WP/3355/2001 of Share Medical Care , Rep by its Secretary Vs The Director General of Health Services on 31 December 2004

IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD

(Special Original Jurisdiction)

FRIDAY, THE THIRTY FIRST DAY OF DECEMBERTWO THOUSAND AND FOUR

PRESENT

THE HON'BLE SRI JUSTICE M.H.S. ANSARI

ANDTHE HON'BLE SRI JUSTICE T.CH.SURYA RAO

WRIT PETITION Nos. 22734 and 22735 of 1996 and 3355 of 2001

W.P.No.22734 of 1996

Between:

Share Mediacl Care, a Society registered under the A.P. Societies Registration Act, rep. by its Secretary, Manik Arke, Administration Office at 5-9-22, SarovarSecretariat Road, Hyderabad.

AND

1 Union of India, rep. by its Secretary, Ministry of Health and Family Welfare, Nirman Bhavan, New Delhi-110 011.

2 The Director General of Health Services (M.G.Station), Nirman Bhavan New Delhi-110 011.

3 State of A.P. rep. by its Principal Secretary, Health, Medical, & Family Welfare Dept., Secretariat Building Hyderabad-500 004.

4 Assistant Commissioner of Customs,

Air Cargo Complex, Begumpet, Hyderabad-016.

Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed herein the High Court may be pleased tocall for the records relating to file No.Z.37011/17/92-MG of the Director General ofHealth Services, (M.G. Section), New Delhi, and issue a writ of Mandamus or anyother writ, order or direction, declaring the action of respondents 1 and 2 i.e., theUnion of India and the Director General of Health Services, New Delhi, in notdisposing petitioner's application dated 17-7-1992 enclosed to State Governmentletter dated 7-10-1992 for grant of exemption from the payment of customs duty asbeing arbitrary and improper and be further pleased to give consequential directionto dispose of the same in accordance with the terms of notification No.64/88-Cus.dated 1-3-1988 and the one time dispensation referred to in F.No.460/86/95-Cus-Min.of Finance, dated 18th December 1995.

Counsel for the Petitioner: M/s. C.KODANDA RAM

Counsel for Respondent Nos.1, 2 & 4: Mr.A.RAJASEKHAR REDDY, SC FOR CG.

Counsel for Respondent No.3 : G.P.FOR MEDICAL & HEALTH

Between:

Share Medical Care, rep. by its Secretary, Manik Arke,A Society registered under the A.P.Societies Registration Act Having its Administrative Office at 5-9-22,Sarovar, Secretariat Road, Hyderabad.

AND

..... PETITIONER

1 Union of India, rep. by its Secretary, Ministry of Health and Family Welfare, Nirman Bhavan, Ministry of Health and Family Welfare, Nirman Bhavan, New Delhi-110 011.

2 The Director General of Health Services (M.G.Station), Nirman Bhavan, New Delhi-110 011.

3 The State of A.P. rep. by its Principal Secretary, Health, Medical, & Family Welfare Dept., Secretariat Buildings, Hyderabad-500 004. Hyderabad-500 004.

4 Assistant Commissioner of Customs, Inland Container Department, Sanathnagar, Hyderabad-500 018.

Petition under Article 226 of the Constitution of India praying that in thecircumstances stated in the affidavit filed herein the High Court may be pleased tocall for the records relating the file No.Z37011/17/92-MG of the Director General ofHealth Services(M.G.Section) and issue a writ of Mandamus or any other writ, order or direction, declaring the inaction of respondents 1 and 2 i. e ., Union of India, andDirector General of Health Services, New Delhi, in issuing an installation certificatein respect of cath lab HICOR equipment imported by petitioner under bill of LadingNo.HAMN 6604 dated 22-12-1992 and invoice No.N.B.108976 dated 14-12-1992,as being arbitrary and improper and be further pleased to issue a consequentialdirection to issue an installation certificate in respect thereof in accordance with theterms of Notification No.64/88-Cus dated 1-3-1988 and the one time dispensationreferred to in F.No.460/86/95-Cus. Ministry of Finance dated 18[th] December 1995.

Counsel for the Petitioner: M/s. C.KODANDARAM

Counsel for Respondent Nos.1, 2 & 4: Mr.A.RAJASEKHAR REDDY, SC FOR CG

Counsel for Respondent No.3 : G.P.FOR MEDICAL & HEALTH

W.P.No. 3355 of 2001

Between:

Share Medical Care, rep. by its Secretary, Manik Arke,A Society registered under the A.P.Societies Registration Act, Having its Administrative Office at 5-9-22,Sarovar, Secretariat Road, Hyderabad.

AND

1 The Director General of Health Services, Govt of India, Nirman Bhavan, New Delhi.

2 The Govt of A.P. rep. by its Secretary, Medical Health & Family Welfare Dept., Medical Health & Family Welfare Dept., Secretariat , Hyderabad.

3 The Asst. Commissioner of Customs

I.C.D, Sanathnagar, Hyderabad.

.....RESPONDENTS

Counsel for the Petitioner: M/s. C.KODANDARAM

Counsel for Respondent Nos.1 & 3: Mr.A.RAJASEKHAR REDDY, SC FOR CG

Counsel for Respondent No.2: G.P.FOR MEDICAL, HEALTH &

FAMILY WELFARE

Petition under Article 226 of the Constitution of India praying that in thecircumstances stated in the affidavit filed herein the High Court may be pleased toissue an appropriate writ of Mandamus, declaring the impugned order dated 25-1- 2000 as illegal, arbitrary and unjustifiable in the facts and circumstances of the caseand consequently direct the 1st respondent to consider the representation dated 14-7-1999 filed by the petitioner and pass appropriate orders in accordance with law.

The Court made the following :

ORDER:(per the Hon’ble Sri Justice M.H.S.Ansari)

The above three writ petitions are by the same petitioner, Share Medical Care. Theywere heard analogously and are being disposed of by this common order.

The instant writ petition has become infructuous as the grievance therein was withregard to non-consideration of the petitioner’s application dated 17-7-1992 for grantof exemption and for a consequential direction to consider the said application interms of Notification No.64/88-Customs, dated 1-3-1988.

W.P.No.22735 of 1996

The grievance in this writ petition is with regard to non-issue of installation certificatein respect of Cath Lab HICOR equipment imported by the petitioner and for aconsequential direction to issue installation certificate. This writ petition is alsorendered infrctuous in view of the subsequent development namely, the order dated25-1-2000 whereby the request of the petitioner to categorise the institution underpara 3 of the Table to Notification No.64/88-Customs, dated 1-3-1988 was rejectedas untenable.

The petitioner has, in the instant writ petition, questioned the order dated 25-1-2000whereby the application of the petitioner to categorise the petitioner’s institutionunder the category para 3 of the Table to the aforesaid Notification No.64/88-Customs, dated 1-3-1988, was rejected.

Briefly stated, the facts in support of the relief prayed for are that the petitionerinstitution applied in the year 1992 for import of certain items of medical equipmentin accordance with Notification No.64/88-Customs, dated 1-3-1988. The State

Government, on the basis of the recommendations of a committee constituted by theDirector of Medical Education recommended for issuance of Customs DutyExemption Certificate (CDEC) to enable the institution to import the equipmentsmentioned in their application. In its report submitted to the Director General ofHealth Services, New Delhi, respondent No.1 herein, the Principal Secretary toState Government, categorically stated that the institution has furnished anundertaking to the following effect.

“1. The institution undertakes to render medical attention to all citizens of India withoutdistinction of caste, creed, rank, religion or language.distinction of caste, creed, rank, religion or language.

2. Share Medical Care has got an appropriate programme and have sufficient funds andother resources required for the establishment of super-speciality hospital.other resources required for the establishment of super-speciality hospital.

3. Share Medical Care agrees to permit the Central/State Government to depute theirrepresentative to inspect the hospital for the purpose of satisfying that the hospitalfulfils the conditions mentioned above.representative to inspect the hospital for the purpose of satisfying that the hospitalfulfils the conditions mentioned above.

4. We certify that the hospital shall without any distinction of caste, creed, religion orlanguage provide free treatment to all indoor-patients belonging to families with anincome of less than Rs.500/- per month and keeping for this purpose at least 10% ofbeds all reserved for such patients as and when the facilities are made available.language provide free treatment to all indoor-patients belonging to families with anincome of less than Rs.500/- per month and keeping for this purpose at least 10% ofbeds all reserved for such patients as and when the facilities are made available.

5. We certify that our hospital shall without any distinction of caste, creed, religion orlanguage provide free treatment on an average to at least 40% to all out-doorpatients belonging to families with an income of less than Rs.500/- per month.language provide free treatment on an average to at least 40% to all out-doorpatients belonging to families with an income of less than Rs.500/- per month.

6. Certified that the charges levied on the patients will be reasonable and also depend upontheir income and the cost of the equipment.their income and the cost of the equipment.

7. Certified that the equipments, apparatus and appliances to be imported by the institutionswill only be used in the institution concerned and will not be removed therefrom forprivate use and will not be sold or otherwise disposed of without prior permission ofthe Govt. of India (Ministry of Health & Family Welfare or Directorate General,Health Services).will only be used in the institution concerned and will not be removed therefrom forprivate use and will not be sold or otherwise disposed of without prior permission ofthe Govt. of India (Ministry of Health & Family Welfare or Directorate General,Health Services).

8. The institution will install the equipment within two months of its import into the countryand start functioning within two months.”and start functioning within two months.”

The Director General of Health Services, New Delhi granted Customs DutyExemption Certificate (CDEC) as requested. It is not in dispute that the petitionerclaimed exemption in respect of import of hospital equipment and was allowed toclear the goods without payment of customs duty on the basis of the CDECs.Subsequently, by an order dated 4-2-1999, CDECs given to the petitioner werecancelled on the ground that it did not satisfy the conditions laid down in the saidnotification falling under category para 2 of the table. Thereupon, the petitioner filedan application dated 14-7-1999 before first respondent seeking recognition of thehospital as falling under category para 3 of the Table to Notification No.64/88, dated1-3-1988. It is the case of the petitioner that the medical equipments are all eitherpaid for by the organisation in the USA in foreign exchange or one paid by thepetitioner by using the donations/funds received in foreign exchange. The petitionerhas FERA registration and all the donations are received through banking channelsand thus, the petitioner qualifies for import of equipment free of customs duty interms of para 3 of the table annexed to the notification. It is the further case of thepetitioner that in respect of persons falling under category para 3 of the notification,there is no obligation on the part of such persons to abide by the terms andconditions laid down with reference to paragraphs 2 and 4 of Notification No.64/88-Customs. Mr. Kodandaram, learned counsel for the petitioner, reiterated before theCourt the above contentions and also relied upon certain decisions in support of thecontention that the impugned order warrants interference on the ground that thepetitioner is entitled to a change in the categorisation to category para 3 of theNotification.

The impugned action of the respondents is sought to be sustained on the groundthat the CDEC was withdrawn, as information was called for from the petitionerpursuant to the notice issued on 11-6-1997 with a view to see whether the petitioneris fulfilling the conditions of the notification, the information so received wasconsidered, and found that the petitioner is not fulfilling the notificational conditionsof free treatment in out-patient and in-patient departments. It is the further case of therespondents that on the basis of the observations of the Supreme Court in MediwellHospital & Health Care Pvt. Ltd. v. Union of India, all CDEC cases undernotification No.64/88 were reviewed. The observations of the Supreme Courtreferred to in the counter affidavit of respondent No.1 are the following.

“……………………..the very notification granting exemption must be construed to castcontinuing obligation on the part of all those who have obtained the certificate from theappropriate authority and on the basis of that have imported equipments without payment ofcustoms duty to give free treatment at least to 40 per cent of the outdoor patients as well asgive free treatment to all the indoor patients belonging to the families with an income of lessthan Rs.500 per month. The competent authority, therefore, should continue to be vigilantand check whether the undertakings given by the applicants are being duly complied withafter getting the benefit of the exemption notification and importing the equipment withoutpayment of customs duty and if on such enquiry the authorities are satisfied that thecontinuing obligations are not being carried out then it would be fully open to the authority toask the persons who have availed of the benefit of exemption to pay the duty payable inrespect of the equipments which have been imported without payment of customs duty.Needless to mention, the Government has granted exemption from payment of customsduty with the sole object that 40% of all outdoor patients and entire indoor patients of the lowincome group whose income is less than Rs.500 per month would be able to receive freetreatment in the Institute. That objective must be achieved at any cost, and the veryauthority who have granted such certificate of exemption would ensure that the obligationimposed on the persons availing of the exemption notification are being duly carried out andon being satisfied that the said obligations have not been discharged they can enforcerealisation of the customs duty from them.”

There is no dispute that the petitioner having failed to comply with the notificationalconditions, CDECs issued to it were withdrawn by order dated 4-2-1999. This actionof respondent No.1, is not under challenge in these proceedings.

As regards the grounds taken by the petitioner, assailing the impugned orderof rejection of the application of the petitioner for consideration of their case underpara 3 of the table, it is the case of the respondent authority that the petitionerapplied for CDEC as institution under project stage under establishment and CDECwas issued to them under category 4 institution with an undertaking that would berelatable to category 2 institution fulfilling the conditions specified therein. As,admittedly, the petitioner did not fulfil the conditions relatable to category 2institution, their claim for conversion of categorisation under category 3 is untenable.

Learned Standing Counsel for Central Government sought to sustain the impugnedorders on the ground that the petitioner having applied for and obtained exemptionon the basis of the undertaking furnished by it as to the compliance with theconditions applicable to the institution in category para 2 of the Notification cannotbe allowed to seek change after having failed to fulfil those obligations. Reliancewas also placed upon Section 111(c) of the Customs Act, the relevant portion ofwhich reads as under.

“Confiscation of improperly imported goods etc.:- The following goods brought from a place outside India shall be liable to confiscation –

(c) any goods exempted, subject to any condition, from duty or anyprohibition in respect of the import thereof under this Act or any other law forthe time being in force in respect of which the condition is not observedunless the non-observance of the condition was sanctioned by the properofficer.”

Relying upon the un-reported judgment in a batch of writ petitions filed beforethe High Court of Karnataka in W.P.No.28186 of 1996 and batch, learned StandingCounsel contended, as held in that case, that if the conditions subject to which theimported goods are exempt from duty are not satisfied, the goods are liable to beconfiscated besides entitling the respondents to recover the amount of duty payable.

From the narration of the facts, as above, it is evident that the petitioner was grantedCDEC under para 4 of the table of Notification No.64/88 as it was in the process ofbeing established. The petitioner furnished an undertaking to fulfil the conditions asapplicable to category 2 and on that basis the State Government recommended thegrant of CDEC to import the equipments. The undertaking of the petitioner to complywith the conditions applicable to category para 3 of the Notification have beenextracted in the letter of the State Government. The only question for considerationin this writ petition is whether the petitioner can be allowed to change thecategorisation after having failed to fulfil the conditions stipulated with respect tocategory 2 institution in respect whereof CDECs were granted.

I n Mediwell Hospital case (supra), the notification in question wasconsidered and it was held that no importer can claim absolute exemption frompayment of customs duty as of a right. The normal rule is that every import attractsduty under the Customs Tariff Act unless otherwise exempted by a notificationissued by the Central Government in exercise of power under Section 25 of theCustoms Act and the person claiming exemption should establish that the pre-conditions prescribed under the notification are fully satisfied. The NotificationNo.64/88-Customs has been issued in exercise of the power under Section 25 of theCustoms Act. We have already extracted the relevant observations of the SupremeCourt with regard to the obligations imposed on the persons availing of theexemption and the duty on the part of the authority granting exemption to see that theobligations are being duly carried out.

The conditions based on which CDECs were granted became part of the exemptionorder. Failure to discharge the obligations undertaken by the petitioner at the time ofimport of the goods has to be construed as non-compliance of the obligations underwhich exemption was granted, and the goods in question are liable to beconfiscated in terms of Section 111(c) of the Customs Act. The petitioner cannot, inour view, on its failure to discharge the obligations undertaken by it at the time ofimport of the goods, be allowed to turn around and claim that it has no suchobligations to discharge or that its case is required to be considered under any othercategory. This is for the reason that the petitioner availed of the exemption pursuantto the specific undertaking given by it to satisfy the obligations prescribed forcategory para 2 of the Notification. Therefore, it is not open to the petitioner to seekalteration of those conditions on the plea now being advanced that its case fallsunder category para 3. We find no substance in the submission of the petitioner thatit is entitled to consideration under a different category and that the respondents arebound to consider its case in category para 3 of the notification after the date ofimport. The case on hand is not one of illegal taxation nor it is a case of a statutoryexemption or deduction to which a citizen is entitled to in law. Therefore, those lineof cases relied upon by Mr. C.Kodandaram, learned counsel for the petitioner haveno application to the case on hand. They have been noted hereunder only for thesake of rejection.

Amalgamated Coalfields Ltd. v. Janapada Sabha -AIR 1961 SC 964.

State of Bombay v. United Motors -1953 SCR 1069

Chokshi Metal Refinery v. C.I.T. -(1977) 107 ITR 63 (Guj.)

Associated Cement Companies Ltd. v. State of Bihar

- 137 STC 389.

As already noticed, in Mediwell Hospital case (supra), it was held that no importercan claim absolute exemption from payment of customs duty as of right. The personclaiming exemption should establish that the conditions prescribed subject to whichthe exemption was granted are fully satisfied.

In the result, W.P.Nos.22734 and 22735 of 1996 are dismissed as infructuous.W.P.No.3355 of 2001 is dismissed upholding the impugned orders. There shall be no order as to costs.

____________________________

(M.H.S.ANSARI, J.)

December 2004.

____________________________

(T.Ch.SURYA RAO, J.)

ARS

To

1. Union of India, rep. by its Secretary, Ministry of Health and Family Welfare,Nirman Bhavan,New Delhi-110 011.Nirman Bhavan,New Delhi-110 011.

2. The Director General of Health Services M.G.Station), Nirman Bhavan, New Delhi-110 011.3. The Principal Secretary, Govt.of A.P., Health, Medical, & Family Welfare Dept.,Secretariat Building,Hyderabad-500 004.3. The Principal Secretary, Govt.of A.P., Health, Medical, & Family Welfare Dept.,Secretariat Building,Hyderabad-500 004.

4. The Assistant Commissioner of Customs, Air Cargo Complex, Begumpet,Hyderabad-016.Hyderabad-016.

5. The Assistant Commissioner of Customs, Inland Container Department,Sanathnagar, Hyderabad-500 018.Sanathnagar, Hyderabad-500 018.

6. Two C.Cs. to Govt. Pleader for Medical & Health, High Court Bldgs., Hyderabad (OUT).

7. Two C.D. copies.