2001 (9) TMI 868 - AT - Customs

Summary

Issues Involved:
1. Compliance with Notification 64/88 conditions.
2. Authority of Customs to deny exemption post-issuance.
3. Applicability of Clause (4) of the notification.
4. Substantial compliance and penalty imposition.
5. Role and responsibility of the Directorate General of Health Services.
6. Validity of the certificates issued by the Directorate General of Health Services, Maharashtra.

Detailed Analysis:

1. Compliance with Notification 64/88 Conditions:
The hospital imported medical equipment under Notification 64/88, which exempts medical equipment from duty if certain conditions are met, including providing free treatment to at least 40% of outdoor patients. The hospital failed to meet this requirement from 1991 to 1998, except for the year 1994-95. Statements from the hospital's Chief Accountant and Administrator confirmed this non-compliance.

2. Authority of Customs to Deny Exemption Post-Issuance:
The hospital argued that once the exemption was granted based on certificates from the Directorate of Health Services, it could not be subsequently denied. However, the judgment emphasized that the exemption is contingent upon continuous compliance with the conditions set forth in the notification, as highlighted by the Supreme Court in Mediwell Hospital & Health Care Pvt. Ltd. v. Union of India.

3. Applicability of Clause (4) of the Notification:
The hospital contended that Clause (4), which applies to hospitals being established, should not affect already established hospitals. The judgment clarified that Clause (4) ensures that newly established hospitals must meet the same conditions as existing hospitals for exemption, emphasizing the ongoing nature of these obligations.

4. Substantial Compliance and Penalty Imposition:
The hospital claimed substantial compliance with the notification, arguing that minor deviations should not result in penalties. The judgment rejected this, stating that the requirement to treat at least 40% of patients free is a strict condition. The hospital's failure to meet this minimum threshold in any of the relevant years constituted a significant breach, justifying penalties.

5. Role and Responsibility of the Directorate General of Health Services:
The hospital referenced a Tribunal decision suggesting leniency due to the role of the Directorate General of Health Services. The judgment distinguished between the Directorate General of Health Services and individual importers, noting that the former, as a government body, has no vested interest in the exemptions granted. Hence, leniency shown to the Directorate General does not extend to the hospital.

6. Validity of the Certificates Issued by the Directorate General of Health Services, Maharashtra:
The hospital relied on certificates from the Directorate General of Health Services, Maharashtra, rather than the Ministry of Health and Family Welfare. The judgment pointed out that the correct certification was not obtained, which would itself disqualify the hospital from the exemption, although this was not the primary ground for the decision.

Conclusion:
The Tribunal upheld the confiscation of the medical equipment and the penalties imposed on the hospital and its administrator. The hospital's failure to comply with the notification's conditions, despite prior claims of full compliance, and the lack of proper certification were critical factors in the decision. The judgment emphasized the importance of strict adherence to the notification's conditions and the ongoing nature of the obligations it imposes. Appeals were dismissed.