By TIOL News Service

BANGALORE, AUG 27, 2018: THE petitioners are aggrieved by the order passed by the Deputy Director General (Medical) in the Directorate General of Health Services, Ministry of Health and Family Welfare, New Delhi, revoking the Custom Duty Exemption Certificate (CDEC) issued in favour of the petitioner-Hospitals under the Notification No.64/88-Cus. dated 01.03.1988 for import of certain medical equipments exempt from customs duty.

The said exemption was given to the petitioner-Hospitals from customs duty subject to the conditions as stipulated in the said Custom Notification No.64/88-Cus. dated 1.3.1988, which, inter alia , required the petitioner-Hospitals to provide free medical treatment on an average to 40% of outdoor patients and 10% of indoor patients.

Referring to the decision of the Division Bench dated 19.7.2011 in Writ Appeal Nos.2369-2370/1999 and other connected Writ Appeals [The Kasturba Medical College & Others Vs. The Union of India & Others]  it is stated that since the petitioner-Hospitals did not file their Affidavits opting for an alternative scheme evolved by the Division Bench of this Court dated 19.7.2011 despite an opportunity given to them and they have failed to give relevant evidence before the Authority for having satisfied the conditions of exemption from customs duty under the said Notification No.64/88- Cus. dated 1.3.1988, therefore, the said CDECs given to them were liable to be revoked and consequently, the customs duty exemption was withdrawn and demand for customs duty was raised by the respondent-Commissioner of Customs, Mangalore to an extent of Rs.4,52,30,472/-.

The prime contention of the petitioner is that the principles of natural justice have been breached and consequently the impugned order deserves to be quashed.

The High Court considered the submissions and inter alia observed -

++ Beyond a pale of doubt, the provisions relating to exemption from tax or duties have to be strictly construed and except upon satisfaction of the conditions for grant of such exemptions stricto sensu , the exemption from customs duty cannot be given by way of largesse to the beneficiaries, like Hospitals and Medical Institutions in the present case.

++ Despite a concession extended by the Division Bench of this Court, upon agreement of learned counsels on both sides, and even deviating from the original terms and conditions of grant of such exemption under the Notification No.64/88-Cus. dated 1.3.1988 in the judgment dated 19.7.2011 in Writ Appeal Nos.2369-2370/1999 and connected writ appeals, the petitioners, for the reasons best known to them, did not file their Affidavits giving their option for such alternative Scheme evolved by the Division Bench of this Court.

++ That shows lack of bona fides on the part of the petitioners. It is equally unfortunate for the Union of India and the concerned Department or the Authority, who were to take a call and respond to the said alternative scheme evolved by the Division Bench of this Court, they maintained a stony silence in the matter, showing scant regard for the directions of this Court.

++ Be that as it may, the situation as per the terms of Division Bench's judgment in these circumstances thus reverted back to the conditions as stipulated in the Custom Notification No.64/88-Cus. dated 1.3.1988 and therefore, satisfying of the conditions of that Notification stricto sensu became sine qua non for the petitioners to establish before the concerned Authorities.

++ Though 22 representatives of different Hospitals were present in the personal hearing before the Deputy Director General (Medical) on 5th and 6th of May 2014, including the present petitioners but none of them submitted any documentary proof in support of their claim of exemption establishing with the relevant record and evidence that they have actually provided 40% of services to the poor sections of the Society free of cost. The burden of proof obviously was upon the persons claiming such exemption to prove and satisfy the conditions of exemption and it could be proved only with the relevant evidence.

++ CDECs (Exemption Certificates) issued to as many as 392 out of 396 Institutions were revoked is a glaring one. It reflects a gross abuse of such customs duty exemption given to the petitioner-Hospitals and other Institutions. Exemption from tax or customs duty is a burden on the public Ex-chequer or public revenue and to that extent, the public loses its money in favour of the beneficiary institutions. Therefore, it is all the more necessary that a strict, meticulous and complete compliance of conditions with the relevant and cogent evidence is proved beyond doubt before the concerned Authorities. A casual, cavalier or compliance by a paper formality is not enough to allow such Institutions to avail exemption under the said exemption notifications. The very purpose of such exemption will be defeated if the conditions are allowed to be breached with impunity and then glossed over by a paper exercise in the name of submitting of a so-called reply furnished by the petitioner in the present case, which does not inspire any confidence.

++ There is no breach of principles of natural justice, as the petitioners and the whole lot of them were provided adequate opportunity to establish their claims, but they not only failed to avail such opportunity before the concerned Authority, but the concerned Authority noted that despite personal presence of 22 representatives, none of them have produced any documentary proof including the representatives of petitioner-Hospital. This not only surprises and shocks the conscience of this Court as to the nonchalant manner in which the petitioner- Institutions took their exemption from customs duty for granted, without satisfying the conditions therefor.

Concluding that the petitioners do not deserve any liberal or sympathetic view in the matter, the Writ Petitions were dismissed.

(See 2018-TIOL-1708-HC-KAR-CUS)