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IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2245 OF 2009 (Arising out of SLP(C) No.3554 of 2009

DR. B.N. HOSPITAL & N. HOSPITAL RES.CENTRE ...APPELLANT (S)

VERSUS

COMMISSIONER OF CUSTSOMS, MUMBAI ...RESPONDENT(S)

WITH

CIVIL APPEAL NO. 2246 OF 2009 @ SLP(C) NO. 4129 OF 2009 CIVIL APPEAL NO. 2247 OF 2009 @ SLP(C) NO. 4286 OF 2009

  O R D E R

Leave granted.

None appears for the respondent, though served.

The  appellant  is  a  Public  Charitable  Trust  registered  with  the  Charity  

Commissioner.  It runs full fledged Multi Speciality Hospital in Mumbai.

On 1st March, 1988, Government of India issued a Notification No 64 of 1988  

exempting import of equipments by hospitals from payment of customs duty on fulfillment  

of conditions prescribed therein.  We quote hereinbelow the said Notification:

“In exercise of the powers conferred by sub-section (i) of  

Section 25 of the Customs Act, 1962 (Act 52 of 1962), the Central  

Government, being satisfied that it is necessary in the public interest  

to do so, hereby exempts all equipments, apparatus, and appliances,  

including  spare  parts  and  accessories  thereof,  but  excluding  

consumable  items  (hereinafter  referred  to  as  the  “hospital  

equipment”), the import of which is approved either generally or in  

each case by the Government of India in the Ministry of Health and

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Family Welfare, or by the Directorate General of Health Services to  

the  Government  of  India,  as  essential  for  use  in  any  hospital  

specified in the table below, from --

(i) the whole  of  duty of  customs leviable  thereon under the  first schedule to the Customs Tariff Act, 1975 (51 of 1975);  and

(ii)  The  whole  of  additional  duty  leviable   thereon under Section 3 of the Customs Tariff Act. 2. In approving the import of any hospital equipment under  

paragraph 1, regard shall be had to the following factors namely:-

(i) that the hospital equipment in respect of which  the exemption is claimed under this  notification  is  not  manufactured in India; and  

(ii) that the hospital equipment in respect of which  the exemption is claimed is necessary for running or maintenance  of the hospital.

3.  Provided that  in  the case of  import of  spare parts,  no  

approval as specified in paragraph  1 will be required subject to the  

conditions that  

(i) the spare parts are imported by the hospital;

(ii) the hospital will, at the time of importation,  produce a certificate from the Ministry of Health and Family Welfare  or the Directorate General of Health Services that  the  said hospital falls in one of the categories  of  hospitals  specified in the said Table;

(iii) the Head of the hospital certifies that  the  spare  parts in question are required  for  the  maintenance  of  an  imported equipment in use with the hospital and such parts  will not be used for any other purpose.

TABLE

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 organization 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

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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).

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 overseas.

4.  Any  such  hospital  which  is  in  the  process  of  being  

established and in respect of which the said Ministry of Health and  

Family Welfare is of opinion --

(i) that there is an appropriate programme for  establishment of the hospital,

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(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 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 and  3 of this Table, and  the  said  Ministry  of  Health  and  Family  Welfare  

certifies that to 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 clearance of the said hospital equipment that  

the same is being imported in accordance with the conditions specified  

in the proviso to that paragraph;

(b) 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; (d) the importer executes a bond in such form and for such  

some  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  within  the  period  specified therefor, as is not proved to the satisfaction of the Assistant  Collector of Customs to have been installed in such hospital, or

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(ii)  if  such  hospital  does  not  start  functioning  within  the  period specified therefor.

Explanation  –  for  the  purposes  of  this  notification,  the  

expression “Hospital” includes any Institution, Centre, Trust, Society,  

Association, Laboratory, Clinic and Maternity Home which renders  

medical, surgical or diagnostic treatment.”

The  issue  which  arose  before  the  High  Court  was  whether  the  appellant  –  

hospital fell within Category 1 of the table annexed to the Notification quoted hereinabove.  

This issue arose because the Director General of Health Services (DGHS) while granting  

Customs Duty Exemption Certificate (CDEC) wrongly categorized the appellant – hospital  

in Category 2 instead of Category 1.  It is this controversy which ultimately came before the  

High Court in Customs Appeal Nos. 52, 53 and 55 of 2008.

In this case, vide the impugned Order, the Division Bench of the High Court held  

that  the  case  is  covered by  the  judgment of  the  Supreme Court  in  the  case  of  Jaslok  

Hospital  & Research  Centre Vs.  Union  of  India reported  in  2007  (218)  ELT  170 (SC).  

Following the decision of the Supreme Court in the case of  Jaslok Hospsital (supra), the  

High Court dismissed the Customs Appeals filed by the appellant herein.

The narrow issue which, therefore, arises for determination in this case: whether  

the  case of  the  appellant  herein  stands  covered by the judgment in  the case  of  Jaslok  

Hospital (supra).  In that case Jaslok Hospital was categorized under Category 2.  That  

categorization  was  cancelled.   There  was  no  challenge  to  the  cancellation  of  the  

categorization  and  without  such  a  challenge  an  application  was  made  for  change  in  

category.   Under  those  circumstances,  this  Court  observed  that  in  order  to  enable  a  

hospital to claim change in the categorization, the hospital must be in some category on the  

date on which application is made for change in categorization.  It is important to note that  

in the case of  Jaslok Hospital (supra), the said hospital applied for re-categorization after

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three years of the cancellation/withdrawal of CDEC.

On the other hand, in the present case, we find that the appellant had applied for  

categorization as Category 1 hospital.  On account of the alleged mistake on the part of  

DGHS, while  granting CDEC categorized the appellant  herein as category 2 instead of  

category 1.  Further, DGHS cancelled CDEC ex-parte without giving any notice or hearing  

to  the  appellant  herein  stating  that  the  conditions  of  Category  2  stood  violated.   This  

cancellation of CDEC has been quashed by the High Court vide its order dated 26.11.2008.  

It appears that the impugned order was passed on 1.10.2008, however, vide Order dated  

26.11.2008 in Writ Petition No. 651 of 2001, the order of cancellation of CDEC, which was  

an ex-parte order, has been set aside.  In the circumstances, we hold that this case is not  

covered by the judgment in the case of Jaslok Hospital (supra).  Therefore, on the date of  

the application for change in categorization the issue of categorization was a live issue.

On this ground alone we set aside the impugned judgment dated October 1, 2008  

in Customs Appeal Nos. 52, 53 and 55 of 2008 and remit the cases to the High Court for  

fresh consideration in accordance with law.

Accordingly, the appeals stand allowed with no order as to costs.       

....................J. [ S.H. KAPADIA ]

New Delhi, ....................J April 08, 2009 [ AFTAB ALAM ]  

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ITEM NO.1                   COURT NO.3                   SECTION III

           S U P R E M E   C O U R T   O F   I N D I A                          RECORD OF PROCEEDINGS                      Petition(s) for Special Leave to Appeal (Civil) No(s).3554/2009

(From the judgment and order dated 01/10/2008 in CA No. 52/2008   of The HIGH COURT OF BOMBAY)

DR.B.N.HOSPITAL & N.HOSPITAL RES.CENTRE              Petitioner(s)

                     VERSUS

COMMISSIONER OF CUSTOMS, MUMBAI                      Respondent(s)

(With appln(s) for permission to place addl. documents on record,  and prayer for interim relief) WITH  SLP(C) NO. 4129 of 2009 - With appln(s) for permission to place addl. documents on  record, and prayer for interim relief SLP(C) NO. 4286 of 2009 - With appln(s) for permission to place addl. documents on  record, and prayer for interim relief

Date: 08/04/2009  This Petition was called on for hearing today.

CORAM :         HON'BLE MR. JUSTICE S.H. KAPADIA         HON'BLE MR. JUSTICE AFTAB ALAM

For Petitioner(s) Mr. Bharat Sangal,Adv. Mr. Prasenjit Das, Adv. Ms. Mrinalini Oinam, Adv.

                     For Respondent(s)

      UPON hearing counsel the Court made the following                            O R D E R  

Leave granted. None appears for the respondent, though served. The appeals are allowed with no order as to costs.

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         (S. Thapar)         PS to Registrar

(Madhu Saxena) Court Master

The signed order is placed on the file.