Oral Judgment: (B.P. Dharmadhikari, J.)
1. Petitioner no.1 practicing Cardiologist and petitioner no.2 the National Heart Centre and Hypertension Clinic question the order dated 1/3/2004, passed by Director General of Health Services (D.G.H.S.) under scheme notified under Notification No.64/88 dated 1/3/1988. By said order D.G.H.S. holds that petitioners did not treat 40% of its outdoor patients free and 10% of its indoor poor patients free and violated conditions of exemption granted to them while allowing import of two machines, hence, Customs Duty Exemption Certificate (C.D.E.C.) issued in their favour under above mentioned scheme under Notification No.64/88 has been withdrawn.
2. This Court has on 18/3/2004 admitted the matter. At that time earlier judgment dated 21/9/2001 in Writ Petition No.2581/2001, between parties and judgment of Madras High Court reported at 2001 (133) E.L.T. page 58 (Madras) [Apollo Hospitals Enterprises Ltd...Versus...Union of India and others], were looked into and interim relief in terms of prayer clause (iii), staying operation and effect of impugned order dated 1/3/2004, came to be granted. This interim order continues to operate even today. With the result, C.D.E.C. has not been withdrawn and petitioners continued in custody of two machines imported by them.
3. The basic facts are not in dispute. Petitioners in 198990 wanted to purchase two machines, viz. Echo Cardiograph with colour mapping with standard accessories and computerized stress system with treadmill. The machines needed to be imported. Petitioners got benefit of Notification No.64/88 issued on 1/3/1988. Subject to terms and conditions stipulated therein the import of these two machines from Norway was exempt from custom duty. The Echo Cardiograph reached Bombay on 5/5/1990 from Norway and duty of Rs.24,96,860/- otherwise would have been payable on it. Computerized stress system reached Delhi on 24/4/1990, from U.S.A. and custom duty payable upon it was assessed at Rs.7,95,015/-.
4. In view of Custom Duty Exemption Certificate (C.D.E.C.) issued to petitioners, they were not required to pay any custom duty. This exemption however is subject to certain conditions which are stipulated in said Notification No.64/88, General Exemption No.104B. We are concerned with only two conditions and those conditions appear in paragraph no.2 of this document. The same read as under:
'2. All such hospitals which 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.' We refer to class (a) patients above as outdoor patients and class (b) patients as indoor poor patients.
5. On 21/1/2000, establishment of petitioners was inspected by Custom Officers and records were seized by said Department. Two show-cause-notices in relation to two machines were then issued on 19/6/2000 and 14/7/2000. These notices are under Section 124 read with Section 25 and 28 (1) of the Customs Act, 1962. The petitioners approached this Court in Writ Petition Nos.2790/2000 and 2792/2000. Petitions were dismissed by a brief order holding that reliance upon earlier decision in case of Mediwell Hospital and Health Care Pvt. Ltd…Versus…Union of India and others , ((1997) 1 SCC 759), was not available due to later judgment in case of M/s. Faridabad Ct. Scan Center…Versus… D.G. Health Services and others, (J.T. 1997 (8) SC 171). Against this adjudication petitioners approached the Hon’ble Apex Court in Special Leave Petition No.12265/2001. The Hon’ble Apex Court took note of fact that challenge was only to show-cause-notice and hence, High Court should not have entertained writ petition under Article 226 of the Constitution of India; it was more appropriate that petitioners filed reply to show-cause-notice and then proceeded further as per Customs Act. The Hon’ble Apex Court also declared that observations of High Court would not come in the way of petitioners.
6. Because of these orders of Hon’ble Apex Court dated 6/8/2001, petitioners filed their detailed reply to show-cause-notices.
7. In the meanwhile, in view of inspection by Custom Authorities, two orders were passed and both machines were attached and seized. These orders are dated 13/3/2002 and 20/9/2002. This action has been independently questioned by petitioners under the Customs Act and after decision by Customs, Excise and Gold (Control) Appellate Tribunal (C.E.G.A.T.), Custom Appeal No.1/2005, has been filed before this Court and is pending for final hearing.
8. It appears that respondent no.1 – D.G.H.S. on 24/2/2000 sought certain information from petitioners about fulfillment of the conditions in Notification No.64/88. On 30/8/2000, said authority passed an order and withdrew C.D.E.C. This order and action dated 30/8/2000 then formed subject matter of Writ Petition No.2581/2001 between parties and on 21/9/2001 High Court set aside that action. Respondent no.1 – D.G.H.S. then approached the Hon’ble Apex Court in Special Leave Petition No.21446/2002. It was disposed of on 6/10/2003 without prejudice to rights and contentions of respondents therein to challenge the withdrawal of exemption before appropriate forum.
9. It is after this that on 1/3/2004 respondent no.1 has passed impugned order withdrawing C.D.E.C.
10. Learned Counsel for petitioners, in this background has submitted that respondent no.1 was brought under pressure by Custom Department and said Department on 19/6/2000 issued a show-cause-notice alleging collusion between petitioners and respondent no.1. Similar allegations were also made in other show-cause-notice. In the wake of these show-cause-notices, respondent no.1 was left with no option, but, to take coercive steps against petitioners to save its face. Respondent no.1 did not apply its mind independently to the issue and even reply filed by petitioners to both show-cause-notices raising vital deficiencies, has not been looked into.
11. Without prejudice, learned Counsel for petitioners submit that exemption notification or C.D.E.C. did not prescribe any particular format in which compliances with conditions imposed by it needed to be informed to respondent no.1. There was no need to file any return and there was no inspection by Custom Authorities or D.G.H.S. till year 2000. Contention is, therefore, data in format maintained by petitioners was only to be used to find out compliances or violations.
12. Our attention is specifically drawn to paragraph nos.4, 6 and 15 to 22 of replies to show-cause-notices submitted by them to respondent no.1 to urge that there relevant material and compliances have been pointed out. Petitioners have also compiled data, then available in suitable charts to facilitate application of mind and to demonstrate how requisite number of patients, i.e., outdoor patients or then indoor poor patients were given treatment. Contention is, this chart and data has not been properly evaluated.
13. Our attention is invited to list of documents which were seized under panchanama by Custom Department about six months prior to issuance of show-cause-notices. Submission is, in absence of said documents, petitioners were handicapped in giving complete details. Learned Counsel for petitioners contends that the records kept in Form 3 (C) of the Income Tax Rules were made available for perusal but, the same have been erroneously discarded.
14. It is urged that in impugned order, there is a reference to findings of three member inspection team deputed by Rosha Committee, but, then those findings were never made available to petitioners.
15. Learned Counsel further submits that finding in impugned order that patients attending camps conducted by petitioners, cannot be taken into consideration to calculate required percentage of 40% or 10%, is erroneous and unsustainable. By analyzing data in charts which formed part and parcel of reply to show-cause-notices, effort is made to demonstrate how outdoor patients have been treated or then patients at camps were admitted as indoor patients. Submission is, in absence of necessary application of mind by respondent no.1, entire order is vitiated.
16. Petitioners rely upon judgment of Madras High Court in case of Apollo Hospitals Enterprises Ltd...Versus...Union of India and others (supra), to submit that exemption Notification No.64/88 stood rescinded in 1994, and as such, after its expiry there was no need or question of its compliance in year 2000, when action was taken against petitioners.
17. Lastly, Counsel for petitioners pointed out that on 28/3/2003 petitioners also wrote to Commissioner of Customs to take back both the machines.
18. Learned A.S.G.I. appearing for respondents heavily relies upon impugned order and findings recorded therein. He submits that the impugned order elaborately looks into main contention of petitioners that patients visiting at camps ought to be recognized for the purposes of noting compliance with clauses – (a) and (b) of paragraph no.2 of exemption Notification No.64/88. He points out that those camps were held at distant places like Tirupati or remote places of District Balaghat in Madhya Pradesh, where obviously the imported instruments were not carried. Contention is, camps so held were only for preliminary detection or primary diagnosis and not for treatment. He relies upon exemption notification to urge that only relevant part therein which can be looked into is 'diagnostic treatment' as in such camps, petitioners could not/did not provide either medical treatment or surgical treatment. He adds that replies filed on record do not show even diagnostic treatment and hence number of patients who may have visited those camps is irrelevant.
19. Inviting our attention to judgment delivered by the Hon’ble Apex Court in case of Mediwell Hospital and Health Care Pvt. Ltd....Versus...Union of India and others, (supra), he submits that there though it was a case of diagnostic centre, the Hon’ble Apex Court has made an exception because of Article 14 of the Constitution of India. He has invited our attention to later judgment of the Hon’ble Apex Court reported at (2001) 6 SCC, 483 [Commr. of Customs (Import), Mumbai...Versus...Jagdish Cancer and Research Centre] to substantiate his contention. He points out that Hon’ble Apex Court has found that judgment in the case of Mediwell Hospital and Health Care Pvt. Ltd....Versus...Union of India and others (supra), is not laying down correct law. He has relied upon paragraph no.14 of later judgment to urge that Hon’ble Apex Court has categorically mandated compliances with conditions stipulated in exemption notification.
20. Our attention is also drawn to judgment of Hon’ble Apex Court in the case of M/s. Faridabad CT Scan Centre...Versus...D.G. Health Services and others (supra), to urge that there again judgment in Mediwell Hospital and Health Care Pvt. Ltd....Versus...Union of India and others (supra), has been found not laying down the correct law. The Hon’ble Apex Court has held that Article 14 of the Constitution of India cannot be resorted to perpetrate wrong orders or wrong practices.
21. To submit that there is no impact of repeal of exemption Notification No.64/88 in present matter, contention advanced by him is, as both machines are in use and have been imported with C.D.E.C., obligation to continue to comply with conditions (a) and (b) of paragraph no.2 survives even after 1994. He states that as such there is no question of any delay in the matter. He also invites our attention to findings recorded by learned Single Judge of Madras High Court in the case of M/s. Apollo Hospitals Enterprises Ltd....Versus...Union of India and others (supra), in an effort to demonstrate that consideration therein runs contrary to the continuous obligation recognized by Hon’ble Apex Court in Mediwell Hospital and Health Care Pvt. Ltd....Versus...Union of India and others (supra), and other judgments.
22. He states that burden to prove compliances with clauses( a) and (b) of paragraph no.2 was upon petitioners and they ought to have produced relevant material. According to him, perusal of reply to show-cause-notices or then even present petition, does not show such compliances. He insists on treatment of 40% outdoor patients at establishment of petitioners or then of 10% indoor poor patients. He points out that in absence of such data, entire petition and challenge is without substance and petition deserves to be dismissed.
23. In brief reply, learned Counsel for petitioners has invited our attention to Division Bench judgment of this Court in Writ Petition No.2581/2001 to urge that the Division Bench has on 21/9/2001 preferred to follow the view of learned Single Judge of Madras High Court. He contends that arguments advanced by learned A.S.G.I. cannot be looked into because reasons in support of action of withdrawal of C.D.E.C. must appear in impugned order dated 1/3/2004 itself. Those reasons cannot be supplemented by oral arguments or by any affidavit. He adds that data produced in the shape of charts and income tax records sufficiently proves compliances with clauses (a) and (b), but, respondent no.1 due to pressure of Custom Department conveniently ignored it. He, therefore, requests for allowing the petition.
24. The impugned order dated 01.03.2004, in its first 13 paragraphs, refers to previous history. The application of mind is contained in paragraph no.14. In paragraph no.14, the observations made earlier by CDEC are reproduced. Those observations are (i) Compliance with clause 2(a) about 40% free outdoor treatment has to be 'in the hospital' where equipments are installed; (ii) Persons attending medical camps cannot be called as out patients; screening does not imply medical, surgical or diagnostic treatment, such persons seen in camps cannot be accepted as patients who have approached hospital. The intention of Notification No. 64/88, is to provide secondary and tertiary health care to patients who do not have access /affordability to such treatment. In paragraph no. 14[iv], there is a reference to findings of three Member Inspection Team deputed by Rosha Committee. The said findings of Rosha Committee are in Clause [a] to [h] of subpara [iv] of para 14. Thereafter, there is reference to judgment of Madras High Court in case of Apollo Hospital, and it is mentioned that said judgment has been appealed against. In sub-para [vi] the effect of resending of Notification No. 64/88 has been looked into and then there is reference to judgment of Karnataka High Court in case of Chhaparal Health Services .vrs. Union of India –(Writ Petition Nos. 35286/2000 and 3740/2001). It is observed that only consequence flowing from repeal notification is that future imports made by the hospitals would not be exempt. Then there is reference to judgment of Hon'ble Supreme Court in case of Mediwell Hospital and in case of Commissioner of Customs .vrs. Jagdish Cancer Institute. Thereafter, in subparagraph [ix], Division Bench judgment of Punjab and Haryana High Court has been referred. In sub-para [xii] of para 14, the impugned order, findings of fact that petitioners have not maintained hospital records and submission of Form 3C of Income Tax Rules, its rejection appear.
25. It is not in dispute before us that the petitioner was not given copy of report submitted by the team sent for inspection on deputation of Rosha Committee. Similarly, report of CDEC Committee drawn extensively in paragraph no.14 of the impugned order, is also never made available to them.
26. The petitioners have along with their reply to show cause notices, have given 6 charts, which mention outdoor patients treated by the hospitals from 1990-91 till February, 2003, year wise. Number of camps conducted and patients examined therein are also given. These patients at camps and patients treated at hospital are added together in last column under heading 'Total patients seen'. In second chart, year wise number of outdoor patients are mentioned. Against 4 camps, again number of free patients finds mention. In last column, total free patients seen, are put together. When these two charts are compared, as against total outdoor patients in hospital figure of 37,284 (patients shown as outdoor patients of hospital in above period), total 9042 patients are shown to be treated free. This proportion is roughly 24%. The patients at camps are shown as seen free. If this number of camp patients is added, out of total figure of patients of 65,886, total free patients seen during above period are 37,644, which is approximately 50%. In next chart, again there is year wise breakup of total patients seen, total free patients seen with calculation of their percentage. In chart no.4 at Page No.214, (marked as Annexure-K) with the petition, similar arrangement in relation to indoor patients and camp patients can be seen. Thus, for total indoor patients of 2762, during above period, free indoor patients are shown at 213, which is little less than 10%. The total free patients admitted during this period are 3480, while total free patients admitted are shown to be 931, in chart at page no.215 (marked as Annexure-L) with the petition. Again this proportion is little above 25%. In last chart at Page No.216 (marked as Annexure-M) with the petition, this percentage is also reflected.
27. Impugned order does not comment upon correctness of or relevance of position appearing in these charts. In absence of report of Rosha Committee or CDEC Committee, it is not very clear why these assertions of treatment of outdoor patients, indoor poor patients by petitioners have not been considered or relied upon by respondent no.1 in the impugned order.
28. However, we cannot forget the position as is appearing in show cause notices. Show cause notice also gives a chart. Same chart has been used in both the show cause notices and the chart also gives in paragraph no.4.3, the records looked into by the inspecting officers and seized or taken over by them, after proper panchnama. It mentions in later paragraph no.5A on the strength of OPD/Daily cash register, the number of patients treated during this period with free patients, during that period. The percentage of such free treatment is also on record. This chart is also made use of in second show cause notice. The assertions of petitioner that it was not having documents and the same were not produced by respondent no.1, is not in dispute before this Court.
29. Thus, when there were two sets of contention before respondent no.1, respondent no.1 ought to have verified original records and thereafter recoded a finding on correctness or otherwise of assertions of the petitioners. This exercise also has not been undertaken. We find that respondent no.1 has mechanically acted upon the report of Team deputed by the Rosha Committee and the findings of CDEC Committee. We therefore, find that there is no independent application of mind by respondent no.1 to the controversy.
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oners gave specific figures of percentage and then, also claimed benefit of persons/patients who visited their camps. The question – Whether there was any diagnostic treatment during those camps is a disputed question, which cannot be answered without recording proper finding on facts. Petitioners have supported their assertions by producing necessary documents maintained under Income Tax Rules. Those documents have been discarded without assigning any reason. 31. In any case, there was no report and there is no finding by respondent no.1 or any authority that free treatment was denied by petitioners to any body or in any deserving case. Is free treatment extendable even to patients with capacity to pay and forced upon them or then the deficit in number of OPD or poor indoor patients can be carried forward and attended to in future. The law explained by the Hon'ble Apex Court shows that rescinding of policy in 1994 does not relieve the petitioners of their obligation to treat and to continue to treat the prescribed percentage of patients free so long as the machines are in operation and it is their continuous obligation which is not wiped out due to repeal of policy. Question in this situation will be, whether some shortfall in reaching prescribed percentage of 40% for OPD or 10% for indoor poor patients, can be always said to be fatal. 32. Parties have invited our attention to various judgments which lay down law in this respect. However, as we find that facts have not still crystallized, we are not inclined to look into the legal propositions emerging from those judgments. We have however, already taken note of the fact that petitioners have declined to pay necessary amount for seeking release of the confiscated /seized machineries, and had requested the Authorities to take the same back. 33. In this situation, we quash and set aside the order dated 01.03.2004. However, we direct respondent no.1 to proceed further in the matter as per law, if at this stage, such a measure is still necessary. 34. With these directions, Writ Petition is partly allowed. Rule is made absolute in aforesaid terms, with no order as to costs.