WP/1266/2001 of M/s.Medinova Diagnostic Services Ltd. Vs The Director General of health Services on 31 December 2004

1. Director General of Health Services

(MG Section), Nirman Bhavan, New Delhi-110 001.

2. The Deputy Commissioner (M.Cell),

O/o. The commissioner of Customs (Air), Air Cargo Complex, Meenambakkam, Chennai-600 027.

.....RESPONDENTS.

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 a writ , order or direction more particularly one in the nature of writ ofMandamus declaring the action of the respondent No.1 in withdrawing the CustomsDuty Exemption Certificate granted in 1988 as arbitrary, illegal, Unconstitutional andviolative of provisions of notification and also violative of principles of natural justiceand consequently declare the proceedings No.F.No: Z 37011/117/88-MG dated 24-2-2000 of the 1st respondent as arbitrary and illegal and also consequently directthe respondents not to cancel any Customs Exemption Certificates granted to thepetitioner during 1988-89 and also direct the respondents not to initiate any proceedings for collection of Customs Duty for all the items mentioned in letter dated2-7-1999 in F.No.Z 37011/17/88-MG of the 1st respondent.

Counsel for the Petitioner: Mr.T.P.ACHARYA

Counsel for the Respondents: Mr. A.RAJASEKHAAR REDDY, S.C.FOR CENTRAL GOVT., The Court made the following:

THE HON’BLE SRI JUSTICE M.H.S.ANSARI

AND

THE HON’BLE SRI JUSTICE T.Ch.SURYA RAO

WRIT PETITION No.1266 of 2001

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

In the instant writ petition, the petitioner has questioned the withdrawal of CustomsDuty Exemption Certificates (CDECs) issued for import of the equipments. It is not indispute that the petitioner imported certain equipments and availed of the benefit ofexemption from customs duty under Notification No.64/88-Customs, dated 1-3-1988.The CDECs were issued in 1988. It is also not in dispute that the petitionerinstitution is only a diagnostic service centre. It has four such diagnostic centres inthe cities of Hyderabad, Kolkata, Pune and Bangalore.

The order impugned was preceded by a show cause notice issued to the petitioner.In the reply dated 13-7-1999 to the show cause notice issued by first respondent, ithas been stated as under.

“It may be incidentally mentioned that equipment for which Customs Duty ExemptionCertificates were issued are in respect of diagnostic treatment and that the same does notrequire the indoor patients as our Institution is only Diagnostic Centre catering to thediagnostic treatment on the requisition of the Medical Practitioners and hospitals.”

It is thus evident that the petitioner is not a hospital having in-patient facilities andhas failed to discharge the obligation applicable to para 2 category of the tableannexed to Notification No.64/88-Customs. It is for the said reason that theimpugned order dated 24-2-2000 has been passed.

The case is squarely covered by the judgment of the Supreme Court in MediwellHospital & Health Care Pvt. Ltd. v. Union of India, and more particularly by theobservations made therein which are as under.

…………………….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.

The petitioner having failed to fulfil the obligations, no fault can be found with theimpugned order passed by first respondent withdrawing CDECs with a view toenable the realisation of customs duty.

Mr. T.P. Acharya, learned counsel for the petitioner, contended that the aforesaidjudgment of the Supreme Court in Mediwell Hospital case (supra) has notconsidered the question with regard to withdrawal of CDECs. It was submitted thatthe question before the Supreme Court in that case was for grant of necessarycertificate to import certain hospital equipments in accordance with NotificationNo.64/88-Customs. The other contention of Mr. Achayra is that the CDEC extendsonly till it is produced before the customs authorities and can have no validity oreffect thereafter to warrant review of the decision or to withdraw the exemption already granted.

The contentions, as above, in the facts and circumstances of this case, of thelearned counsel, are misconceived. As held in Mediwell Hospital case cited supra,no importer can claim absolute exemption from payment of customs duty as of aright. The normal rule is that every import attracts duty under Customs Tariff Actunless otherwise exempted by a notification issued by the Central Government inexercise of power under Section 25(1) of the Customs Act. In the very samejudgment, the conditions enumerated in the table annexed to Notification No.64/88have been extracted. The petitioner having undertaken to discharge the obligationsin para 2 category of the notification, cannot now be allowed to turn around and saythat it has no such obligations to fulfil nor it is open to it to contend that it has noobligations with respect to providing free medical facilities, surgical or diagnostictreatment to indoor and outdoor patients. As regards the other contentions includingthe contention with respect to the power to withdraw the CDECs, the passageextracted supra from the judgment of the Supreme Court, in our view, is a completeanswer to reject the contentions raised.

In the light of the above, the writ petition is liable to be and is accordingly dismissed.However, in the facts and circumstances of the case, there shall be no order as tocosts.

____________________________

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

31[st] December 2004.

____________________________

(T.Ch.SURYA RAO, J.)

1. Director General of Health Services

(MG Section), Nirman Bhavan, New Delhi-110 001.

2. The Deputy Commissioner (M.Cell),

O/o. The commissioner of Customs (Air), Air Cargo Complex, Meenambakkam, Chennai-600 027.

3. Two C.D. copies.