W.P. (C) No. 2485 of 2001 Page 1 of 29 IN THE HIGH COURT OF DELHI AT NEW DELHI W.P.(C) 2485 of 2001 & CMs 4301/2001 & 12962/2007 Reserved on: 27th August 2010 Decision on: 24th September 2010 M/s. R.G. STONE UROLOGICAL RESEARCH INSTITUTE ..... Petitioner Through: Mr. Jeevan Prakash with Mr. Jyotinder Kumar, Advocate. versus UNION OF INDIA & ORS ..... Respondents Through: Ms. Maneesha Dhir, Ms. Geeta Sharma, and Ms. Preeti Dalal, Advocates for R-1 to 3 & 5. Mr. Amiet K. Andley with Mr. Arun K. Sharma, Advocate for R-4/GNCTD. CORAM: JUSTICE S. MURALIDHAR 1. Whether Reporters of local papers may be allowed to see the judgment? No 2. To be referred to the Reporter or not? Yes 3. Whether the judgment should be reported in Digest? Yes JUDGMENT 24.09.2010 1. The challenge in this writ petition is to an order dated 20th November 2000 passed by the Directorate General of Health Services (`DGHS‟) (MG Section) withdrawing the Customs Duty Exemption Certificate (`CDEC‟) issued to the Petitioner for the import of medical equipments and spare parts in terms of a Notification No. 64/88 dated 1st March 1988 issued by the Ministry of Finance, Government of India. Facts 2. The Petitioner, which is a unit of R.G. Stone Enterprises Pvt. Ltd., is a hospital with indoor patient facilities and total bed strength of 17 beds. On W.P. (C) No. 2485 of 2001 Page 2 of 29 20th January 1987, the Petitioner‟s predecessor-in-interest, i.e. the Delhi Urological Institute and Research Centre (DUIRC) was issued an import licence for importing one Lithostar Universal Urological Workstation for therapy and diagnostics and one Ultrasound Sonolines. On 19th April 1987, DUIRC applied for a CDEC for import of two equipments, i.e., one Lithotriptor and one ultrasound equipment. On 27th June 1988, the DGHS issued a CDEC in respect of the Lithostar Universal Urological Workstation in favour of DUIRC. On 3rd January 1989, CDEC was granted to DUIRC for the spare parts with respect to the above equipments. 3. On 6th/11th July 1989, the DUIRC informed the Joint Secretary (Medical), Delhi Administration of the fact that it had installed the Lithostar equipment and enclosed a copy of the installation certificate from the suppliers. The address of DUIRC was shown as Bansal Nursing Home Complex - 3590, Sita Ram Bazar, Delhi-110006 and its Centre at F-12, East of Kailash, New Delhi- 110065. On 7th August 1989, in reply to the above letter the Directorate of Health Services, Delhi Administration called for an explanation of the circumstances under which the installation of the equipment had taken place on a site other than that mentioned in the undertaking given by DUIRC. In other words, an explanation was sought as to why the equipment was installed at F-12, East of Kailash, New Delhi instead of 3590, Sita Ram Bazar, Delhi. 4. On 12th June 1990, the DUIRC replied to the above letter explaining that on account of the inadequate space and the congested area, it was not possible to install the equipment at the Sita Ram Bazar address. Moreover, W.P. (C) No. 2485 of 2001 Page 3 of 29 no ambulance could enter or exit the area. The site at East of Kailash had the capacity for 40 beds whereas the one at Sita Ram Bazar had only 10-12 beds. Also, it explained that getting the equipments released from the customs had delayed the commissioning of the project. However, DUIRC expressed regret for installing the equipment in a site other than the one approved by the DGHS. It further informed the DGHS that DUIRC was popularly known as “R.G. Stone Clinic”. Meanwhile, on 24th April 1990, yet another CDEC was issued by the DGHS to DUIRC for further spare parts. 5. On 30th April 1992, the Directorate of Health Services (DHS) of the Delhi Administration wrote to the DUIRC asking for the quarterly returns. Pursuant thereto, the DUIRC submitted detailed information in the form of a report dated 24th July 1992. The details in brief for the period from 1st January 1992 to 30th June 1992 were set out. As far as the Out-Patient Department (OPD) patients, the total number was 929, of which 563 were paid patients and 366 were free patients. Further it was informed that during this period the DUIRC had treated 383 patients by lithotripsy and of these it had “given generous concession to 72 financially needy patients.” The DUIRC added that: “We have also treated free 5 patients who were not having income of more than Rs. 500/- per month. We are also keeping 10% of our beds for this category of patients.” It further pointed out that it had sent a written communication to the DGHS expressing its desire to treat more poor free patients as recommended by any government medical institution. Several press releases and advertisements inviting poor persons for concessional and free treatment at the institute had already been issued. W.P. (C) No. 2485 of 2001 Page 4 of 29 6. In response to the above return filed by the DUIRC, the DHS, Delhi Administration wrote to the DUIRC a letter dated 7th August 1992 stating as under: “Sir, This is in reference to your letter dated 24th July 1992, on the subject of submission of your quarterly reports. i) Your quarterly statement have been inspected and found in order till dated 30th June 1992. ii) You are also requested to intimate the Directorate regarding the change in premises from Bazar Sita Ram to F-12, East of Kailash, New Delhi. Vide paras 4 (B) of N.N. 64/88 as to why it was deemed necessary to change the premises. Yours faithfully, -Sd- (Dr. S.C. Mahajan) Medical Superintendent Nursing Homes (II)” 7. The DUIRC, by a separate letter dated 15th September 1992, again furnished the reasons for the change in the place of installation of the equipment. According to the Petitioner, nothing was heard in response thereto. The DUIRC also submitted a Proforma in compliance with Notification No. 64/88 dated 1st March 1988 in terms of which the CDEC had been granted. The figures of total number of patients treated in OPD, the number of patients treated free for the years 1992, 1993 and 1994, and the details of indoor treatment provided during these three years were given. As regards indoor patients under the column “No. of admissions given to patients with less than Rs.500/- pm”, the DUIRC indicated „Nil‟. However, W.P. (C) No. 2485 of 2001 Page 5 of 29 under the column “No. of admissions given to the patient & treated free/with concession” for years 1992, 1993 and 1994, the figures indicated were 78, 88 and 208 respectively. The number of beds specialty wise was shown to be seventeen. A note was further added to the Proforma stating that “No patient with income less than Rs.500/- p.m. has come to our Institute for Indoor Treatment. However, we have treated with free/concession to personnel of DWS only.” 8. The above report was furnished to the DHS on 15th July 1999. In response thereto, on 23rd August 1999 the DHS wrote to the DUIRC stating: “With reference to your statement as per proforma for the calendar years 1992, 1993 & 1994, we confirm that the report has been examined and found in order.” 9. On 14th January 2000, the DGHS wrote to the DUIRC asking it to furnish further information as required under the exemption Notification No. 64/88. On 24th January 2000, R.G. Stone Urological Research Institute (the Petitioner herein) inter alia pointed out that the details for the years 1992, 1993 and 1994 had already been submitted to the DHS of the Delhi Administration and that a certificate had already been received from the DHS stating that those details were found in order. As regards the details for the years 1995, 1996, 1997, 1998 and 1999, it was stated that it would be submitted in due course. 10. Another reminder was sent by the DGHS on 8th March 2000 to the Petitioner, asking it to furnish the necessary information within ten days. In W.P. (C) No. 2485 of 2001 Page 6 of 29 reply, on 11th March 2000 the Petitioner informed the DGHS that “A satisfactory report of period from 1995 onwards could not be inspected by State Government‟s concerned authority because of their busy schedule. As soon as, the inspection is over we will complete the formalities.” On 15th November 2000, the Petitioner enclosed the report for the period 1995 to 30th October 2000. A photocopy of the said letter bearing the receipt of acknowledgement dated 25th November 2000, presumably of the DGHS, has been enclosed. In the Proforma, details were given up to year 1999 as regards the OPD patients. The detailed lists of concessions extended for the entire period with the names of the patients was also enclosed. On 18th November 2000, the Petitioner wrote to the DGHS stating that report as regards the period 1995 till 30th October 2000 had already been submitted to the Director, Lok Nayak Hospital, New Delhi. The postal proof of the above letter having been dispatched to the Deputy Director, DGHS is also enclosed. 11. Thereafter on 20th November 2000, the impugned order came to be passed by the DGHS without referring to the Petitioner‟s letters dated 15th November 2000 and 18th November 2000. The DGHS observed that since the Petitioner had failed to furnish any information “to substantiate continuous discharge of the post import obligations, it has been concluded that your institution is not eligible to retain the benefits of customs duty exemption availed under the said notification. Therefore, the CDEC referred to in annexure are, hereby withdrawn as cancelled.” 12. The Petitioner states that in the impugned order dated 20th November W.P. (C) No. 2485 of 2001 Page 7 of 29 2000, a reference was made to a report prepared by the State Government. However, copy of the said report was not furnished to the Petitioner. On 25th November 2000, the Director (Administration), Lok Nayak Hospital asked the Petitioner to furnish information as regards Columns G & H of point 3 of the Proforma. On 28th November 2000, the Petitioner wrote to the DGHS requesting revocation of the impugned order dated 20th November 2000. On 30th December 2000, the Petitioner furnished the details asked for by the Director (Administration), Lok Nayak Hospital by the letter dated 25th November 2000. 13. The Petitioner states that on 3rd January 2001 the Director (Administration), Lok Nayak Hospital submitted a report to the State Health Secretary of the GNCTD to the effect that there was nothing adverse against the Petitioner. 14. Consequent upon the impugned order dated 20th November 2000 having been marked by the DGHS to the Commissioner of Customs, the Petitioner received a notice dated 7th March 2001 from the latter and proceedings commenced under the Customs Act, 1962 as well. 15. In the above background, the Petitioner filed the present petition on 18th April 2001 challenging the order dated 20th November 2000. 16. On 18th January 2002, this Court directed that till the next date no final order will be passed pursuant to the impugned order by the Respondents. That interim order was continued till 29th January 2004 when it was W.P. (C) No. 2485 of 2001 Page 8 of 29 modified to the extent that “the final order, if any, passed by the respondent authorities shall not be given effect to till the next date.” 17. The Petitioner was permitted to amend the writ petition by an order dated 18th January 2005 whereby the Petitioner was allowed to incorporate certain facts arising as a consequence of the impugned order. The amended writ petition 18. To complete this narration, it may be mentioned that by the amendment the Petitioner brought on record the following facts: (i) The original import licence was in the name of DUIRC. An amendment was applied for to incorporate the words (“a unit of R.G. Stone Enterprises Pvt. Ltd.”) under the name of the said Centre in the import licence. (ii) All correspondence between the DUIRC and the Petitioner and the DGHS and the DHS was only at the East of Kailash address and that both authorities were aware of the installation of the equipment at that address. (iii) On 6th/11th July 1989 the DUIRC informed the Joint Secretary (Medical) Delhi Administration that its Centre had started functioning and that an installation certificate in terms of Para 4(b) of the Notification No. 64/88 should be issued to it. The letter head on which the above letter was typed out indicated that the Petitioner‟s unit was located at East of Kailash. W.P. (C) No. 2485 of 2001 Page 9 of 29 (iv) The DUIRC and later the Petitioner continued to provide free concessional treatment to poor patients between 1992 and 1999. It also organised free camps at several places outside Delhi. (v) The impugned order of 20th November 2000 was issued by the DHS despite being aware of the fact that the investigations by the Delhi Government were in progress and that the details were to be submitted after the conclusion of such investigations. The reasons given in the impugned order were also assailed. 19. In the amended writ petition, additional grounds of challenge were also raised. The Petitioner, on 26th August 2002, filed a photocopy of the inspection report dated 3rd January 2001 of the Director (Administration), Lok Nayak Hospital. Reply of the Respondents 20. A counter affidavit was filed to the amended writ petition by Respondents 1 to 3. While it was not denied that the State Government had given a report dated 3rd January 2001, it was stated that such report was received belatedly “i.e. much after the impugned order, which included the information for the years 1995 to 1999.” It was pointed out that the said inspection report “has also not stated that the institution is giving entire services free in OPD and has not treated any indoor patient with income less than `500/- per month, free of cost.” The Respondents maintained that despite repeated reminders by the DGHS, no reply had been received from the Petitioner. W.P. (C) No. 2485 of 2001 Page 10 of 29 21. A reference was made by the Respondents 1 to 3 to Writ Petition (Civil) No. 409 of 1996 (PUCL v. Union of India) filed in this Court as a public interest litigation seeking the quashing of suspected illegal CDECs issued by the DGHS. This Court constituted a one man committee of Mr. S.D. Mohile, Member (CBEC) for taking action for recovery of customs duty and for initiating other proceedings under the Customs Act, 1962 against the defaulting parties. Another committee called the Rosha Committee under the Chairmanship of Shri Padam Rosha, comprising of senior officers drawn from the Revenue Intelligence, Central Excise, DGHS and CBI was constituted under the orders of this Court. It was stated that the Rosha Committee was also examining the Petitioner‟s case. 22. A reference was also made in the reply to the judgment of the Supreme Court in Mediwell Hospital & Health Care (P) Ltd. v. Union of India AIR 1997 SC 1623 (hereafter `the Mediwell Hospital case‟) in which it is held that the Notification No. 64/88 granting exemption should be construed as casting a continuing obligation on the part of all those who had obtained certificate from the appropriate authority. It was held that the objective of giving free treatment to at least 40 per cent of the outdoor patients as well as free treatment to all the indoor patients belonging to families with an income of less than ` 500/- per month must be achieved at all costs and if the said obligation was not discharged, then steps could be taken for realisation of the customs duty from such of those entities who had availed the CDECs. 23. The Respondents state that the case of the Petitioner was considered at the CDEC meeting held on 7th September 2000 and despite opportunities W.P. (C) No. 2485 of 2001 Page 11 of 29 given to the Petitioner, it had failed to give information for the period from 1995 onwards. As regards the report of the GNCTD, it is stated that the information provided by the Petitioner had not been verified and cross- checked with the registers. It was stated that MG Section of the DGHS had not received the Petitioner‟s letters dated 11th March 2000, 15th November 2000 and 18th November 2000. Although it is not denied that the report of the Delhi Government of 3rd January 2001 was received by the DGHS only on 15th January 2001, it was not in dispute that no patient with the income of less than ` 500/- per month came to the Petitioner for indoor treatment. It was submitted that the voluminous documents submitted and the various concessions given to patients was not information sought for “in terms of the notification requirement.” Submissions of Counsel 24. Apart from reiterating the facts narrated hereinbefore, Mr. Jeevan Prakash learned counsel appearing for the Petitioner referred to the fact that by a Notification No. 98/94 dated 1st March 1994, the Notification no. 64/88 dated 1st Mach 1988 had been rescinded. He, therefore, submitted that in any event after 1st March 1994 there was no obligation on the Petitioner to continue to comply with the obligation under Notification No. 64/88.He referred to the decision of the Supreme Court in Faridabad CT Scan Centre v. D.G. Health Services (1997) 7 SCC 752 which overruled a certain operative portion of the decision in the Mediwell Hospital. He also referred to the decision in Sri Sathya Sai Institute High Medical Sciences v. Union of India 2003 (158) ELT 675 (SC), which overruled certain other operative portions of the decision in Mediwell Hospital case. He also placed reliance W.P. (C) No. 2485 of 2001 Page 12 of 29 upon the judgments of the different High Courts in Apollo Hospitals Enterprises Ltd. v. Union of India 2001 (133) ELT 58 (Mad); J.J.M. Medical College v. Director General of Health Services 2006 (193) ELT 401 (Kar); Core Healthcare Ltd. v. Union of India 2006 (198) ELT 21 (Guj) and Dr. Balabhai Nanavati Hospital & Nanavati Hospital Medical Research Centre v. Union of India 2009 (233) ELT 442 (Bom.). In order to buttress the submission that the decision in the Mediwell Hospital case no longer holds good, learned counsel for the Petitioner relied upon the decisions in State of Haryana v. Ranbir (2006) 5 SCC 167 and Divisional Controller, KSRTC v. Mahadeva Shetty (2003) 7 SCC 197. 25. Appearing for the Respondents Ms. Preeti Dalal, learned Advocate referred to the decisions in Bharath Diagnostic Centre v. Commissioner of Customs, Air Cargo (I & G), New Delhi 2007 (207) ELT 113 (Tri. – Bang.) and the Division Bench of the Bombay High Court in Shah Diagnostic Institute Private Ltd. v. Union of India 2008 (222) ELT 12 (Bom). It was submitted that once a CDEC had been obtained, the obligation thereunder had to be continuously met notwithstanding the fact that the notification stood withdrawn in 1994. In the instant case, as far as the DGHS is concerned, it had no information from the Petitioner that it had complied with its obligations for the years 1995 to 1999 and, therefore, it was justified in withdrawing the CDEC. Scope of Notification No. 64/88: Applicability of Para 2 to the Petitioner 26. The first issue to be considered is about the scope of the Notification No. 64/88 issued under the Customs Act, 1962. The Table appended to the W.P. (C) No. 2485 of 2001 Page 13 of 29 notification sets out the conditions subject to which the CDEC is granted to hospitals. Para 2(a) of the Table requires a hospital certified by the Ministry of Health and Family Welfare, Government of India to comply with the following requirements of free treatment: “(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; and (c) at reasonable charges, either on the basis of the income of the patients concerned or otherwise, to patients other than those specified in clauses (a) and (b).” 27. Para 4 of the Table to the said notification, which is relevant for the present purposes, reads as under: “4. Any such hospital which is in the process of being established and in respect of which the said Ministry of Health and Family Welfare is of opinion- (i) that there is an appropriate programme for establishment of the hospital, (ii) that there are sufficient funds and other resources required for such establishment of the hospital, (iii) that such hospital would be in a position to start functioning within a period of two years, and (iv) that such hospital, when it starts functioning would be relatable to a hospital specified in paragraph 1, 2 or 3 of this Table. and the said Ministry of Health and Family Welfare certifies to that effect: Provided that- W.P. (C) No. 2485 of 2001 Page 14 of 29 (a) in the case of a hospital relatable to paragraph 3 of this Table, the importer produces evidence to the Assistant Collector of Customs at the time of clearance of the said hospital equipment that the same is being imported in accordance with the conditions specified in proviso to that paragraph: (b) the importer shall give an undertaking in writing to the Assistant Collector at the time of clearance of the said hospital equipment that the importer shall furnish certificates from the said Ministry of Health and Family Welfare or from the Directorate General of Health Services, Government of India, within such period as the Assistant Collector of Customs may specify in this behalf or within such extended period as the Assistant Collector of Customs, on sufficient cause being shown, may allow in each case, to the effect- (i) that such hospital equipment has been installed in the hospital; and (ii) that such hospital has started functioning; (c) the importer shall furnish, at the appropriate time, the certificates referred to in (b); (d) the importer executes a bond in such form and for such sum as may be specified by the Assistant Collector of Customs binding himself to pay, on demand, an amount equal to the duty leviable on the said hospital equipment— (i) if such hospital starts functioning within the period specified therefor, as is not proved to the satisfaction of the Assistant Collector of Customs to have been installed in such hospital, or (ii) if such hospital does not start functioning within the period specified therefor. Explanation.—For the purposes of this notification, the expression “Hospital” includes any Institution, Centre, Trust, Society, Association, Laboratory, Clinic and Maternity Home which renders medical, surgical or diagnostic treatment.” W.P. (C) No. 2485 of 2001 Page 15 of 29 28. Although it is sought to be contended by the learned counsel for the Petitioner that the requirement under Para 2 was applicable only to the existing hospitals, this court is unable to accept the said submission. Para 4 relates to hospitals which are in the process of being established. This clause certainly applies to the Petitioner since at the time it obtained the CDEC, it was in the process of being established. Nevertheless under Para 4(iv), such hospitals which start functioning “would be relatable to a hospital specified in paragraph 1, 2 or 3 of this Table.” Therefore, once the Petitioner Hospital commenced its functioning, it had to comply with the requirement of Para 2. No objection by Respondents to explanation given by Petitioner for shifting the site of installation of equipment 29. An analysis of the above narrative reveals that the Petitioner, on its part, had given a satisfactory explanation why it had to shift the place of installation of