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PETITIONER:

MEDIWELL HOSPITAL & HEALTH CARE PVT. LTD.

Vs.

RESPONDENT:

UNION OF INDIA & ORS.

DATE OF JUDGMENT: 17/12/1996

BENCH:

K. RAMASWAMY, G.B. PATTANAIK

ACT:

HEADNOTE:

JUDGMENT:

J U D G M E N T

PATTANAIK, J.

Leave granted.

The appellant, had applied to respondent no, 2,

Director General of Health Services, Ministry of Health and

Family Welfare for grant of necessary certificate which

would enable the appellant to import certain hospital

equipments without payment of import duty in accordance with

the notification no. 64/88-customs dated 1.3.1988. The said

respondent no.2 having refused to issue the certificate in

question,- the appellant filed a Writ Petition in the High

Court of Punjab and Haryana which was registered as C.W.P.

No. 1310 of 1995. The said Writ Petition having been

dismissed by the High Court by the impugned judgment dated

31.1.1996 the appellant has approached this Court.

The case of the appellant in the nutshell is that the

Government of India in exercise of power conferred by Sub-

Section (1) of Section 25 of the Customs Act, 1962

(hereinafter referred to as `The Act') had exempted levy of

customs duty on import of hospital equipments imported by

specified category of hospitals (Charitable) subject to

certification from the Director General of Health Services.

The appellant who had established a Modern Heart Institute

and Research Centre at Chandigarh being desirous of

importing sophisticated equipments like Stress Test System,

Colour Dooppler Holter Monitor Recorder, Tread Mill Test

Machine, applied to the Director General for issuance of a

certificate so that the machinery imported would not be

liable for levy of customs duty. The respondent no. 2, by

his letter dated 2.2.1993 after scrutinising the project

report submitted by the appellant and on being satisfied

that the import of the equipments are essential for use in

any hospital granted certificate for importing Marquette Max

though the appellant was intending to import Marquette Case

15. On receipt of the certificate dated 2.2.1993 the

appellant applied for amendment of the exemption

certificate. But no action was taken by the respondent no.2.

Ultimately the imported equipment arrived in India on 22nd

March, 1993 and the appellant released the same on

furnishing Bank Guarante. Thereafter the appellant

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approached the respondent no.2 for grant of exemption

certificate but as no order was passed by respondent no.2

the appellant approached the High Court by filing a Writ

Petition which was registered as W.P. No. 10717 of 1993. The

said Writ Petition was disposed of by order dated 16.2.1994

directing the respondent no.2 to take a final decision on

the application of the appellant within 10 weeks and it was

further ordered that the Bank Guarantee furnished by the

appellant will not be encashed till then. On 12.8.94 the

respondent no.3 after due enquiry recommended for grant of

certificate of exemption to the appellant but

notwithstanding the said recommendation the respondent no.2

by his order dated 26th December, 1994, refused to grant the

exemption certificate for import of Marquette Case 15 which

is undoubtedly one of the most essential and modern

equipment necessary for combating the heart ailments. The

appellant, therefore, had no other alternative than to file

the Writ Petition registered as W.P. No. 1310 of 1995 which

was dismissed by the impugned order dated 31st January,

1996. Hence this appeal by Special Leave.

The High Court in the impugned order came to the

conclusion that the appellant is merely running a Diagnostic

Centre and is not a hospital and as such the exemption

notification ated 1.3.1988 will not cover the case of the

appellant. The High Court also came to the conclusion that

the appellant has got a commercial venture and the

conditions stipulated in the exemption notification have not

been satisfied and, therefore, the appellant was not

entitled for issuance of mandamus for the grant of

certificate in question.

Mr. Arun Jaitley, learned senior counsel appearing for

the appellant contended that the expression "hospital" in

the exemption notification brings within its sweep a

Diagnostic Centre also and bearing in mind the object with

which the notification has been issued there is no

justification for giving a narrow construction to the word

"hospital". The learned senior counsel also contended that

all the pre-conditions enabling import of hospital

equipments without paying the customs duty as per the

notification have been duly satisfied by the appellant and

the High Court was in error in coming to the conclusion that

the conditions precedent have not been satisfied. Mr.

Jaitley, learned senior counsel lastly urged that similar

Diagnostic Centres as that of the appellant have already

been granted exemption certificate by respondent no.2 on the

basis of which equipments in such Diagnostic Centres have

been imported without payment of customs duty and refusal in

the case of the appellant is a hostile discrimination

without any reasonable nexus and as such must be held to be

arbitrary and violative of Article 14 of the Constitution

and, therefore, a Writ of Mandamus must be issued to

respondent No.2 for grant of certificate of exemption.

Mr. Mahajan, learned senior counsel appearing for the

Union of India, on the other hand contended, that the High

Court rightly came to the conclusion that Diagnostic Centre

will not come under the purview of the examption

notification and there is no error in such conclusion of the

High Court which requires to be interfered with by this

Court in exercise of power under Article 136 of the

Constitution. The learned senior counsel further contended

that the exemption notification having indicated certain

obligations on the part of the person who import equipments

without paying any customs duty and those obligations not

being carried out, the respondent no. 2 was wholly justified

in refusing to grant the exemption certificate and the High

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Court did not commit any error in dismissing the Writ

Petition. So far as the allegations of the appellant

regarding discrimination are concerned, neither there has

been any reply to the same by the respondents nor any

authority of the respondents nor in course of hearing any

arguments had been advanced by the learned counsel appearing

for the Union of India.

In view of the rival submissions 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 person 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.

Coming to the first question it is sen that Section 25

of the Customs Act enables the Central Government, if it is

satisfied that it is necessary in the public interest so to

do to exempt generally or subject to such conditions as may

be specified description from the whole or any part of the

duty of customs leviable thereon by a notification in the

Official Gazette. In exercise of the aforesaid power under

Section 25 of the Customs Act the Central Government issued

a notification no. 64/88-customs dated 1.3.1988 granting

exemption from payment of customs duty to the import of all

equipments, apparatus and appliances subject to the approval

of the Government of India in the Ministry of Health and

Family Welfare or by the Director General of the Health

Services to the Government of India to the effect that the

import of the equipment in question is essential for use in

any hospital. The notification in question also provided

certain condition to be satisfied by the hospitals in

question which intend to import the equipment before

claiming the exemption under the notification. The said

conditions are enumerated in the table to the notification

which is extracted hereinbelow:-

"1. All such hospitals as may be

certified by the said Ministry of

Health and Family Welfare to be run

or substantially aided by such

charitable organisation as may be

approved, from time to time, by the

said Ministry of Health and Family

Welfare.

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% of all their outdoor

patients; and

b) Free to all indoor patients

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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)."--

Clauses 3 and 4 of this

notification also indicate the pre-

conditions to be satisfied before

the certificate in question is

issue. Clauses 3 and 4 are

extracted hereinbelow in extenso:-

"3. Any such hospital in respect

of which the said Ministry of

Health and Family Welfare, may,

having regard to the type of

medical, surgical or diagnostic

treatment available there, or the

geographical situation thereof, or

the class of patients for whom the

medical, surgical or diagnostic

treatment is being provided,

certify either generally or in each

case, that the hospital even though

it makes a charge for the said

treatment, is nevertheless run on

non-profit basis and is deserving

of exemption from the payment of

duty on the said hospital equipment

under this notification.

Provided that the hospital

equipment in respect of which the

exemption is claimed, is imported

by such hospital by way of free

gift from donor abroad or has been

purchased out of donations received

abroad in foreign exchange.

Provided further that where the

said hospital equipment has been

purchased out of donations received

abroad in foreign exchange, the

hospital has been permitted to

maintain an account abroad by the

Reserve Bank of India for the

purposes of receiving funds donated

oversees.

4. Any such hospital which is in

the process of being satisfied and

in respect of which the said

Ministry or Health and Family

Welfare is of opinion--

i) That there is an appropriate

programme for establishment of the

hospital.

ii) that there are sufficient

funds and other resources required

for such establishment of the

hospital,

iii) that such hospital, would be

in a position to start functioning

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within a period of two years, and

iv) that such hospital, when

starts functioning would be

relatable to a hospital specified

in paragraph 1, 2 or 3 of this

Table, and the said Ministry of

Health and Family Welfare certifies

to that effect;

Provided that -

a) in the case of a hospital

relatable to paragraph 3 of this

Table the importer produces

evidence to the Assistant Collector

of Customs at the time of same is

being imported in accordance with

the conditions specified in proviso

to that paragraph the importer

shall give an undertaking in

writing to the Assistant Collector

at the time of clearance of the

said hospital equipment that the

importer shall furnish certificates

from the said Ministry of Health

and Family Welfare or from the

Directorate General of Health

Services, Government of India,

within such period as the Assistant

Collector of Customs may specify in

this behalf or within such extended

period as the Assistant Collector

of Customs, on sufficient cause

being shown, may allow in each

case, to the effect:-

i) that such hospital equipment

has been installed in the hospital;

and

ii) that such hospital has started

functioning;

c) the importer shall furnish, at

the appropriate time, the

certificates referred to in (b);

d) the importer executes a bond

in such form and for such sum as

may be specified by the Assistant

Collector of Customs binding

himself to pay, on demand an amount

equal to the duty leviable on the

said hospital equal to the duty

leviable on the said hospital

equipment:-

i) if such hospital starts

functioning with the period

specified therefore, as is not

proved to the satisfaction of the

Assistant Collector of Customs to

have been installed in such

hospital, or

ii) if such hospital does not

start functioning within the period

specified therefore.

EXPLANATION for the purposes of

this notification, the expression

Hospital includes any Institution,

Centre, Trust, Society,

Association, Laboratory, Clinic and

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Maternity Home which renders

medical, surgical or diagnostic

treatment."

It is true that no importer can claim absolute

exemption from payment of customs duty as a right. The

normal rule is that every import attracts duty under the

Customs Tariff Act unless otherwise exempted by a

notification issued by the Central Government in exercise of

power under Section 25 of the Act and the person claiming

exemption certificate should establish that the pre-

conditions prescribed under the notification are fully

satisfied. In the context of the dispute between the parties

and on reading the exemption notification as a whole it

appears that the government intended to exempt such

hospitals from payment of customs duty on import of

equipments which are certified by the Ministry of Health and

Family Welfare to the effect that it provides medical,

surgical or diagnostic treatment. Thus a Diagnostic Centre

run by a private individual purely on commercial basis may

not be entitled to the exemption under the notification

issued by the Central Government. The conclusion of the

Central Government as well as that of the High Court on this

score, therefore, may not be held to be incorrect and the

appellant may not be entitled to seek for issuance of

mandamus to respondent no.2 on this ground.

But when the second question is examined we find

sufficient force in the arguments of learned senior counsel

appearing for the appellant which has been specifically

averred in the application for Special Leave and not denied

by the respondents that several such individual Diagnostic

Centres not attached to any hospital have been granted the

exemption certificates by respondent no.2 enabling such

Diagnostic Centres to import equipments without payment of

customs duty. In courts of hearing of this application on

30th September, 1996, faced with the averments made by the

appellant the counsel for the respondent sought for three

weeks' time to file affidavit of the competent official

explaining whether exemption to the similar institute has

been granted, and if so, under what circumstances and as to

why the same would not be granted to the appellant. Though

the time granted to the respondents was again extended by

further two weeks' by order dated 28.10.1996 on the request

of the counsel appearing for the respondents but ultimately

no affidavit came to be filed on behalf of the respondents

nor in course of hearing the counsel appearing for the

respondents was able to advance any argument on that score.

In this view of the matter when other Diagnostic Centres

have been already granted the certificate enabling them to

import equipments without paying customs duty in terms of

the notification issued by the Central Government under

Section 25(1) of the Customs Act we see no reason to deny

the said exemption certificate to the appellant. On facts

alleged it cannot be disputed that the appellant intended to

import latest equipment for Cardio Vascular Imaging System.

When respondent no.2 has already granted certificates in

favour of several such Diagnostic Centres, as alleged in the

Special Leave Application, refusal on his part to grant such

certificate to the appellant without any justifiable reason

tantamounts to a discriminatory treatment meted out to the

appellant which on the face of it is violative of Article 14

of the Constitution of India. In view of our conclusion, as

aforesaid, we have no doubt in our mind that the order of

respondent no.2 refusing to grant certificate to the

appellant is liable to be struck down and the High Court

also committed serious error in rejecting the Writ Petition

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filed by the appellant.

Coming to the third question we have carefully

considered the materials on record as well as the

notification of the Central Government dated 1.3.1988

containing several obligations on the part of the person who

are availing benefit of the exemption notification. On going

through the same we are satisfied that the appellant also

had given necessary undertaking as required under the

notification and, therefore, is otherwise entitled to avail

of the benefit of the notification in question.

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 have

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 atleast to 40

per cent of the out door patients as well as would give free

treatment to all the indoor patients belonging to the

families with an income of less than Rs. 500/- p.m. The

competent authority, therefore, should continue to be

vigilant and check whether the undertakings given by the

applicants are being duly complied with after getting the

benefit of the exemption notification and importing the

equipment without payment of customs duty and if on such

enquiry the authorities are satisfied that the continuing

obligation are not being carried out then it would be fully

open to the authority to ask the person who have availed of

the benefit of exemption to pay the duty payable in respect

of the equipments which have been imported without payment

of customs duty. Needless to mention the government has

granted exemption from payment of customs duty with the sole

object that 40% of all outdoor patients and entire indoor

patients of the low income group whose income is less than

Rs.500/- p.m. would be able to receive free treatment in the

Institute. That objective must be achieved at any cost, and

the very authority who have granted such certificate of

exemption would ensure that the obligation imposed on the

persons availing of the exemption notification are being

duly carried out and on being satisfied that the said

obligations have not been discharged they can enforce

realisation of the customs duty from them.

It is needless to reiterate that all the persons

including the appellant who had the benefit of importing the

hospital equipment with exemption of customs duty under the

notification should notify in the local newspaper every

month the total number of patients they have treated and the

40% of them are the indigent persons below stipulated income

of Rs.500/- per month with full particulars and address

thereof which would ensure that the application to treat 40%

of the patients free of cost would continuously be

fulfilled. In the even of default, there should be coercive

official action to perform their obligation undertaken by

all such persons. This condition becomes a part of the

exemption order application and strictly be enforced by all

concerned including the Police personnels when complaints of

non-compliance were made by the indigent persons, on denial

of such treatment in the conerned hospital or diagnostic

centres, as the case may be.

Subject to the aforesaid observations, the impugned

order of respondent no. 2 as well as that of the High Court

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are set aside and respondent no. 2 is directed to re-

consider the matter and issue necessary certificate to the

appellant within a period of three months from the date of

receipt of the order. Since the appellant has already

imported the equipment on furnishing bank guarantee. On

production of the necessary certificate issued by respondent

no.2 enabling the appellant exemption from payment of

customs duty the bank guarantee would stand discharged. But

availability of such concession by the appellant would be

subject to the direction and conditions as stated earlier.

The appeal is accordingly allowed. But in the

circumstances there will be no order as to costs.