2007 (2) TMI 2 - SC - Customs

Denial of Notification No. 64/88-Cus. Category 3 exemption held illegal; authorities must grant benefit if conditions met

SHARE MEDICAL CARE Versus UNION OF INDIA

SC allowed the appeal, holding that denial of entitlement to exemption under category 3 of Notification No. 64/88-Cus. was illegal. The DGHS and HC erred ... Eligibility for exemption under different categories of Notification No. 64/88-Cus. - Hospital equipments - benefit of exemption notification para-2 of the table - HELD THAT:- In the instant case, the ground which weighed with the Deputy Director General (Medical), DGHS for non-considering the prayer of the appellant was that earlier, exemption was sought under category 2 of exemption notification, not under category 3 of exemption notification and exemption under category 2 was withdrawn. This is hardly a ground sustainable in law. On the contrary, well settled law is that in case the applicant is entitled to benefit under two different Notifications or under two different Heads, he can claim more benefit and it is the duty of the authorities to grant such benefits if the applicant is otherwise entitled to such benefit. Therefore, non-consideration on the part of the Deputy Director General (Medical), DGHS to the prayer of the appellant in claiming exemption under category 3 of the notification is illegal and improper. The prayer ought to have been considered and decided on merits. Grant of exemption under category 2 of the notification or withdrawal of the said benefit cannot come in the way of the applicant in claiming exemption under category 3 if the conditions laid down thereunder have been fulfilled. The High Court also committed the same error and hence the order of the High Court also suffers from the same infirmity and is liable to be set aside. In our opinion, the decision in Mediwell Hospital [1996 (12) TMI 51 - SUPREME COURT] would not take away the right of the appellant to claim benefit under para 3 of the Table of exemption notification. If the appellant is not entitled to exemption under para 2, it cannot make grievance against denial of exemption. But if it is otherwise entitled to such benefit under para 3, it cannot be denied either. The contention of the authorities, therefore, has no force and must be rejected. The appeal deserves to be allowed and is accordingly allowed. Issues Involved:1. Eligibility for exemption under different categories of Notification No. 64/88-Cus.2. Legality of rejection of exemption application by DGHS.3. High Court's dismissal of the appellant's petitions.4. Applicability of precedents regarding exemption benefits.Detailed Analysis:1. Eligibility for exemption under different categories of Notification No. 64/88-Cus:The appellant, a charitable hospital, initially applied for and was granted exemption under category 2 of Notification No. 64/88-Cus, which pertains to hospital equipment imported by specified charitable hospitals. Later, the appellant sought exemption under category 3, arguing it was a non-profit organization operating in rural areas, thus qualifying for greater benefits. The Deputy Director General (Medical), DGHS, rejected this application, stating that since the appellant initially applied under category 2, it could not subsequently apply under category 3.2. Legality of rejection of exemption application by DGHS:The Supreme Court found the rejection by DGHS to be illegal and contrary to law. The Court emphasized that an applicant is not barred from claiming more or greater benefits under a different category or notification if they are entitled to it. The Court cited precedents such as 'Collector of Central Excise, Baroda v. Indian Petro Chemicals' and 'H.C.L. Limited v. Collector of Customs, New Delhi,' which established that an assessee could claim the benefit of the more beneficial exemption notification.3. High Court's dismissal of the appellant's petitions:The High Court dismissed the appellant's petitions, noting that the appellant initially claimed and was granted exemption under category 2, and that the appellant did not fulfill conditions under category 2, making its claim for conversion to category 3 untenable. The Supreme Court found this reasoning flawed, stating that the High Court repeated the error of not considering the appellant's claim for exemption under category 3 on its merits.4. Applicability of precedents regarding exemption benefits:The Supreme Court referred to several precedents to support its decision. In 'Unichem Laboratories Ltd. v. Collector of Central Excise, Bombay,' the Court held that if no time is fixed for claiming benefits under an exemption notification, it could be done at any time. The Court also cited 'Kerala State Cooperative Marketing Federation Ltd. & Ors. v. Commissioner of Income Tax,' which emphasized that each head of exemption should be treated as separate and distinct. The Court concluded that the appellant was entitled to claim exemption under category 3, and the authorities were duty-bound to consider it on merits.Conclusion:The Supreme Court allowed the appeal, directing the respondent-authorities to reconsider the appellant's case for exemption under category 3 of the exemption notification in accordance with law and on its merits. The Court emphasized that the authorities must act reasonably and fairly, ensuring that the appellant is not deprived of benefits it is legally entitled to. The High Court's order and the decision of the Deputy Director General (Medical), DGHS, were set aside.