Diagnostic centre entitled to custom duty exemption; administrative refusal struck down as discriminatory under Article 14; authority must reissue certificate

SC allowed the appeal, holding that while exemption from customs duty is not an absolute right, a diagnostic centre meeting notification criteria is entitled to certification by the Ministry. The Court struck down the administrative refusal and the HC's rejection as violative of Article 14 for discriminatory treatment, and directed the authority to re-consider and issue the required certificate within three months. Because the appellant had furnished the prescribed undertaking and a bank guarantee for already imported equipment, the guarantee shall be discharged upon production of the certificate enabling duty exemption.

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Issues Involved:
1. Whether a Diagnostic Centre is entitled to seek the issuance of a certificate to enable it to import equipment without payment of customs duty.
2. Whether there has been discriminatory treatment between the appellant and similarly situated persons.
3. Whether the appellant had complied with all the pre-conditions stipulated in the exemption notification for being entitled to the issuance of a certificate.

Issue-Wise Detailed Analysis:

1. Entitlement of Diagnostic Centre to Import Equipment Without Customs Duty:

The appellant applied to the Director General of Health Services (Respondent No. 2) for a certificate to import hospital equipment without paying customs duty under Notification No. 64/88-Customs, dated 1-3-1988. The High Court concluded that the appellant was running a Diagnostic Centre, not a hospital, and thus did not qualify for the exemption. The Supreme Court noted that Section 25 of the Customs Act allows the Central Government to exempt certain goods from customs duty if it is in the public interest. The exemption notification included conditions that had to be met by hospitals. The Court found that the notification's intent was to exempt hospitals providing medical, surgical, or diagnostic treatment. A Diagnostic Centre run purely on a commercial basis might not qualify. Therefore, the High Court's conclusion that the appellant did not meet the exemption criteria was upheld.

2. Discriminatory Treatment:

The appellant argued that other similar Diagnostic Centres had been granted exemption certificates, and the refusal in their case was discriminatory and violated Article 14 of the Constitution. The Supreme Court found merit in this argument. Despite multiple opportunities, the respondents failed to provide any explanation or affidavit to counter the appellant's claim of discrimination. The Court observed that when other Diagnostic Centres had been granted certificates, denying the same to the appellant without a justifiable reason was discriminatory. This constituted a violation of Article 14, and the refusal by Respondent No. 2 was deemed arbitrary and unjustified.

3. Compliance with Pre-Conditions:

The Court examined the materials on record and the obligations under the notification. It concluded that the appellant had provided the necessary undertakings required by the notification. Therefore, the appellant was entitled to the exemption certificate. The Court emphasized that the exemption notification implied a continuing obligation to provide free treatment to 40% of outdoor patients and all indoor patients from families earning less than Rs. 500 per month. The authorities must ensure compliance with these conditions, and failure to do so would justify demanding the customs duty.

Conclusion:

The Supreme Court set aside the orders of Respondent No. 2 and the High Court. It directed Respondent No. 2 to reconsider and issue the necessary certificate to the appellant within three months. The bank guarantee furnished by the appellant would be discharged upon the issuance of the certificate. The Court also mandated that all beneficiaries of the exemption must notify the public monthly about the number of patients treated, ensuring compliance with the obligation to treat indigent patients.

Final Judgment:

The appeal was allowed, and the impugned orders were set aside. Respondent No. 2 was directed to issue the certificate within three months, subject to the appellant fulfilling the conditions of providing free treatment to the specified percentage of patients. No order as to costs was made.

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