2026-VIL-1047-CESTAT-HYD-CU
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CUSTOMS CESTAT Cases

Customs duty exemption under conditional notification – A appellant-hospital imported medical equipment during 1990-1993 claiming exemption under Notification No. 65/88-Cus based on Customs Duty Exemption Certificates issued by the DGHS. The exemption was conditional upon providing free treatment to 40% of outdoor patients and reserving 10% of hospital beds for economically weaker sections - The Director General subsequently cancelled the certificates on finding non-fulfillment of these mandatory conditions - Whether the cancellation of the exemption certificates by the competent authority disentitles the importer from availing customs duty exemption and whether the goods become liable for confiscation under Section 111(o) of the Customs Act, 1962 – HELD - The exemption Notification granted exemption not as an unconditional benefit but subject to strict compliance with specified social obligations, the object being to ensure that hospitals importing sophisticated medical equipment extend benefits to economically weaker sections. The records indicate that competent authorities found the hospital failed to provide free treatment to the prescribed percentage of outdoor patients and failed to reserve the required percentage of beds for poor indoor patients. It is a settled principle that where an exemption notification prescribes conditions, the beneficiary must establish strict compliance with those conditions, and failure to satisfy prescribed requirements renders the exemption unavailable - The Supreme Court in Mediwell Hospital case categorically held that hospitals availing benefit under the notification are under continuing obligation to comply with conditions and authorities are duty bound to ensure such compliance. Once the Director General cancelled the certificates on account of violation of notification conditions, the hospital ceased to possess the essential qualification for availing exemption, and customs authorities were justified in initiating action for recovery of duty foregone and confiscation of imported goods – The impugned order is upheld and the appeal is dismissed
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