Holding

An applicant is not estopped from claiming exemption under a different category of the same notification; the authority must consider the claim on its merits.

Summary

Share Medical Care, a charitable hospital society, imported medical equipment in 1992‑93 and obtained customs duty exemption under paragraph 2 of Notification No. 64/88. The society later applied for exemption under paragraph 3, claiming eligibility as a non‑profit rural institution, but the Deputy Director General (Medical) rejected the application, stating that the earlier exemption under paragraph 2 barred any further claim. The Society challenged the rejection in the High Court, which dismissed the petition, holding that the withdrawal of paragraph‑2 benefits precluded a paragraph‑3 claim. The Supreme Court held that an applicant is not estopped from seeking a more beneficial exemption under a different head of the same notification, even if a prior exemption was granted and later withdrawn. Consequently, the Court directed the authorities to reconsider the paragraph‑3 application on its merits and allowed the appeal with costs.

Issues considered

Whether a charitable hospital that has obtained customs duty exemption under paragraph 2 of Notification No. 64/88 can later claim exemption under paragraph 3 of the same notification.
Whether the withdrawal of the paragraph‑2 exemption bars the hospital from seeking exemption under paragraph 3.
Whether the authority's refusal to consider the paragraph‑3 application is legally valid.

Legislation cited

Customs Act, 1962
Income Tax Act, 1961s. 80-P(2)(a)

Subjects

Customs duty exemptionNotification 64/88Charitable hospitalEstoppelMultiple exemptionsAdministrative lawPublic societies

Judgment

A SHARE.... MEDICAL CARE
v.
UNION OF INDIA AND ORS.

FEBRUARY 23, 2007

B [C.K. THAKKER AND LOKESHWAR SINGH PANTA, JJ.]

Customs Act, 1962:

Charitable Hospital-Importing hospital equipments-Claiming benefit
C under para 3 of the Table of exemption Notification No. 64188-Cus dated
March l,l988-Refusal on ground that hospital itself had sought and was
granted benefit of para 2, and since the benefit was withdrawn on non-
fulfilment of obligation under para 2, it cannot claim benefit under para 3-
Held, authori1ies would reconsider case of hospital as to exemption under
D para 3 strictly in accordance with law on its own merits-Notification No.
64188-Cus dated March 1, 1988.

The appellant, a Society registered under the Andhra Pradesh
(Telengana Area) Public Societies Act, 1350-Fasli and being a charitable
hospital imported certain medical equipment in the year 1992-93 and applied
E for the benefit of exemption of Notification No. 64/88-Cus dated March 1,1988,
under para 2 of the Table. The benefit was granted. Since the Society was
also entitled to exemption under para 3 of the table, an application was made
to that effect. The application was rejected with the observation that since
request was made for exemption under para 2 earlier which was grante~, it
was not open to the Society to apply for exemption under para 3 of the table.
F The appellant challenged the order in the High Court, which dismissed the
writ petition.
(
In the appeal filed by the Society, it was contended for the respondent
that the appellant never objected to categorization of the Hospital under para
G 2 of the table of the exemption notification and when the said exemption benefits
were withdrawn for non-fulfilment of free treatment obligations, the appellant
represented its case as an afterthought to category under para 3.

On the question: whether the appellant could claim exemption under
para 3 of the table of the exemption Notification and non consideration of the
H 44
SHARE MEDICAL CARE v. U.0.1. 45
said application was in consonance with law. A
-·\

Allowing the appeal, the Court

HELD: 1.1. Even if an applicant does not claim benefit under a particular
notification at the initial stage, he is not debarred, prohibited or estopped from
claiming such benefit at a later stage. In the instant case, the ground which B
weighed with the authority concerned for non-considering the prayer of the
appellant was that earlier, exemption was sought under category 2 of exemption
notification, not under category 3 and exemption under category 2 was
withdrawn. This is hardly a ground sustainable in law. On the contrary, well
settled law is that in case the applicant is entitled to benefit under two different
Notifications or under two different Heads, he can claim more benefit and it
c
is the duty of the authorities·to grant such benefits if the applicant is otherwise
entitled to such benefit. Therefore, non-consideration on the part of the
authority concerned to the prayer of the appellant in claiming exemption under
'
category 3 of the notification is illegal and improper. (Paras 16-17) (50-0-G(
D
Collector of Central Excise, Baroda v. Indian Petro Chemicals, (1997)
11 SCC 318; H.C.l. Limited v. Collector of Customs, New Delhi, (2001) 130
E.L.T. 405 (SC); Unichem Laboratories Ltd. v. Collector of Central Excise,
Bombay, (2002] 7 SCC 145 : JT (2002) 6 SC 547 and Kera/a State
Cooperative Marketing Federation Ltd. & Ors. v. Commissioner of Income
Tax, (1998) 5 SCC 48: JT (1998) 4 SC 145, relied on. E
1.2. The decision in Mediwel/ Hospital* would not take away the right
of the appellant to claim benefit under para 3 of the Table of exemption
notification. If the appellant is not entitled to exemption under para 2, it cannot
make grievance against denial of exemption. But if it is otherwise entitled to
such benefit under para 3, it cannot be denied either. (Para 21) (52-A-B( F
)
Mediwel/ Hospital & Health Care Pvt. Ltd v. Union of India & Ors.,
(1997] 1 SCC 759: JT (1997) I SC 270, referred to.

1.3. The respondent-authorities are directed to re-consider the case of
the appeliant as to exemption in category 3 of the exemption notification G
strictly in accordance with law, on its own merits and without being inhibited
by the observations made in the judgment. (Para 22] (52-B-C)
-\
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 919 of2007.

H
46 SUPREME COURT REPORTS (2007) 3 S.C.R.

A From the Final common Judgment and Order dated 31.12.2004 of the
High Court of Judicature, Andhra Pradesh at Hyderabad in W.P. Nos. and
22734, 22735/1996 and 3355 of2001.

V. Sridharan, Alok Yadav, G. Tushar Rao, Y. Ramesh, Y. Raja Gopala Rao
and Y. Vismai for the Appellant.
B
Vikas Singh, A.S.G., Krishan Mahajan, R. Basani and Sushma Suri for
the Respondents.
i
The Judgment of the Court was delivered by

c C.K. THAKKER, J. I. Leave granted.

2. This appeal has been filed against a common judgment and order
passed by the High Court of Andhra Pradesh, Hyderabad on December 31,
2004 in Writ Petition Nos. 22734 & 22735 of 1996 and 3355 of2001.
,

D J. Few facts which are necessary for understanding the controversy are
that the appellant-Share Medical Care is a Society registered under the Andhra
Pradesh (Telengana Area) Public Societies Act, 1350 Fasli (Act I of 1350 F)
('Society' for short) and owes its origin to the desire of Non Resident Indian
(NRI) Scientists and Doctors based in the United States of America (USA).
The aim of the Society is to share the advanced technology with the citizens
E of India. The appellant-Society was established with the intention to construct
and run hospitals, medical and diagnostic centers, etc. It is a charitable
hospital and is run on 'no-profit' basis. It is located at village Ghanapur, about
40-50 kms away from the city of Hyderabad. It started its activities in the year
1993. It has specialized in treatment of heart and related ailments having the
F latest equipments and specialist doctors.

4. In the year 1992-93, the appellant-Society imported certain medical
equipments for the use in its charitable hospital. According to the appellant,
under Notification No. 64/88-Cus dated March I, 1988, exemptions were granted
to hospital equipments.imported by specified category of hospitals (charitable)
G subject to certification by Directorate General of Health Services (DGHS). The
table in the notification classified hospitals in four categories. According to
the appellant, it falls under Para No.3 of the table of notification. }-

5. The appellant, however, along with several other hospitals, had applied
for the benefit of exemption notification not under para 3 but para 2 of the
H
SHARE MEDICAL CARE v. U.0.1. [THAKKER, J.] 47
·• table. The benefit of exemption was granted. Since the Society was also A
entitled to exemption under para 3 of the table, an application was made to
DGHS highlighting the fact that the appellant is a non-profit organization and
had been permitted to import medical equipments by DGHS by certification.
It has been registered as an institution to receive donations in foreign exchange
and since the area of operations of the main hospital at Ghanapur and the
Rural Health Hospital are in rural areas, it would be entitled to invoke para B
3 of the table of notification of exemption. The Deputy Director General
(Medical), DGHS, by an order dated January 25, 2000 rejected the application
of the appellant observing therein that initially the request was made by the
appellant for exemption under para 2 of the notification and accordingly, the
institution was granted such exemption. It was, therefore, not open to apply C
for exemption under para 3 of the table of the exemption notification and the
application was liable to be rejected.

6. Being aggrieved by the above order passed by the Deputy Director
General (Medical), the appellant-Society filed the above petitions in the High
Court of Andhra Pradesh. The High Court also dismissed the petitions D
observing that it was not in dispute that the appellant (petitioner) claimed
exemption in respect of import of hospital equipments and was allowed on the
basis of its prayer under category para 2 of the table. The High Court noted
that the learned counsel for the appellant-petitioner relied upon certain
decisions in support of the contention that a categorization could be changed E
but it held that the exemption was granted in category 2 of the table, certain
information was sought which was not supplied by the Society and the
exemption was withdrawn. Regarding category 3, however, the High Court
observed that when the appellant did not fulfill conditions relatable to category
2 institution, its claim for conversion of categorization under category 3 was
untenable. Accordingly, all petitions were dismissed. F
7. We have heard learned counsel for the parties.

8. Learned counsel for the appellant submitted that it is settled law that
even if exemption is granted for one category or under one notification and
the applicant is entitled to claim more or greater benefit under other category G
or other notification, the 8Uthority is duty bound to consider the case of the
applicant in the other category or other notification and there is no question
of any estoppel or bar to such plea. It was, therefore, incumbent upon the
Deputy Director General (Medical), DGHS to consider the application of the
appellant on merits and rejection of application only on the ground that the H
48 SUPREME COURT REPORTS [2007] 3 S.C.R.

A appellant had earlier applied under category 2 and, therefore, it was not open
to it to apply under category 3 and the application was not tenable was illegal
and contrary to law. The learned counsel for the appellant further submitted
that it was only because of rejection of application on the ground of
maintainability that it made a limited prayer before the High Court to direct
B the Deputy Director General (Medical), DGHS to consider and decide the
application of the appellant on merits. By not doing so, the error of law
committed by the Deputy Director General (Medical), DGHS had been repeated
by the High Court and hence both the orders are liable to be set aside. It was
submitted that the Deputy Director General (Medical), DGHS may be asked
to consider the matter of the appellant on merits as to whether it would be
C entitled to exemption under category 3.

9. The learned counsel for the respondents, on the other hand, supported
the order of the authority relying on an affidavit in reply filed by the Assistant
Director General (M) who stated that the representation of the appellant was
examined carefully by the authorities and it was decided that when the
D appellant had voluntarily applied under category 2 of the exemption notification,
he could not change it to category 3. Category 2 exemption was not 'thrust
upon' the appellant. The appellant-hospital never objected the categorization
of its hospital in the past. When the said exemption benefits were withdrawn
for non-fulfillment of free treatment obligations, the appellant represented its
E case as an 'afterthought' to category under para 3 of the table of exemption
notlftcation which was rejected. It, therefore, cannot be said that any illegality
had been committed and the appeal deserves to be dismissed.

I0. Having heard learned counsel for the parties, in our opinion, the
appeal deserves to be allowed. It is, no doubt, true that initially the appellant
F claimed exemption under category 2 of exemption notification which was
granted. That, however, does not mean that the appellant could not claim
exemption under category 3. So far as cancellation of exemption under category
2 is concerned, we are not called upon to decide legality or otherwise of the
said decision as it has not been challenged before us in the present
proceedings. The short question which we have to answer is whether the
G appellant could claim exemption under category 3 and non-consideration of
the said application by the Deputy Director General (Medical) is in consonance
with law. Our reply is in the negative. And we are supported in our view by
the decisions of this Court.

11. In this connection, attention of the Court has been invited to certain
H
SHARE MEDICAL CARE v. U.O.L [THAKKER, J.) 49
decisions by the learned counsel for the appellant. A
·i
12. In Collector of Central Excise, Baroda v. Indian Petro Chemicals,
[1997] 11 SCC 318, this Court held that if two exemption notifications are
applicable in a given case, the assessee may claim benefit of the more beneficial
one. Similarly, in H.CL. Limitedv. Collector of Customs, New Delhi, (2001)
130 E.L.T. 405 (SC), this Court relying upon Indian Petro Chemicals, held that B
where there are two exemption notifications that cover the case in question,
the assessee is entitled to the benefit of that exemption notification which
may give him greater or larger relief. In Unichem Laboratories Ltd v. Collector
• of Central Excise, Bombay, [2002] 7 SCC I45 : JT (2002) 6 SC 547, the
appellant was a manufacturer of bulk drugs. Exemption was granted to him
under one item. He, thereafter, filed a revised classification list categorizing
c
its bulk drugs under the other Head claiming more benefit. The claim was
rejected on the ground that the appellant had not claimed the benefit of
exemption at the time of filing the classification list and subsequently it could
not be done. The appellant approached this Court.
D
13. Allowing the appeal and setting aside the order, this Court held that
if no time is fixed for the purpose of getting benefit under the exemption
notification, it could be claimed at any time. If the notification applies, the
.,
benefit thereunder must be extended to the appellant. The Court held that the
authorities as well as the Tribunal were not right in holding that the appellant
ought to have claimed the benefit of the notification at the time of filing of E
classification lists and not at a subsequent stage.

14. The Court then stated:

" ... There can be no doubt that the authorities functioning under the
Act must, as are in duty bound, protect the interest of the Revenue F
by levying and collecting the duty in accordance with law - no less
> and also no more. It is no part of their duty to deprive an assessee
of the benefit available to him in law with a view to augment the
quantum of duty for the benefit of the Revenue. They must act
reasonably and fairly". G
(Emphasis supplied)

15. In Kera/a State Cooperative Marketing Federation Ltd & Ors. v.
Commissioner ofIncome Tax, [1998] 5 SCC 48: JT (1998) 4 SC 145, interpreting
Section 80-P(2)(a) of the Income Tax Act, 1961, this Court said:
H
50 SUPREME COURT REPORTS [2007] 3 S. C.R.

A "We may notice that the provision is introduced with a view to
encouraging and promoting growth of co-operative sector in the
economic life of the country and in pursuance of the declared policy
of the Government. The correct way of reading the different heads of
exemption enumerated in the section would be to treat each as a
separate and distinct head of exemption. Whenever a question arises
B as to whether any particular category of an income of a co-operative
society is exempt from tax what has to be seen is whether income fell
within any of the several heads of exemption. If it fell within any one
head of exemption, it would be free from tax notwithstanding that the
conditions of another head of exemption are not satisfied and such
c income is not free from tax under that head of exemption. The
expression "marketing" is an expression of wide import. It involves
exchange functions such as buying and selling, physical functions
such as storage, transportation, processing and other commercial
activities such as standardisation, financing, marketing intelligence
etc. Such activities can be carried on by an Apex Society rather than
D a primary society". (emphasis supplied)

16. From the above decisions, it is clear that even if an applicant does
not claim benefit under a particular notification at the initial stage, he is not
debarred, prohibited or estopped from claiming such benefit at a later stage.

E 17. In the instant case, the ground which weighed with the Deputy
Director General (Medical), DGHS for non-considering the prayer of the
appellant was that earlier, exemption was sought under category 2 of exemption
notification, not under category 3 of exemption notification and exemption
under category 2 was withdrawn. This is hardly a ground sustainable in law.
F On the contrary, well settled law is that in case the applicant is entitled to
benefit under two different Notifications or under two different Heads, he can
claim more benefit and it is the duty of the authorities to grant such benefits {
if the applicant is otherwise entitled to such benefit. Therefore, non-
consideration on the part of the Deputy Director General (Medical), DGHS to
the prayer of the appellant in claiming exemption under category 3 of the
G notification is illegal and improper. The prayer ought to have been considered
and decided on merits. Grant of exemption under category 2 of the notification
or withdrawal of the said benefit cannot come in the way of the applicant in
claiming exemption under category 3 if the conditions laid down thereunder
have been fulfilled. The High Court also committed the same error and hence
H the order of the High Court also suffers from the same infirmity and is liable
SHARE MEDICAL CARE v. U.0.1. [THAKKER, J.] 51
to be set aside. A
18. Strong reliance was placed by the respondents on a decision of this
Court in Mediwel/ Hospital & Health Care Pvt. Ltd. v. Union of India & Ors.,
[1997] l SCC 759 : JT (1997) I SC 270. In Mediwell Hospital, the Court was
considering the very same notification 64/88 and grant of exemption to hospital
equipments imported by specified category of hospitals. The Court held that B
an Individual Diagnostic Centre if covered by the notification, could claim
import of equipments without paying customs duty. But in case of failure on
the part of the persons availing the benefit to satisfy conditions laid down
in the notification, it is incumbent on the authorities to recover such duty.

19. The Court stated; c
The competent authority, therefore, should continue to be vigilant
and check whether the undertakings given by the applicants are being
duly complied with after getting the benefit of the exemption notification
and importing the equipment without payment of customs duty and D
if on such enquiry the authorities are satisfied that the continuing
obligation are not being carried out then it would be fully open to the
authority to ask the person who have availed of the benefit of
exemption to pay the duty payable in respect of the equipments which
have been imported without payment of customs duty. Needless to
mention the government has granted exemption from payment of E
customs duty with the sole object that 40% of all outdoor patients and
entire indoor patients of the low income group whose income is less
than Rs.500/- p.m. would be able to receive free treatment in the
Institute. That objective must be achieved at any cost, and the very
authority who have granted such certificate of exemption would ensure
that the obligation imposed on the persons availing of the exemption F
notification are being duly carried out and on being satisfied that the
said obligations have not been discharged they can enforce realisation
of the customs duty from them.

20. In the counter-affidavit, it has been asserted that in the light of the G
observations in Mediwell Hospital, the Director General of Health Services
and Department of Health decided to review cases of all (396) beneficent
_\ institutions who had availed of benefits under notification 64/88, and the
appellant was one of them. Since it was found that the appellant was not
fulfilling the conditions set out in para 2 of the Table, the benefit was
withdrawn. H
52 SUPREME COURT REPORTS (2007] 3 S.C.R.

A 21. In our opinion, the decision in Mediwell Hospital would not take
away the right of the appellant to claim benefit under para 3 of ihe Table of
exemption notification. If the appellant is not entitled to exemption under para
2, it cannot make grievance against denial of exemption. But if it is otherwise
entitled to such benefit under para 3, it cannot be denied either. The contention
B of the authorities, therefore, has no force and must be rejected.

22. For the foregoing reasons, the appeal deserves to be allowed and
is accordingly allowed. The respondent-authorities are directed to re-consider
the case of the appellant as to exemption in category 3 of the exemption .,
notification strictly in accordance with law, on its own merits and without
C being inhibited by the observations made by us hereinabove. The appeal is
allowed with costs.

RP. Appeal allowed.

>-