TMI Blog2012 (6) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... stance that the notification dated 1st March 1988 had come to an end cannot be a ground to reject the plea for re-categorization. Petition allowed by setting aside the impugned order. Deputy Director General shall reconsider the Application submitted by the Petitioner for re-categorization under category 1 - 2203 of 2009 - - - Dated:- 19-7-2011 - Dr. D.Y. Chandrachud and Anoop V. Mohta, JJ. REPRESENTED BY : S/Shri E.P. Bharucha Sr. Advocate with Cyrus Bharucha, Sachin Chandarana and Ms. Pranika Bhatia and Shreranth Paruchuri i/by M/s. Manilal Kher Ambalal Co., for the Petitioner. S/Shri R.V. Desai, Sr. Advocate with M.S. Bhardwaj and Advait Sethna, for the Respondent. [Judgment per : D.Y. Chandrachud, J. (Oral)]. The challenge in these proceedings under Article 226 of the Constitution is to an order of the Deputy Director General in the Directorate General of Health Services (DGHS) of the Union Ministry of Health and Family Welfare dated 15th October, 2009. By the impugned order, it has been held that : (i) The Petitioner failed to fulfil the continuous obligation of free treatment as stipulated in an Exemption Notification (Notification 64/88-Cus) and unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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). 4. It is not in dispute that on every occasion of import the Petitioner had applied to the competent authority for the issuance of a customs duty exemption certificate. A sample of one such application dated 5th May 1993 has been annexed to the affidavit-in-reply. On 14th September 1993, the Directorate of Health Services in the Government of Maharashtra, issued a certificate stating that the institution fell within category 2. Accordingly a certification was issued to the effect that the hospital fulfilled the requirements for category 2. An affidavit was filed by the Medical Administrator of the hospital on 8th September 1993, agreeing to comply with the requirements mandated for a category 2 institution and undertaking to accept the liability for the payment of customs duty on a failure of compliance of the conditions specified in the exemption notification. 5. On 6th January 2000, a notice to show cause was issued to the Petitioner calling upon it to explain as to why customs duty of ₹ 5,22,130/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o accept the liability for the payment of customs duty on failure of compliance with the conditions laid down in the exemption notification; (iii) After the exemption benefits were withdrawn for non-fulfilment of the free treatment obligation, the Petitioner had represented its case to re-categorize the hospital under category 1 of the notification. The request for re-categorization belatedly made after eight years could not be entertained; (iv) The Petitioner had never been approved as a charitable hospital by the DGHS or by the Union Ministry of Health and Family Welfare nor had applied for the grant of CDECs under category 1; and (v) Consequently, the cancellation of the CDECs for failure of compliance with the obligations attached to category 2 was valid. The request for re-categorization could not be granted. 9. Counsel appearing on behalf of the Petitioner submitted that; (i) In view of the judgment of the Supreme Court in Share Medical Care v. Union of India - 2007 (4) SCC 573 = 2007 (209) E.L.T. 321 (S.C.), the fact that the Petitioner had been categorized in category 2 did not preclude it from seeking categorization in a more beneficial category namely category 1 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1993; (ii) Until 2001 when the CDECs were cancelled, the Petitioner did not make any complaint about categorization; (iii) The issue of categorization did not arise either before the Division Bench of this Court or before the Supreme Court in the Customs Appeal; (iv) The Union Ministry of Health and Family Welfare was not a party to the proceedings before the Supreme Court which culminated in the judgment dated 8th April 2009 and would therefore, not be bound by the observations contained in the judgment; and (v) Re-categorization in category 1 was sought by the Petitioner on 4th August 2009. An Application belatedly made could not have been entertained and was correctly rejected. 11. The rival submissions now fall for determination. 12. On 1st March 1988, the Government of India issued a notification under Section 25 of the Customs Act, 1962 exempting the import of equipment required for use in hospitals specified in the table to the notification from the payment of customs duty subject to the fulfilment of the conditions of the notification. From the material before the Court, it appears that the Petitioner availed of the exemption from customs duty from 1989. On 6th August ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of by a judgment of a Division Bench dated 26th November 2008. The order of cancellation was set aside on the ground that there was a breach of the principles of natural justice, leaving it open to the authority to issue a fresh notice to show cause and pass an order in accordance with law. In pursuance of the judgment of the Division Bench dated 26th November 2008, the Deputy Director General re-considered the matter and sustained the order of cancellation of the CDECs by the impugned order dated 15th October 2009. 14. The judgment of the Supreme Court which was delivered on the Appeal preferred by the Petitioner against the dismissal of the Customs Appeal by this Court, has a significant bearing on the present case. As the Supreme Court observed the issue there was as follows : The issue which arose before the High Court was whether the appellant-hospital fell within Category 1 of the table annexed to the Notification quoted hereinabove. This issue arose because the Director General of Health Services (DGHS) while granting Customs Duty Exemption Certificate (CDEC) wrongly categorized the appellant-hospital in Category 2 instead of Category 1. It is this controversy which ul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... communication of DGHS dated 14-11-2000 withdrawing/cancelling CDECs. Apart from this, the Supreme Court held that a change of categorization was sought after a lapse of three years from the cancellation of the CDECs and could not be entertained belatedly. 16. When the Appeal filed by the Petitioner against the judgment of the Division Bench of this Court dismissing the Customs Appeal, came up before the Supreme Court, the judgment in Jaslok Hospital was distinguished on the ground that: (i) In the Jaslok Hospital case there was no challenge to the cancellation of the CDECs whereas, in the present case, the cancellation of the CDECs was as a matter of fact impugned in writ proceedings before this Court (WP 651/2001) and on 26 November 2008, the order of cancellation had been set aside by the Division Bench of this Court; and (ii) In the Jaslok Hospital case, there was an Application for re-categorization made after three years of the cancellation of the CDECs. At this stage, it would be necessary to advert to the observations contained in the judgment of the Supreme Court dated 8th April 2009 - The narrow issue which, therefore, arises for determination in this case, is whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009 when the issue of categorization was a live issue as noted by the Supreme Court. 18. The question as to whether an importer who has been categorized in category 2 of the exemption notification of 1st March 1988 can apply for re-categorization in another category of the same notification is not res-integra. In Share Medical Care v. Union of India - 2007 (4) SCC 573 = 2007 (209) E.L.T. 321 (S.C.), the Supreme Court had to deal with a similar situation. In that case in 1992-1993, medical equipment was imported for use in a hospital which had been categorized in category 2 of the exemption notification dated 1st March 1988. The Appellant sought a re-categorization in category 3 but its representation was dismissed by the Deputy Director General. The Andhra Pradesh High Court while dismissing the petition under Article 226 observed that the hospital had claimed an exemption on the basis of category 2 of the table to the exemption notification. It was only when the hospital did not fulfil the conditions relatable to category 2 that it sought a conversion of categorization under category 3 which, according to the High Court, was not tenable. 19. The Supreme Court allowed the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... category 2 which was voluntarily sought by the Applicant and it was only when the benefit of the exemption was withdrawn for non-fulfilment of the free treatment obligation that the Applicant had represented its case for a change in a categorization. The Supreme Court rejected the submission and specifically held that notwithstanding this, if the Applicant was entitled to a more beneficial categorization under the law, the authorities were duty bound to consider and grant the request. 21. In the present case, the order of the Deputy Director General would show that the authority has proceeded to reject the application for re-categorization in category 1 instead of category 2 for the reason that the Petitioner had initially been categorized in category 2. This aspect of the reasoning is clearly specious. Such a reason cannot be sustained in law in view of the judgment of the Supreme Court in Share Medical Care. As we have noted earlier, in the present case, the Directorate of Health Services of the State Government had on 14th September 1993 issued a certificate by which it had informed the DGHS that the Petitioner fell in category 2. It was on this basis that the Petitioner came ..... X X X X Extracts X X X X X X X X Extracts X X X X
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