2018 (3) TMI 1735 - HC - Customs

Violation of import conditions - Import of two machinery Echo Cardiograph with colour mapping with standard accessories and computerized stress system with treadmill for specified purpose - petitioners did not treat 40% of its outdoor patients free and 10% of its indoor poor patients free - Customs Duty Exemption Certificate (C.D.E.C.) issued under N/N. 64/88 has been withdrawn - independent application of mind not done - principles of natural justice - Held that - It is not in dispute before us that the petitioner was not given copy of report submitted by the team sent for inspection on deputation of Rosha Committee. Similarly report of C.D.E.C. Committee drawn extensively in Paragraph No. 14 of the impugned order is also never made available to them. For total indoor patients of 2762 during above period free indoor patients are shown at 213 which is little less than 10%. The total free patients admitted during this period are 3480 while total free patients admitted are shown to be 931 in chart at Page No. 215 (marked as Annexure-L) with the petition. Again this proportion is little above 25%. In last chart at Page No. 216 (marked as Annexure-M) with the petition this percentage is also reflected. Impugned order does not comment upon correctness of or relevance of position appearing in these charts. In absence of report of Rosha Committee or C.D.E.C. Committee it is not very clear why these assertions of treatment of outdoor patients indoor poor patients by petitioners have not been considered or relied upon by Respondent No. 1 in the impugned order - when there were two sets of contention before Respondent No. 1 Respondent No. 1 ought to have verified original records and thereafter recorded a finding on correctness or otherwise of assertions of the petitioners. This exercise also has not been undertaken. We find that Respondent No. 1 has mechanically acted upon the report of team deputed by the Rosha Committee and the findings of C.D.E.C. Committee. We therefore find that there is no independent application of mind by Respondent No. 1 to the controversy. Petitioners gave specific figures of percentage and then also claimed benefit of persons/patients who visited their camps. The question Whether there was any diagnostic treatment during those camps is a disputed question which cannot be answered without recording proper finding on facts. Petitioners have supported their assertions by producing necessary documents maintained under Income-tax Rules. Those documents have been discarded without assigning any reason - In any case there was no report and there is no finding by Respondent No. 1 or any authority that free treatment was denied by petitioners to any body or in any deserving case. Is free treatment extendable even to patients with capacity to pay and forced upon them or then the deficit in number of OPD or poor indoor patients can be carried forward and attended to in future. The petitioners have declined to pay necessary amount for seeking release of the confiscated/seized machineries and had requested the Authorities to take the same back - we quash and set aside the order dated 1-3-2004. However we direct Respondent No. 1 to proceed further in the matter as per law if at this stage such a measure is still necessary - petition allowed in part.

Summary

Issues Involved:
1. Compliance with conditions of Customs Duty Exemption Certificate (C.D.E.C.) under Notification No. 64/88.
2. Validity of the withdrawal of C.D.E.C. by Director General of Health Services (D.G.H.S.).
3. Consideration of patients treated at medical camps for compliance with exemption conditions.
4. Impact of rescission of Notification No. 64/88 on compliance obligations.

Issue-wise Detailed Analysis:

1. Compliance with conditions of Customs Duty Exemption Certificate (C.D.E.C.) under Notification No. 64/88:
The petitioners, a practising cardiologist and a clinic, imported two medical machines under the exemption provided by Notification No. 64/88, which required them to treat 40% of outdoor patients and 10% of indoor poor patients free of charge. The Customs Officers inspected the petitioners' establishment and seized records, leading to show cause notices alleging non-compliance with these conditions. The petitioners argued that their data, including charts and income-tax records, demonstrated compliance, but these were allegedly not properly evaluated by the authorities.

2. Validity of the withdrawal of C.D.E.C. by Director General of Health Services (D.G.H.S.):
The D.G.H.S. withdrew the C.D.E.C. on the grounds of non-compliance with the exemption conditions. The petitioners contended that this action was taken under pressure from the Customs Department and without independent application of mind. They also argued that they were not provided with the findings of the inspection team or the C.D.E.C. Committee, which were extensively referred to in the impugned order. The court found that the D.G.H.S. had acted mechanically and without verifying the original records, leading to the quashing of the withdrawal order.

3. Consideration of patients treated at medical camps for compliance with exemption conditions:
The petitioners claimed that patients treated at medical camps should be considered for compliance with the exemption conditions. The D.G.H.S. and the Customs Department argued that such patients could not be counted as they were not treated at the hospital where the imported machines were installed. The court noted that the question of whether diagnostic treatment at camps could be considered was a disputed fact that required proper findings, which were absent in the impugned order.

4. Impact of rescission of Notification No. 64/88 on compliance obligations:
The petitioners argued that the rescission of Notification No. 64/88 in 1994 meant there was no need for compliance in 2000. However, the court referred to the law explained by the Supreme Court, which indicated that the obligation to treat the prescribed percentage of patients free of charge continued as long as the machines were in operation. The court found that the rescission did not relieve the petitioners of their continuous obligation.

Conclusion:
The court quashed the order dated 1-3-2004 withdrawing the C.D.E.C. and directed the D.G.H.S. to proceed further in the matter as per law if necessary. The petition was partly allowed, and the rule was made absolute with no order as to costs.