2006 (3) TMI 64 - HC - Customs

Imported Hospital equipments Non-fulfillment of condition of Not. 279/83 and Not. 64/88 and cleared equipment on nil rate of duty Neither free medical treatment given to poor families nor hospital beds were reserved for them Misrepresentation Exemption under said notification not available

Issues Involved:
1. Constitutionality of Notification Clauses
2. Eligibility of Diagnostic Centre as 'Hospital'
3. Compliance with Notification Conditions
4. Installation of Equipment at Breach Candy Hospital
5. Effect of Rescission of Notification No. 64/88-Cus

Detailed Analysis:

Re: Contention (a) - Constitutionality of Notification Clauses
The petitioners challenged the constitutionality of clause 3(b) of Notification No. 279/83-Cus and clause 2(b) of Notification No. 64/88-Cus, arguing they were violative of Articles 14 and 19(1)(g) of the Constitution of India. The court rejected this contention, stating that the petitioners had initially represented compliance with these conditions to obtain the exemption. The court found the conditions reasonable and having a nexus to the objective of providing free medical treatment to low-income families. The court emphasized that the petitioners could not challenge the constitutionality of clauses they had agreed to comply with to obtain benefits.

Re: Contention (b) - Eligibility of Diagnostic Centre as 'Hospital'
The petitioners argued that their diagnostic centre should be considered a 'Hospital' under the notifications. The court found this argument immaterial, stating the primary issue was whether the petitioner met the exemption eligibility. The court noted that the petitioner did not have inpatient bed facilities, a critical requirement under the notifications, thus disqualifying them from the exemption. The court also found that the petitioners had obtained the necessary certificate through misrepresentation.

Re: Contention (c) - Compliance with Notification Conditions
The petitioners argued that diagnostic centres could not meet the bed reservation criteria stipulated in the notifications. The court dismissed this argument, stating that if the diagnostic centres could not meet the criteria, they were not entitled to the exemption. The court emphasized that fulfilling the conditions of the exemption notification was mandatory for availing the benefits.

Re: Contention (d) - Installation of Equipment at Breach Candy Hospital
The petitioners contended that the MRI machine was installed at Breach Candy Hospital, which met the notification conditions. The court found this contention dishonest, noting that the certificate obtained by the petitioners specified that the equipment would be used solely at their institute. The court referenced the Supreme Court judgment in Jagdish Cancer & Research Centre, which held that the exemption conditions must be met by the hospital where the equipment is installed. The court concluded that any agreement with Breach Candy Hospital did not absolve the petitioners from fulfilling the conditions of the notification.

Re: Contention (e) - Effect of Rescission of Notification No. 64/88-Cus
The petitioners argued that the rescission of Notification No. 64/88-Cus on 1st March 1994 ended their liability to fulfill its conditions. The court rejected this argument, citing Section 159A of the Customs Act, which maintains the obligations and liabilities incurred under a rescinded notification. The court held that the rescission did not affect the petitioners' liability to fulfill clause 2(b) of the notification.

Conclusion:
The court dismissed both writ petitions, directing the petitioners to pay the duty amount of Rs. 3,82,47,105/- with simple interest at 6% per annum from the date of demand and a penalty of Rs. 10,00,000/-. If the duty is not paid within four weeks, the interest rate would increase to 9% per annum. The court also imposed costs of Rs. 10,000/- for each writ petition and rejected the oral prayer for a stay.

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