All In The Name Of Charity
The court has done its part. Now the executive must take action against those who have connived in the misuse of this benefit.''
Section 25(1) of the Customs Act exempts levy of customs duty on equipments imported by specified categories of hospitals (charitable), subject to clarification from the director general of health services, that the import of the said equipment is essential for the applicants hospital. The central government issued a notification (no. 64/88 customs dated 1-3-1985), outlining the conditions that had to be fulfilled by the hospitals before seeking this benefit. These conditions are :
Hospitals be run or substantially aided by such charitable organisation as may be approved, from time to time, by the ministry of health and family welfare;
Hospitals providing medical, surgical or diagnostic treatment not only without any distinction of caste, creed, religion, etc but also:
a) Free, for atleast 40 per cent of all its outdoor patients;
b) Free, for all indoor patients belonging to families with an income of less than Rs 500 per month, and keeping atleast 10 per cent of beds reserved for such patients;
c) Providing treatment at reasonable charges, either on the basis of the income of the patients or otherwise, to patients other than those specified in Clause (a) and (b).
Clause 3 & 4 of the notificat-ion indicate the preconditions to be satisfied before the certificate in question can be issued. They are:
The hospital, even though it charges some amount for treatment is nevertheless run on a non-profit basis and therefore it deserves an exemption.
The ministry of health must form an opinion i) That there is an appropriate programme for the establishment of the hospital. ii) That there are sufficient funds and other resources required for establishing the hospital. iii) That such a hospital, would be in a position to start functioning within a period of two years.
Similarly, the customs department must be satisfied that the imported equipment has been installed and has started functioning in the hospital.
However, open misuse of these benefits came to the notice of the Supreme Court in Mediwell Hospital & Health care Pvt Ltd vs UOI & ORS JT 1997(1) SC 270. The appellant had applied to the director general of health services for the certificate needed to import certain equipment without payment of duty. However, this request was rejected by the high court. Hence, they appealed to the SC.
The appellant's case was, that it had established a modern heart institute and research centre and wanted to import sophisticated equipments for the institute. The request was turned down on the ground that the appellant was merely running a diagnostic centre on a commercial basis, and that it was not a hospital.
The appellant argued before the SC that the expression hospital in the exemption notification brings within its perview a diagnostic centre and hence, it is entitled to the exemption. It was also urged that similar diagnostic centres have been granted duty exemptions earlier and a refusal in this particular case amounts to a discrimination and must be held to be arbitrary and violative of Article 14 of the Constitution.
The SC decided that :
It is true that no importer can claim absolute exemption from payment of customs duty as a right. The normal rule is that every import attracts duty under the Customs Tariff Act, unless otherwise exempted by a notification issued by the central government in exercise of power under Section 25 of the Act and the person claiming exemption should establish that the pre-conditions prescribed under the notification are fully met. In the context of the present dispute and with regards the exemption notification as a whole, it appears that the government intended to exempt such hospitals from payment of customs duty on import of equipments, which are certified by the ministry of health and family welfare. Thus a diagnostic centre run by a private individual purely on a commercial basis may not be entitled to the exemption under the notification issued by the central government.
The appellant's claim that other diagnostic centres have been granted similar certificates was not refuted by the government. In view of this the court decided that the refusal to grant such certificate to the appellant without any justifiable reason tentamounts to a discriminatory treatment meted out to the appellant, which on the face of it is violative of Article 14 of the Constitution of India.
Hence, the writ petition was allowed after the court was satisfied that the appellant had complied with the requisite conditions. The court cautioned the government by stating that the competent authority should be vigilant and check whether the undertaking given by the applicants are being duly complied with after availing the benefits. If on enquiry, the authorities are satisfied that the continuing obligations are not being met, then they would be fully authorised to ask for payment of duty against the imported equipments.
The court further directed that all persons who avail the duty exemption benefits, should notify in the local newspaper every month, the total number of patients they have treated and the 40 per cent who are indignant persons below the stipulated income, with full particulars and address thereof . This would ensure that the aim of treating 40 per cent of the patients free of cost is being continuously fulfilled.
In the event of a default, there should be coercive official action. This condition will become a part of the exemption order application and has to be strictly enforced.
The court has done its part of the work. Now the executive must take action against those who have connived in the misuse of the benefit and ensure that the conditions prescribed by the court are strictly complied.