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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.