2002 (6) TMI 527 - HC - Central Excise

Court dismisses writ petitions challenging customs duty exemptions for diagnostic centers under specific notification.

The court dismissed multiple writ petitions challenging the withdrawal of customs duty exemptions granted to diagnostic centers under Notification No. ... Writ Petition - Hospital equipments - Diagnostic centre - Exemption Issues Involved:1. Legality of withdrawing customs duty exemptions granted under Notification No. 64/88, dated 1-3-1988.2. Interpretation of the term 'hospital' under the said notification.3. Compliance with conditions stipulated in the notification for availing the exemption.Detailed Analysis:1. Legality of Withdrawing Customs Duty Exemptions:These writ petitions were taken together for hearing and are disposed of by this common order. W.P. No. 1544 of 1998 has been filed by Medwin Hospital challenging an order dated 25-11-1997 withdrawing the exemption granted in respect of the customs duty. The main ground of challenge is that the impugned order is contrary to the policy of the Government of India spelled out through notification No. 64/88, dated 1-3-1988.W.P. No. 3109 of 1998 has been filed by Godavari CT Scanning Centre challenging the proceedings of 1st Respondent dated 7-1-1998. By this order also the exemption certificate dated 16-6-1994 granted to the petitioner in respect of the customs duty was withdrawn.W.P. No. 1533 of 1998 has been filed by M/s. Medinova Diagnostic Services challenging an order dated 19-12-1997 by which also the exemption granted in respect of the customs duty was withdrawn.W.P. No. 33257 of 1997 has been filed by Kailash Diagnostic and Rehabilitation Centre. In this writ petition also an order dated 4-11-1997 is challenged by which the exemption granted in respect of the customs duty was withdrawn.All these writ petitions raise the same question of law and fact and the writ petitioners are aggrieved by similar orders.2. Interpretation of the Term 'Hospital' Under Notification No. 64/88:The whole question revolves around the interpretation of the policy enunciated under the Notification No. 64/88, dated 1-3-1988. This question has already come up before various High Courts and also before the Supreme Court on occasions more than one. Before going to the judgments, it will be pertinent to refer to certain facts.Paragraph 2 of the notification is important which lays down, 'In approving the import of any hospital equipment under paragraph 1, regard shall be had to the following factors namely:- (i) that the hospital equipment in respect of which the exemption is claimed under this notification is not manufactured in India; and (ii) that the hospital equipment in respect of which the exemption is claimed is necessary for running or maintenance of the hospital.'In the explanation at the end of the notification, it has been stated, 'For the purposes of this notification, the expression 'Hospital' includes any Institution, Centre, Trust, Society, Association, Laboratory, Clinic and Maternity Home which renders medical, surgical or diagnostic treatment.'It is contended before us that in certain cases diagnostic procedures are used for the purposes of treatment as well. It is also contended that even laparoscopy was basically a procedure for diagnosis, but even surgeries were conducted through laparoscopy. Similarly, in the department of radiology, many diagnostic procedures are also used for the purposes of treatment. We do not want to enter into this arena at this stage because it is nobody's case that these diagnostic centres had been used, not only for the purposes of diagnosis but also for the basis of diagnostic treatment. Therefore, the explanation to the notification No. 64/88, dated 1-3-1988 makes it clear that the hospitals which were entitled to exemption were only those institutions, centres, Trusts, Societies, Associations, Laboratories, clinics, and Maternity Homes which render treatment whether it was medical, surgical, or diagnostic treatment.3. Compliance with Conditions Stipulated in the Notification for Availing the Exemption:The second condition imposed was that free treatment had to be given to all indoor patients belonging to families with an income of less than rupees five hundred per month and for this purpose 10 per cent of all the hospital beds had to be reserved for such patients. None of the petitioners has any indoor facility and obviously so and they were not admitting any patients and they were using their institutions as diagnostic institutions and not as treatment institutions. It appears that they had given false undertakings while getting the exemption. The record has been perused wherein they had agreed to comply with these conditions, but these conditions were impossible for them to be followed because they were not at all running any hospitals.Judgments Referenced:Learned Standing Counsel for Central Government appearing for the respondents submits that this controversy has already been resolved by various judgments of the Courts. One of the judgments referred is Mediwell Hospital and Health Care Pvt. Ltd. v. Union of India & Ors - 1997 (89) E.L.T. 425 (S.C.) = AIR 1997 SC 1623. In this case, the High Court had dealt with a diagnostic centre and had come to the conclusion that the appellant was merely a diagnostic centre and was not a hospital and as such the exemption notification dated 1-3-1988 would not cover his case. The matter was taken to the Supreme Court and the Supreme Court framed three questions for its consideration. The 1st question was 'whether a Diagnostic Centre is entitled to seek for issuance of a certificate to enable it to import equipment without payment of customs duty.' After extraction of the provisions of the notification No. 64/88, the Supreme Court held, 'Thus a Diagnostic Centre run by a private individual purely on a 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.'Another matter came before the Supreme Court in M/s. Faridabad CT. Scan Centre v. D.G. Health Services & Ors - JT 997 (8) 171. This judgment was delivered by a Bench of three Judges of the Supreme Court. The 3-Judge Bench considered the matter and observed that in the earlier case Mediwell Hospital & Health Care Pvt. Ltd. v. Union of India & Ors. [1997 (89) E.L.T. 425 (S.C.)] although the Supreme Court had come to the conclusion that the Diagnostic Centres were not entitled to any exemption, but had granted the relief on the ground that several other individual diagnostic centres not attached to any hospital had been granted such an exemption. The 3-Judge Bench of the Supreme Court did not approve the view and in para-3 of the Judgment said, 'We fail to see how Article 14 can be attracted in cases where wrong orders are issued in favour of others. Wrong orders cannot be perpetuated with the help of Article 14 on the basis that such wrong orders were earlier passed in favour of some other persons and, therefore, there will be discrimination against others if correct orders are passed against them. In fact, in the case of Union of India (Railway Board) & Ors. v. J. V. Subhaiah and Ors. [1996 (2) SCC 258], the same Learned Judge in his judgment has observed in para 21 that the principle of equality enshrined under Article 14 does not apply when the order relied upon is unsustainable in law and is illegal. Such an order cannot form the basis for holding that other employees are discriminated against under Article 14. The benefit of the exemption notification, in the present case, cannot, therefore, be extended to the petitioner on the ground that such benefit has been wrongly extended to others. With respect, the decision in Mediwell Hospital (supra) does not lay down the correct law on this point.'For the reasons given hereinabove, all the writ petitions are dismissed. No order as to costs.