IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No.5807 of 2004 For Approval and Signature:
HONOURABLE MS. JUSTICE HARSHA DEVANI HONOURABLE MR. JUSTICE R.M.CHHAYA ========================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment?
2 To be referred to the Reporter or not?
3 Whether their Lordships wish to see the fair copy of the judgment?
Whether this case involves a substantial question of law as 4 to the interpretation of the constitution of India, 1950 or any order made thereunder?
5 Whether it is to be circulated to the civil judge?
========================================= GUJARAT METHODIST CHURCH CARDIOTHORACIC AND VASCULAR - Petitioner(s) Versus UNION OF INDIA & 2 - Respondent(s) ========================================= Appearance:
MR MITUL K SHELAT for Petitioner(s): 1, SERVED BY RPAD - (R) for Respondent(s): 1, MRS VASAVDATTA BHATT for Respondent(s): 1 - 3.
========================================= CORAM : HONOURABLE MS. JUSTICE HARSHA DEVANI and HONOURABLE MR. JUSTICE R.M.CHHAYA Date : 20/07/2012 CAV JUDGMENT (Per : HONOURABLE MS. JUSTICE HARSHA DEVANI)
1. The facts of the case as appearing in the petition are that the petitioner is a public charitable trust duly registered under the provisions of the Bombay Public Trusts Act and is also a society registered under the Societies Registration Act. The society is approved by the Government of India as eligible to receive gift supplies under Indo-U.S. agreement. Since it was felt that there was a necessity for establishing a State of the Art Hospital in Gujarat encompassing research and latest surgical and operation techniques and procedures to cater to all persons, irrespective of caste, creed or economic criteria, a project was mooted to set up such a hospital at Nadiad, which was established, interalia by donation of acres of land by the Methodist Church and trust fund of Shri Dharamsinh Desai Foundation, corporate bodies and well-wishers. The hospital was named as Dharamsinh Desai Memorial Methodist Institute of Cardiology and Cardio-vascular Surgery. For the purpose of the hospital, the petitioner imported Cardiac Catherisation Laboratory from Siemens, Germany which was used for coronary angiography as well as for angioplasty. It is used to diagnose heart defects, to take blood samples and pressure readings from different parts of the heart and for imagination of coronary arteries, heart chambers, and major blood vessels and also for treatment purposes like Balloon Valvuloplasty etc.
2. By its letter dated 18th March, 1994, the second respondent granted Customs Duty exemption certificate for import of the aforesaid equipment. Accordingly, the equipment was duly imported and cleared without payment of duty in accordance with the exemption granted under Customs Notification No.64/1988 dated 1st March, 1988. Though the date of arrival of the subject equipment at Bombay Port was 9th September, 1993, it was cleared and brought to Nadiad much later. On account of non-receipt of structural plans necessary for installation from Bombay and Germany, there was a delay in setting up the equipment. There was further delay in setting up peripheral facilities like air-conditioning, electrical fittings etc. and the delay by the Company itself, that is, three months for carrying out its actual installation, the subject equipment became operational on 28th March, 1996. It is the case of the petitioner that insofar as the hospital was concerned, the Out Patient Department was started on a limited basis in January, 1995 and was extended since April, 1995 and the hospital started functioning on full-fledged basis from January, 1997.
3. On 22nd January, 1998, the Assistant Commissioner, Ahmedabad effected seizure of the subject equipment without any intimation whatsoever. The petitioner was, therefore, constrained to move a writ petition before this court being Special Civil Application No.1181/1998 for lifting the seizure of the equipments. The said petition came to be disposed of in view of the stand of the authorities that there was no bar on utilisation of the equipment. The duty exemption certificate dated 18th March, 1994 was granted on the basis that the hospital fell within Item No.4 of the table to the Notification, being a hospital in the process of being established, which when functioning would be relatable to a hospital specified in para 1, 2 or 3 of the said table. It appears that initially the petitioner had indicated that it would be governed by para 2 which covered hospitals run for private medical, surgical or diagnostic treatment without any distinction of caste, creed, religion or language and free on an average to at least 40% of outdoor patients and free to indoor patients of families with income of less than Rs.500/- per month. However, since the petitioner thereafter realised that the hospital would also fall within para 1 of the table, being hospital run or substantially aided by charitable organisation as approved from time to time by the Ministry of Health and Family Welfare, on 6th February, 1998, the petitioner applied for an approval of the hospital under Category-1 of the Notification. During the pendency of the aforesaid application, a show-cause notice cum duty demand notice dated 19th February, 1998 came to be issued by the Commissioner of Customs (Import) (the third respondent herein) on the ground that the installation and hospital running certificate had not been submitted by the petitioner and that it was not providing free treatment on an average to at least 40% of the outdoor patients. The petitioner gave reply to the show-cause notice on 22nd March, 1998 contesting the factual foundations alleged in the show-cause notice. On 5th March, 1998, the petitioner applied to the second respondent through the Director of Health Services, Government of Gujarat for issuance of Installation Certificate as postulated in the notification. In response to the said application, by letter dated 20th May, 1998, the second respondent called upon the petitioner to furnish information to enable it to exempt the case. The petitioner furnished all the relevant data regarding the importation, installation and working of the subject equipment by its letter dated 1st June, 1998. The Government of Gujarat after due verification also recommended the grant of installation certificate to the petitioner by its letter dated 21st July, 1998. The petitioner has thereafter continued to operate the subject equipment. It is the case of the petitioner that the hospital has been organising regular medical camps wherein it is providing free medical facilities. The details regarding the number of camps organized as well as the number of patients provided treatment therein in the last five years, have been set out in a table which has been annexed alongwith the petition. The hospital has undertaken 1200 open heart surgeries, 2400 angiography, 300 Balloon Pulmonary Valvuloplasty and 90 permanent Pacemakers up to April, 2004 and maintains scrupulous records which can be easily verified by the authorities.
4. By a letter dated 25th January, 1999, the second respondent rejected the application for issuance of Installation Certificate and simultaneously withdrew the Customs Duty Exemption Certificate issued for the subject equipment with effect from the date of issuance thereof, that is, 8th March, 1994. The petitioner challenged the said letter dated 25th January, 1999 by filing a writ petition before this court being Special Civil Application No.1192/1999. During the pendency of the said writ petition, the order dated 25th January, 1999 came to be stayed. Subsequently, a letter dated 3rd March, 1999 of the Commissioner of Customs came to be served on the petitioner that the request for issuance of Installation Certificate has been rejected. The petitioner also received a notice for adjudication of the show-cause notice. The petitioner, therefore, moved Civil Application No.2848/1999 in the above referred writ petition wherein the proceedings pursuant to the show-cause notice came to be stayed by an order dated 1st April, 1999. In view of the fact that the application dated 6th February, 1998 made by the petitioner for certificate under Category-1 of the Import Notification had not been processed, the petitioner moved an application being Civil Application No.11024/2000 in Special Civil Application No.1192/1999. By a judgment and order dated 16th July, 2003, the petition came to be allowed and the impugned order came to be quashed and set aside with a direction to the second respondent to consider the application of the petitioner for issuance of installation certificate and taking appropriate decision thereon within two months thereof. Pursuant to the said decision, the second respondent served a notice dated 9th October, 2003 on the petitioner calling upon it to show cause as to why eligibility of the institution could not be considered only under Category-2 of the Customs Notification No.64/1988. The petitioner gave its reply to the show-cause notice on 20th October, 2003 contesting the factual foundations alleged in the notice and also submitted various documents in support of its contention. By an order dated 26th March, 2004, the second respondent rejected the request of the petitioner to categorise it under Category-1 of the Customs Notification No.64/1988 and for issuance of installation certificate. Under the said order, the Customs Duty Exemption Certificate issued for the subject equipment on 18th March, 1994 was also withdrawn on the ground that since the petitioner was a Category-4 institution at the time it had applied for exemption, when it starts functioning, it had to relate to Category-2 as per the undertaking given by it and that the petitioner had failed to substantiate fulfilment of the conditions stipulated under Category-2 within two years from the date of issuance of the certificate. Apprehending that on the basis of the cancellation certificate, the third respondent was proceeding to adjudicate the show-cause notice dated 19th February, 1998 and confirm the demand raised therein without further notice to the petitioner, the petitioner has filed the present writ petition under Articles 226 and 227 of the Constitution of India, challenging the order dated 26th March, 2004 passed by the second respondent as well as seeking a direction to the said respondent to grant a certificate to the effect that the subject equipment has been installed in the hospital and that such hospital has started functioning and to categorise the petitioner under category 1 of the Customs Notification No.64 of 1988 dated 1st March, 1988.
5. In response to the averments made in the petition, an affidavit dated 1st October, 2004 has been made by one Dr. Jai Karan, son of Shri Ram Baran. However, in the entire affidavit, the designation of the said person is not stated nor is it anywhere stated as to on behalf of which respondent, the affidavit-in-reply has been filed.
6. Mr. Mitul Shelat, learned advocate appearing on behalf of the petitioner invited the attention of the court to the General Exemption No.104B whereby exemption to hospital equipments imported by specified category of hospitals (charitable) subject to certification from DGHS is provided for. Reference was made to the table below the said notification to point out that initially, when a hospital is in the process of being established, it has to be certified under Category-4 therein namely, any such hospital which is in the process of being established and in respect of which the Ministry of Health and Family Welfare is of the opinion that the factors enumerated thereunder are satisfied. Inviting attention to clause (iv) of para 4, it was pointed out that such hospital when starts functioning would be relatable to a hospital specified in paragraphs 1, 2 or 3 of the table. Under the circumstances, till the hospital starts functioning, it is not possible to ascertain as to whether the hospital would be relatable to a hospital specified in paragraphs 1, 2 or 3 of the table. It was submitted that initially the petitioner had indicated that it would be covered by paragraph 2 of the said notification. However, subsequently by its application dated 6th February, 1998, the petitioner had applied for categorisation under Category-1 of the notification. Reference was made to the judgment and order dated 16th July, 2003 passed by this court in Special Civil Application No.1192/1999 to point out that the court had specifically held that in the impugned order, the respondent No.2 had proceeded on the footing that the hospital of the petitioner falls in Category 2 of the hospitals mentioned in the table to which the conditions incorporated in Clause (1), (b) and (c) were applicable and which did not apply to a hospital falling under Category-1 or even to a hospital which was in the process of establishment which when it starts functioning would fall in Category 1. If such opportunity was given, the petitioner could have pleaded before the concerned authority its case that it was a hospital falling in Category-1 and that even the hospital which was in the process of establishment and which fell under Category-4 was, when it starts functioning, to be run in the manner contemplated in Category- 1, and was a hospital of such nature and that the conditions of free treatment did not apply to these categories. It was pointed out that the court had specifically observed that the respondent authority had without considering the significance of the categorisation of hospitals and the effect of clause (iv) of Category-4 read with Category-1 straightaway proceeded to consider the matter in light of the conditions which were attached to the hospitals falling in Category-2. The court accordingly held that the impugned order is passed without proper application of mind to the contents of the exemption notification and quashed the said order with a direction to the second respondent to reconsider the application of the petitioner for issuance of installation certificate and to take appropriate decision thereon. It was emphatically argued that despite the specific findings of the court, the said authority has, in complete disregard of the same, proceeded to pass the impugned order on the very same ground.
6.1 Inviting attention to the impugned order, it was pointed out that the petitioner's application came to be rejected on the ground that the petitioner did not fulfill the condition prescribed in Category-2 and that the equipment was installed and made functional only on 28th March, 1998 four years after issuance of CDEC whereas it should have installed the equipment and started fulfilling the conditions under Category-2 in two years' time. It was submitted that insofar as the ground that the petitioner ought to have fulfilled the conditions in two years is concerned, no such condition is stipulated in the notification. The reference to two years relates to the opinion of the Ministry of Health and Family Welfare that such hospital would be in a position to start functioning within a period of two years, but there is no mandate that it should start functioning within the said two years. It was submitted that it is obvious that establishing a hospital, more particularly with the aid of charity can never be undertaken with a clock work precision and unavoidable delay would not be a factor for denying exemption to such hospital.
6.2 Next, it was submitted that the ground that the percentage of patients treated for the year 1995-96 and 1996-
97 was 34.31% and 12.60% below the minimum stipulated percentage under the notification proceeds on a misreading of the said notification. From the record, it is apparent that the total number of patients treated in the outpatient department by the hospital is 45%, which is more than the required percentage of 40% in the notification. However, the authorities have refused to consider the data of the subsequent period, that is, up to the year 2004 which clearly demonstrates the factum regarding the work undertaken by the petitioner on charity basis. It was submitted that the custom duty exemption certificate cannot be withdrawn in April, 2004 on the alleged figures of 1995-96. According to the learned counsel, the petitioner was in the process of establishing a unit, named Dharamsinh Desai Memorial Methodist Institute of Cardiology and Cardiovascular Research, through two registered societies and trusts, namely, - Gujarat Methodist Church Cardio Thoracic and Vascular Research Society and both are charitable trusts and accordingly registered with the proper authorities. This means that the activity carried out by the petitioner is of a hospital which is run or substantially aided by charitable organisation, which may be approved by the concerned authority. This being the position, the hospital of the petitioner falls under Category-1 of the table appended to Notification No.64/1988. It was submitted that assuming without admitting that the petitioner has failed to provide free services to at least 40% of its outdoor patients and that it has failed to provide 10% beds for indoor patients of specified low income, but the duty is not demandable on the equipment in question inasmuch as the said conditions are applicable to the hospitals falling within Category-2 whereas the case of the petitioner is likely to be covered under Category-1 of the table. It was urged that in the light of the fact that the case of the petitioner is initiated under Category-4 of the table, the concerned Ministry has yet to decide that out of the three categories, under which category, the hospital would fall.
6.3 The learned counsel further invited the attention of the court to the show-cause notice issued by the second respondent and more particularly the last ground stated therein namely, that as per the records, neither the hospital run by M/s. Gujarat Methodist Church Cardio Thoracic and Vascular Research Society, Nadiad was certified by MOHFW nor M/s. Gujarat Methodist Church Cardio Thoracic and Vascular Research Society, Nadiad was approved as a charitable organisation by MOHFW to run such hospitals at that point of time. It was submitted that if at the relevant point of time when the exemption certificate was sought for, the hospital in question was a hospital in terms of the ground raised by the second respondent, the certificate issued by the second respondent to the petitioner would have been under Category- 1 and not Category-4. It was submitted that in cases where a hospital falls under Category-4, it is only subsequent thereto, that the second respondent is required to apply his mind to the facts of the case and decide as to whether the hospital would fall under Category 1, 2 or 3. By the impugned order dated 26th March, 2004, the request of the petitioner to categorise it under Category-1 of the Customs Notification No.64/1988 and for issuance of installation certificate is rejected and the CDECs issued under Category-4 of the said Notification are also withdrawn.
6.4 Reliance was placed upon the decision of the Supreme Court in the case of Share Medical Care vs. Union of India and Others, (2007) 4 SCC 573 wherein the Supreme Court had held that it was incumbent upon the Deputy Director General (Medical), DGHS to consider the application of the appellant on merits and rejection of application only on the ground that the appellant had earlier applied under Category-2 and, therefore, it was not open to it to apply under Category-3 and the application was not tenable, was illegal and contrary to law. It was submitted that the impugned order flies in the face of the above referred decision of the Supreme Court. Reliance was also placed upon the decision of the Supreme Court in the case of Faridabad CT. Scan Centre vs. D.G. Health Services and others, (1997) 7 SCC 752, to submit that the decision of the Supreme Court in Mediwell Hospital & Health Care (P) Ltd. vs. Union of India, (1997) 1 SCC 759 has been held to not lay down the correct law. The decision of the Supreme Court in the case of Comptroller and Auditor General of India vs. K.S. Jagannathan, (1980) 2 SCC 679, was relied upon for the proposition that in exercise of its jurisdiction under Article 226, the High Court can issue a writ of mandamus or a writ in the nature of mandamus or pass orders and give directions to compel the performance in a proper and lawful manner of the discretion conferred upon the government or a public authority, and in a proper case, in order to prevent injustice resulting to the concerned parties, the court may itself pass an order or give directions which the government or the public authority should have passed or given had it properly and lawfully exercised its discretion. It was, accordingly, urged that this court may pass appropriate orders which otherwise ought to have been passed by the Government or the concerned public authority.
7. Opposing the petition, Mrs. Vasavdutta Bhatt, learned standing counsel for the respondents placed reliance upon the averment made in the affidavit-in-reply filed on behalf of the respondents. It was submitted that the issue before the Government is regarding fulfilment of the conditions prescribed under Category-2. According to the learned counsel categorisation under Category-1 is applicable to institutions as may be certified by the Ministry of Health and Family Welfare to be run substantially aided by such charitable organisation as may be approved from time to time by the said Ministry, whereas, the petitioner hospital was neither run nor aided by any charitable organisation approved by the Ministry nor was it certified by the Ministry to this extent. It was argued that for issuance of installation certificate, the following two conditions are required to be fulfilled. Firstly, such hospital equipment should have been installed in the hospital and secondly, that such hospital should have started functioning. It was submitted that being a Category-4 institution, when it started functioning the petitioner institution had to relate to Category-2 in terms of the undertaking given by it and hence, the issuance of installation certificate is linked to fulfillment of conditions under Category-2. It was emphatically argued that the petitioner's hospital's case was only to be considered under Category-2 of the Customs Notification in view of the above facts and that despite the fact that the petitioner hospital was given ample opportunities to substantiate and to produce records to substantiate fulfillment of the conditions stipulated under Category- 2 of the Notification, the petitioner had failed to comply with the same.
7.1 Reliance was placed upon the decision of the Supreme Court in the case of Mediwell Hospital & Health Care Pvt. Ltd. vs. Union of India (supra), wherein it has been held that once an institution is a beneficiary under the exemption Notification No.64/1988-Cus., there is a continuing onus on the part of the beneficiary to fulfill the conditions. It was, accordingly, submitted that the request of the petitioner institution to categorise it under Category-1 of the Customs Notification No.64/1988 and for issuance of installation certificate was rejected and CDECs issued under Category-3 of the said notification were withdrawn by the impugned order in the light of the aforesaid facts. It was submitted that the respondent had acted strictly in terms of the observation of the Supreme Court in the case of Mediwell Hospital & Health Care Pvt. Ltd. vs. Union of India (supra) and that the institution was not found to be fulfilling the import conditions, and hence, the benefit of the exemption notification had rightly been withdrawn by the impugned order.
7.2 Next it was submitted that pursuant to the directions issued by this court vide its order dated 6th July, 2003, the case of the petitioner has been duly considered and disposed of and thus the action of the respondents is legal and sustainable in law. It was reiterated that the petitioner institution has given an undertaking certifying that the hospital when it starts functioning, will be relatable to a hospital covered under Category-2 under Customs Notification No.64/1988 and that categorisation under Category-1 is applicable to institutions as may be certified by the Ministry of Health and Family Welfare to be run substantially aided by such charitable organisation as may be approved, which condition is not satisfied by the petitioner institution. Insofar as the question of installation certificate is concerned, the learned advocate submitted that the equipment for which CDEC was issued was installed and made functional only on 28th March, 1998, that is, after four years of issuance of the CDEC, whereas it should have been installed and started fulfilling the conditions under Category-2 within two years' time as per the terms and conditions of the Notification No.64/1988. It was, accordingly, urged that the impugned order passed by the second respondent is just, proper and legal and does not warrant interference by this court.
8. From the facts noted hereinabove, it is apparent that the petitioner had sought exemption from payment of customs duty in respect of Cardiac Catherisation Laboratory from Siemens, Germany imported by it for the purposes of its hospital. Pursuant to the said application, the second respondent certified that the hospital equipment in respect of which the exemption from payment of customs duty was claimed by the petitioner is necessary for running or maintenance of the hospital in terms of Ministry of Finance's (Department of Revenue) Notification No.64/1988-Cus. dated 1st March, 1988 and that the hospital falls in Category-4 of the table annexed to the said notification. Since the installation certificate was not produced as per the undertaking given by the petitioner at the time of getting the equipment cleared without payment of customs duty on the strength of the exemption certificate, the third respondent – Commissioner of Customs (Import) issued a show-cause notice cum demand notice requiring the petitioner to show cause as to why customs duty of Rs.66,26,949/- should not be demanded and confirmed under section 28(1) of the Customs Act, 1962 and the equipment in question should not be confiscated under section 111(o) of the Customs Act, on the ground that the installation and hospital running certificate had not been submitted by the petitioner, and that it was not providing free treatment on an average to at least 40% of the outdoor patients. The petitioner contested the notice by filing its reply and at the same time, made an application dated 5th March, 1998 to the second respondent for issuance of installation certificate, as postulated in the notification. However, the said application came to be rejected on 25th January, 1999 by the second respondent, who simultaneously also withdrew the customs duty exemption certificate which was issued on 18th March, 1994. The aforesaid order came to be challenged before this court by way of a writ petition being Special Civil Application No.1192/1999. The said petition came to be allowed by quashing the order impugned therein and directing the second respondent to reconsider the application of the petitioner for issuance of installation certificate and to take an appropriate decision thereon in accordance with law. In the said decision, this court held as follows:-
“7. It is clear on a plain reading of the aforesaid notification that mere mention of Category-4 in the exemption certificate did not preclude consideration of the question whether the hospital in the process of establishment to which Category-4 applied would when it starts functioning become a hospital of the type falling in Category 1, 2 or 3 of the Table. In other words, it was open for the petitioner to show that when the hospital which was in the process of being established would when it starts functioning become a hospital run or substantially aided by a charitable organisation. The notification shows that if the hospitals fall in Category-1 of hospitals named in the Table, the conditions which were attached to the hospitals falling in Category-2 were not attracted. In other words, if it was specified by the agency that hospital was run or substantially aided by a charitable organisation as may be approved from time to time by the Ministry, then to such hospital, the requirement of free treatment envisaged in Clauses (a) and (b) of the Table did not apply, because, no condition is attached to the hospitals which are mentioned in Category-1 of the Table. A hospital falling in Category-4 was required to satisfy the conditions mentioned therein which included the condition to the effect that when it starts functioning it would be relatable to meaning thereby that it will be of the nature or a hospital specified in paragraphs 1, 2 or 3 of the Table. In other words, if the hospital which is in the process of being established was not to be relatable to category of a hospital specified in paragraphs 1, 2 or 3 of the Table, it would not get the benefit of exemption. Such a condition which was peculiar to hospital which is in the process of being established falling in Category-4 did not have the effect of adding the conditions meant for the hospitals covered in Categories 1, 2 or 3 automatically applicable to it. Each category had its own conditions and conditions applicable to one did not apply to the other. Therefore, also, the conditions of Category-2 could not be read in Category-4 for which the exemption certificate was granted to the petitioner. A hospital to which Category-4 relates was yet in the process of being established, and for getting the benefit of exemption, it should become a hospital of the type of hospital that fall in Categories 1, 2 or 3, when it starts functioning. The idea underlying Category-4 appears to be to encourage bringing into existence of new hospitals of the nature falling in Categories 1, 2 or 3.
8. It appears from the record that the respondent no.2 has made the impugned order without affording any opportunity of being heard to the petitioner. The exemption certificate which was issued under the said notification on 18.3.'94 in favour of the petitioner created valuable rights and before withdrawing the exemption benefit, it was incumbent upon the respondent no.2 to give an opportunity to the petitioner against the proposed action, which admittedly was not given. In fact, from the impugned order, it appears that the respondent no.2 had proceeded on the footing that the hospital of the petitioner falls in Category-2 of hospitals mentioned in the Table to which the conditions incorporated in the Clauses (1), (b) and (c) were applicable and which did not apply to a hospital falling under Category-1 or even to a hospital which was in the process of establishment which when it starts functioning would fall in Category-1. If such opportunity was given, the petitioner could have pleaded before the concerned authority its case that it was a hospital falling in Category-1 and that even the hospital which was in the process of establishment and which fell under Category-4 was, when it starts functioning, to be run in the manner contemplated in Category-1, and was a hospital of such nature and that the conditions of free treatment did not apply to these categories.
9. We are not going into the factual question as to whether the petitioner's hospital actually fell in one category or the other, but we are only pointing out that the respondent-authority has, without considering the significance of the categorisation of hospitals and the effect of clause (iv) of Category-4 read with Category-1, straightaway proceeded to consider the matter in light of the conditions which were attached to the hospitals falling in Category-2. The impugned order is, in our opinion, passed without proper application of mind to the contents of the exemption notification and has been made without giving any opportunity of being heard to the petitioner against the denial of the installation certificate which had a nexus only with the installation of the equipment and the running of the hospital, and against withdrawal of the Duty Exemption Certificate, rendering it illegal and void.”
Pursuant thereto, the second respondent issued a show-cause notice dated 7th October, 2003 calling upon the petitioner to show cause as to why the eligibility of the institution could not be considered only under Category-2 of the Customs Notification No.64/1988. It was further observed that the institution has already been found not fulfilling the obligations set under para 2 of the table annexed to the Customs Notification No.64/1988.
9. Before dealing with the rival contentions raised by the learned advocates for the respective parties, it would be necessary to briefly refer to the Exemption Notification in question in order to properly appreciate the scheme and the purpose underlying the same. The notification envisages exemption of all equipment, apparatus and appliances, including spare parts and accessories thereof, the import of which is approved either generally or in each case by the Government of India or by the Directorate General of Health Services as essential for use in any hospital specified in the table appended to the Notification. The table below the notification classifies hospitals in four different categories. Category-1 deals with hospitals certified by the Ministry of Health and Family Welfare as being run or substantially aided by such charitable organisation as may be approved from time to time by the said Ministry. Category-2 comprises hospitals, which may be certified by the Ministry of Health and Family Welfare in each case to be run for providing medical, surgical or diagnostic treatment without any distinction of caste, creed, race, religion or language and free on an average to at least 40% of the outdoor patients and also indoor patients with a family income of less than Rs.500/- per month. Category-3 includes hospitals which the Ministry of Health and Family Welfare may having regard to the treatment available therein or the geographical situation thereof, or the class of patients for whom such treatment is provided either generally or in each case certify that the hospital even though it makes a charge for the said treatment, is nevertheless run on non-profit basis and is deserving of exemption from the payment of duty on the import of hospital equipment, provided that the equipment so imported is received by way of free gift from a donor abroad or purchased out of the donations received in foreign exchange. The fourth and the only other category comprises hospitals, which are in the process of being established and in respect of which the Ministry of Health and Family Welfare is of the opinion that there is an appropriate programme for establishment of the hospital, that there are sufficient funds and other resources required for such establishment and that such hospital would start functioning within a period of two years and when it starts functioning, it would be relatable to a hospital specified in Categories 1, 2 or 3 referred to hereinabove.
10. Thus, insofar as the petitioner is concerned, it was granted exemption under the fourth category and as such, upon starting functioning, it was required to be relatable to a hospital specified in Category 1, 2 or 3.
11. As noted hereinabove, initially when the petitioner had filed an application for being placed in Category-1 of the table appended to the Notification No.64/1988, the second respondent had rejected the same on the ground that in the undertaking submitted by the petitioner it had chosen Category-2 and hence, the conditions applicable to Category-2 were applicable to the petitioner, which were not satisfied and had, accordingly, rejected the application. In the writ petition filed by the petitioner challenging the said order, this court by its judgment and order dated 16th July, 2003 has categorically held that the above referred notification shows that if hospitals fall in Category-1 of hospitals named in the table, the conditions which are attached to the hospitals falling in Category-2 are not attracted. In other words, if it was specified by the agency that hospital was run or substantially aided by charitable organisation as may be approved from time to time by the Ministry, then to such hospital, the requirement of free treatment envisaged in Clauses (a) and (b) of the table did not apply, because no condition is attached to the hospitals which are mentioned in Category-1 of the table. The court observed that the hospital falling in Category-4 was required to satisfy the conditions mentioned therein which included the condition to the effect that when it starts functioning, it would be relatable to, meaning thereby, that it will be of the nature or a hospital specified in paragraphs 1, 2 or 3 of the table. In other words, if the hospital which is in the process of being established was not to be relatable to a hospital specified in paragraphs 1, 2 or 3 of the table, it would not get the benefit of exemption. Such a condition which was peculiar to a hospital which is in the process of being established falling in Category-4 did not have the effect of adding the conditions meant for the hospitals covered in Categories 1, 2 or 3 automatically applicable to it. Each category had its own conditions and conditions applicable to one did not apply to the other. Therefore, the conditions of category-2 could not be read in Category-4 for which the exemption certificate was granted to the petitioner. A hospital to which Category-
4 relates was a hospital which was in the process of being established and for getting the benefit of exemption, it should become a hospital of the type of hospital that fall in Categories 1, 2 or 3, when it starts functioning. The idea underlying Category-4 appears to be to encourage bringing into existence of new hospitals of the nature falling in Categories 1, 2 or 3. The court held that the respondent authority has without considering the significance of categorisation of hospitals and the effect of clause (iv)) of Category-4 read with Category-1, straightaway proceeded to consider the matter in the light of the conditions which are attached to the hospitals falling in Category-2. It is in the light of the aforesaid findings recorded by it that this court had set aside the said order and directed the second respondent to consider the matter afresh.
12. It may be pertinent to note that pursuant to the aforesaid decision of this court, the second respondent issued a show-cause notice dated 7th October, 2003 on the following grounds:-
● At the time of application, the hospitals desiring to avail benefits under 64/88 cus notification, were given an opportunity to identify itself with one of the categories listed in para 1, 2, 3 of the table annexed to the notification.
● The institution gave an undertaking certifying that the hospital when starts functioning will be relatable to a hospital covered under category 2 under custom notification 64/88 cus.
● The State Govt certified that the hospital would fulfill the conditions stipulated under the chosen category.
● For category 4 institutions, certification for installation implies that the equipment has been installed, the hospital has started functioning and relatable to one of the categories specified in the table annexed to the notification.
● The issue of installation certificate cannot be delinked from the fulfillment of the conditions chosen by the applicant that is category 2.
● Categorisation under category 1 is applicable to institutions as may be certified by the Ministry of Health and Family Welfare (MOHFW), to be run substantially aided by such charitable organization as may be approved, from time to time, by the said MOHFW.
● As per records, neither the hospital run by M/s. Gujarat Methodist Church Cardio Thoracic & Vascular Research Society, Nadiad was certified by MOHFW nor M/s. Gujarat Methodist Church Cardio Thoracic & Vascular Research Society, Nadiad, was approved as a charitable organization by MOHFW to run such hospitals at that point of time.”
From the grounds stated hereinabove it is apparent that the fifth ground, namely, the issue of installation certificate cannot be delinked from the fulfillment of conditions chosen by the applicant, that is, category-2 is clearly in contravention of the judgment passed by this court wherein it has been specifically held that a hospital which is granted exemption under Category-4, upon starting functioning, can be placed in either Category-1, Category-2 or Category-3. Despite the specific finding recorded by this court, in the show-cause notice itself, the second respondent has stated that the issue of installation certificate cannot be delinked from the fulfillment of conditions chosen by the applicant, that is, category-2. In the impugned order dated 26th March, 2004, the second respondent has held as follows:-
“9. After examining the documents available on record, the following were observed:
● The CDEC was issued to the petitioner as a category 4 institution. Such a hospital when starts functioning has to relate to para 1, 2 or 3 of the table annexed to the notification.
● M/s. Gujarat Methodist Church Cardio Thoracic & Vascular Research Society, Nadiad gave an undertaking on a stamp paper that the hospital when starts functioning would be relatable to a hospital falling under category 2 of the notification 64/88 thereby inter alia fulfilling:
o free treatment on an average to 40%of the out door patients.
o free treatment to all indoor patients whose family income is less than Rs.500/- per month and for such purpose reserve 10% of its indoor beds;
o Treatment at reasonable rates to the remaining patients.
The issue before the government is fulfillment of conditions prescribed under Category 2.
● Categorization under category 1 is applicable to institutions as may be certified by the Ministry of Health and Family Welfare (MOHFW), to be run substantially aided by such charitable organization as may be approved, from time to time, by the said MOHFW. This hospital was neither run nor aided by any charitable organization approved by MOHFW nor certified by MOHFW to this extent.
● For issuance of installation certificate, the two conditions to be fulfilled are:
o That such hospital equipment has been installed in the hospital; and
o That such hospital has started functioning;
● Being a category 4 institution, when starts functioning, it had to relate to category 2, as per the undertaking given by the institution. Hence, the issuance of installation certificate is linked to fulfillment of conditions under category 2.
● The statistics given by the hospital at the time of personal hearing on fulfillment of conditions is for a limited period and not supported by any documentary evidence/records and is not certified by the State Government.
● On the contrary, the letter No.CUS-1098-350(C)/B dated 25.3.98 issued by the Deputy Secretary had annexed the free treatment certified by the CMO cum Civil Surgeon, Nadiad according to which the free OPD treatment for the year, 1995-96 and 1996-97 is 34.31% and 12.60% respectively which is below the minimum stipulated 40%. This report from the State Govt. does not categorically state whether all indoor patients with income less than Rs.500/- p.m. are treated free.
● The equipment was installed and made functional only on 28.3.1998, four years after the issuance of CDEC where as it should have installed the equipment and started fulfilling the conditions under category-2 in two years time.
● The judgments, which are quoted, are not related to Health Department or Hospitals. The facts and circumstances quoted are different and do not relate to issue involved. In the facts and circumstances, there is no need to rely on the judgments.
10. In view of the above, it is held that the case of M/s. Gujarat Methodist Church Cardio Thoracic & Vascular Research Society, Nadiad can only be considered under category 2 of Custom Notification 64/88. The hospital was given ample opportunities to substantiate and to produce records to substantiate fulfillment of the conditions stipulated under category 2 of the notification but they failed to comply. The facts submitted by the Government of Gujarat vide letter dated 25.3.98 indicated that the free OPD treatment is less than 40% for the year 1995-96 and 1996-97.”
From the judgment and order passed by this court, it is apparent that the reliance placed by the second respondent on the undertaking given by the petitioner for Category-2 status under the Customs Notification No.64/88 and the assertion that the issue of installation certificate cannot be delinked from the fulfillment of conditions chosen by the petitioner, that is, Category-2, is in flagrant defiance of the decision of this court, which is binding upon the respondents as the same has not been challenged by them and as such, has attained finality. The respondents, therefore, are bound to act in compliance with the said order and consider the case with an open mind and ascertain as to whether or not the petitioner complies with the requirements of Category-1. From the contents of the show- cause notice itself, it is apparent that the second respondent has made up its mind not to abide by the order of this court which is evident from the tenor of the show-cause notice whereby the petitioner has been called upon to show cause as to why the eligibility of the institution should not be considered only under Category-2 of the Customs Notification No.64/1988 with a further observation that the institution had already been found not fulfilling the obligations set out under paragraph 2 of the table annexed to Customs Notification No.64/1988. Viewed in the light of the observations of this court in its judgment and order dated 16th July, 2003 passed in Special Civil Application No.1192 of 1999, it is apparent that the respondent has issued the show-cause notice as well as passed the impugned order in flagrant disobedience of the order passed by this court, whereby, though the show-cause notice is purportedly issued pursuant to the said order, the contents of the show-cause notice and the findings arrived at by the authority are in complete disregard of the findings recorded therein. If the respondents were aggrieved by the aforesaid judgment and order passed by this court, it was open for them to challenge the same. But once having accepted the said order, they are bound to abide by the same and cannot in purported compliance of the said judgment ignore what is held therein. Under the circumstances, the impugned order not being in consonance with the aforesaid decision of this court cannot be sustained. The respondent No.2 is, therefore, required to be directed to decide the application for issuance of installation certificate without adverting to the fact that in the undertaking filed by the petitioner, the petitioner has chosen Category-2. The finding recorded by the second respondent that the installation certificate cannot be delinked from the fulfillment of the conditions chosen by the petitioner in Category-2 is in clear defiance of the order passed by this court and as such cannot be countenanced for a moment.
13. At this juncture, it may be apposite to refer to the decision of the Supreme Court in Share Medical Care vs. Union of India and Others, (2007) 4 SCC 573 wherein the Supreme Court was dealing with a case where the appellant therein had applied for the benefit of the exemption Notification not under para 3 but para 2 of the table. The benefit of exemption was granted. Since the society was also entitled to exemption under para 3 of the table, an application was made to DGHS highlighting that the appellant was a non- profit organisation and had been permitted to import medical equipment by DGHS by certification. The Deputy Director General (Medical), DGHS, rejected the application of the appellant observing that initially the request was made by the appellant for exemption under para 2 of the Notification and accordingly, the institution was granted such exemption. It was, therefore, not open to apply for exemption under para 3 of the table of the exemption notification and the application was liable to be rejected. The appellant therein challenged the said order before the High Court of Andhra Pradesh. However, the petition came to be dismissed. The appellant carried the matter before the Supreme Court. The Supreme Court was of the opinion that merely because the appellant had claimed exemption under Category 2 of the exemption notification which was granted does not mean that the appellant could not claim exemption under Category 3. The court referring to various decisions on the issue held that even if an applicant does not claim benefit under a particular notification at the initial stage, he is not debarred, prohibited or estopped from claiming such benefit at a later stage. In the facts of the said case, the court held that the ground which weighed with the Deputy Director General (Medical), DGHS for not considering the prayer of the appellant was that earlier, exemption was sought under Category 2 of the exemption notification, not under Category 3 of the exemption notification and exemption under Category 2 was withdrawn. It was held that this is hardly a ground sustainable in law. On the contrary, the well-settled law is that in case the applicant is entitled to the benefit under two different notifications, or under two different heads, he could 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. It was held that 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.
Before the Supreme Court, strong reliance had been placed by the respondents on its earlier decision in the case of Mediwell Hospital and Health Care (P) Private Ltd. vs. Union of India (supra). The court held that the decision in Mediwell Hospital would not take away the right of the appellant to claim benefit under para 3 of the table of the 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 court, accordingly, did not find any force in the contention of the authorities and rejected the same.
14. Examining the facts of the present case in the light of the above decision, in the opinion of this court, the petitioner stands on an even stronger footing than the appellant before the Supreme Court inasmuch as in the said case, the appellant was already granted exemption under Category-2 and subsequent to withdrawal of the said exemption, claimed the benefit of Category-3. Whereas, in the present case, the petitioner was granted exemption under Category-4 which is in respect of a hospital which is in the process of being established and which upon starting functioning would fall under any of the three categories viz. 1, 2 or 3. Thus, upon the hospital having started functioning, the petitioner has claimed that it falls under Category-1 instead of Category 2 as mentioned in its undertaking. This is not a case where the petitioner was granted exemption under Category-2 and upon withdrawal of the same is claiming benefit under Category-1. The petitioner upon its hospital having started functioning has claimed that it belongs to Category-1. Under the circumstances, when in the light of the aforesaid decision, even after exemption is granted under one of the three categories, it is permissible to change the category, it would certainly be open to the petitioner at a stage prior thereto, to claim the benefit of category-1 instead of Category-2. As held by this court in the above referred writ petition, the conditions below Category-2 are not required to be satisfied in case a hospital falls under Category-1. Under the circumstances, the second respondent while considering the application of the petitioner was required to examine as to whether or not the petitioner satisfies the requirements of category-1 so as to be entitled to the benefit thereof and only thereafter proceed to ascertain whether or not the conditions under category-2 are satisfied.
15. In the show-cause notice issued by the second respondent, one of the grounds stated is that neither the hospital run by M/s. Gujarat Methodist Church Cardio Thoracic and Vascular Research Society, Nadiad was certified by MOHFW nor M/s. Gujarat Methodist Church Cardio Thoracic and Vascular Research Society, Nadiad was approved as a charitable organisation by MOHFW to run such hospitals at that point of time. In this regard, there is considerable force in the submission advanced by the learned advocate for the petitioner namely that if such certificate was available at the relevant time, the petitioner would not fall under category 4 but would have been certified as falling under Category-1. A perusal of the conditions stipulated below Category-4 indicate that one of the conditions therein is that such hospital would be in a position to start functioning within a period of two years and that such hospital when starts functioning would be relatable to a hospital specified in paragraphs 1, 2 or 3 of the table. Thus, at the time when the exemption is granted under Category-4, the hospital would not have started functioning and as such, the requirements of paragraphs 1, 2 and 3 of the table independently would not be satisfied at the relevant point of time. Under clause (iii) of paragraph 4, the hospital should be in a position to start functioning within a period of two years. Under the circumstances, the requirements of paragraphs 1, 2 or 3 are required to be ascertained accordingly at the stage when the hospital starts functioning and not prior thereto. In the facts of the case, the customs duty exemption certificate was granted on 18th March, 1994. Under the circumstances, two years thereafter would be on or about 18th March, 1996. Therefore, the requirements of paragraphs 1, 2 or 3 would be required to be considered accordingly after the hospital starts functioning. In the facts of the present case, it appears that the second respondent has taken into consideration the period from the date of grant of exemption certificate on which date, in the light of the conditions prescribed under Category-4, it would be apparent that the hospital would not be functioning. Under the circumstances, the requirements of paragraphs 1, 2 or 3 would not have been satisfied at that stage otherwise the certificate of exemption would have been granted under paragraph 1, 2 or 3, and not under paragraph 4. Thus, it is only at a subsequent stage, when the hospital starts functioning, that it would be relatable to a hospital specified in paragraph 1, 2 or 3 of the table and as such, it was incumbent on the second respondent to examine as to whether or not the petitioner satisfies the requirements of Category No.1 so as to be entitled to issuance of an exemption certificate under the said category.
16. In the facts of the present case, a perusal of the impugned order makes it amply clear that the second respondent has decided the matter with a closed mind which is apparent from the contents of the show-cause notice as noted hereinabove. The very basis of the impugned order, that is, the show-cause notice itself is contrary to the order passed by this court in the above referred writ petition inasmuch as the same calls upon the petitioner to show cause as to why it should not be considered only under Category-2 of Customs Notification No.64/1988 despite the fact that this court had categorically held that the respondent was required to consider the case and decide as to under which category the petitioner would fall.
17. In the light of the aforesaid discussion, it is apparent that the impugned order has been passed in clear disregard of the decision of this court in the above referred writ petition.
Moreover, the same is also not in consonance with the law laid down by the Supreme Court in the case of Share Medical Care vs. Union of India (supra) and as such, cannot be sustained. The decision of the Supreme Court in the case of Mediwell Hospital and Health Care (P) Ltd. vs. Union of India and others (supra) would not be applicable to the facts of the present case as held by the Supreme Court in the case of Share Medical Care (supra).
18. On behalf of the petitioner, reliance has been placed on the decision of the Supreme Court in the case of Comptroller and Auditor General of India vs. K.S. Jagannathan (supra) for contending that the High Court can in the exercise of its jurisdiction under Article 226 issue a writ of mandamus or a writ in the nature of mandamus or pass orders and give directions to compel the performance in a proper and lawful manner of the discretion conferred upon the Government or public authority and in a proper case, in order to prevent injustice resulting to the concerned parties, the court may itself pass an order or give directions which the Government or the public authority should have passed or given had it properly and lawfully exercised its discretion. The learned counsel for the petitioner urged that instead of remanding the matter to the authority, this court may itself pass an order or give directions which the second respondent should have passed or given had it properly and lawfully exercised its discretion. In this regard, considering the nature of the case, it would not be possible for this court to pass an order which the respondent No.2 could have passed inasmuch the same would require the examination of the facts of the case and to arrive at a finding of fact as to whether or not the petitioner would fall under Category-1 of the table appended to the Notification No.64/1988.
19. In the light of the aforesaid discussion, the petition succeeds and is accordingly allowed. The impugned order dated 26th March, 2004 passed by the second respondent is hereby quashed and set aside. The matter is restored to the file of the second respondent who shall decide the application afresh without taking into consideration the fact that in the undertaking given by the petitioner it had chosen Category-2. The second respondent shall examine as to whether or not the petitioner satisfies the requirements of Category-1 so as to be entitled to the benefit thereof. It is only if the second respondent comes to the conclusion that the petitioner does not satisfy the requirements of Category-1 on merits that he shall proceed to ascertain whether or not the conditions under Category-2 are satisfied. The second respondent shall take an appropriate decision in accordance with law as expeditiously as possible and preferably within a period of three months from the date of receipt of a writ of this order. Rule is made absolute accordingly with no order as to costs.
( Harsha Devani, J. ) ( R.M. Chhaya, J. ) hki