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2006 Supreme(Bom) 335
IN THE HIGH COURT OF BOMBAY
Shah Diagnostic Institute Private Limited
Versus
Union of India
Decided on, MARCH 7, 2006
Headnote:Customs Act, 1962 - Section 25 Constitution of India, Articles 14 and 19(1)(g) Exemption from import duty Import of medical diagnostic equipments Conditions for import duty exemption mentioned in clause 3(b) in notification dated 1.1.1983 and clause 2(b) of the notfn. dated 1.1.1988 has nexus with the object sought to be achieved Conditions are not unreasonable, irrational or arbitrary. The petitioners applied for the benefit of the said notifications. As a matter of fact, they represented to the authorities that they fulfilled and/or undertook to fulfil the conditions mentioned in the said notifications and took clearance of the equipment on nil duty. When it came to the notice that the first petitioner has not fulfilled the pre-requisite conditions mentioned in clause 3(b) of the Notification dated 1st March, 1983 and clause 2(b) of the Notification dated 1st March, 1988 an order of recovery of duty and penalty has been passed, the petitioners seek to challenge the constitutionality of the notifications which cannot be permitted and shows the dishonesty of the petitioners. As a matter of fact, the petitioners obtained a certificate from the Director General of Health Services as was required under the Notification No. 64/88 to the effect that entire treatment facility will be provided to the families with an income of less than Rs. 500/per month whenever made available and for this purpose at least 10% of the hospital beds are reserved. Having got the certificate to that effect from the Director General of Health services by representing that the treatment facilities will be provided free to all families with an income of less than Rs. 500 per month and for this purpose at least 10% of hospital beds shall be kept reserved, it is not open to the petitioners to challenge the constitutional validity of clauses 3(b) and 2(b) of the above referred Notification s respectively. The condition imposed in para 3(b) of the Notification No. 279/83 and para 2(b) of Notification No. 64/88 is reasonable and has nexus to the object sought to be achieved. By no stretch of imagination, the said condition can be said to be irrational, arbitrary, unreasonable or bereft of reason.
Customs Act, 1962 - Section 25 Eligibility for exemption from customs duty under the Notification dated 1.3.1988 Import of medical diagnostic equipment by petitioner-Diagnostic Centre Condition that ’Hospital’ must provide free medical and diagnostic treatment to indoor patients having income less than Rs. 500 and reservation of 10% of its beds for such patients Petitioner not having in-patient bed facilities Not eligible to benefit of exemption under the said notification. It is not in dispute that the petitioner Diagnostic Centre does not have any in-patient bed facilities. The very fact that the first petitioner has not in-patient bed facilities disentitles it from the benefit of exemption notifications. One of the essential conditions in the aforesaid notifications is that the ’Hospital’ as defined therein must provide free medical and diagnostic treatment to all indoor patients belonging to the families with an income of less than Rs. 500/per month and 10% of its beds should be reserved for such patients. The first petitioner, admittedly, does not have any facility of in-patients and, therefore, obviously cannot fulfil this essential condition. That makes the first petitioner ineligible to the benefit of exemption.
Customs Act, 1962 - Section 25 Notification dated 1st March, 1988 Exemption from payment of basic customs duty is only available upon fulfilment of the conditions stipulated in the notification. The diagnostic centres (for the purpose of notification deemed to be ’Hospital’) which do not have the facility for inpatients as stipulated in para 2(b) of Notification No.64/ 88-Cus dated 1st March, 1988, cannot get the benefit of exemption under the said notification. But for the exemption Notification No. 64/88, the duty was payable on the import of MRI machine by the petitioners. For getting the benefits of the exemption notification, the first petitioner has to fulfil the conditions of the said notification. If it cannot, it has to pay the duty. If they cannot meet the criterion in reservation of beds stipulated by the Notifications, surely they are not entitled to the exemption under the said Notifications. Exemption from payment of basic customs duty is only available upon fulfilment of the conditions stipulated in the Notifications.
Customs Act, 1962 - Section 25 Notification No. 64/88 Cus dated 1st March, 1988 Petitioner diagnostic centre imported MRI machine by seeking exemption under the Notification and installed it in the premises of Breach Candy Hospital and Research Centre Held, the petitioner has practised fraud on revenue authorities and is not entitled to duty exemption. The design of the petitioners in importing the hospital equipment (MRI machine) for the purposes of Breach Candy Hospital and Research Centre under purported agreement dated 2nd July, 1987 was dishonest and fraud on the revenue authorities by seeking exemption under the aforesaid Notification No. 64/88. Even the certificate that has been obtained by the petitioners from the Director General of Health Services record that the imported diagnostic equipment/apparatus/appliance will be used in the institute itself only and will not be removed therefrom. Such being the condition, petitioners cannot get exemption from payment of duty in importing the equipment in its name for installation at Breach Candy Hospital and Research Centre. Whatever arrangement or agreement the first petitioner may have had with the Breach Candy Hospital and Research Centre, such arrangement or agreement shall not absolve the petitioner No. 2 from its liability of fulfilment of the conditions prescribed in the Notification dated 1st March, 1988. 2001 (132) ELT 357 (SC), Rel.
Customs Act, 1962 - Sections 25 and 159-A Rescission of Notification No. 64/88 Held, does not affect the liability acquired, accrued or incurred by petitioners with regard to fulfilment of clause 2(b) of the Notification by virtue of Section 159-A. Section 159-A of the Customs Act was operating on 1st April, 1994 when the Notification No.64/88-Cus was rescinded. In other words, rescission of the Notification No. 64/88 does not affect the liability acquired, accrued or incurred by the petitioners with regard to fulfilment of clause 2(b) of the said Notification.
R. M. LODHA, J.
( 1 ) THESE two writ petitions raise identical issues; these were heard together and are being disposed of by this common judgment.
( 2 ) IN Writ Petition No. 2476 of 1994, the petitioner challenges the order dated 28th August, 1994 passed by the Collector of Customs -II, Mumbai whereby he ordered recovery of the amount of duty of rs. 3,82,47,105/- from the petitioner and also imposed a penalty of Rs. 10,00,000/ -.
( 3 ) THE facts obtaining in Writ Petition No. 2476 of 1994 may be briefly summarised thus :i) The first petitioner M/s. Shah Diagnostic institute Private Limited applied and was granted import licence bearing No. P/g/2099659 dated 17th december, 1985 for import of MRI Machine. ii) Prior to the grant of import licence dated 17th December, 1985 for import of MRI machine, the first petitioner applied for recommendation certificate to the Director of Health Services, maharashtra. The said application was processed at various levels and ultimately on 7th September, 1989 the Director General of Health Services, New Delhi granted certificate to the petitioner for the benefit of the Notification Nos. 279/83-Cus dated 1st March, 1983 and No. 63/88-Cus dated 1st March, 1988. iii) Pursuant to the import licence dated 17th december, 1985 and the certificate issued by the director General of Health Services, New Delhi regarding satisfaction of the conditions of the notification Nos. 279/83 and 64/88, the petitioners imported one MRI machine in part shipments and cleared the same for home consumption after filing four bills of entry (No. 1948 dated 12th March, 1987 and Nos. 122 and 123 dated 2nd May, 1988 and 11832 dated 30th May, 1988 ). iv) The petitioners applied for exemption under the Notification Nos. 279/83 and 64/88. The MRI machine was allowed clearance at nil rate of duty.
( 4 ) BY the show cause notices dated 14th december, 1992, 5th June, 1993 and 10th November, 1993, the petitioners were called upon to show cause as to why the duty amounting to Rs. 3,82,47,105/- be not levied and recovered for non-levy of the duty and why the MRI machine be not confiscated and penalty be imposed upon the petitioners. Addendum to the said show cause notices were also issued.
( 5 ) THE petitioners filed reply to the said notices and denied their liability of payment of duty for import of the MRI machine.
( 6 ) THE petitioners were heard and ultimately by the impugned order dated 28th August, 1994, an order of recovery of the amount of duty in the sum of rs. 3,82,47,105/- was passed and the penalty of rs. 10,00,000/- was imposed. This order, as indicated above, is challenged in Writ Petition No. 2476 of 1994.
( 7 ) IN so far as Writ Petition No. 2809 of 1991 is concerned, the petitioners have prayed for clearance of spare parts of MRI machine in terms of notification No. 64/88-Cus dated 1st March, 1988 on production of certificate of the competent authority as required there with some other incidental reliefs.
( 8 ) WE heard Mr. Madhur Baya, the learned counsel for the petitioners and Mr. A. J. Rana, the learned senior counsel for the revenue.
( 9 ) MR. MADHUR Baya, the learned counsel for the petitioner raised the following contentions before us :a) That clause 3 (b) of the Notification no. 279/83-Cus dated 1st March, 1983 and clause 2 (b) of the Notification No. 64/88-Cus dated 1st March, 1988 are unconstitutional and ultravires of Articles 14 and 19 (1) (g) of the Constitution of India. b) That the first petitioner is a diagnostic centre and is covered by the term hospital as given in the explanation to the Notification Nos. 279/83 and 64/88 and, therefore, even otherwise eligible to the benefit of the notifications. c) That the petitioners substantially complied with the conditions of the said notifications and the non fulfilment of the conditions laid down in clauses 3 (b) and 2 (b) of the Notification Nos. 279/83 and 64/88 respectively do not render the petitioners ineligible. According to him, the diagno
