To levy or exact (a tax or duty)". Thus, it has to be a levy
   or exact which is become payable and has to be paid.
   Likewise, the word 'impose' is defined by Oxford English
 F Dictionary, as relevant for the purpose of the present case,
   as "Lay or inflict (a tax, duty, charge, obligation, etc.) (on or
   upon), esp. forcibly; compel compliance with; force (oneself)
   on or upon the attention etc. of."

G      17. In view of the above, we cannot agree with the
  submission of Mr. Radhakrishnan that fine been "imposed"
  in the present case. The stipulation contained in the
  adjudicating order was only contingent in nature which
H contingency would have arisen only on exercising the
  FORTIS HOSPITAL LTD. v. COMMNR. OF CUSTOMS, 471
             IMPORT [A. K. SIKRI, J.]

option by the importer to pay fine in lieu of confiscation and 1-A
to redeem the goods.                                        ri,


     18. As already mentioned above, Section 124 dJals
with confiscation of goods and penalty and does not deal
with payment of import duty. No doubt, such a payment of B
import duty becomes payable by virtue of sub- section'~(2)
of Section 125 but only when condition stipulated in-the
                                                          c
said provision is fulfilled, namely, fine is paid in lieu of
confiscation of goods. When the Department chose to take ,c
action under Section 124 of the Act, it should have been
alive of the situation that the Noticee may not exercise the
option and in such case, duty would not be payable
automatically.
                                                             D
     19. It is not that the Department is without any rem~dy.
We have gone through the provisions of notification N~. 64/
88 dated 01.03.1988. As pointed out above, importer would
be exempted from payment of import duty on hospital .:iE
equipment only when the conditions contained in the s~id · -
notification are satisfied. Some of the conditions,' ~s
pointed out above, are to be fulfilled in future. If that 'is not
done and the importer is found to have violated those
conditions, Show Cause Notice could always be given 1F
under the said notification on payment of duty, indepen_d~nt
of the action which is permissible under Section 124 ~nd
Section 125 of the Act. It is also important to mention that
under certain circumstances mentioned in the notification, r.     ~.G
the importer can be asked to execute a bond as welt, In
those cases, action can be taken under the said pol)d
when the conditions contained therein are viplat~d.
Therefore, if the Department wanted the Institute to pay the , ·H
472       SUPREME COURT REPORTS                 [2015] 4 S. C.R.


A duty, which may have become payable, it could have taken
  independent action; de hors Section 124 of the Act, for
  payment of duty, simultaneously with the notice under
  Section 124 of the Act or by issuing composite notice for
8 such an action. No doubt, it could have waited for option to
  be exercised by the Institute under Section 125(1) of the
  Act as well and in that eventuality, duty would have
  automatically become payable under Section 125(2) of the
  Act. But when such an option was not exercised, it could
C have taken separate and independent action by issuing
  Show Cause Notice to the effect that the Institute had
  violated the terms of exemption notification and therefore,
  was liable to pay duty.
 D
        20. What is emphasised is that when in the Show
   Cause Notice issued under Section 124, nothing was
   stated about the payment of import duty, there could not
   have been direction to that effect in the final order Further,
 E insofar as Section 125(2) is concerned, the contingency
   contained therein did not occur in the present procedure for
   want of exercise of option to pay fine. We, thus, are of the
   opinion that the view taken by the CESTAT is correct and
 F the contrary view taken by the High Court in the impugned
   judgment is not warranted on the interpretation of Section
   125(2) of the Act.

      21. High Court is not correct in observing that it is
G immaterial whether option under Section 125(2) is
  exercised or not. We would like to point out that the High
  Court has referred to the judgment in the case of
  'Commissioner of Customs(lmport), Mumbai v. Jagdish
H Cancer & Research Centre' [2001 (6) SCC 483] in support
 FORTIS HOSPITAL LTD. v. COMMNR. OF CUSTOMS, 473
            IMPORT [A. K. SIKRI, J.]

of its conclusion. However, on going through the said A
judgment, we find that the issue with which we are
concerned in the present case did not occur for
consideration before the court in that case at all, as is clear
from para 12 of the said judgment, which is reproduced 8
below: -

     "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        c
     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
                                                                 0
     charges payable in respect of such goods". A reading
     of sub-sections (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        E
     pc_iyment 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) to Section
     125 of the Customs Act. It would not attract Section        F
     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           G
     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   H
474       SUPREME COURT REPORTS                [2015] 4 S.C.R.


A        Customs Act. A reference may beneficially be made
         to a decision of this Court reported in Mohan Meakins
         Ltd. v. CCE wherein it has been observed in para 6:
         (SCC p.465)
 B       Therefore, there is a mandatory requirement on the
         adjudicating officer before permitting the redemption
         of goods, firstly, to assess the market value of the
         goods and then to levy any duty or charge payable on
c        such goods apart from the redemption fine that he
         intends to levy under sub-section (1) of that section."

         In this view of the matter the objection raised by the
         Centre that Section 28 of the Customs Act would be
D        attracted is not sustainable."

       22. Obviously, the argument raised in that case
  predicated on Section 28(1) of the Customs Act and plea
  was that notice was not issued by the "competent officer"
E and was also beyond the time prescribed under Section
  28(1). In that context, the Court dealt with the provisions of
  Section 125(1) as well as 125(2) and observed that order
  of payment of duty under Section 125(2) would be an
F integral part of the proceedings relating to confiscation and
  consequential orders thereon. This order, however, must be
  pursuant to a show cause notice and adjudication. The court
  dealing with the question as to whether sub-section (2) of
G Section 125 would be applicable even when option to pay
  fine in lieu of confiscation is not exercised.

      23. Accordingly, we allow the appeal and set aside the
  order passed by the High Court. We make it clear that it
H would still be open to the Department to take appropriate
 FORTIS HOSPITAL LTD. v. COMMNR. OF CUSTOMS, 475
             IMPORT [A K. SIKRI, J.]

independent action against the appellant for payment of A
import duty, in case it is still within period of limitation.

Nidhi Jain                                 Appeal allowed.