The Great Electric Airplane Race
It took me quite sometime to write as have been depressed about things. Then a few days back saw Nova’s The Great Electric Airplane Race. While it was fabulous and a pleasure to see and know that there are more than 200 odd startups who are in the race of making an electric airplane which works and has FAA certification. I was disappointed though that there no coverage of any University projects.
From what little I know, almost all advanced materials which U.S. had made has been first researched in mostly Universities and when it is close to fruition then either spin-off as a startup or give to some commercial organization/venture to make it scalable and profitable. If they had, I am sure more people could be convinced to join sciences and engineering in college. I actually do want to come to this as part of both general medicine and vaccine development in U.S. but will come later. The idea that industry works alone should be discouraged, but that perhaps may require another article to articulate why I believe so.
Medical Device – Ventilators in India
Before the pandemic, probably most didn’t know what a ventilator is and was, at least I didn’t, although I probably used it during my somewhat brief hospital stay a couple of years ago. It entered into the Indian twitter lexicon more so in the second wave as the number of people who got infected became more and more and the ventilators which were serving them became less and less just due to sheer mismatch of numbers and requirements.
Rich countries donated/gifted ventilators to India on which GOI put GST of 28%. Apparently, they are a luxury item, just like my hearing aid.
Last week Delhi High Court passed a judgement that imposition of GST should not be on a gift like ventilators or oxygenators. The order can be found here. Even without reading the judgement the shout from the right was ‘judicial activism’ while after reading it is a good judgement which touches on several points. The first, in itself, stating the dichotomy that if a commercial organization wanted to import a ventilator or an oxygenator the IGST payable is nil while for an individual it is 12%. The State (here State refers to State Government in this case Gujarat Govt.) did reduce the IGST for state from 12% to NIL IGST for federal states but that to till only 30.06.2021. No relief to individuals on that account.
The Court also made use of Mr. Arvind Datar, as Amicus Curiae or friend of court. The petitioner, an 85-year-old gentleman who has put it up has put broad assertions under Article 21 (right to live) and the court in its wisdom also added Article 14 which enshrines equality of everyone before law.
The Amicus Curiae, as his duty, guided the court into how the IGST law works and shared a brief history of the law and the changes happening before and after it. During his submissions, he also shared the Mega Exemption Notification no. 50/2017 under which several items are there which are exempted from putting IGST. The Amicus Curiae did note that such exemptions were also there before Mega Exemption Notification had come into play.
However, DGFT (Directorate General of Foreign Trade) on 30-04-2021 issued notification No. 4/2015-2020 through which oxygenators had been exempted from Custom Duty/BCD (Basic Customs Duty. In another notification on no. 30/2021 dated 01.05.2021 it reduced IGST from 28% to 12% for personal use. If however the oxygenator was procured by a canalizing agency (bodies such as State Trading Corporation of India (STC) or/and Metals and Minerals Corporation (MMTC) and such are defined as canalising agents) then it will be fully exempted from paying any sort of IGST, albeit subject to certain conditions. What the conditions are were not shared in the open court.
The Amicus Curiae further observed that it is contrary to practice where both BCD and IGST has been exempted for canalising agents and others, some IGST has to be paid for personal use. To share within the narrow boundaries of the topic, he shared entry no. 607A of General Exemption no.190 where duty and IGST in case of life-saving drugs are zero provided the life-saving drugs imported have been provided by zero cost from an overseas supplier for personal use.
He further shared that the oxygen generator would fall in the same entry of 607A as it fulfills all the criteria as shared for life-saving medicines and devices. He also used the help of Drugs and Cosmetics Act 1940 which provides such a relief.
The Amicus Curiae further noted that GOI amended its foreign trade policy (2015-2020) via notification no.4/2015-2020, dated 30.04.2021, issued by DGFT where Rakhi and life-saving drugs for personal use has been exempted from BCD till 30-07-2021. No reason not to give the same exemption to oxygenators which fulfill the same thing.
The Amicus Curiae, further observes that there are “exceptional circumstances” provisions as adverted to in sub-section (2) of Section 25 of the Customs Act, whereby Covid-19 which is known and labelled as a pandemic where the distinctions between the two classes of individuals or agencies do not make any sense. While he did make the observation that exemption from duty is not a right, in the light of the pandemic and Article 14, it does not make sense to have distinctions between the two classes of importers.
He further shared from Circular no. 9/2014-Customs, dated 19.08.2014 by CBEC (Central Board of Excise and Customs) which gave broad exemptions under Section 25 (2) of the same act in respect of goods and services imported for safety and rehabilitation of people suffering and effected by natural disasters and epidemics.
He further submits that the impugned notification is irrational as there is no intelligible differentia rule applied or observed in classifying the import of oxygen concentrators into two categories. One, by the State and its agencies; and the other, by an individual for personal use by way of gift. So there was an absence of ‘adequate determining principle’. To bolster his argument, he shared the judgements of –
a) Union of India vs. N.S. Rathnam & Sons, (2015) 10 SCC 681 (N.S. Ratnams and Sons Case)
b) Shayara Bano vs. Union of India, (2017) 9 SCC 1 (Shayara Bano Case)
The Amicus Curiae also rightly observed that the right to life also encompasses within it, the right to health. You cannot have one without the other and within that is the right to have affordable treatment. He further stated that the state does not only have a duty but a positive obligation is cast upon it to ensure that the citizen’s health is secured. He again cited Navtej Singh Johars vs Union of India (Navtej Singh Johar Case) in defence of right to life. Mr. Datar also shared that unlike in normal circumstances, it is and should be enough to show ‘distinct and noticeable burdensomeness’ which is directly attributable to the impugned/questionable tax. The gentleman cited Indian Express Newspapers (Bombay) Private Limited vs. Union of India, (1985) 1 SCC 641 (Indian Express case) 1985 which shared both about Article 19 (1) (a) and Article 21.
Bloggers note – At this juncture, I should point out which I am sharing the judgement and I would be sharing only the Amicus Curiae POV and then the judge’s final observations. While I was reading it, I was stuck by the fact that the Amicus Curiae had cited 4 cases till now, 3 of them are pretty well known both in the legal fraternity and even among public at large. Another 3 which have been shared below which are also of great significance. Hence, felt the need to share the whole judgement.
The Amicus Curiae further observed that this tax would have to be disproportionately will have to be paid by the old and the infirm, and they might find it difficult to pay the amounts needed to pay the customs duty/IGST as well as find the agent to pay in this pandemic.
Blogger Note – The situation with the elderly is something like this. Now there are a few things to note, only Central Govt. employees and pensioners get pensions which has been freezed since last year. The rest of the elderly population does not. The rate of interest has fallen to record lows from 5-6% in savings interest rate to 2% and on Fixed Deposits at 4.9% while the nominal inflation rate has up by 6% while CPI and real inflation rates are and would be much more. And this is when there is absolutely no demand in the economy. To add to all this, RBI shared a couple of months ago that fraud of 5 trillion rupees has been committed between 2015 and 2019 in banks. And this is different from the number of record NPA’s that have been both in Public and Private Sector banks. To get out of this, the banks have squeezed their customers and are squeezing as well as asking GOI for bailouts. How much GOI is responsible for the frauds as well as NPA’s would probably require its own space. And even now, RBI and banks have made heavy provisions as lockdowns are still a facet and are supposed to remain a facet till the end of the year or even next year (all depending upon when we get the vaccine).
The Amicus Curiae further argued that the ventilators which are available locally are of bad quality. The result of all this has resulted in a huge amount of unsurmountable pressure on hospitals which they are unable to overcome. Therefore, the levy of IGST on oxygenators has direct impact on health of the citizen. So the examination of the law should not be by what intention it was but how it is affecting citizen rights now. For this he shared R.C.Cooper vs Union of India (another famous case R.C. Cooper vs Union of India) especially paragraph 49 and Federation of Hotel & Restaurant Association of India vs. Union of India, (1989) at paragraph 46 (Federation of Hotel Case)
Mr. Datar further shared the Supreme Court order dated 18.12.2020, passed in Suo Moto Writ Petition(Civil) No.7/2020, to buttress the plea that the right to health includes the right to affordable treatment.
Blogger’s Note – For those, who don’t know Suo Moto is when the Court, whether Supreme Court or the High Courts take up a matter for public good. It could be in anything, law and order, Banking, Finance, Public Health etc. etc. This was the norm before 2014. The excesses of the executive were curtailed by both the Higher and the lower Judiciary. That is and was the reason that Judiciary is and was known as the third pillar of Indian democracy. A good characterization of Suo Moto can be found here.
Before ending his submission, the learned Amicus Curiae also shared Jeeja Ghosh vs. Union of India, (2016) (Jeeja Ghosh Case, an outstanding case as it deals with people with disabilities and their rights and the observations made by the Division Bench of Hon’ble Mr. Justice A. K. Sikri as well as Hon’ble Mr. Justice R. K. Agrawal.)
After Amicus Curiae completed his submissions, it was the turn of Mr. Sudhir Nandrajog, and he adopted the arguments and submissions made by the Amicus Curiae. The gentleman reiterated the facts of the case and how the impugned notification was violative of both Article 14 and 21 of the Indian Constitution.
Blogger’s Note – The High Court’s judgement which shows all the above arguments by the Amicus Curiae and the petitioner’s lawyer also shared the State’s view. It is only on page 24, where the Delhi High Court starts to share its own observations on the arguments of both sides.
Judgement continued – The first observation that the Court makes is that while the petitioner demonstrated that the impugned tax imposition would have a ‘distinct and noticeable burdensomeness’ while the State did not state or share in any way how much of a loss it would incur if such a tax were let go and how much additional work would have to be done in order to receive this specific tax. It didn’t need to do something which is down the wire or mathematically precise, but it didn’t even care to show even theoretically how many people will be affected by the above. The counter-affidavit by the State is silent on the whole issue.
The Court also contended that the State failed to prove how collecting IGST from the concerned individuals would help in fighting coronavirus in any substantial manner for the public at large. The High Court shared observations from the Navtej Singh Johar case where it is observed that the State has both negative and positive obligations to ensure that its citizens are able to enjoy the right to health.
The High Court further made the point that no respectable person does like to be turned into a ‘charity case.’ If the State contends that those who obey the law should pay the taxes then it is also obligatory on the state’s part to lessen exactions such as taxes at the very least in times of war, famine, floods, epidemics and pandemics. Such an approach would lead a person to live a life of dignity which is part of Article 21 of the Constitution.
Another point that was made by the State that only the GST council is able to make any changes as regards to exemptions rather than the State were found to be false as the State had made some exemptions without going to the GST council using its own powers under Section 25 of the Customs Act.
The Court also points out that it does send a discriminatory pattern when somebody like petitioner has to pay the tax for personal use while those who are buying it for commercial use do not have to pay the tax.
The Court agreed of the view of the Amicus Curiae, Mr. Datar that oxygenator should be taxed at NIL rate at IGST as it is part of life-saving drugs and oxygenator fits the bill as medical equipment as it is used in the treatment, mitigation and prevention of spread of Coronavirus. Mr. Datar also did show that oxygenator is placed at the same level as other life-saving drugs. The Court felt further emboldened as the observations by Supreme Court in State of Andhra Pradesh vs. Linde India Limited, 2020 ( State of Andhra Pradesh vs Linde Ltd.)
The Court further shared many subsequent notifications from the State and various press releases by the State itself which does make the Court’s point that oxygenators indeed are drugs as defined in the court case above. The State should have it as part of notification 190. This would preserve the start of the notification date from 03.05.2021 and the state would not have to issue a new notification.
The Court further went to postulate that any persons similar to the petitioner could avail of the same, if they furnish a letter of undertaking to an officer designated by the State that the medical equipment would not be put to commercial use. Till the state does not do that, in the interim the importer could give the same undertaking to Joint Secretary, Customs or their nominee can hand over the same to custom officer.
The Court also shared that it does not disagree with the State’s arguments but the challenges which have arisen are in a unique time period/circumstances, so they are basing their judgement based on how the situation is.
The Court also mentioned an order given by Supreme Court Diary No. 10669/2020 passed on 20.03.2020 where SC has taken pains to understand the issues faced by the citizens. The court also mentioned the Small Scale Industrial Manufactures Association Case (both of these cases I don’t know) .
So in conclusion, the Court holds the imposition of IGST on oxygenator which are imported by individuals as gifts from their relatives as unconstitutional. They also shared that any taxes taken by GOI in above scenario have to be returned. The relief to the state is they will not have to pay interest cost on the same.
To check misuse of the same, the petitioner or people who are in similar circumstances would have to give a letter of undertaking to an officer designated by the State within 7 days of the state notifying the patient or anybody authorized by him/her to act on their behalf to share the letter of undertaking with the State. And till the State doesn’t provide an officer, the above will continue.
Hence, both the writ petition and the pending application are disposed off.
The Registry is directed to release any money deposited by the petitioner along with any interest occurred on it (if any) .
At the end they record appreciation of Mr. Arvind Datar, Mr. Zoheb Hossain, Mr. Sudhir Nandrajog as well as Mr. Siddharth Bambha. It is only due to their assistance that the court could reach the conclusion it did.
For Delhi High Court
RAJIV SHAKDHER, J.
TALWANT SINGH, J.
May 21, 2020
Blogger’s Observations – Now, after the verdict GOI does have few choices, either accept the verdict or appeal in the SC. A third choice is to make a committee and come to the same conclusions via the committee. GOI has done something similar in the past. If that happens and the same conclusions are reached as before, then the aggrieved may have no choice but to appear in the highest court of law. And this will put the aggrieved at a much more vulnerable place than before as SC court fees, lawyer fees etc. are quite high compared to High Courts. So, there is a possibility that the petitioner may not even approach unless and until some non-profit (NGO) does decide to fight and put it up as common cause or something similar.
There is another judgement that I will share, probably tomorrow. Thankfully, that one is pretty short compared to this one. So it should be far more easier to read. FWIW, I did learn about the whole freeenode stuff and many channels who have shifted from freenode to libera. I will share my own experience of the same but that probably will take a day or two.
The above picture of Zeeshan. There have been a whole team of Indian Youth Congress workers (main opposition party to the ruling party) who have doing lot of relief effort. They have been buying Oxygenators from abroad with help of Being Human Foundation started by Salman Khan, an actor who works in A-grade movies in Bollywood.