FORTIS HOSPITAL LTD. versus COMMISSIONER OF CUSTOMS, IMPORT

Citation: [2015] 4 S.C.R. 456 · Decided: 24-03-2015 · Supreme Court of India · Bench: A.K. SIKRI · Disposal: Appeal(s) allowed

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Judgment (excerpt)

A 
B 
c 
[2015] 4 S.C.R. 456 
FORTIS HOSPITAL LTD. 
v. 
COMMISSIONER OF CUSTOMS, IMPORT 
(Civil Appeal No. 1049 of 2008) 
MARCH 24, 2015. 
[ A.K. SIKRI AND R. F. NARIMAN, JJ. ] 
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. 
0 
124, proposing to confiscate the equipment and impose 
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] 
1.3 Insofar as the payment of fine is concerned, G 
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. [Pa

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