2021 (5) TMI 742 - HC - Customs

Levy of IGST on oxygen concentrators - right to health and affordable treatment - Whether the State's action, of imposing IGST on oxygen concentrators, which were directly imported by individuals, albeit free of cost, without the aid of a canalising agency runs afoul of Article 14 of the Constitution? - HELD THAT - On the day, when the instant petition was served on the Standing Counsel for the State, i.e., 03.052021, yet another notification bearing no. 4/2021-Customs, dated 03.05.2021, was issued by the State; this time, by exercising powers under Section 25(2) 5 of the Customs Act. Through this notification, the State, inter alia, exempted the imposition of IGST on oxygen concentrators subject to the conditions provided in the annexure appended to the said notification - The conditions prescribed in the notification dated 03.05.2021, prevent the petitioner from claiming exemption from imposition of IGST, although, the oxygen concentrator imported by him is gifted i.e., has been received free of cost and is for personal use. Condition no. 1, which exempts from the imposition of IGST only those oxygen concentrators that are imported, for COVID relief through a canalizing agency creates, to our minds, a manifestly arbitrary and unreasonable distinction between two identically circumstanced users depending on how the oxygen concentrator has been imported. Imposition of IGST is, thus, as per notification dated 03.05.2021, completely waived, i.e., exempted, if the oxygen concentrator is imported through a canalizing agency. The exclusion of individuals, such as the petitioner, from the benefits of the 03.05.2021 notification only because they chose to receive the oxygen concentrators as a gift, albeit directly, without going through a canalizing agency is, in our opinion, violative of Article 14 of the Constitution - There is no justification whatsoever in excluding individuals from the purview of notification dated 03.05.2021 only on the ground that they received oxygen concentrators directly as gifts from their friends and/or relatives located outside the country. It is the petitioner s case that the oxygen concentrator was shipped to him by his nephew who is located in New York, United States of America. What is, to be borne in mind, is not the benefits the State has granted up until now. What is instead, required to be judicially reviewed is the action of the State, in not treating, even-handedly, persons, who ordinarily should fall in the same class users. The distinction, drawn, as noted above, is manifestly arbitrary, unreasonable, unfair and wholly unsustainable. Whether Article 21 of the Constitution, which includes the right to health and affordable treatment, would require the State to demonstrate that levy and collection of the impugned tax in times of pandemic, war, famine, floods, and such like conditions would subserve public interest? - Whether Article 21 of the Constitution, imposes on the State, a positive obligation to provide adequate resources for protecting and preserving the health and well-being of persons residing within its jurisdiction? - HELD THAT - If the State expected its action to be sustained, in the instant case, it ought to have demonstrated, that the revenue, it would possibly garner, as IGST, in respect of oxygen concentrators which are imported in the circumstances, in which, the petitioner is put, would be appreciably more than the cost incurred to administer the collection of IGST on such transactions. These details need not have borne mathematical precision; a broad-brush approach would have sufficed-so that we could be persuaded to hold that denying relief to the petitioner and persons similarly circumstanced would be in public weal. The counter-affidavit filed by the State gives us no clue whatsoever concerning this vital issue - the petitioner has demonstrated, by adverting to his circumstances, that IGST involves distinct and noticeable burdensomeness , which is, directly attributable to its imposition. A bare perusal of the IGST Act would show that the Government can exempt, generally, either absolutely or subject to such conditions as it may specify, inter alia, goods or services or both of any specified description from whole or any part of tax leviable thereof with effect from such date as it may indicate provided that it is satisfied that it is necessary in the public interest to do so based on a recommendation received from the GST Council in that behalf - The said provision does not bind the Government to issue an exemption notification even if a recommendation in that regard is made by the GST Council. Furthermore, a perusal of the notification dated 01.05.2021 and 03.05.2021, would show that the State has exercised its powers for grant of exemption by relying upon Section 25(1) and 25(2) of the Customs Act in respect of so much of IGST that was leviable under Section 3(7) of the CTA read with Section 5 of the IGST Act. There is no reference in these two notifications to Section 6(1) of the IGST Act. There is weight in Mr. Datar s argument that the power to grant exemption from IGST is relatable to Section 3(12) of the CTA. The compliance of clause (a) of condition no. 104 appended to entry no. 607A of the General Exemption No. 190, should suffice, in our opinion. Thus, it would be sufficient if the persons, who are similarly circumstanced as the petitioner, furnish a letter of undertaking, to the officer designated by the State which would, inter alia, state that the oxygen concentrator would not be put to commercial use. Till such time an officer is designated by the State, it would be in order, if the importer were to address the letter of undertaking to the Joint Secretary, Customs and/or his/her nominee and handover the same to the officer detailed at the customs barrier. The imposition of IGST on oxygen concentrators which are imported by individuals and are received by them as gifts i.e. free of cost for personal use, is unconstitutional - the declaration notification no. 30/2021 dated 01.05.2021 is quashed. Petition disposed off.

Summary

Issues Involved:
1. Imposition of IGST on oxygen concentrators imported for personal use.
2. Violation of Article 14 of the Constitution.
3. Violation of Article 21 of the Constitution regarding the right to health and affordable treatment.
4. Relief to the petitioner.

Issue-wise Detailed Analysis:

Issue No. (i): Imposition of IGST on Oxygen Concentrators Imported for Personal Use

The petitioner, an 85-year-old individual, challenged the imposition of IGST on an oxygen concentrator gifted by his nephew. The State had issued several notifications to mitigate the impact of the COVID-19 pandemic, including exempting oxygen concentrators from BCD but not from IGST for personal use. The notification dated 03.05.2021 exempted IGST for oxygen concentrators imported through a canalizing agency but not for individuals. This distinction was deemed "manifestly arbitrary and unreasonable," violating Article 14 of the Constitution as it created an artificial and unsustainable distinction between similarly circumstanced users based on the method of importation.

Issue No. (ii) and (iii): Violation of Article 14 and Article 21 of the Constitution

The right to health, a second-generation right flowing from the right to life under Article 21, requires the State to ensure affordable treatment, especially during extraordinary times like a pandemic. The Court emphasized that taxation must bend to equity in such times. The State failed to demonstrate that the revenue from IGST on personal imports of oxygen concentrators would outweigh the administrative costs of collection. The petitioner showed that the IGST imposed a "distinct and noticeable burdensomeness," directly impacting his right to health. The Court highlighted the State's positive obligation to take ameliorative measures to protect public health.

Issue No. (iv): Relief to the Petitioner

The Court declared the imposition of IGST on oxygen concentrators imported as gifts for personal use unconstitutional, quashing the notification dated 01.05.2021. The Court held that individuals receiving oxygen concentrators as gifts should not be equated with commercial importers. The notification dated 03.05.2021 was preserved but interpreted to include oxygen concentrators under the exemption for life-saving drugs/medicines, supplied free of cost, under General Exemption No. 190. The cumbersome certification procedure under condition no. 104 was deemed impractical, and a letter of undertaking was deemed sufficient to prevent commercial misuse.

Conclusion:

The Court held that the imposition of IGST on oxygen concentrators received as gifts for personal use was unconstitutional, quashing the relevant notification. It mandated that individuals furnish a letter of undertaking to prevent commercial misuse, ensuring equitable treatment and upholding the right to health under Article 21. The Court's decision emphasized the need for a humanistic approach in times of calamity, aligning legal principles with societal needs.