2012 (10) TMI 114 - HC - Customs

Court quashes order, directs reassessment for Category-1 eligibility, emphasizes legal compliance

GUJARAT METHODIST CHURCH CARDIOTHORACIC AND VASCULAR Versus UNION OF INDIA

GUJARAT METHODIST CHURCH CARDIOTHORACIC AND VASCULAR Versus UNION OF INDIA - 2014 (305) E.L.T. 529 (Guj.) Issues Involved:1. Customs Duty Exemption Certificate (CDEC) issuance and withdrawal.2. Classification under different categories of hospitals for customs duty exemption.3. Compliance with conditions stipulated under Category-2 of Customs Notification No.64/1988.4. Legal interpretation of the exemption notification and its application to the petitioner's hospital.Detailed Analysis:1. Customs Duty Exemption Certificate (CDEC) Issuance and Withdrawal:The petitioner, a public charitable trust, imported a Cardiac Catherisation Laboratory from Germany for its hospital in Gujarat under the Customs Notification No.64/1988, which allowed duty exemption. The equipment was imported and cleared without duty based on a certificate granted by the second respondent on 18th March 1994. However, the equipment was seized by the Assistant Commissioner on 22nd January 1998, leading to a writ petition by the petitioner. The duty exemption certificate was later withdrawn on 25th January 1999, which was challenged and stayed by the court. The court directed the second respondent to reconsider the application for an installation certificate.2. Classification Under Different Categories of Hospitals for Customs Duty Exemption:The petitioner's hospital was initially classified under Category-4 of the Customs Notification No.64/1988, which pertains to hospitals in the process of being established. The petitioner later applied for reclassification under Category-1, which includes hospitals run or substantially aided by charitable organizations approved by the Ministry of Health and Family Welfare. The second respondent rejected this reclassification, insisting that the petitioner had to fulfill the conditions under Category-2, which involves providing free treatment to a specified percentage of patients.3. Compliance with Conditions Stipulated Under Category-2 of Customs Notification No.64/1988:The second respondent's rejection was based on the petitioner's alleged failure to meet Category-2 conditions, such as providing free treatment to at least 40% of outdoor patients and reserving 10% of beds for indoor patients from low-income families. The petitioner contested this, arguing that the hospital was a charitable institution under Category-1 and that the conditions of Category-2 did not apply. The court noted that the second respondent had not properly considered whether the hospital met the criteria for Category-1, as directed in a previous judgment.4. Legal Interpretation of the Exemption Notification and Its Application to the Petitioner's Hospital:The court emphasized that each category under the exemption notification has distinct conditions and that the conditions for Category-2 should not be automatically applied to hospitals initially classified under Category-4. The court found that the second respondent had not adhered to the court's earlier directive to reconsider the petitioner's application for Category-1 classification without being influenced by the initial Category-2 undertaking. The court cited the Supreme Court's decision in Share Medical Care vs. Union of India, which held that an institution could apply for reclassification under a different category if it meets the relevant criteria.Conclusion:The court quashed the impugned order dated 26th March 2004, which rejected the petitioner's application for Category-1 classification and withdrew the duty exemption certificate. The court directed the second respondent to reconsider the application afresh, focusing on whether the petitioner meets the requirements for Category-1. If the petitioner does not satisfy Category-1 requirements, only then should the second respondent examine compliance with Category-2 conditions. The second respondent was instructed to take a decision within three months. The court's decision underscores the importance of proper legal interpretation and adherence to judicial directives in administrative decisions.