Court quashes Customs Duty Exemption Certificate withdrawal for lack of evaluation. Patients at medical camps still eligible.

The court quashed the order withdrawing the Customs Duty Exemption Certificate (C.D.E.C.) due to lack of proper evaluation and independent verification by the Director General of Health Services. The court also ruled that patients treated at medical camps could be considered for compliance, emphasizing the continuous obligation to treat a percentage of patients free of charge as long as the machines were in operation, despite the rescission of the relevant notification. The petition was partly allowed, directing further proceedings by the D.G.H.S. if required, with no costs awarded.

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Issues Involved:
1. Compliance with conditions of Customs Duty Exemption Certificate (C.D.E.C.) under Notification No. 64/88.
2. Validity of the withdrawal of C.D.E.C. by Director General of Health Services (D.G.H.S.).
3. Consideration of patients treated at medical camps for compliance with exemption conditions.
4. Impact of rescission of Notification No. 64/88 on compliance obligations.

Issue-wise Detailed Analysis:

1. Compliance with conditions of Customs Duty Exemption Certificate (C.D.E.C.) under Notification No. 64/88:
The petitioners, a practising cardiologist and a clinic, imported two medical machines under the exemption provided by Notification No. 64/88, which required them to treat 40% of outdoor patients and 10% of indoor poor patients free of charge. The Customs Officers inspected the petitioners' establishment and seized records, leading to show cause notices alleging non-compliance with these conditions. The petitioners argued that their data, including charts and income-tax records, demonstrated compliance, but these were allegedly not properly evaluated by the authorities.

2. Validity of the withdrawal of C.D.E.C. by Director General of Health Services (D.G.H.S.):
The D.G.H.S. withdrew the C.D.E.C. on the grounds of non-compliance with the exemption conditions. The petitioners contended that this action was taken under pressure from the Customs Department and without independent application of mind. They also argued that they were not provided with the findings of the inspection team or the C.D.E.C. Committee, which were extensively referred to in the impugned order. The court found that the D.G.H.S. had acted mechanically and without verifying the original records, leading to the quashing of the withdrawal order.

3. Consideration of patients treated at medical camps for compliance with exemption conditions:
The petitioners claimed that patients treated at medical camps should be considered for compliance with the exemption conditions. The D.G.H.S. and the Customs Department argued that such patients could not be counted as they were not treated at the hospital where the imported machines were installed. The court noted that the question of whether diagnostic treatment at camps could be considered was a disputed fact that required proper findings, which were absent in the impugned order.

4. Impact of rescission of Notification No. 64/88 on compliance obligations:
The petitioners argued that the rescission of Notification No. 64/88 in 1994 meant there was no need for compliance in 2000. However, the court referred to the law explained by the Supreme Court, which indicated that the obligation to treat the prescribed percentage of patients free of charge continued as long as the machines were in operation. The court found that the rescission did not relieve the petitioners of their continuous obligation.

Conclusion:
The court quashed the order dated 1-3-2004 withdrawing the C.D.E.C. and directed the D.G.H.S. to proceed further in the matter as per law if necessary. The petition was partly allowed, and the rule was made absolute with no order as to costs.

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