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TMI Blog1999 (2) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioners for the grant of exemption certificates and the withdrawal of certificates already granted has been assailed on a variety of grounds. The challenge arises against the following backdrop :- 2. People's Union of Civil Liberties in a writ petition filed in public interest before the High Court of Delhi made serious allegations about what it described as a financial scam involving custom free, import of expensive medical equipment worth thousand crores on the basis of custom duty exemption certificates issued by the Directorate General of Health Sciences. These certificates were according to the petitioners, granted illegally with a view to defraud the exchequer of a huge amount recoverable on the import of such equipment by a large number of hospitals established in different parts of the Country. While the petition was pending consideration before a Division Bench of the High Court, the Government of India by an order dated 20th of May, 1996 appointed Shri K. Chandramouli, Joint Secretary, Ministry of Health and Family Welfare to conduct a preliminary enquiry as to the validity of the certificates issued by the Directorate of Health Services from time to time. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject to which the exemption from duty was granted. These Committees submitted their interim reports from time to time, upon consideration whereof, the Court by an order dated 19th of December, 1996 directed all pending applications for the grant of exemption certificates to be decided in accordance with law. By another order dated 1st of May, 1997, the Court directed the disposal of all such pending applications within a period of 3 months from the date of the said order with a direction to the Chief Secretaries of the State Governments to render all possible assistance and to furnish the necessary information in regard to the pending applications expeditiously so as to reach the Ministry of Health and Directorate General, Health Services not later than 10 days from the date of the order. Instructions were accordingly issued by the Govt. of India to all Chief Secretaries in terms of a letter dated 30th of May, 1997 to despatch the requisite information in a proforma forwarded to them under the said letter so as to reach the Ministry within 10 days. The following passage from the letter is in this regard relevant:- "In the meantime, the High Court of Delhi has directed this Ministr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Kasturba Medical College, Manipal and Kasturba Medical College, Mangalore, these applications were rejected on different dates between 3rd of July, 1997 to 23rd of July, 1997. The delay in the response from the State Government was, it appears, brought to the notice of the Delhi High Court, who by order dated 1st of August, 1997 directed that all such cases in which recommendations of the State Government had been received upto 8th of August, 1997 should be reconsidered by the Committee. Consequently, the request was reconsidered in the light of the recommendations of the State Government, who rejected the same for the second time by orders that have been challenged in these writ Petitions and to which I shall presently refer. The Committee was of the view that the Institutions did not for various reasons qualify for the grant of exemption under the exemption notification. Certificates already issued as in the case of Karnataka Institute of Medical Sciences (KIMS) were also directed to be cancelled. 5. Several contentions have been urged on behalf of the petitioners in these Petitions in an attempt to demonstrate that the petitioners were eligible for the grant of the exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to a hospital specified in Categories 1, 2 or 3 referred to above. The hospitals established by the petitioners in this bunch of Petitions claim to be falling in Category-2 of the table appended to the notification. It would therefore be profitable to extract para-2 of the table, which deals with the said category in extenso :- "2. All such hospitals which may be certified by the said Ministry of Health and Family Welfare, in each case, to be run for providing medical, surgical or diagnostic treatment not only without any distinction of caste, creed, race, religion or language but also, - (a) free, on an average, to at least 40 per cent of all their outdoor patients; and (b) free, 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 per cent of all the hospital beds reserved for such patients; and (c) at reasonable charges, either on the basis of the income of the patients concerned or otherwise, to patients other than those specified in clauses (a) and (b)." 6. A plain reading of the above would show that any hospital claiming benefit under Category-2 shall have to establish to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly, the Court declared the obligation to provide free treatment to 40% outpatients and all indoor patients with a family income of less than Rs. 500/- per month to be a continuing obligation. In order to ensure that the benefit reached the deserving, the authorities were asked to monitor the same and to take appropriate action if there was a default in the discharge of that obligation. The following passage from the said decision is in this connection apposite :- "While, therefore, we accept the contentions of Mr. Jaitley, learned senior counsel appearing for the appellant that the appellant was entitled to get the certificate from respondent No. 2 which would enable the appellant to import the equipment without payment of customs duty but at the same time we would like to observe that the very notification granting exemption must be construed to cast continuing obligation on the part of all those who obtained the certificate from the appropriate authority and on the basis of that to have imported equipments without payment of customs duty to give free treatment at least to 40 per cent of the out door patients as well as would give free treatment to all the indoor patients belon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no question of its refusal in other cases constituting hostile discrimination. The Court repelled the contention based on Article 14 in the following words : "3. We fail to see how Article 14 can be attracted in cases where wrong orders are issued in favour of others. Wrong orders cannot be perpetuated with the help of Article 14 on the basis that such wrong orders were earlier passed in favour of some other persons and, therefore, there will be discrimination against others if correct orders are passed against them. In fact, in the case of Union of India (Rly. Board) v. J.V. Subhaiah the same learned Judge in his Judgment has observed in para 21 that the principle of equality enshrined under Article 14 does not apply when the order relied upon is unsustainable in law and is illegal. Such an order cannot form the basis for holding that other employees are discriminated against under Article 14. The benefit of the exemption notification, in the present case, cannot, therefore, be extended to the petitioner on the ground that such benefit has been wrongly extended to others. With respect, the decision in Mediwell Hospital does not lay down the correct law on this point." 11.&emsp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the word treatment is not confined only to examination or diagnosis as contended by the respondents, but includes steps taken to effect a cure for a disease or injury. What is significant is that the expression is wide enough to include the application of remedies to the disease and not just its diagnosis. It would include medicines and therapies considered necessary for cure. This interpretation is supported by the context, in which the term has been used in the notification as also the purpose underlying the same. The word 'treatment' appears in the company of expressions `medical', `surgical' and `diagnostic'. The expression diagnosis implies the process of identifying the disease by means of its symptoms. The expression diagnostic according to the Dictionary, means distinguishing or differentiating a disease by its symptoms. The diagnosis of the disease, may itself involve a prolonged investigation and may in turn constitute a part of the treatment to be given to the patient. Medical or surgical treatment that any such diagnosis may indicate is what the notification envisages and not just the diagnosis or advice. 15. The words used in the notification apart, the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d these Petitions in the context of the above. 17. Manipal Hospital, Bangalore, Writ Petitions No. 28186-87/96 filed by this Hospital, challenges the validity of an order dated 27th September, 1996 issued by the Assistant Commissioner of Customs Mangalore, where under Customs Bond 123/91, dated 4th of October, 1991 for a sum of Rs. 2,61,22,467.00 was enforced against the petitioner on account of its failure to produce relevant documents in connection with the import of Equipment and calls upon the petitioner to pay an amount of Rs. 31,03,27,369.00 towards customs duty. 18. In Writ Petition No. 7730/98 the petitioner Hospital challenges the validity of an order dated 29th of October, 1997, rejecting its applications for the grant of "Exemption Certificates" in respect of equipment indicated in the annexure to the said order. Similarly, Writ Petition No. 28589/98 calls in question an order of rejection dated 2nd of June, 1998, issued against the petitioner Hospital following Order dated 29th of October, 1997 challenged in W.P. No. 7730/98. Writ Petition No. 29130/98 filed by this Hospital assails the validity of order dated 25th of August, 1998. issued by the Deputy Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y therefore be extracted together with the hospital's response to the same :- Facilities/Services provided FREE to indoor patients 4(h) referred to in clause (d) above : : 10% of the beds available are in the free category where beds, operations/procedures etc. are free. For economically weaker sections concessions are granted in the bills at the time of discharge. In case of dialysis Prosthetics, Cobalt therapy, dentures etc. only service charges are free, actual material cost has to be met by the beneficiary." 21. The above would indicate that the so called free treatment given to both O.P.D. and in-patients does not include medicines. The free treatment is limited even according to the petitioner to lab investigations, X-Rays, Bed charges and professional charges only. This position was not disputed by Mr. Shivgoor, Counsel appearing for the Hospital in the course of his submissions as indeed the same could not have been disputed in view of the following specific averments made in para 9.7 of W.P.No. 7730/98 :- "Medicines and consumables cannot be supplied free to inpatients as the cost is prohibitive and there is no financial aid fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly justified in declining to grant the exemption certificates to the petitioner on the ground that it did not qualify for the same. 23. The second and an equally important reason which lends itself as a basis for the impugned orders of rejection, is the fact that the petitioner had neither reserved 10% of its Beds for patients with a family income of less than Rs. 500/- nor were those to whom such indoor treatment was given identifiable by reference to their income. It was contended by Mr. Shivgoor, that the reservation of the Beds was not necessary, so long as patients who qualified for free treatment were entertained and given such treatment. It was submitted that there was no material to show that even a single patient who deserved free indoor treatment had been refused admission. At any rate so long as free treatment was provided to every one who was eligible for the same, argued the learned Counsel, reservation of Beds was unnecessary, and a wastage which could prejudicially affect genuine patients visiting the Hospital for urgent medical treatment. 24. The Notification as already noticed earlier envisages free treatment to all indoor patients belonging to familie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same. No satisfactory or transparent mechanism was disclosed by the Hospital for purposes of determining whether a patient being admitted for treatment was really one belonging to the income group eligible for free treatment, while according to Mr. Shivgoor, it was the Public Relations Officer of the Hospital who determines on the basis of his subjective satisfaction whether a patient deserves free treatment according to the inspection report, submitted by the Assistant Director General (HA) copy whereof was produced by Mr. Ashok Haranahalli, the decision whether a patient should be given free treatment is taken by the consultant of the Hospital not necessarily on the basis of his income. Such being the case, the Hospital wants this Court to believe that all those who were admitted as in-patients during the relevant period i.e., 1994-96 belonged to the category of patients with less than Rs. 500/- income every month, for it is then alone that the Hospital can show that it has treated at least 10% of the patients of the eligible category free. Records for the relevant years were summoned for verifying whether there really was any process of determination of the eligibility of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the petitioners' applications for the grant of CDECs in connection with the imports referred to in the Annexure to the said order. A mandamus directing the Respondents to consider the applications of the petitioner afresh has also been prayed for. 28. The primary question that arises for consideration in all these petitions is whether the petitioner hospital was entitled to the issue of the exemption certificates applied for or secured by it keeping in view the requirements prescribed in the exemption notification. A time bound Notice was issued to the petitioner-Hospital also and upon its failure to provide the requisite information, the request for grant of the certificates declined by the Committee constituted for the purpose in terms of a decision taken on the 22nd of July, 1997. That decision was later reviewed by the Committee in the light of the directive issued by the Delhi High Court in the Committee's meeting held on 20th of August, 1997. Fresh inputs made available to the committee subsequent to its earlier decision, also did not in the opinion of the committee make any improvement in the case of the hospital. The report received by the Committee from the State G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hanism for determining the eligibility of the patient for free treatment in the prescribed category, the Respondents were justified in holding that the Hospital had not established its entitlement to the grant of exemption certificates. As in the case of Manipal Hospital, Bangalore, so also in the present case, the absence of any transparent and satisfactory method for determining the entitlement of those seeking treatment, makes it difficult to count all those treated free or given concessions at the time of their discharge, as patients belonging to the poorer sections of the Society having regard in particular to the fact that a large number of such patients are admittedly treated free for considerations other than their financial status. The figures indicated by the Hospital in fact appear to include patients to whom concessions have been given at the time of discharge. As to what is the nature of a concession has not been indicated. In any event, a concession in the charges levied for treatment is not the same thing as free treatment as envisaged by the exemption Notification. Super added to this is the fact that no free treatment is provided in certain disciplines like dialysi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the CDECs have been refused by the respondents. The request for the grant of exemption certificates was considered and turned down by the CDECs Committee in its meeting held on 22nd of July, 1997. The matter was examined further in the Committees meeting held on 21st of August, 1997, in which the Committee reiterated its earlier view. The rejection order issued on 13th of October, 1997 inter alia points out that the College was not providing free treatment to 40% of the OPD patients. The order further states that the information provided does not state whether the free treatment given by the Hospital was to patients with a family income of less than Rs. 500/- per month. 33. In the proforma furnished by the College on 2nd of April, 1993, the College has described the facilities/services provided to free OPD patients in the following words :- "All patients are given consultation, examination and advice free of cost. In case various investigations like laboratory, x-rays etc., are required, nominal charges are levied. Medicines have to be purchased, while the prescription by Doctor would be free of cost. In case of poor patients who are unable to pay, even investigation char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of order dated 12th of December, 1997 issued by the Directorate General of Health Services refusing to issue the installation certificates and revoking the CDECs already granted in its favour on the ground that the Hospital does not satisfy the requirements of the excemption notification. A demand notice issued by the Assistant Commissioner of Customs asking the Hospital to pay a sum of Rs. 86,15,252.44 towards customs duty payable on the medical equipment imported by it has also been challenged besides an order dated 22nd of January 1998 issued by the Superintendent of Customs, Bangalore detaining the equipment in question for non-payment of the amount mentioned above. In W.P. No. 14643/98 this Hospital has challenged the order made by the Assistant Commissioner of Customs, Chennai confirming a demand of Rs. 14,53,564/- under Section 28(2) of the Customs Act, 1962 consequent upon the petitioner's failure to produce an installation certificate and the revocation of the CDECs granted in its favour. 37. The petitioner claims to be what is described by it as a `substantially charitable Institution'. Apart from its own hospital it is utilising the clinical facilities available in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Out Patient or In Patient Department. In the latter Department, the wards were classified into three categories, viz., General, Semi Special and Special and an admission fee of Rs. 25/- was being charged even for the General Ward besides a ward charge of Rs. 15/- per day per patient. Injections were also chargeable both from the in and out-patients even when disposable needles and syringes are brought by the patient himself. These facts in the opinion of the Committee disentitled the petitioner from claiming any exemption. The Committee accordingly recommended the revocation of the CDECs earlier issued to the petitioner on 9th of March, 1992 and 5th of October, 1993. A formal order to that effect followed on 12th of December, 1997, which is under challenge in these proceedings. 38. Mr. Veerabhadrappa, Counsel appearing for the petitioner, argued that the petitioner did not have an adequate notice or opportunity to produce material in support of its claim that it was eligible for the grant of exemption. The order was in that sense violative of the principles of natural justice, according to the learned Counsel. I do not see any substance in that submission. In response to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmittee appointed by the State Government, the correctness whereof has not been disputed by the petitioners. It is therefore difficult to see how having been granted an opportunity to furnish the requisite information and having availed of that opportunity, the petitioner can possibly turn round and say that the decision was violative of principles of natural justice. 39. Mr. Veerabhadrappa next argued that the petitioner was actually providing free medical treatment to all the Outdoor patients and that the contrary view taken by the Committee was not justified. I see no merit in that submission either. "The information furnished by the petitioner to the State Government and verified by it clearly stated that the so-called free treatment to OPD patients was confined only to free consultation. There is no explanation forthcoming from the petitioner as to why it did not claim that free treatment included medicine, investigations etc. in the information furnished by it, if it was actually providing those facilities to the patients. The proforma filled up by the petitioner specifically limits the free treatment to `free consultation' only. This was found to be correct even by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccording to the learned Counsel inapplicable as it was not the case of the respondents that there was any collusion or any wilful mis-statement or suppression of facts by the petitioner-importer. 42. Mr. Haranahalli on the other hand contended that the impugned orders of seizure of the equipment were referable to Section 111(o) of the Customs Act, which reads thus : "Confiscation" of improperly imported goods, etc. - The following goods brought from a place outside India shall be liable to confiscation - (a) to (n)- xxx xxx xxx (o) any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non observance of the condition was sanctioned by the proper officer." 43. A plain reading of the above would show that goods, which are exempted from payment of duty subject to any condition are liable to be confiscated in case the conditions subject to which the same are exempted from duty are not satisfied unless the non-observance thereof sanctioned by the proper officer. The medical equipment in the inst ..... 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