Andhra HC (Pre-Telangana)
Kailash Diagnostic & Rehabilitation ... vs D.G. Of Health Services on 18 June, 2002
Equivalent citations: 2003ECR540(AP), 2003(153)ELT281(AP)
Author: Bilal Nazki
Bench: Bilal Nazki
ORDER
1. These writ petitions were taken together for hearing and are disposed of by this common order.
2. W.P. No. 1544 of 1998 has been filed by Medwin Hospital challenging an order dated 25-11-1997 withdrawing the exemption granted in respect of the customs duty. The main ground of challenge is that the impugned order is contrary to the policy of the Government of India spelled out through notification No. 64/88, dated 1-3-1988.
3. W.P. No. 3109 of 1998 has been filed by Godavari CT Scanning Centre challenging the proceedings of 1st Respondent dated 7-1-1998. By this order also the exemption certificate dated 16-6-1994 granted to the petitioner in respect of the customs duty was withdrawn.
4. W.P. No. 1533 of 1998 has been filed by M/s. Medinova Diagnostic Services challenging an order dated 19-12-1997 by which also the exemption granted in respect of the customs duty was withdrawn.
5. W.P. No. 33257 of 1997 has been filed by Kailash Diagnostic and Rehabilitation Centre. In this writ petition also an order dated 4-11-1997 is challenged by which the exemption granted in respect of the customs duty was withdrawn.
6. All these writ petitions raise same question of law and fact and the writ petitioners are aggrieved of the similar orders.
7. Petitioner in W.P. No. 1544 of 1998 is the Managing Partner of Medwin Hospitals, Ashoknagar, Hyderabad. He submits that the Medwin hospital is a division of Jaya Diagnostic and Research Centre Limited and the same had been established in the year 1990. It is further submitted that the hospital is a 400-bed super-speciality hospital having various facilities, treating outpatients and inpatients since the date of establishment. It is further submitted that realizing the fact that sophisticated medical equipment was not indigenously made and therefore it was necessary to import quality medical equipments. The Government of India was conscious of the fact that in order to provide better care, import of medical equipments it issued a notification No. 64/88, dated 1-3-1988 exemption from payment of customs duty on such equipments. The notification was issued in exercise of power under Section 25 of the Customs Act, 1962. It exempted all equipments, apparatus, appliances including spare parts and accessories thereof, but excluded consumable items. Under this notifications hospitals were defined which could avail of the exemption and after it was certified that a particular hospital was entitled to such exemption, the exemptions were granted. Under the Central Government Health Scheme the Petitioner was given recognition on 16-1-1992. Secretary to Government of Andhra Pradesh, Medical and Health Department recommended the case of the petitioner on 23-12-1988. In this letter it was stated that the centre has infrastructural facilities and an undertaking has been given that the centre would diagnose 40% of their patients free of cost and would also reserve 10% of the beds for free treatment. The above condition was contemplated in the notification No. 64/88, dated 1-3-1988. It is further submitted that the petitioner is following the conditions. It: is also contended that the same authority was withdrawing the exemption who had inspected the hospital on 18-11-1988 and had confirmed that all the conditions laid down under the exemption policy were being followed. In spite of having given the exemption, 1st respondent issued a notice dated 25-11-1997 which is impugned in this writ petition on the ground that the petitioner institution was only a diagnostic centre and was not a hospital and was not treating the patients and in-patients and out-patients.
8. Counter has not been filed in this writ petition. Counter has been filed in W.P. No. 33257 of 1997 in which it is briefly stated that all the institutions are diagnostic institutions and not hospitals, therefore they were not entitled to exemption.
9. Now the whole question revolves around the interpretation of the policy enunciated under the Notification No. 64/88, dated 1-3-1988. This question has already come up before the various High Courts and also before the Supreme Court on occasions more than one. Before going to the judgments, it will be pertinent to refer to certain facts.
10. W.P. No. 1544 of 1988 has been filed by Medwin Hospital. It claims to be a division of Jaya Diagnostic and Research Centre Ltd., but there is nothing on record to show, as a matter of fact, that the Medwin hospital is a division of Jaya Diagnostic and Research Centre Ltd. The letter dated 25-11-1997 by which the exemption was withdrawn was written to M/s. Jaya Diagnostic Research Centre Ltd. Certificate of incorporation which has been placed on record issued by the Registrar of Companies, Andhra Pradesh shows that Jaya Diagnostic and Research Centre Ltd. is incorporated on 21-9-1987. There is no mention of any hospital. Certificate of commencement of business was also issued in the name of Jaya Diagnostic and Research Centre Ltd. A letter of exemption was given on 23-12-1988 which has been relied on by the petitioner was written by the Secretary to Government, Health, Medical and Family Welfare Department, Hyderabad to the Director General of Health Services, Ministry of Health and Family Welfare, New Delhi in which it was stated that he was forwarding the application of Jaya Diagnostic and Research Centre Ltd., Hyderabad for grant of exemption to enable them to import certain medical equipments. This letter further stated, "M/s. Jaya Diagnostic and Research Centre, Hyderabad have certified that:
(1) The institution undertakes Diagnosis to all citizens of India without distinction of caste, creed, rank, religion or language;
(2) The institution undertakes to diagnose free of cost at least 40% of their outdoor patients;
(3) The institution shall reserve 10% of their beds for free treatment to all families with an income of less than Rs. 500/- (Rupees five hundred only);
(4) The institution shall ensure that the charges levied for other patients are reasonable either on the basis of the income of patients/guardians or otherwise;
(5) The institution will use the imported equipment only in the institution concerned and the equipment will not be removed there from for private use and will not be sold or otherwise disposed of without prior permission of the Government;
(6) The institution agrees to permit the Centre/State Government on their representative to inspect the hospital for purposes of satisfying that the Centre fulfils the conditions mentioned above;
(7) The institution has an appropriate programme for establishment of this hospital;
(8) The institution will start functioning within two years; (9) The institution has sufficient funds to establish this centre; Thereafter a certificate has also been enclosed to this letter which has
been given by Dr. K.K. Sen, Asst. Director General. This certificate is also reproduced below, "It is certified that Jaya Diagnostic & Research Centre, Ltd., 100-Raghava Ratna Towers, Chiragali Lane, Hyderabad, Andhra Pradesh :
(1) Provides medical, surgical and diagnostic treatment not only without any distinction of caste, creed, race, religion or language, but also -
(2) Free, on an average, to at least 40% of all their outdoor patients, and (3) Free to all indoor patients belonging to families with an income of less than Rs. 500/- p.m. and keeping for this purpose at least 10% of all the hospital beds reserved for such patients; and (4) At reasonable charges, either on the basis of the income of the patients concerned or otherwise, to patients other than those specified in Clauses (2) and (3) above;"
These facts relating to this case have been given in detail because we do not find anywhere there is any record to show that Medwin hospital is a division of Jaya Diagnostic & Research Centre Ltd. The Party aggrieved by the order impugned is Jaya Diagnostic & Research Centre Ltd. and they have not filed any writ petition. Without showing the connection between Medwin hospital and Jaya Diagnostic & Research Centre Ltd. this writ petition is not otherwise maintainable. The exemption had been granted to Jaya Diagnostic & Research Centre Ltd. and it has been withdrawn from it. Medwin hospital has nowhere been in picture right from 1988 to 1997. This writ petition is liable to be dismissed on this count alone. The other grounds which related to the interpretation of the notification No. 64/88, dated 1-3-1988 will have to be gone into while considering the import of that notification and would be dealt with after the facts relating to other writ petitions are discussed.
11. In W.P. No. 3109 of 1998 also the petitioner claims that Godavari CT Scanning Centre is a division of Swatantra Multi Specialty Hospital and was incorporated on 14-4-1991. M/s. Swatantra Multi Specialty Hospitals runs a multi specialty hospital in Rajahmundry with an intake of 165 in-patients/beds. Out of the said 165 beds, 50 had been leased out to the petitioner for using the same for its own purpose. This Scanning Centre was also granted exemption. It is further submitted that M/s. Swatantra Multi Speciality Hospital was required to have a CT scan which is a very important diagnostic instrument. With a view to import CT scan equipment the petitioner made an application to the 1st respondent for necessary permission to import the machinery. After due inspection by the office of 1st respondent, permission was granted for importing the equipment. The Petitioner placed an order and the machinery was imported on 25-5-1993. Subsequent to the installation of the machinery and commencement of operations, the petitioner made an application to the 1st respondent for granting duty exemption certificate and the same was granted by the 1st respondent on 16-6-1994. Prior to the grant of this certificate all the necessary enquiries were made by the 1st respondent. After receiving the duty exemption certificate the petitioner requested the 4th respondent on 23-7-1994 to release the PD bond. A communication was sent by the 4th respondent in March, 1995 that the petitioner has not submitted installation certificate, therefore he was not entitled to any ex emption. The Petitioner was further directed to pay a sum of Rs. 38,49,604/-within ten days from the date of receipt of the notice. The petitioner thereafter addressed a letter to the 4th respondent on 14-4-1995 informing him that the inspection had been made by the competent authority and a representation has been made to the 2nd respondent to transmit the report to the 1st respondent for granting installation certificate. The petitioner requested the 4th respondent to wait for issuance of necessary communication from the 1st respondent. The Petitioner also addressed a letter on 28-2-1996 to the 1st respondent to grant him installation certificate and communicate the same to the Customs House, Madras. 1st respondent on 5-10-1995 informed the petitioner that the reports from the State Governments have not been received. The Petitioner was advised to file an application along with recommendations of the State Government. 2nd respondent on the representation of the petitioner forwarded the report on 18-5-1996 and recommended for grant of installation certificate. 1st respondent vide letter dated 23-4-1996 informed the petitioner that in view of the stay granted by the Court for issuance of the installation certificate under notification No. 64/88, it was not possible to consider the grant of such a certificate. While the matters stood thus, the 4th respondent issued a notice on 30-9-1996 proposing to make a provisional assessment on the equipment imported without extending the benefit of notification No. 64/88. The petitioner was directed to pay a sum of Rs. 38,49,604/-. Since the goods were charged solely due to the inaction of the 1st respondent and the 4th respondent was threatening coercive action for realizing the duty, the petitioner filed a writ petitioner and directed the 4th respondent not to take coercive steps pending further orders. This writ petitioner is also pending in the Court. Thereafter the 1st respondent issued proceedings dated 9-7-1997 directing the petitioner to show cause as to why customs duty exemption certificate issued to him under notification No. 64/88 shall not be withdrawn. It was stated in the show-cause notice that the petitioner was only a diagnostic centre/laboratory not having indoor patients and thus not fulfilling the obligation of providing free indoor treatment to all patients belonging to families with an income of less than Rs. 500/- per month. The Petitioner accordingly sent a detailed reply on 23-7-1997. The Respondents issued an order on 7-1-1998 withdrawing the customs duty exemption certificate dated 16-6-1994 granted to the petitioner. This order is now challenged in this writ petition. We have seen all the correspondence and also the exemption certificate dated 16-6-1994. This certificate granting exemption was also given to Godavari CT Scanning Centre. There is nothing on record to show that this Godavari CT Scanning Centre is a division of Swatantra Multi Specialty Hospitals. Neither it was stated before the Government of Andhra Pradesh nor before the Government of India at any point of time that this Godavari CT Scanning Centre is a part of Swatantra Multi Specialty Hospital. Even the letter written by the Principal Secretary to Government, Health, Medical & Family Welfare Department, Hyderabad to the Director General, Health Services, Government of India by which the exemption was recommended was in favour of Godavari CT Scanning Centre, Rajahmundry. It cannot be said that exemption had been granted to Swatantra Multi Specialty Hospital. The exemption had admitted been sought by Godavari CT Scanning Centre, had been granted to it and has been withdrawn from it.
12. Now coming to the third writ petitioner being W.P. No. 1533 of 1998 filed by M/s. Medinova Diagnostic Services, this is admittedly a diagnostic centre which was also granted exemption and later on it was withdrawn on the ground that diagnostic centre were not eligible for exemption.
13. Then coming to W.P. No. 33257 of 1997, this is also admittedly a diagnostic centre. Exemption was granted and later on withdrawn, as, according to the respondents, it was not available to the diagnostic centres.
14. Now let us have a look at the notification No. 64/88, dated 1-3-1988. Paragraph 1 of the notification lays down, "In exercise of the powers conferred by Sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts all equipment, apparatus and appliances, including spare parts and accessories thereof, but excluding consumable items (hereinafter referred to as the "hospital equipment"), the import of which is approved either generally or in each case by the Government of India in the Ministry of Health and Family Welfare, or by the Directorate General of Health Services to the Government of India, as essential for use in any hospital specified in the Table below, from
(i) the whole of the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975); and
(ii) the whole of the additional duty leviable thereon under Section 3 of the said Customs Tariff Act.
Paragraph 2 of the notification is important which lays down.
"In approving the import of any hospital equipment under paragraph 1, regard shall be had to the following factors namely:-
(i) that the hospital equipment in respect of which the exemption is claimed under this notification is not manufactured in India; and
(ii) that the hospital equipment in respect of which the exemption is claimed is necessary for running or maintenance of the hospital."
In the explanation at the end of the notification it has been stated, "For the purposes of this notification, the expression "Hospital" includes any Institution, Centre, Trust, Society, Association, Laboratory, Clinic and Maternity Home which renders medical, surgical or diagnostic treatment,"
15. It is contended before us that in certain cases diagnostic procedures are used for the purposes of treatment as well. It is also contended that even laproscopy was basically a procedure for diagnosis, but even surgeries were conducted through laproscopy. Similarly in the department of radiology many diagnostic procedures are also used for the purposes of treatment. We do not want to enter into this arena at this stage, because it is nobody's case that these diagnostic centres had been used, not only for the purposes of diagnosis, but also for the basis of diagnostic treatment. Therefore the explanation to the notification No. 64/88, dated 1-3-1988 makes it clear that the hospitals which were entitled to exemption were only those institutions, centres, Trusts, Societies, Associations, Laboratories, clinics and Maternity Homes which render treatment whether it was medical, surgical or diagnostic treatment. So even if a Co-Operative society or a philanthropic association offers treatment surgical, medical or diagnostic, it would be hospital within the meaning of notification No. 64/88. But, on the other hand, if a medical institution does not provide treatment of any kind, either medical or surgical or diagnostic, it would not be hospital within the meaning of the notification No. 64/88. Therefore the diagnostic centres are not hospitals within the meaning of the notification, as such they are not entitled to any exemption under the notification. This is further made clear in the table of the notification. It is stated in para 2 of the table, "All such hospitals as may be certified by the said Ministry of Health and Family Welfare, in each case, to be run for providing medical, surgical or diagnostic treatment not only without any distinction of caste, creed, race, religion or language, but also,
(a) free, on an average, to at least 40 per cent of all their outdoor patients; and
(b) free to all indoor patients belonging to families with an income of less than rupees five hundred per month, and keeping for this purpose at least 10 per cent of all the hospital beds reserved for such patients; and
(c) at reasonable charges, either on the basis of the income of the patients concerned or otherwise, to patients other than those specified in Clauses (a) and (b)."
The second condition imposed was that free treatment had to be given to all indoor patients belonging to families with an income of less than rupees five hundred per month and for this purpose 10 per cent of all the hospital beds had to be reserved for such patients. None of the petitioners has any indoor facility and obviously so and they were not admitting any patients and they were using their institutions as diagnostic institutions and not as treatment institutions. It appears that they had given false undertaking while getting the exemption. The record has been perused wherein they had agreed to comply with these conditions, but these conditions were impossible for them to be followed because they were not at all running any hospitals.
16. Learned Standing Counsel for Central Government appearing for the respondents submits that this controversy has already been resolved by various judgments of the Courts. One of the judgments referred is Mediwell Hospital and Health Care Pvt. Ltd. v. Union of India & Ors. . In this case the High Court had dealt with a diagnostic centre and had come to the conclusion that the appellant was merely a diagnostic centre and was not a hospital and as such the exemption notification dated 1-3-1988 would not cover his case. The matter was taken to the Supreme Court and the Supreme Court framed three questions for its consideration. The 1st question was "whether a Diagnostic Centre is entitled to seek for issuance of a certificate to enable it to import equipments without payment of customs duty." After extraction the provisions of the notification No. 64/88, the Supreme Court held, "Thus a Diagnostic Centre run by a private individual purely on commercial basis may not be entitled to the exemption under the notification issued by the Central Government. The conclusion of the Central Government as well as that of the High Court on this score, therefore, may not be held to be incorrect and the appellant may not be entitled to seek for issuance of mandamus to respondent No. 2 on this ground."
So on this question the Supreme Court was clear that under the notification no exemption could be granted to a Diagnostic Centre. But the Supreme Court framed two more questions for its consideration. One of the contentions before the Supreme Court was that similarly placed Diagnostic Centres had been granted exemption. Though the Supreme Court gave time to the respondents to deny such an allegation, but it was not denied. Therefore, the Supreme Court held, "When respondent No. 2 has already granted certificates in favour of several such Diagnostic Centres, as alleged in the Special Leave Application, refusal on his part to grant such certificate to the appellant without any justifiable reason tantamounts to a discriminatory treatment meted out to the appellant which on the fact of it is violative of Article 14 of the Constitution of India. In view of our conclusion, as aforesaid, we have no doubt in our mind that the order of Respondent No. 2 refusing to grant certificate to the appellant is liable to be struck down and the High Court also committed serious error in rejecting the writ petition filed by the appellant."
17. This is the first judgment of the Supreme Court which was delivered by a Bench of two Judges. Thereafter another matter came before the Supreme Court in Faridabad CT. Scan Centre v. D.G. Health Services & Ors. . This judgment was delivered by a Bench of three Judges of the Supreme Court. Whereas the earlier case referred to above was decided on 17-12-1996, this case was decided on 15-9-1997. This judgment reviewed the earlier judgment. Earlier a Special Leave Petition was dismissed by a Bench of two Judges on 16-12-1996. Later on it was found that another Bench of two Judges in a similar matter Mediwell Hospital & Health Care Pvt. Ltd. v. Union of India & Ors. (1st supra) had taken a different view in the matter. Therefore, the order dismissing the Special Leave Petitioner was recalled and the reasons were given in an order dated 8-8-1997 by a Bench of two Judges. The reasons were, "After we had dismissed S.L.P. (C) No. 23964 of 1996 on 16-12-1996, another 2-Judge Bench appears to have granted relief in a similar matter which may give impression that the view taken therein is different. It is, therefore, appropriate that the possible ambiguity or uncertainty on the question of law should be removed by judgment of a 3 Judge Bench. We, therefore, recall our order dated 16-12-1996 dismissing the special leave petition and direct that the Special Leave Petition be listed for hearing before a 3-Judge Bench. The papers be placed before the Hon'ble C.J.I, for constituting the Bench."
18. Thereafter the matter came up before a Bench of three Judges. The 3-Judge Bench considered the matter and observed that in the earlier case Mediwell Hospital & Health Care Pvt. Ltd. v. Union of India & Ors. although the Supreme Court had come to the conclusion that the Diagnostic Centres were not entitled to any exemption, but had granted the relief on the ground that several other individual diagnostic centres not attached to any hospital and been granted such an exemption. The 3-Judge Bench of the Supreme Court did not approve the view and in para-3 of the Judgment said, "We fail to see how Article 14 can be attracted in cases where wrong orders are issued in favour of others. Wrong orders cannot be perpetuated with the help of Article 14 on the basis that such wrong orders were earlier passed in favour of some other persons and, therefore, there will be discrimination against others if correct orders are passed against them. In fact, in the case of Union of India (Railway Board) & Ors. v. J. V. Subhaiah and Ors. , the same Learned Judge in his judgment has observed in para 21 that the principle of equality enshrined under Article 14 does not apply when the order relied upon in unsustainable in law and is illegal. Such an order cannot form the basis for holding that other employees are discriminated against under Article 14. The benefit of the exemption notification, in the present case, cannot, therefore, be extended to the petitioner on the ground that such benefit has been wrongly extended to others. With respect, the decision in Mediwell Hospital (supra) does not lay down the correct law on this point."
19. The Respondents have further relied on the judgments viz., Medical Relief Society of South Kanara v. Union of India 1999 (111) E.L.T. 327 (Kar.), Peoples Union for Civil Liberties, New Delhi v. Union of India & Ors. C.W.P. No. 409 of 1996 (Delhi High Court), CT Scan Research Centre Pvt. Ltd v. Director General of Health Services & Ors. C.W.P. No. 6164 of 1998 (Punjab & Haryana High Court), Chaparral Health Services Ltd. v. Union of India & Ors. W.P. No. 35286 of 200 & batch (Karnataka High Court) [2001 (130) E.L.T. 34 (Kar.)], Nilagiri Cancer Centre (P) Ltd., v. Director General of Health Services & Ors. W.P. No. 16050 of 1999 (Madras High Court) , and Commissioner of Customs (Import), Mumbai v. Jagdish Cancer & Research Centre - , but in view of the judgment of the 3-Judge Bench of the Supreme Court in Faridabad CT. Scan Centre v. D. G. Health Services & Ors. (2nd supra) the position is crystal clear and the matter is not res integra. The petitioners have referred to the judgments viz., K.P. Varghese v. I.T.O. (SC) -, India Extrusion v. Commr. of Comml. Taxes (A. P.) - , P.P.P. Industries v. Commissioner of Industries - (1994) 92 STC 110, and State of M.P. v. G.S. Dall & Floor Mills (SC) -, but we do not consider it appropriate to go through those judgments, since the controversy is squarely covered by the judgment of the Supreme Court referred to above.
For the reasons given hereinabove, all the writ petitions are dismissed. No order as to costs.