REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO……………./2008               (arising out of SLP(Civil) No. 6536/2006)

M/s. Andromeda Foundation India P.Ltd.     ...Appellant

Vs.

D.G.H.S. & Ors.                                        ….Respondents

J U D G M E N T  

HARJIT SINGH BEDI,J.

1. Leave granted.

2. This  appeal  is  directed  against  the  judgment  of  the

Andhra Pradesh High Court which, while exercising its

writ  jurisdiction under Article  226 of  the Constitution,

has dismissed the Writ Petition questioning the validity

of  the  order  dated  9th December  1997  issued  by  the

Director General Health Services, New Delhi.  The facts

of the case are as under:

3. The  appellant  herein,  is  a  private  limited  company

established  for  the  purpose  of  conducting  diagnostic

tests  and  treating  patients  with  specific  Andrological

problems.  On      1st March 1988, a Notification was

issued  by  the  Government  of  India  whereby  medical

equipment  imported  for  specified  purposes,  was

exempted  from the payment  of  customs duty.   Taking

advantage of the aforesaid Notification, the appellant got

sanction  to  import  four  machines  (though  only  three

were  imported)  and  also  furnished  the  necessary

documents  to  the  authorities.   Respondent  No.2,  the

Director,  Medical  Education  submitted  a  report  to

respondent No.3, Secretary to the Government, Health,

Medical  &  Family  Welfare  Department,  Govt.  of  A.P.,

intimating that he had conducted an inspection of the

appellant’s  hospital  with  respect  to  the  use  of  the

imported equipment and the free services that were to be

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provided to the poor in accordance with the terms of the

exemption  Notification.   Taking  note  of  the  report

aforesaid,  respondent  No.3  forwarded  the

recommendation to respondent No.1 for the issuance of

an  installation  certificate.   It  appears  that  respondent

No.1  thereafter  asked  for  some  additional  information

which too was collected and conveyed to the said officer

vide  letter  dated  29th March  1996.   The  appellant,

however, received two letters dated 18th June 1997 and

14th July  1997  requiring  it  to  furnish  yet  more

information with respect  to the use of the “Hand Held

Recording Doppler” for which an authorization for import

had been issued.  The appellant in its reply dated 28th

July 1997 pointed out that this equipment had not been

imported, but gave the other details to the respondent.

Respondent No.1, however, wrote another letter dated 6th

October  1997  to  the  appellant  giving  10  days  time  to

furnish  the  information  that  had  been  sought.   Some

additional information was supplied but it appears that

respondent  No.1  was  not  satisfied  on  which,  vide

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annexure P5 dated 6th October 1997 the appellant was

refused  the  installation  certificate  for  the  imported

medical equipment.  The appellant once again wrote to

respondent No.1 that the required information had been

supplied on which a reply dated 9th December 1997 was

received from respondent No.1 that the information had,

in fact, not been furnished and in particular referred to

the  details  of  the  use  of  the  “Hand  Held  Recording

Doppler” and the details of the free services which had to

be given to the poorest individuals.  Vide order dated 9th

December  1997,  respondent  No.1  thereupon  withdrew

the Customs Duty Exemption Certificate which had been

issued  to  the  appellant.   The  appellant  submitted  a

detailed  Memorandum  to  respondent  No.1  on  6th

February 1998 but to no effect.  Being aggrieved thereby,

the appellant filed the present Writ Petition challenging

the  order  dated  9th December  1997 and praying  for  a

direction  to  respondent  No.1  to  issue  the  Installation

Certificate  with respect  to the imported equipment.   A

counter  affidavit  was  filed  in  response  to  the  Writ

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Petition  and  on  a  consideration  of  the  matter,  the

Division  Bench  of  the  High  Court  dismissed  the  Writ

Petition by the impugned judgment dated 8th November,

2005.   It  is  in  these  circumstances  that  the  present

matter is before us.

4. Mr.  Rana  Mukherjee,  the  learned  counsel  for  the

appellant, has raised several arguments in the course of

the hearing. He has first and foremost submitted that as

the  representation  filed  by  the  appellant  was  still

pending  decision,  it  would  be  appropriate  that  a

direction be issued for a decision in that matter.  He has

also  submitted  that  from  the  impugned   judgment  it

appeared  that  the  exemption  granted  to  the  appellant

had been cancelled due to the following reasons: (1) that

the  data  with  respect  to  the  use  of  the  “Hand  Held

Recording Doppler” had not been supplied, (2) that the

data  pertaining  to  the  OPD/IPD  cases  had  not  been

supplied,(3) free OPD for one equipment had been found

to be less than 40% for one year and (4) that information

furnished by the institute did not clarify the OPD/IPD

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free  facilities,  that  were  required  to  be  given  to  those

whose  income was less than Rs.500/-  per  month and

the information required had not been furnished in the

prescribed  format.   He  has  pleaded  that  as  per  the

information  given  to  the  respondents,  the  Hand  Held

Recording Doppler had not been imported and as far as

point  Nos.  2  and  3  are  concerned,  there  was  only  a

marginal deviation with respect to the facilities provided

to the poorer sections of the population and the required

information  had,  in  fact,  been  supplied  to  the

respondents  as  per  their  direction.   He  has  in  this

connection  referred  us to  extracts  of  the  OPD register

which  has  been  appended  with  the  reply.   It  has

accordingly  been  pleaded  that  in  the  light  of  the

judgments of this Court in  Commissioner of Customs

(Import),  Mumbai  vs.  Jagdish  Cancer  &  Research

Centre (2001) 6 SCC 483, a marginal deviation would

not  involve  penal  consequence.   It  has  also  been

submitted that as per the provisions of section 124 of the

Customs Act, 1962, it was incumbent to have given the

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appellant  a  show  cause  notice  before   making   the

impugned order and as this procedure too had not been

adopted, the High Court judgment was not maintainable.

5.  The learned counsel  for the respondent has, however,

pointed  out  that  as  per  the  guidelines  issued  by  the

Ministry  on  10th August  1993  superceding  the  earlier

ones, a proforma for the more effective monitoring of the

use  of  the  equipment  had been  devised  and as  these

guidelines  had  not  been  followed  by  the  appellant,

despite being called upon to do so, and as the necessary

information had not been furnished by the appellant in

the prescribed format, there was no merit in the petition.

For this plea, the learned counsel has also relied upon

Jagdish Cancer & Research Centre’s case (supra).  It

has also been pleaded that in the light of the judgment

in  Mediwell  Hospital  &  Health  Care  Pvt.  Ltd. vs.

Union  of  India  &  Ors.  (1997)  1  SCC  759, the

submission  of  the  necessary  information  in  the

prescribed  format  was  a  continuing  obligation  and  as

such  it  was  incumbent  on  the  appellant  to  have

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furnished the information as per the guidelines and on

its failure to do so, the action that had been taken was

fully justified.  

6.  We  have  considered  the  arguments  advanced  by  the

learned  counsel  for  the  parties.   Undoubtedly,  the

representation dated 6th February 1998 had been filed by

the appellant before the concerned respondent and the

same has  not yet been decided.  It has accordingly been

submitted by Mr. Mukherjee that it would be proper to

set  aside  the  order  of  the  High Court  and to  issue  a

direction that the representation be first  decided.  We

are unable to accept this plea at this belated stage as the

appellant  had  filed  a  writ  petition  seeking  the  courts`

intervention in the matter and having failed he cannot

now claim a decision on the representation.  We also find

that section 124 of the Customs Act has absolutely no

applicability  to  the  facts  of  the  present  case  as  this

provision deals with the confiscation of goods, which is

not the case before us.

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7. On  the  contrary,  we  are  of  the  opinion  that  the

appellant’s  general  conduct  has  been  most

unsatisfactory, as despite  being called upon to furnish

specific details time and again, it had not done so.  We

have seen the information furnished by the appellant on

20th July 1997, a copy appended as annexure P4 to the

SLP Paper Book.  We find that it does not even remotely

fulfill  the  requirement  as  per  proforma that  had been

laid  down  in  the  Notification dated  10th August  1993.

We  have  no  doubt  that  having  imported  medical

equipment on concessional terms, it was incumbent on

the  appellant  to  have  scrupulously  observed  the

conditions  of  the  import  and  to  follow  the  guidelines

designed  to  ensure  that  the  equipment  was  being

properly utilized.  In Mediwell Hospital & Health Care’s

case (supra) this is was what the Court had to say:

“The  competent  authority,  therefore, should  continue  to  be  vigilant  and check whether the undertakings given by the applicants are being being duly complied with after getting the benefit

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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 obligations are  not  being carried out then it would be fully open to to the authority to ask the persons 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 per month 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  realization  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

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patients  they  have  treated  and whether 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 condition to treat 40% of  the  patients  free  of  cost  would continuously be fulfilled.  In the event of  default,  there  should  be  coercive official  action  to  perform  their obligation  undertaking  by  all  such persons.  This  condition  becomes  a part  of  the  exemption  order application and strictly be enforced by all  concerned  including  the  police personnel  when  complaints  of  non- compliance are made by the indigent persons, on denial of such treatment in  the  hospital  concerned  or diagnostic  centres,  a  the  case  may be.”

6. It  has  been  fairly  pointed  out  by  both  the  learned

counsel  that  this  judgment  has  been  overruled  in  a

subsequent  matter  on  a  different  point,  but  the

observations hereinabove quoted still hold the field.  In

Jagdish Cancer & Research Centre’s case (supra), this

Court was again called upon to consider the implications

of the non-compliance with the conditions of  import and

it was observed thus:

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“Learned  counsel  for  the respondent has next urged that looking to the  total  picture  of  the  free  treatment provided by the Centre, it is to be noticed that shortfall in providing free treatment is marginal.  The  percentage  of  persons provided free treatment cannot be precise. During a certain period, it may be a little less or a little higher. He has also drawn our  attention to  a  chart  prepared  by  the respondent  and  filed  with  an  affidavit before CEGAT, showing that the treatment provided  to  outdoor  patients  is  39.8  per cent and instead of 10 cent indoor patients it is 8.9. per cent. In connection with this submission,  it  may be  observed  that  this aspect of the matter has been considered by the Commissioner as well as CEGAT in some  details  and  ultimately  it  has  been found that there was a shortfall  which is also  not  disputed  by  the  respondent.  A perusal of the condition in the notification indicates  that on an average,  at  least  40 per cent of all outdoor patients should be provided free treatment. It is, thus, at least 40  per  cent  or  maybe  above.  It  is submitted  that  the  condition  nowhere indicates  that  within  what  period  the prescribed percentage is to be achieved. It is submitted that it should be during the life  of  the  equipment  imported.  Thus, shortfall of a particular year may be made good  in  the   following  year.   We  are  not impressed by this argument. It would, not at all, be necessary to prescribe any period

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to achieve the given percentage of patients treated  free.  It  should  generally  be  all through the period. It being at least 40 per cent,  there  is  hardly any occasion to  say that in case there is more than 40 per cent in a given period, that may make good the deficiency in the previous or the following year. In any case, over and above all, it has not been in dispute that the Centre did not have  inpatient  facility.  According  to  the condition of  notification, 10% of the total beds in the hospital are to be kept reserved for patients of families having an income of less  than Rs.500 per month. The case  of the Centre, in this connection, is that they had an arrangement with another hospital in the proximity which is a sister concern of the Centre, with whom the Centre had entered into an agreement for reserving 10 per cent beds. Payments in respect of these inpatients is to be made by the Centre. We feel that 10 per cent of the total number of beds  are  supposed  to  be  reserved  for patients  of  such  families  in  the  hospital where  the  equipment  is  installed.  The purpose  of  the  notification  for  grant  of exemption from payment of customs duty would not be served by making payment of expenditure incurred on some inpatients in some other hospital as alleged. It has also not  been  shown  that  the  alleged arrangements  had  the  approval  of  the authority concerned or that it was brought to their notice at all.”

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8. It has been contended by Mr. Mukherjee that as per the

information provided by the appellant in his proforma,

there was only a marginal deviation in the provision of

free  facilities  to  those  having  an  income  of  less  than

Rs.500 per month.  We see from a perusal of the record

that this was not the only factor which had led to the

action  against  the  appellant  as  several  cumulative

factors  had been taken into account, the primary one

being  the  non-submission  of  the  information  in  the

prescribed format.  We have also perused the extract of

the OPD register furnished by the appellant in its own

format with regard to the provision of free facilities to the

poor.  We cannot but remark that it hides more than it

reveals.

9. We are also conscious of the large scale misuse of the

medical  equipment  imported  under  the  exemption

notification,  and  in  the  light  of  the  observations  in

Mediwell’s  case  supra  ,  it  is  essential  that  the

authorities regulatory monitor the use of the equipment.

We accordingly find no merit in this appeal. Dismissed.

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    ……………………………J. (TARUN CHATTERJEE )

  ……………………………J.

      ( HARJIT SINGH BEDI) New Delhi, Dated:  May 16, 2008

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