2014 (10) TMI 440 - SC - Customs

Customs duty exemption for diagnostic centers clarified under Notification No. 64/88-CUS. Appeal dismissed, liability to pay duty upheld.

M/s. Bharat Diagnostic Centre Versus Commissioner of Customs

M/s. Bharat Diagnostic Centre Versus Commissioner of Customs - 2014 (307) E.L.T. 632 (SC) Issues Involved:1. Eligibility of diagnostic centers for customs duty exemption under Notification No. 64/88-CUS dated 01.03.1988.2. Interpretation of the term 'Hospital' in the context of the exemption notification.3. Applicability of the principles of strict and liberal interpretation to exemption notifications.4. Validity and consequences of the withdrawal of the Customs Duty Exemption Certificate by the Directorate General of Health Services (DGHS).Comprehensive, Issue-Wise Detailed Analysis:1. Eligibility of diagnostic centers for customs duty exemption under Notification No. 64/88-CUS dated 01.03.1988:The core issue was whether diagnostic centers are entitled to customs duty exemption under the specified notification. The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) had previously denied this benefit based on a stray observation in the Mediwell Hospital & Health Care Pvt. Ltd. case, which suggested that diagnostic centers run purely on a commercial basis may not qualify for the exemption.2. Interpretation of the term 'Hospital' in the context of the exemption notification:The notification's explanation defined 'Hospital' broadly to include any institution, center, trust, society, association, laboratory, clinic, and maternity home providing medical, surgical, or diagnostic treatment. This broad definition was central to determining the eligibility of diagnostic centers for the exemption. The court emphasized that the word 'includes' in the definition extends the meaning beyond its natural import, thereby encompassing diagnostic centers within the scope of the exemption.3. Applicability of the principles of strict and liberal interpretation to exemption notifications:The court reiterated the settled principles of interpreting exemption notifications. Initially, a strict interpretation is applied to ascertain eligibility. Once eligibility is established, a liberal interpretation may be adopted for the exemption clause. This principle was supported by precedents such as Gammon (I) Ltd. v. Commr. of Customs, Commr. of Customs (Imports) v. Tullow India Operations Ltd., A.P. Steel Re-Rolling Mill Ltd. v. State of Kerala, and Collector of Customs (Preventive) v. Malwa Industries Ltd. The court held that the diagnostic center, being part of the broader definition of 'Hospital,' could claim the exemption if it met the specified conditions.4. Validity and consequences of the withdrawal of the Customs Duty Exemption Certificate by the DGHS:The appellant had obtained an exemption certificate from the DGHS, which was later withdrawn. The court noted that the appellant did not effectively challenge this withdrawal. Consequently, the customs authorities issued a demand notice for the customs duty, citing non-compliance with the notification's conditions. The court held that without a valid exemption certificate, the appellant could not claim the exemption and was liable to pay the customs duty.Conclusion:The court dismissed the appeal, affirming that the diagnostic center could be eligible for the exemption under the notification if it fulfilled all the conditions. However, due to the withdrawal of the exemption certificate by the DGHS and the appellant's failure to challenge this withdrawal effectively, the demand for customs duty was upheld. The judgment clarified the broad interpretation of 'Hospital' in the notification and reinforced the principles of interpreting exemption notifications. The appeal was dismissed, and the demand for customs duty was upheld.