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TMI Blog2010 (9) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... Jeevan Prakash, with Jyotinder Kumar, Advocates, for the Petitioner. Ms. Maneesha Dhir, Ms. Geeta Sharma, Ms. Preeti Dalal and S/Shri Amiet K. Andley, with Arun K. Sharma, Advocates, for the Respondent. [Judgment]. The challenge in this writ petition is to an order dated 20th November 2000 passed by the Directorate General of Health Services ( DGHS ) (MG Section) withdrawing the Customs Duty Exemption Certificate ( CDEC ) issued to the Petitioner for the import of medical equipments and spare parts in terms of a Notification No. 64/88 dated 1st March 1988 issued by the Ministry of Finance, Government of India. Facts 2. The Petitioner, which is a unit of R.G. Stone Enterprises Pvt. Ltd., is a hospital with indoor patient facilities and total bed strength of 17 beds. On 20th January 1987, the Petitioner s predecessor-in-interest, i.e. the Delhi Urological Institute and Research Centre (DUIRC) was issued an import licence for importing one Lithostar Universal Urological Workstation for therapy and diagnostics and one Ultrasound Sonolines. On 19th April 1987, DUIRC applied for a CDEC for import of two equipments, i.e., one Lithotriptor and one ultrasound equipment. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated 383 patients by lithotripsy and of these it had given generous concession to 72 financially needy patients. The DUIRC added that: We have also treated free 5 patients who were not having income of more than Rs. 500/- per month. We are also keeping 10% of our beds for this category of patients. It further pointed out that it had sent a written communication to the DGHS expressing its desire to treat more poor free patients as recommended by any government medical institution. Several press releases and advertisements inviting poor persons for concessional and free treatment at the institute had already been issued. 6. In response to the above return filed by the DUIRC, the DHS, Delhi Administration wrote to the DUIRC a letter dated 7th August 1992, stating as under : Sir, This is in reference to your letter dated 24th July 1992, on the subject of submission of your quarterly reports. (i) Your quarterly statement have been inspected and found in order till dated 30th June 1992. (ii) You are also requested to intimate the Directorate regarding the change in premises from Bazar Sita Ram to F-12, East of Kailash, New Delhi. Vide paras 4 (B) of N.N. 64/88 as to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , on 11th March 2000 the Petitioner informed the DGHS that A satisfactory report of period from 1995 onwards could not be inspected by State Government s concerned authority because of their busy schedule. As soon as, the inspection is over we will complete the formalities. On 15th November 2000, the Petitioner enclosed the report for the period 1995 to 30th October 2000. A photocopy of the said letter bearing the receipt of acknowledgement dated 25th November 2000, presumably of the DGHS, has been enclosed. In the Proforma, details were given up to year 1999 as regards the OPD patients. The detailed lists of concessions extended for the entire period with the names of the patients was also enclosed. On 18th November 2000, the Petitioner wrote to the DGHS stating that report as regards the period 1995 till 30th October 2000 had already been submitted to the Director, Lok Nayak Hospital, New Delhi. The postal proof of the above letter having been dispatched to the Deputy Director, DGHS is also enclosed. 11. Thereafter on 20th November 2000, the impugned order came to be passed by the DGHS without referring to the Petitioner s letters dated 15th November 2000 and 18th November 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord the following facts : (i) The original import licence was in the name of DUIRC. An amendment was applied for to incorporate the words ( a unit of R.G. Stone Enterprises Pvt. Ltd. ) under the name of the said Centre in the import licence. (ii) All correspondence between the DUIRC and the Petitioner and the DGHS and the DHS was only at the East of Kailash address and that both authorities were aware of the installation of the equipment at that address. (iii) On 6th/11th July 1989, the DUIRC informed the Joint Secretary (Medical) Delhi Administration that its Centre had started functioning and that an installation certificate in terms of Para 4(b) of the Notification No. 64/88 should be issued to it. The letter head on which the above letter was typed out indicated that the Petitioner s unit was located at East of Kailash. (iv) The DUIRC and later the Petitioner continued to provide free concessional treatment to poor patients between 1992 and 1999. It also organised free camps at several places outside Delhi. (v) The impugned order of 20th November 2000 was issued by the DHS despite being aware of the fact that the investigations by the Delhi Government wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents as well as free treatment to all the indoor patients belonging to families with an income of less than Rs. 500/- per month must be achieved at all costs and if the said obligation was not discharged, then steps could be taken for realisation of the customs duty from such of those entities who had availed the CDECs. 23. The Respondents state that the case of the Petitioner was considered at the CDEC meeting held on 7th September 2000 and despite opportunities given to the Petitioner, it had failed to give information for the period from 1995 onwards. As regards the report of the GNCTD, it is stated that the information provided by the Petitioner had not been verified and cross-checked with the registers. It was stated that MG Section of the DGHS had not received the Petitioner s letters dated 11th March 2000, 15th November 2000 and 18th November 2000. Although it is not denied that the report of the Delhi Government of 3rd January 2001 was received by the DGHS only on 15th January 2001, it was not in dispute that no patient with the income of less than Rs. 500/- per month came to the Petitioner for indoor treatment. It was submitted that the voluminous documents submitted and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the Petitioner that it had complied with its obligations for the years 1995 to 1999 and, therefore, it was justified in withdrawing the CDEC. Scope of Notification No. 64/88 : Applicability of Para 2 to the Petitioner 26. The first issue to be considered is about the scope of the Notification No. 64/88 issued under the Customs Act, 1962. The Table appended to the notification sets out the conditions subject to which the CDEC is granted to hospitals. Para 2(a) of the Table requires a hospital certified by the Ministry of Health and Family Welfare, Government of India to comply with the following requirements of free treatment : (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). 27. Para 4 of the Table to the said notification, which is relevant f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification, the expression Hospital includes any Institution, Centre, Trust, Society, Association, Laboratory, Clinic and Maternity Home which renders medical, surgical or diagnostic treatment. 28. Although it is sought to be contended by the learned counsel for the Petitioner that the requirement under Para 2 was applicable only to the existing hospitals, this court is unable to accept the said submission. Para 4 relates to hospitals which are in the process of being established. This clause certainly applies to the Petitioner since at the time it obtained the CDEC, it was in the process of being established. Nevertheless under Para 4(iv), such hospitals which start functioning would be relatable to a hospital specified in paragraph 1, 2 or 3 of this Table. Therefore, once the Petitioner Hospital commenced its functioning, it had to comply with the requirement of Para 2. No objection by Respondents to explanation given by Petitioner for shifting the site of installation of equipment 29. An analysis of the above narrative reveals that the Petitioner, on its part, had given a satisfactory explanation why it had to shift the place of installation of the equipment from Sita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal and, therefore, was not covered by the Notification No. 64/88. In allowing Mediwell s appeal, the three issues were addressed by the Supreme Court as is apparent from para 7 of the judgment (SCC@ p. 762) : 7. In view of the rival submission the questions which arose for our consideration are : 1. Whether a diagnostic centre is entitled to seek for issuance of a certificate to enable it to import equipments without payment of customs duty? 2. Whether in the facts and circumstances of the present case, more particularly in the absence of any denial of the allegations made by the appellant it is possible for the Court to come to the conclusion that there has been a discriminatory treatment between appellant and persons similarly situated, and if so, whether there is any nexus for the same. 3. Whether the appellant had complied with all the pre conditions stipulated in the exemption notification for being entitled to the issuance of a certificate by the Respondent No. 2 for import of the equipment in question without payment of customs duty. 33. What is relevant, as far as the present case is concerned, is the answer to Question No. 3. The Supreme Court observed that wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that so far as the DGHS was concerned, 396 cases were examined. In respect of 386 institutions/hospitals CDEC has either been withdrawn or cancelled. 35. In the meanwhile, within nine months of the decision in Mediwell Hospital case, the issue was again examined by a three Judge Bench of the Supreme Court in Faridabad CT. Scan Centre v. D.G. Health Services. The Petitioner was aggrieved by the denial of the CDEC and cited the cases of certain others similarly placed who had been granted such CDECs. Reliance was placed on the observations made in para 10 of the Mediwell Hospital case that a diagnostic centre run by a private individual purely on commercial basis may not be entitled to exemption under the notification issued by the Central Government. It was noticed in Faridabad CT. Scan Centre that despite the above observations made in the Mediwell Hospital case, Mediwell had been granted on the ground that several other individual diagnostic centres not attached to any hospital had been granted the exemption and that denial of such CDEC to Mediwell would be violative of Article 14 of the Constitution. The three-Judge Bench disagreed with the above view expressed in the Mediw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnificant is that none of the above three judgments noticed an important fact that the Notification No. 64/88 stood withdrawn with effect from 1st March 1994, itself. Consequently, there was no occasion for the Supreme Court to consider whether the obligation to fulfill the conditions attached to the said Notification continued even beyond that date. That question arose before the Madras High Court in Apollo Hospitals Enterprises Ltd. v. Union of India. In that case, the Petitioner had imported certain life saving medical equipments for installation in its hospital and obtained a CDEC under the Notification No. 64/88. The Petitioner s application was rejected on the ground that the DGHS had relied upon a certain report, a copy of which had not been given to the Petitioner. Secondly, the DGHS had failed to consider whether non-compliance of the requirement of Clause 2 of the Notification No. 64/88 was wilful. It had also not considered whether the compliance was required to be made only till such time the Notification No. 64/88 survived. 41. The learned Single Judge of the Madras High Court in Apollo Hospitals held that the requirement of complying with the condition under Clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent under Para 2 of the Table to provide free treatment to at least 40% of all their outdoor patients and provide free treatment to all indoor patients belonging to families with an income of less than Rs. 500/- per month, would be a continuing obligation but that such obligation would continue till the time the Notification No. 64/88 continued to exist. Such obligation could not be enforced even after the repeal of the said notification, i.e., even after 1st March 1994. 44. It is in the above background that this Court proceeds to examine the judgment of the Division Bench of the Bombay High Court in Shah Diagnostic Institute Private Ltd. v. Union of India. The facts in that case were that the Petitioner was granted a CDEC on 17th December 1985 for import of an MRI machine. The MRI machine was allowed clearance in part shipments. The show cause notices were issued on 14th December 1992, 5th June 1993 and 10th November 1993 calling upon the Petitioners therein to show cause as to why the duty amount of Rs. 3,82,47,105/- should not be levied and recovered and the MR1 machine not be confiscated. After considering the reply of the Petitioners, an order was passed on 28th August 1994 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said notification was in force. Referring to paras 42 and 43 of the Madras High Court ruling in Apollo Hospitals, the CESTAT also held that a careful reading of the said paras would reveal that the authorities can enforce the obligations only during the period when the Notification No. 64/88 was in force and not for the subsequent period. 47. The resultant position on a collective reading of the judgment of the Bombay High Court in Shah Diagnostic and the order of the CESTAT in Bharath Diagnostics Centre is that with the repeal of the Customs Notification No. 64/88 with effect from 1st March 1994, the Petitioner in the instant case would have to satisfy the Respondents that it duly complied with the conditionalities in Para 2 of the Table to the Notification during the time the said Notification was in force. While all the judgments referred hereinbefore talk of the validity of action taken by the Respondents after the repeal of the Notification for the non-compliance during the period the said notification was in force, none of the judgments state that the obligation to comply with the conditions under Notification No. 64/88 continued after the said notification was repealed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance even up to 31st October 2000. 53. Without going into the factual controversy whether such details were in fact received by the DGHS, the fact remains that as far as the Delhi Government was concerned, its special inspection report of 3rd January 2001 clearly indicated that the Petitioner had complied with the conditions of Notification No. 64/88 even as on that date. As far as the Petitioner is concerned, it was entitled to presume that with no objection having been raised to the figures submitted by it up to 1st March 1994, it had complied with the requirements of Notification No. 64/88. The action taken by the DGHS by way of the impugned order in seeking to withdraw the CDEC for non-compliance of the conditionalities attached to the Notification No. 64/88 was, therefore, unsustainable in law. 54. As regards the obligations for the period subsequent to 1st March 1994, as already held by this Court, there is no such obligation arising from the Notification No. 64/88 after the date of its repeal. Even otherwise, the Petitioner is entitled to take benefit of the certificate given to it by the Delhi Government on 3rd January 2001 that it continued to fulfill its obligations ..... X X X X Extracts X X X X X X X X Extracts X X X X
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