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CASE NO.: Appeal (civil)  919 of 2007

PETITIONER: SHARE MEDICAL CARE

RESPONDENT: UNION OF INDIA & ORS

DATE OF JUDGMENT: 23/02/2007

BENCH: C.K. THAKKER & LOKESHWAR SINGH PANTA

JUDGMENT: J U D G M E N T (Arising out of SPECIAL LEAVE PETITION (C) NOs.10429 to 10431 OF 2005)

C.K. THAKKER, J.

       Leave granted.         This appeal has been filed against a common  judgment and order passed by the High Court of Andhra  Pradesh, Hyderabad on December 31, 2004 in Writ  Petition Nos. 22734 & 22735 of 1996 and 3355 of 2001.         Few facts which are necessary for understanding the  controversy are that the appellant\027Share Medical Care is  a Society registered under the Andhra Pradesh (Telengana  Area) Public Societies Act, 1350 Fasli (Act 1 of 1350 F)  (’Society’ for short) and owes its origin to the desire of Non  Resident Indian (NRI) Scientists and Doctors based in the  United States of America (USA). The aim of the Society is  to share the advanced technology with the citizens of  India. The appellant-Society was established with the  intention to construct and run hospitals, medical and  diagnostic centers, etc. It is a charitable hospital and is  run on ’no-profit’ basis. It is located at village Ghanapur,  about 40-50 kms away from the city of Hyderabad. It  started its activities in the year 1993. It has specialized in  treatment of heart and related ailments having the latest  equipments and specialist doctors.         In the year 1992-93, the appellant-Society imported  certain medical equipments for the use in its charitable  hospital. According to the appellant, under Notification  No. 64/88-Cus dated March 1, 1988, exemptions were  granted to hospital equipments imported by specified  category of hospitals (charitable) subject to certification by  Directorate General of Health Services (DGHS). The table  in the notification classified hospitals in four categories.  According to the appellant, it falls under Para No.3 of the  table of notification.         The appellant, however, along with several other  hospitals, had applied for the benefit of exemption  notification not under para 3 but para 2 of the table. The  benefit of exemption was granted. Since the Society was  also entitled to exemption under para 3 of the table, an  application was made to DGHS highlighting the fact that  the appellant is a non-profit organization and had been  permitted to import medical equipments by DGHS by  certification.  It has been registered as an institution to  receive donations in foreign exchange and since the area  of operations of the main hospital at Ghanapur and the  Rural Health Hospital are in rural areas, it would be  entitled to invoke para 3 of the table of notification of

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exemption. The Deputy Director General (Medical), DGHS,  by an order dated January 25, 2000 rejected the  application of the appellant observing therein that initially  the request was made by the appellant for exemption  under para 2 of the notification and accordingly, the  institution was granted such exemption. It was, therefore,  not open to apply for exemption under para 3 of the table  of the exemption notification and the application was  liable to be rejected.         Being aggrieved by the above order passed by the  Deputy Director General (Medical), the appellant-Society  filed the above petitions in the High Court of Andhra  Pradesh. The High Court also dismissed the petitions  observing that it was not in dispute that the appellant  (petitioner) claimed exemption in respect of import of  hospital equipments and was allowed on the basis of its  prayer under category para 2 of the table. The High Court  noted that the learned counsel for the appellant-petitioner  relied upon certain decisions in support of the contention  that a categorization could be changed but it held that the  exemption was granted in category 2 of the table, certain  information was sought which was not supplied by the  Society and the exemption was withdrawn. Regarding  category 3, however, the High Court observed that when  the appellant did not fulfill conditions relatable to category  2 institution, its claim for conversion of categorization  under category 3 was untenable. Accordingly, all petitions  were dismissed.

       We have heard learned counsel for the parties.

       Learned counsel for the appellant submitted that it  is settled law that even if exemption is granted for one  category or under one notification and the applicant is  entitled to claim more or greater benefit under other  category or other notification, the authority is duty bound  to consider the case of the applicant in the other category  or other notification and there is no question of any  estoppel or bar to such plea. It was, therefore, incumbent  upon the Deputy Director General (Medical), DGHS to  consider the application of the appellant on merits and  rejection of application only on the ground that the  appellant had earlier applied under category 2 and,  therefore, it was not open to it to apply under category 3  and the application was not tenable was illegal and  contrary to law. The learned counsel for the appellant  further submitted that it was only because of rejection of  application on the ground of maintainability that it made  a limited prayer before the High Court to direct the  Deputy Director General (Medical), DGHS to consider and  decide the application of the appellant on merits. By not  doing so, the error of law committed by the Deputy  Director General (Medical), DGHS had been repeated by  the High Court and hence both the orders are liable to be  set aside.  It was submitted that the Deputy Director  General (Medical), DGHS may be asked to consider the  matter of the appellant on merits as to whether it would  be entitled to exemption under category 3.         The learned counsel for the respondents, on the  other hand, supported the order of the authority relying  on an affidavit in reply filed by the Assistant Director  General (M) who stated that the representation of the  appellant was examined carefully by the authorities and it  was decided that when the appellant had voluntarily  applied under category 2 of the exemption notification, he

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could not change it to category 3. Category 2 exemption  was not ’thrust upon’ the appellant. The appellant- hospital never objected the categorization of its hospital in  the past. When the said exemption benefits were  withdrawn for non-fulfillment of free treatment  obligations, the appellant represented its case as an  ’afterthought’ to category under para 3 of the table of  exemption notification which was rejected. It, therefore,  cannot be said that any illegality had been committed and  the appeal deserves to be dismissed.         Having heard learned counsel for the parties, in our  opinion, the appeal deserves to be allowed. It is, no doubt,  true that initially the appellant claimed exemption under  category 2 of exemption notification which was granted.  That, however, does not mean that the appellant could not  claim exemption under category 3. So far as cancellation  of exemption under category 2 is concerned, we are not  called upon to decide legality or otherwise of the said  decision as it has not been challenged before us in the  present proceedings. The short question which we have to  answer is whether the appellant could claim exemption  under category 3 and non-consideration of the said  application by the Deputy Director General (Medical) is in  consonance with law.  Our reply is in the negative.  And  we are supported in our view by the decisions of this  Court.         In this connection, attention of the Court has been  invited to certain decisions by the learned counsel for the  appellant.         In Collector of Central Excise, Baroda v. Indian Petro  Chemicals, (1997) 11 SCC 318, this Court held that if two  exemption notifications are applicable in a given case, the  assessee may claim benefit of the more beneficial one.  Similarly, in H.C.L. Limited v. Collector of Customs, New  Delhi, (2001) 130 E.L.T. 405 (SC), this Court relying upon  Indian Petro Chemicals, held that where there are two  exemption notifications that cover the case in question,  the assessee is entitled to the benefit of that exemption  notification which may give him greater or larger relief. In  Unichem Laboratories Ltd. v. Collector of Central Excise,  Bombay, (2002) 7 SCC 145 : JT 2002 (6) SC 547, the  appellant was a manufacturer of bulk drugs.  Exemption  was granted to him under one item. He, thereafter, filed a  revised classification list categorizing its bulk drugs under  the other Head claiming more benefit. The claim was  rejected on the ground that the appellant had not claimed  the benefit of exemption at the time of filing the  classification list and subsequently it could not be done.  The appellant approached this Court.          Allowing the appeal and setting aside the order, this  Court held that if no time is fixed for the purpose of  getting benefit under the exemption notification, it could  be claimed at any time. If the notification applies, the  benefit thereunder must be extended to the appellant. The  Court held that the authorities as well as the Tribunal  were not right in holding that the appellant ought to have  claimed the benefit of the notification at the time of filing  of classification lists and not at a subsequent stage.          The Court then stated; "\005There can be no doubt that the authorities  functioning under the Act must, as are in duty  bound, protect the interest of the Revenue by  levying and collecting the duty in accordance with  law - no less and also no more. It is no part of  their duty to deprive an assessee of the benefit

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available to him in law with a view to augment the  quantum of duty for the benefit of the Revenue.  They must act reasonably and fairly".                                                        (emphasis supplied)

       In Kerala State Cooperative Marketing  Federation Ltd. & Ors. v. Commissioner of Income  Tax, (1998) 5 SCC 48 : JT 1998 (4) SC 145,  interpreting Section 80-P(2)(a) of the Income Tax  Act, 1961, this Court said; "We may notice that the provision is introduced  with a view to encouraging and promoting growth  of co-operative sector in the economic life of the  country and in pursuance of the declared policy of  the Government. The correct way of reading the  different heads of exemption enumerated in the  section would be to treat each as a separate and  distinct head of exemption. Whenever a question  arises as to whether any particular category  of an income of a co-operative society is  exempt from tax what has to be seen is  whether income fell within any of the several  heads of exemption. If it fell within any one  head of exemption, it would be free from tax  notwithstanding that the conditions of  another head of exemption are not satisfied  and such income is not free from tax under  that head of exemption. The expression  "marketing" is an expression of wide import. It  involves exchange functions such as buying and  selling, physical functions such as storage,  transportation, processing and other commercial  activities such as standardisation, financing,  marketing intelligence etc. Such activities can be  carried on by an Apex Society rather than a  primary society".               (emphasis supplied)

                From the above decisions, it is clear that even if an  applicant does not claim benefit under a particular  notification at the initial stage, he is not debarred,  prohibited or estopped from claiming such benefit at a  later stage.          In the instant case, the ground which weighed with  the Deputy Director General (Medical), DGHS for non- considering the prayer of the appellant was that earlier,  exemption was sought under category 2 of exemption  notification, not under category 3 of exemption  notification and exemption under category 2 was  withdrawn. This is hardly a ground sustainable in law. On  the contrary, well settled law is that in case the applicant  is entitled to benefit under two different Notifications or  under two different Heads, he can claim more benefit and  it is the duty of the authorities to grant such benefits if  the applicant is otherwise entitled to such benefit.  Therefore, non-consideration on the part of the Deputy  Director General (Medical), DGHS to the prayer of the  appellant in claiming exemption under category 3 of the  notification is illegal and improper.  The prayer ought to  have been considered and decided on merits. Grant of  exemption under category 2 of the notification or  withdrawal of the said benefit cannot come in the way of  the applicant in claiming exemption under category 3 if  the conditions laid down thereunder have been fulfilled.

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The High Court also committed the same error and hence  the order of the High Court also suffers from the same  infirmity and is liable to be set aside.         Strong reliance was placed by the respondents on a  decision of this Court in Mediwell Hospital & Health Care  Pvt. Ltd. v. Union of India & Ors., (1997) 1 SCC 759 : JT  1997 (1) SC 270.  In Mediwell Hospital, the Court was  considering the very same notification 64/88 and grant of  exemption to hospital equipments imported by specified  category of hospitals.  The Court held that an Individual  Diagnostic Centre if covered by the notification, could  claim import of equipments without paying customs duty.   But in case of failure on the part of the persons availing  the benefit to satisfy conditions laid down in the  notification, it is incumbent on the authorities to recover  such duty.         The Court stated;         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.

       In the counter-affidavit, it has been asserted that in  the light of the observations in Mediwell Hospital, the  Director General of Health Services and Department of  Health decided to review cases of all (396) beneficent  institutions who had availed of benefits under notification  64/88, and the appellant was one of them.  Since it was  found that the appellant was not fulfilling the conditions  set out in para 2 of the Table, the benefit was withdrawn.         In our opinion, the decision in Mediwell Hospital  would not take away the right of the appellant to claim  benefit under para 3 of the Table of exemption  notification. If the appellant is not entitled to exemption  under para 2, it cannot make grievance against denial of  exemption.  But if it is otherwise entitled to such benefit  under para 3, it cannot be denied either.  The contention  of the authorities, therefore, has no force and must be  rejected.

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       For the foregoing reasons, the appeal deserves to be  allowed and is accordingly allowed. The respondent- authorities are directed to re-consider the case of the  appellant as to exemption in category 3 of the exemption  notification strictly in accordance with law, on its own  merits and without being inhibited by the observations  made by us hereinabove.  The appeal is allowed with  costs.