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24.09.2010

1. The challenge in this writ petition is to an order dated 20th November 2000 passed by the Directorate General of Health Services (`DGHS‟) (MG Section) withdrawing the Customs Duty Exemption Certificate (`CDEC‟) issued to the Petitioner for the import of medical equipments and spare parts in terms of a Notification No. 64/88 dated 1st March 1988 issued by the Ministry of Finance, Government of India.

Facts

2. The Petitioner, which is a unit of R.G. Stone Enterprises Pvt. Ltd., is a hospital with indoor patient facilities and total bed strength of 17 beds. On 20th January 1987, the Petitioner‟s predecessor-in-interest, i.e. the Delhi Urological Institute and Research Centre (DUIRC) was issued an import licence for importing one Lithostar Universal Urological Workstation for therapy and diagnostics and one Ultrasound Sonolines. On 19th April 1987, DUIRC applied for a CDEC for import of two equipments, i.e., one Lithotriptor and one ultrasound equipment. On 27th June 1988, the DGHS issued a CDEC in respect of the Lithostar Universal Urological Workstation in favour of DUIRC. On 3rd January 1989, CDEC was granted to DUIRC for the spare parts with respect to the above equipments.

Analysis of Mediwell Hospital and the later Supreme Court decisions

31. This brings us to the decisions of the Supreme Court, beginning with the Mediwell Hospital case, on whether the obligation under Notification No. 64/88 continues indefinitely and, in any event, even after the repeal of the said notification.

32. The facts in the Mediwell Hospital case, a judgment delivered by a Bench of two learned Judges of the Supreme Court, were that the Mediwell Hospital & Health Care Pvt. Ltd established a Modern Heart Institute and Research Centre. It obtained a CDEC from the DGHS in respect of certain sophisticated hospital equipments. When it applied for amendment in the CDEC on the ground that it was granted the CDEC for equipments other than what was imported by it, the DGHS refused to grant CDEC for Marquette Case 15 (the equipment imported in that case). In the meanwhile, the equipment was imported and was allowed to be cleared by the Customs Authority upon the Mediwell furnishing a bank guarantee. The High Court of Punjab and Haryana held that Mediwell was merely running a Diagnostic Centre and not a hospital and, therefore, was not covered by the Notification No. 64/88. In allowing Mediwell‟s appeal, the three issues were addressed by the Supreme Court as is apparent from para 7 of the judgment (SCC@ p.

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 by the Respondent No. 2 for import of the equipment in question without payment of customs duty."

33. What is relevant, as far as the present case is concerned, is the answer to Question No. 3. The Supreme Court observed that while Mediwell was entitled to get the CDEC from the DGHS, "the very notification granting exemption must be construed to cast continuing obligation on the part of all those who have obtained the certificate from the appropriate authority and on the basis of that have imported equipments without payment of customs duty to give free treatment at least to 40 per cent of the outdoor patients as well as give free treatment to all the indoor patients belonging to the families with an income of less than Rs. 500 per month." The Supreme Court required the competent authority to "continue to be vigilant and check whether the undertakings given by the applicants are being duly complied with after getting the benefit of the exemption notification and importing the equipment without payment of customs duty." It was consequently held that if upon enquiry the authority was satisfied that the said obligation was not being carried out "then it would be fully open to the authority to ask the persons who have availed of the benefit of exemption to pay the duty payable in respect of the equipments which have been imported without payment of customs duty." All the above observations were made in para 13 of the judgment (SCC@ p.766). In para 14, a direction was given that all the persons, including Mediwell, who had the benefit of the CDECs "should notify in the local newspaper every month the total number of patients they have treated and whether 40% of them are the indigent persons below stipulated income of ` 500/- per month full particulars and address thereof which would ensure that the condition to treat 40% of the patients free of cost would continuously be fulfilled." In the event of default, it was directed that coercive official action should be undertaken, and that the above condition should become part of the CDEC itself. Subject to the fulfillment of the above conditions, as set out in paras 13 and 14 of the judgment (SCC@ p.766-767), the judgment of the High Court was set aside and the DGHS was directed to reconsider the case of Mediwell and issue the necessary CDECs within a period of three months.

34. Thereafter, the writ petition filed by the PUCL in this Court was heard and a detailed order was passed on 2nd May 2003 by a Division Bench of this Court. After examining the report of the Member (Customs), Central Board of Excise and Customs („CBEC‟) it was noted that so far as the DGHS was concerned, "396 cases were examined. In respect of 386 institutions/hospitals CDEC has either been withdrawn or cancelled."

35. In the meanwhile, within nine months of the decision in Mediwell Hospital case, the issue was again examined by a three Judge Bench of the Supreme Court in Faridabad CT. Scan Centre v. D.G. Health Services. The Petitioner was aggrieved by the denial of the CDEC and cited the cases of certain others similarly placed who had been granted such CDECs. Reliance was placed on the observations made in para 10 of the Mediwell Hospital case that a diagnostic centre run by a private individual purely on commercial basis may not be entitled to exemption under the notification issued by the Central Government. It was noticed in Faridabad CT. Scan Centre that despite the above observations made in the Mediwell Hospital case, Mediwell had been granted on the ground that several other individual diagnostic centres not attached to any hospital had been granted the exemption and that denial of such CDEC to Mediwell would be violative of Article 14 of the Constitution. The three-Judge Bench disagreed with the above view expressed in the Mediwell Hospital case. It explained that the principle of equality under Article 14 did not apply when the order relied upon was unsustainable in law and illegal. It was held that "the decision in Mediwell Hospital does not lay down the correct law on this point." (emphasis supplied)