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Issues Involved:
1. Compliance with Clause 2 of Notification 64/88. 2. Violation of principles of natural justice. 3. Reliance on the Report of officials. 4. Consideration of innocuous statements by the petitioner's representatives. 5. Enforceability of rescinded Notification 64/88. Summary: Issue 1: Compliance with Clause 2 of Notification 64/88 The petitioners imported life-saving medical equipment under Customs Notification No. 64/88, which provided Customs Duty exemption. The exemption required compliance with Clause 2, which mandated free treatment to at least 40% of outdoor patients and reserved 10% of hospital beds for families with an income of less than Rs. 500 per month. The Director General of Health Services (DGHS) rejected the petitioners' applications and canceled existing certificates, alleging non-compliance with these conditions. Issue 2: Violation of Principles of Natural Justice The petitioners argued that the DGHS's actions were arbitrary and violated principles of natural justice. They contended that the DGHS kept applications pending for years and rejected them without providing an opportunity to respond to adverse reports. The court agreed, noting that the petitioners were not given notice or a chance to explain before the impugned orders were passed. Issue 3: Reliance on the Report of Officials The DGHS relied on reports from visiting officials to conclude non-compliance with Clause 2. The petitioners argued that these reports were prepared without informing them of their purpose, leading to incomplete information. The court found that the DGHS should have provided the petitioners with an opportunity to explain the reports before making a decision. Issue 4: Consideration of Innocuous Statements The petitioners claimed that the visiting officials gathered information without revealing its purpose, which led to innocuous statements being used against them. The court held that statements made without knowledge of their implications should not be strictly construed against the petitioners without an opportunity to explain. Issue 5: Enforceability of Rescinded Notification 64/88 Notification 64/88 was rescinded by Notification No. 99/94. The petitioners argued that obligations under the rescinded notification could not be enforced. The court agreed, stating that liabilities arising from Notification 64/88 could only be enforced for the period it was in force (until February 1994). The court directed the DGHS to consider pending applications under subsequent notifications (122/94 and 55/95). Conclusion: The court set aside the impugned proceedings and remitted the matters back to the DGHS for fresh disposal, emphasizing the need to adhere to principles of natural justice and consider subsequent notifications for pending applications.
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