1996 (12) TMI 51 - SC - Customs

Whether a Diagnostic Centre is entitled to seek for issuance of a certificate to enable it to import equipments without payment of customs duty? 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? 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? Held that - It is true that no importer can claim absolute exemption from payment of customs duty as a right. 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. 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 metted 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 filed by the appellant. As 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. Appeal allowed.The impugned order of Respondent No. 2 as well as that of the High Court 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.

Summary

Issues Involved:
1. Whether a Diagnostic Centre is entitled to seek the issuance of a certificate to enable it to import equipment without payment of customs duty.
2. Whether there has been discriminatory treatment between the appellant and similarly situated persons.
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.

Issue-Wise Detailed Analysis:

1. Entitlement of Diagnostic Centre to Import Equipment Without Customs Duty:

The appellant applied to the Director General of Health Services (Respondent No. 2) for a certificate to import hospital equipment without paying customs duty under Notification No. 64/88-Customs, dated 1-3-1988. The High Court concluded that the appellant was running a Diagnostic Centre, not a hospital, and thus did not qualify for the exemption. The Supreme Court noted that Section 25 of the Customs Act allows the Central Government to exempt certain goods from customs duty if it is in the public interest. The exemption notification included conditions that had to be met by hospitals. The Court found that the notification's intent was to exempt hospitals providing medical, surgical, or diagnostic treatment. A Diagnostic Centre run purely on a commercial basis might not qualify. Therefore, the High Court's conclusion that the appellant did not meet the exemption criteria was upheld.

2. Discriminatory Treatment:

The appellant argued that other similar Diagnostic Centres had been granted exemption certificates, and the refusal in their case was discriminatory and violated Article 14 of the Constitution. The Supreme Court found merit in this argument. Despite multiple opportunities, the respondents failed to provide any explanation or affidavit to counter the appellant's claim of discrimination. The Court observed that when other Diagnostic Centres had been granted certificates, denying the same to the appellant without a justifiable reason was discriminatory. This constituted a violation of Article 14, and the refusal by Respondent No. 2 was deemed arbitrary and unjustified.

3. Compliance with Pre-Conditions:

The Court examined the materials on record and the obligations under the notification. It concluded that the appellant had provided the necessary undertakings required by the notification. Therefore, the appellant was entitled to the exemption certificate. The Court emphasized that the exemption notification implied a continuing obligation to provide free treatment to 40% of outdoor patients and all indoor patients from families earning less than Rs. 500 per month. The authorities must ensure compliance with these conditions, and failure to do so would justify demanding the customs duty.

Conclusion:

The Supreme Court set aside the orders of Respondent No. 2 and the High Court. It directed Respondent No. 2 to reconsider and issue the necessary certificate to the appellant within three months. The bank guarantee furnished by the appellant would be discharged upon the issuance of the certificate. The Court also mandated that all beneficiaries of the exemption must notify the public monthly about the number of patients treated, ensuring compliance with the obligation to treat indigent patients.

Final Judgment:

The appeal was allowed, and the impugned orders were set aside. Respondent No. 2 was directed to issue the certificate within three months, subject to the appellant fulfilling the conditions of providing free treatment to the specified percentage of patients. No order as to costs was made.