Case Note & Summary
The dispute arose from the refusal of the Director General of Health Services, Ministry of Health and Family Welfare, to grant a customs duty exemption certificate to the appellant, a private limited company running a modern heart institute and research centre at Chandigarh, for the import of specified hospital equipment. The appellant sought the certificate under Notification No. 64/88-Customs dated 1 March 1988, issued under Section 25(1) of the Customs Act, 1962, which exempted customs duty on hospital equipment imported by specified categories of charitable hospitals subject to certification that the import was essential for use in any hospital. The appellant had applied for a certificate to import a Marquette Case 15 stress test system, colour doppler, holter monitor recorder, and treadmill test machine. Initially, respondent no.2 issued a certificate dated 2 February 1993 for Marquette Max, but the appellant sought amendment to Marquette Case 15. When the equipment arrived on 22 March 1993, the appellant released it by furnishing a bank guarantee. The appellant then approached the Punjab and Haryana High Court in Writ Petition No. 10717 of 1993, which on 16 February 1994 directed respondent no.2 to decide the application within ten weeks and restrained encashment of the bank guarantee. Respondent no.3 recommended grant of the exemption certificate on 12 August 1994 after due enquiry, but respondent no.2 refused by order dated 26 December 1994. The appellant then filed Writ Petition No. 1310 of 1995, which the High Court dismissed on 31 January 1996, holding that the appellant was merely running a diagnostic centre and not a hospital, and that it was a commercial venture not satisfying the notification conditions. The appellant appealed to the Supreme Court by special leave. The Supreme Court considered three questions: whether a diagnostic centre was entitled to the certificate; whether there was discriminatory treatment; and whether the appellant complied with pre-conditions. The appellant argued that the expression 'hospital' in the notification included diagnostic centre, that all pre-conditions were satisfied, and that similar diagnostic centres had been granted exemption, making the refusal arbitrary and violative of Article 14. The Union of India contended that a diagnostic centre did not come within the notification and that obligations were not carried out. The Court examined the notification and noted that its Explanation defined 'hospital' to include any institution, centre, trust, society, association, laboratory, clinic and maternity home rendering medical, surgical or diagnostic treatment. It held that a diagnostic centre fell within this inclusive definition and that the appellant was entitled to the exemption certificate. The Court further found that the respondents had not denied the allegation of similar centres being granted exemption, and the refusal was therefore arbitrary and discriminatory. It also found that the appellant had satisfied the pre-conditions, as respondent no.3 had recommended grant. Accordingly, the Supreme Court allowed the appeal, set aside the High Court order, and directed respondent no.2 to issue the exemption certificate.
Headnote
A) Customs Law - Exemption Notification - Definition of Hospital - Customs Act, 1962, Section 25(1), Notification No. 64/88-Customs - The notification exempted customs duty on import of hospital equipment subject to certification, and its explanation defined 'hospital' to include any institution, centre, trust, society, association, laboratory, clinic and maternity home rendering medical, surgical or diagnostic treatment. The court held that a diagnostic centre rendering diagnostic treatment fell within the inclusive definition and was entitled to seek the exemption certificate. Held that the expression 'hospital' includes a diagnostic centre (Paras Not mentioned). B) Constitutional Law - Article 14 - Arbitrary Discrimination - Constitution of India, Article 14 - The appellant alleged that similar diagnostic centres were granted exemption certificates while its application was refused, and the respondents did not deny or rebut this allegation. The court held that such refusal without reasonable nexus was arbitrary and violative of Article 14 of the Constitution. Held that discriminatory refusal entitled the appellant to relief (Paras Not mentioned). C) Customs Law - Exemption Conditions - Compliance with Pre-conditions - Customs Act, 1962, Section 25(1), Notification No. 64/88-Customs - The court examined whether the appellant satisfied the conditions in the notification, including certification and use of equipment in a hospital. It noted that respondent no.3 had recommended grant after due enquiry and that the conditions were met. The refusal by respondent no.2 was therefore unjustified. Held that the appellant was entitled to issuance of the exemption certificate (Paras Not mentioned).
Issue of Consideration
Whether a diagnostic centre is entitled to seek issuance of a certificate to enable it to import equipments without payment of customs duty under Notification No. 64/88-Customs; Whether there was discriminatory treatment between the appellant and similarly situated persons in the absence of any denial by the respondents; Whether the appellant complied with all pre-conditions stipulated in the exemption notification for being entitled to the certificate.
Final Decision
The Supreme Court allowed the appeal, set aside the High Court order, and directed respondent no.2 to issue the exemption certificate for import of the equipment.
Law Points
- Exemption notifications under Section 25 of the Customs Act
- 1962 must be construed in the context of their object
- Definition of 'hospital' in Notification No. 64/88-Customs includes diagnostic centres rendering diagnostic treatment
- Claimant must prove compliance with all pre-conditions in exemption notification
- Arbitrary denial of exemption to similarly situated persons violates Article 14 of the Constitution
- Writ of mandamus may issue where refusal is arbitrary and discriminatory.
