1999 (2) TMI 202 - HC - Customs

Summary

Issues Involved:
1. Interpretation of Notification No. 64/88 dated 1st March 1988.
2. Eligibility for customs duty exemption on imported medical equipment.
3. Validity of exemption certificates granted and their subsequent withdrawal.
4. Compliance with conditions stipulated in the exemption notification.
5. Procedural fairness and natural justice in the denial of exemption certificates.

Summary:

1. Interpretation of Notification No. 64/88:
The primary issue was the interpretation of Notification No. 64/88, dated 1st March 1988, issued by the Central Government u/s 25 of the Customs Act, 1962. The notification envisages exemption of medical equipment from customs duty, provided certain conditions are met. The notification classifies hospitals into four categories, with specific conditions for each.

2. Eligibility for Customs Duty Exemption:
Hospitals claiming exemption under Category-2 must provide medical, surgical, or diagnostic treatment without any distinction of caste, creed, race, religion, or language, and must:
- Provide free treatment to at least 40% of outdoor patients.
- Provide free treatment to all indoor patients from families with an income of less than Rs. 500/- per month, reserving at least 10% of beds for such patients.
- Charge reasonable rates to other patients.

3. Validity of Exemption Certificates and Their Withdrawal:
The court examined whether the hospitals met the conditions for the grant of exemption certificates. The respondents argued that the hospitals did not fulfill the continuous obligation to provide free treatment as stipulated, leading to the withdrawal of previously granted certificates.

4. Compliance with Conditions:
The court emphasized that the term "treatment" includes the application of remedies, not just consultation and diagnosis. The hospitals failed to provide free medicines and consumables, which is a crucial part of "treatment" as per the notification. The court noted that the intention behind the exemption was to benefit the poorest sections of society, and merely providing free consultation does not meet this objective.

5. Procedural Fairness and Natural Justice:
The hospitals argued that they were not given adequate notice or opportunity to furnish relevant information. The court found that the hospitals were given sufficient opportunities to provide the required information and that the decisions were based on the material available. The court upheld the respondents' actions, stating that the hospitals did not meet the exemption criteria and that the procedural requirements were adequately followed.

Conclusion:
The petitions were dismissed, and the court upheld the respondents' decisions to refuse the grant of exemption certificates and to withdraw previously granted certificates. The hospitals were found not to have met the conditions stipulated in the exemption notification, and the court emphasized the need for strict compliance with the conditions to ensure the intended benefits reach the deserving sections of society.