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2023 (4) TMI 1151 - HC - CustomsWithdrawal of benefit of exemption granted to the petitioners/hospitals from payment of customs duty for the imported medical equipments, apparatus etc. - HELD THAT - Exemption Notification No.64/88 Customs dated 01.03.1988 was issued in exercise of powers conferred by Sub-Section (1) of Section 25 of the Customs Act, 1962 (52 of 1962). The Central Government in the Public Interest exempted all equipments, apparatus and appliances, including spare parts and accessories thereof, by excluding consumable items, the import of which is approved either generally or in each case by the Government of India in the Ministry of Health and Family Welfare, or by the Directorate General of Health Services to the Government of India, as essential for use in any Hospital specified. The issue of importance rest on the factual matrix, which is to be determined by the competent authority for granting exemption from payment of customs duty. The conditions stipulated in the notification No.64/88 is unambiguous that to provide free treatment on an average to at least 40% of their outdoor patients and free treatment to all indoor patients belonging to families with an income of less than rupees five hundred per month and keeping for this purpose at least 10% of all the hospital beds reserved for such patients - the interpretation of these two conditions must be read in consonance with the purpose and object of granting exemption from payment of customs duty. On considering elaborately the Constitutional perspectives, role of the Courts and the liability of the State, the exemption was granted in public interest, in order to achieve the Constitutional goal and the perspectives of the Constitution. Right to Life being a Fundamental Right and medical facilities to be provided is an integral part of Article 21. The Government while expanding the scope of medical facilities to the poor and the poorest of poor, imposed conditions for exemption of customs duty and it is needless to state that the exemption is granted at the cost of public funds. Therefore, the nexus between the exemption from payment of customs duty and the conditions imposed to provide free treatment by the hospitals on availing the benefit of exemption is to be understood holistically in order to ensure that the Constitutional mandates are honoured for the welfare of the people. In the perspective of the Constitution, one should understand that the medical facilities being the basic right to the citizen of our great Nation and the poorest of poor will not be in a position to get specialised treatment, the Government thought fit and granted exemption from public funds and imposed conditions to provide free treatment for at least 40% of their outdoor patients. The writ petitioners have given undertaking that they will abide by the conditions on availing the exemption from payment of customs duty. With reference to the issue regarding the compliance of the clause in notification No.64/88, the Director General of Health Services categorically found that the petitioners hospital are the beneficiaries under the Notification dated 01.03.1988. The compliance of conditions are continuing onus. The hospitals were given ample opportunities to substantiate their claim that they have fullfilled the conditions stipulated in the notification. The hospitals have furnished informations regarding the free treatment provided based on the conditions. The Director General of Health Services formed an opinion that the medical services provided by the hospitals through the outdoor camps in another place, which is away from the location of the imported equipments installed cannot be considered. Accordingly, the claims of the petitioners hospital were not accepted as they conducted free medical camps outside the places and away from the place, where the imported medical equipments are installed. The free medical treatment contemplated under the said notification should be with a reference to outpatients treated at the hospitals, which includes all the equipments imported availing of the duty exemption benefits. The Director of Health Services, New Delhi found that the writ petitioners hospitals have not treated 40% of the outdoor patients and its indoor patients free of cost. Hence, they have not fulfilled the post import conditions as undertaken at the time of importation of goods. Thus, the writ petitioners are found to be not eligible to avail / retain the CDECs issued to them under notification No.64/88 Cus dated 01.03.1988. The petitioners could not establish that they have treated 40% of their outdoor patients in the hospital, where the imported medical equipments are installed and further they have failed to establish that 10% of all the hospital beds are reserved for such patients, who have taken free treatment in the hospital, where the imported medical equipments are installed. These facts are not seriously disputed by the writ petitioners. Contrarily, the writ petitioners have consistently contended that they are not obligated to provide the treatment in the place, where the imported medical equipments are installed - When the petitioners themselves have not established that they have reserved 10% beds in the hospital, where the imported equipments are installed and further, they have not proved that 40% of outdoor patients are treated free of cost in their hospitals, where the imported medical equipments are installed, this Court is of the considered opinion that the petitioners are not entitled for the relief as such sought for in the present writ petitions. The respondents have rightly and legitimately cancelled the Customs Duty Exemption Certificate (CDEC) granted in favour of the petitioners, which is in consonance with the Constitutional principles and the purpose and object of the conditions imposed in the Notification No.64/88 in public interest from public funds, more so, the petitioners have given an undertaking to comply with the conditions. Petition dismissed.
Issues Involved:
1. Validity of the order passed by the Director General of Health Services withdrawing the benefit of exemption from customs duty. 2. Compliance with conditions stipulated in Customs Notification No.64/88. 3. Continuous obligation of hospitals to provide free treatment post-rescindment of the notification. 4. Authority and recommendations of the State Government versus the Director General of Health Services. 5. Interpretation of "outdoor patients" and the location of treatment. 6. Legal precedents and their applicability to the case. Summary: Validity of the Order: The writ petitions challenge the order dated 23.06.2010 by the Director General of Health Services (DGHS) withdrawing the customs duty exemption previously granted to the petitioners/hospitals for imported medical equipment. Compliance with Conditions: The hospitals imported medical equipment under Customs Notification No.64/88, which required them to provide free treatment to at least 40% of outdoor patients and reserve 10% of hospital beds for patients with family incomes below Rs.500 per month. The petitioners claimed compliance with these conditions through outdoor medical camps and other measures. Continuous Obligation Post-Rescindment: The petitioners argued that their obligation to provide free treatment ceased after the rescindment of Notification No.64/88 in 1994. However, the court held that the obligation to comply with the conditions continued as long as the imported equipment was in use, referencing the Supreme Court's ruling in Mediwell Hospital & Health Care Pvt Ltd. v. Union of India, which emphasized a continuing obligation to provide free treatment. Authority and Recommendations: The petitioners contended that the State Government's recommendations, based on inspections, should be binding on the DGHS. However, the court ruled that the DGHS has the authority to independently verify compliance with the conditions stipulated in the notification and is not strictly bound by the State Government's recommendations. Interpretation of "Outdoor Patients": The court clarified that the term "outdoor patients" refers to patients treated at the hospital where the imported equipment is installed, not those treated at external medical camps. The court emphasized that the purpose of the exemption was to provide specialized treatment using the imported equipment to the specified percentage of patients. Legal Precedents: The court referenced several judgments, including Mediwell Hospital & Health Care Pvt Ltd. v. Union of India, which upheld the continuing obligation to provide free treatment, and Commissioner of Customs (Imports), Mumbai v. M/s. Jagadis Cancer and Research Centre, which reinforced the need for compliance with the conditions of the exemption. Conclusion: The court found that the petitioners failed to prove compliance with the conditions stipulated in Notification No.64/88, specifically the provision of free treatment to 40% of outdoor patients and the reservation of 10% of hospital beds for eligible patients. Consequently, the DGHS's decision to withdraw the customs duty exemption certificates was upheld, and the writ petitions were dismissed.
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