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Lokash Chemical Works Vs. M.S. Mehta, Collector of Customs (Preventive) Bombay and Others - Court Judgment

LegalCrystal Citation
SubjectCustoms
CourtMumbai High Court
Decided On
Case NumberMisc. Petition No. 513 of 1973
Judge
Reported in1981(8)ELT235(Bom)
ActsCustoms Act, 1962 - Sections 2(33), 3 and 47
AppellantLokash Chemical Works
RespondentM.S. Mehta, Collector of Customs (Preventive) Bombay and Others
Excerpt:
- - and whereas since there was no intention of allowing import of any banned item to you and as you have got the item niacinamide endorsed on your licences by deliberately suppressing from this office the vital information that niacinamide in name as nicotinamide which was a banned item there is reason to believe that the goods in question imported by you being of banned category not meant to be utilised for the purpose for which they have been imported. this show cause notice clearly states and proceed on the basis that the petitioner had already imported the goods. if satisfied about the feasibility and permissibility of import it is their function to permit the import by grant of licence and impose such conditions as they find necessary. accordingly, by section 47 of the customs.....ordermodi, j.1. the petitioner carries on business at raipur in the state of madhya pradesh of manufacturing, inter alia, drugs and medicines, one of the product being vitamins preparation. one of the ingredients with go into such product is 'nicotinamide' also known as 'nicotonmide'. however, the import trade policy describes this only as niacinamide.2. in the year 1971 the petitioner was a small-scale industry and was granted three import licences respectively dated 4-6-1971, 7-6-1971 and 3-8-1971 which permitted import of various items mentioned therein. these licences were what are known as actual users licences. one of the conditions of such licences is that goods imported must be used by the importer himself and cannot be sold in the market. one of the requirements to be complied.....
Judgment:
ORDER

Modi, J.

1. The petitioner carries on business at Raipur in the State of Madhya Pradesh of manufacturing, inter alia, drugs and medicines, one of the product being vitamins preparation. One of the ingredients with go into such product is 'nicotinamide' also known as 'nicotonmide'. However, the Import Trade Policy describes this only as Niacinamide.

2. In the year 1971 the petitioner was a small-scale industry and was granted three import licences respectively dated 4-6-1971, 7-6-1971 and 3-8-1971 which permitted import of various items mentioned therein. These licences were what are known as actual users licences. One of the conditions of such licences is that goods imported must be used by the importer himself and cannot be sold in the market. One of the requirements to be complied with for obtaining such licence or having the same amended is that in case the importer is a small scale industry, the importer has to apply to the sponsoring authority, the Drug Controller for issue of essentiality certificate. It is only after such a certificate is granted that application for licence or amendment thereof may be considered by the licensing authorities.

3. The Import Trade Control Hand Book of Rules and Procedure (1971 Edition) at page 55 paragraph 80(3) provides, inter alia, that the sponsoring authorities will make their recommendations for licences subject to the conditions laid down. The conditions inter alia are that the sponsoring authorities will not recommend import of any item which is not licensable to actual users in terms of the relevant import policy. Paragraph 80(1) provides that the licensing authorities will consider the items mentioned therein which include recommendation of the sponsoring authority, availability of foreign exchange and policy in respect of the items sought to be imported. This paragraph falls in Chapter IV which is headed as 'Actual Users (industrial)'. It is, therefore, a duty and obligation of the Drug Controller and the licensing authorities to ascertain whether the item sought to be included in any licence is licensable or not.

4. In September, 1971 the petitioner desired inclusion of 15 other items one of which was niacinamide, in the licences and applied to the Drug Controller for essentiality certificate for those items. The Drug Controller issued a certificate dated 16-10-1971 for all the items applied for. On the basis of this the petitioner by an application dated 3-11-1971 requested the Joint Chief Controller of Imports and Exports (J.C.C.I.E.) for the amendment of the licences. By a letter dated 27-12-1971 the petitioner was informed that 7 items out of the 15 could not be considered on various grounds. Two of the said 7 items, menthol and oxyquinoline, were stated to be banned for imports and, therefore, not allowed. The licences were thereafter accordingly by inclusion of 8 out of 15 items applied for. One of the items included in the licence was 'nicoinamide'. In January 1972 the petitioner established letter of credit and the goods arrived in Bombay between 1-3-1972 and 2-5-1972 in three separate consignments. The bill of entry in respect of the first consignment was filed on or about 1-3-1972. From this day onward the petitioner found itself in difficulty.

5. On 7-4-1972, the petitioner received a letter dated 27-3-1972 from the Controller of Imports on behalf of the J.C.C.I.E. In the said letter is is alleged that the Customs Authorities at Bombay had informed the office of J.C.C.I.E. that the petitioner had imported certain consignment of nicotinamide under the licence issued by his office and that the Customs authorities had reported that the nicotinamide is same as nicotinamide, which was banned for import under the import licensing policies for the period April 1969/March 1970 and April 1970/March 1971 to which the said import licences related. It was further alleged that as actual user the petitioner would have known that Niacinamide was same as nicotinamide and the petitioner should have taken steps not to import the said item against the said import licences issued to the petitioner and should have got the item deleted from the same. The petitioner was called upon the explain as to how it imported Niacinamide which was banned item and was called upon to explain why the petitioner included the item Niacinamide in the application which was made for the import licences. This letter makes a strange reading. If the contention of the licensing authority was that the niacinamide and Niacinamide being same were banned item under relevant policy why did it grant such an amendment of the licences. A person has a right to and may apply for import licence for any item he may desire and no fault can be found with the applicant for applying for importing any of them. It is the duty of the authorities concerned to check as to whether an import licence could and should be granted in respect of a particular item or not, to ascertain the nature of the item applied for and its permissibility for import. If it is the duty of the person applying for licence to ascertain whether a particular item is a banned item and accordingly to interpret the policy, it would be unnecessary to have high officers with large staff to consider applications and issue licences. It is the Drug Controller and the licensing authority who should have known or should have tried to ascertain whether nicotinamide was a banned item before issuing the licence. If at all there is a default it is on the part of authorities in granting the amendment of the licences without understanding what the item applied for was and not applying mind at the time of issuing amendment. The letter is obviously an attempt to pass off the blame to the petitioner for the default of licensing and justify, if any, in issuing amendment.

6. The petitioner did give explanation by its letter dated 11-4-72. In this letter it is inter alia stated that Niacinamide is the common name for this drug and used by chemists and pharmacists. It is explained that believing that this item must have been permissible item because of some public notice or otherwise that the petitioner sought to import the same. After this explanation was given, no action has been taken against the petitioner for cancellation or suspension of licences till today. It can therefore be assumed that the explanation given by the petitioner was found satisfactory and no ground existed for cancellation of the licence as contemplated by the Imports (Control) Order, 1955.

7. As no action was taken by the licensing authorities the petitioner repeatedly wrote to the Customs authorities to permit the clearance of the goods but the Customs authorities adopted the policy of complete inaction in spite of the fact that so far they were concerned valid licences were produced before them. Not only that but the Customs authorities by the letter dated 15-6-1972 stated that the J.C.C.I.E. by his letter of 25-3-1972 had called upon the petitioner to explain how it had imported nicoinamide, a banned item and sought to advise it that the proper course would be to approach the J.C.C.I.E. with a suitable explanation. It was not the province of the Customs authorities to advise the petitioner who had already replied to the show cause notice by its letter dated 13-4-1972 and which was followed by inaction on the part of the licensing authority. It is clear that the petitioner was being unnecessarily harassed by the authorities for no fault of the petitioner. The petitioner by its advocate's letter dated 4-7-1972 did point out to the Collector of Customs the fact of the aforesaid reply having been given. By the said letter it was also pointed out that if the contention of the Customs authorities was that the goods were not covered by the import licence they ought to issue a show case notice to the petitioner and decide as to whether the goods can be permitted to be cleared or not. The Assistant Collector of Customs by his letter dated 12-7-1972 intimated the Attorneys of the petitioner that the Chief Controller of Imports & Exports, New Delhi had been requested to expedite decision in the matter. Even after this request for expedition neither the licensing authority took any steps for cancellation of the licence nor did Customs Authorities issue any show cause notice. Non-issuance of the show cause notice by the Customs authorities is obviously for the reason, that they were aware that in case of the valid licence produced before them, them had no option but to permit the clearance of the goods. With a view to get out of the difficulty the Customs authorities adopted an attitude of sitting tight on the goods and driving petitioners to adopt some proceedings. Taking advantage of this delay the Chief Controller of Import and Exports, New Delhi issued a public notice dated 21-9-1979 whereby it was inter alia stated (i) that according to the import policy for the period April 1972/March 1973, the import of the nicotinamide was not permissible to actual users, (ii) that import licence that might have been issued shall be valid for shipment of that item against the unutilised value of such licences, (iii) that unutilised value meant the value for which the goods had not been shipped or the licence holder had not made any firm commitment by opening an irrevocable letter of credit and (iv) that it was decided that actual users who had imported nicotinamide and other import these items thereafter against irrevocable letter of credit opened on or before the date of the public notice, should report particulars of the goods whether in stock or under shipment, to the C.C.I.E. (Import Policy Cell) Udyog Bhavan, New Delhi within thirty days from the date of the public notice indicating the quantity and the C.I.F. value of the goods and till further directions from the Chief Controller of Imports & Exports, the import material should not be utilised in any manner by the licence holders. It is clear that as per this public notice, even if it had legal effect, as the petitioner's goods had already arrived and for which letters of credit had already been opened, the licences to the extent of the value of these goods did not become invalid. The Collector of Customs by his letter dated 12-1-1972 invited the attention of the petitioner to the said public notice and stated that the petitioner may be directed to comply with the requirements of the said notice. Here again this letter shows the obstructive attitude of the Customs which is unexplainable as the said public notice specifically made the licences invalid only to the extent of unutilised value. It is also not understood what the Customs authority meant by compliance with requirements of the notice as there are no directions required to be complied with in so far as the Customs was concerned. In view of this position, the Customs authorities instead of writing such a letter ought to have permitted clearance of the goods and the licensing authorities could have taken such proper steps as may be available to them. After some further correspondence the petitioner filed this petition in June 1973.

8. The matter has been made more complicated by what transpired after the filing of the petition. On 20-6-1973, rule was issued and notice was directed to be given for interim relief. By an order dated 2-8-1972, pending the hearing and final disposal of the petition, the petitioner was permitted to clear the goods on the petitioner's undertaking not to deal with or dispose of the goods, except with the order of the Court and on giving a personal bond for the marker value of the goods. The respondents were directed to permit immediate clearance of the goods on payment of customs duty. The respondents further agreed to issue a detention certificate for remission and refund of demurrage charges in the event of the petitioner succeeding in the petition and the proceedings arising out of notice under Clause 10C dated 6th July, 1973. The latter directions were granted as after the filing of the petition a notice under Clause 10C was issued bearing the aforesaid date.

9. Thereafter there were some negotiations of settlement between the petitioner and the respondents. When the matter reached hearing on 14-10-1976 some statement was made before the Court regarding the settlement of the matter. There is controversy as to what exactly were the proposals for settlement. However, it is clear from the minutes dated 14-10-1976 that at that stage there were only proposals for settlement and that no agreement was arrived at and the matter was adjourned to 3-11-1976 for consideration of the proposals. On 9-4-1977 the petitioner submitted before the 4th respondent details regarding the landed cost and other charges and expenses and the 4th respondent purported to pass an order dated 25-10-1978 under clause 10C of the Imports (Control) Rules, 1955 fixing the price at Rs. 79.23 and directed that the said goods should be sold to Indian Drugs and Pharmaceuticals Ltd., Hyderabad (IDPL) at the said price. By another order dated 26-10-1978 the said price was increased to Rs. 89.23 not because that was the price arrived at in accordance with the formula laid down in Clause 10C but because the IDPL was willing to pay the same. This order is also challenged by way of an amendment to petition.

10. At this stage it will be convenient to set out the provisions of the bond. The said bond inter alia provides as follows :-

1. 'The importer agrees that despite the release of the goods after debiting the import licences for the value determined by the Assistant Collector of Customs, the Customs Authorities will have to the right to adjudicate and in the adjudication proceedings impose such fines and/or penalties as they may deem fit. It is further agreed that the debit of the licences as aforesaid shall not be contended before any authority as an act of acquiescence on the part of the Customs authority for the validity of licences.

2. If in the course of the adjudication proceedings, Authority orders the outright confiscation of Niacinamide, the importer agrees and undertakes to produce and hand over the said Niacinamide to the Customs Authorities and shall not plead inability to produce the same on the grounds of sale, transfer or disposal in any other manner or deterioration or destruction of the goods for any reason whatsoever'.

It is, therefore, apparent that the said goods were not really permitted to be cleared out were only allowed to pass through the Customs barrier while retaining the right of the Customs Authorities to adjudicate whether the said goods can be allowed to be cleared or not and to confiscate them and/or to impose penalty or levy fine as a consequence of the finding that may be arrived at on adoption of proceedings, after the disposal of this petition.

11. The said show cause notice dated 6-7-1973 stated, inter alia as follows :-

'AND WHEREAS the Customs Authority has reported to office that you have imported consignments of Niacinamide against the above mentioned licences. The Customs Authority has further brought to the notice of the office that Niacinamide which you have imported is the same as Nicotinamide which is banned for import under the Licensing Policies for the licensing periods April 1969/March 1970 and April 1970/March 1971 to which the licences in question relate vide List II of Appendix-19 of the Red Books for the said Licensing Periods. You are an established actual user and hence you were knowing that niacinamide is the same as nicotinamide and that it was a banned item as per the Import Policy.

AND WHEREAS since there was no intention of allowing import of any banned item to you and as you have got the item niacinamide endorsed on your licences by deliberately suppressing from this office the vital information that niacinamide in name as nicotinamide which was a banned item there is reason to believe that the goods in question imported by you being of banned category not meant to be utilised for the purpose for which they have been imported.

This show cause notice clearly states and proceed on the basis that the petitioner had already imported the goods. It is difficult to understand as to how the goods which were not allowed to be cleared till that date can be said to have been imported. The meaning of word 'import' in Clause 10C must necessarily mean cleared by Customs. The goods which are not allowed to be cleared as prohibited will have to be confiscated and will vest in the Govt. The question of actual user being able to use or not any prohibited goods can only arises after the goods have passed Customs barrier. It is also not understood as to how it can be said that any goods, just because their import is banned could be said to be not meant for the purpose for which they had been imported. This notice shows total non-application of the mind on the part of the respondent No. 4 and total misconception regarding the provisions of the Clause 10C of the Imports (Control) Order, 1955. The said clause 10C comes into play only on the importation of any goods or at any time thereafter. It obviously contemplates importation of goods under a valid licence. If the importation is without licence or under an invalid licence, it is only the Customs authorities who can deal with the same and not the licensing authority. It is only the Customs authority who can confiscate the goods and pass other suitable orders under the provisions of the Customs Act. The only power that the licensing authority may have is to prosecute the person for importing prohibited goods under section 5 of the Imports and Exports (Control) Act, 1947, but they will have no power to give directions in respect of the goods so imported. The power over the goods or over the distribution of the goods can vest in the licensing authority only when they are imported pursuant to a licence.

12. Mr. Rana's contention in this regard is that the Customs Authorities, on a valid import licence being produced, were bound to allow clearance of the goods which conform to the description in the licence and, therefore, the petitioner had a right to issue of mandamus against the Customs authorities. He further contended that even on true interpretation of the import policy for the relevant year, which had no force of law, niacinamide/nicotinamide was not a banned item. His further contention was that even if it was a banned item issue under the policy, the policy did not have any statutory force and a licence issued by licensing authority for any item even if banned would be valid and effective, till validity cancelled or rendered ineffective in accordance with the Imports (Control) Order, 1955. He contended that in any event the 4th respondent had no jurisdiction to take proceedings under Clause 10C and issue show cause notice and the order passed under clause 10C is invalid and void.

13. The functions of the licensing authorities and the Customs authorities operate in different fields though they may at times inter est so as to operate in some common area. The function of the licensing authorities is to consider whether any particular item should be allowed to be imported or not, looking to various circumstances such as the requirement of the item, the amount of foreign exchange involved, permissibility for import and other relevant factors. If satisfied about the feasibility and permissibility of import it is their function to permit the import by grant of licence and impose such conditions as they find necessary. This granting of licence may be dependent upon a policy enunciated in advance by the Government or may even be made to depend on the individual judgment of the licensing authority. Such a policy may be publicised for the convenience of the importers or kept confidential and made known only to the officers concerned. It may be that from time to time import of certain items instead of being governed by a policy laid down in advance, be left to the individual judgment of an officer who may not enunciate any policy in advance. As against this the function of Customs Authorities start only after the goods are imported and brought into to the territorial water of the country. Customs authorities are concerned with the recovery of Customs duty and to check evasion of payment of duty and with the prevention of entry of the goods which are prohibited goods as defined by the Customs Act. The prohibited goods are defined by section 2(33) of the Customs Act, 1962 to mean any goods the import or export of which is subject to any prohibition under that Act or any other law for the time being in force. However, the goods in respect of which the conditions subject to which the goods are permitted to be imported have been complied with are excluded from the definition of prohibited goods. This exception in respect of goods permitted to be imported has correlation with and it is to be understood in the light of the scheme of the Import and Export Control Act and Import (Control) Order. By section 3 of the Act the Central Government is given a power to prohibit, restrict or control the import of goods and under Clause 3 of the Order there is a blanket prohibition on import of any goods of the description specified in Schedule 1 except under and in accordance with the licence or Customs Clearance permit granted by the Central Government or by any officer specified in schedule II. It is in view of this provision, that when the conditions subject to which the goods are permitted to be imported are complied with, they are excluded from the definition of prohibited goods in the Customs Act. Accordingly, by section 47 of the Customs Act it is provided that where the proper officer is satisfied that any goods entered for home consumption are not prohibited goods and the importer has paid the import duty, if any, assessed thereon and any charges payable under that Act in respect of the same, the proper officer may make an order permitting clearance of the goods for home consumption. The effect of section 47 read with section 2(33) is that once licence is granted a proper officer has to ascertain (i) whether the goods sought to be imported correspond to the description in the licence, (ii) whether the conditions imposed in the licence and required to be complied with by the importer have been complied with by the importer and if his finding on the aforesaid issues is in the affirmative he is bound to allow clearance of the goods on payment of duty. It is not for the Customs authorities to interpret licensing policy or to enforce the same once a valid licence is produced. This function is of the licensing authority. If this bifurcation of function is not adhered to there is every likelihood of utter confusion. The licensing authority may interpret the policy one way and the Customs authorities may take contrary view producing a conflict between the two authorities resulting in harassment to the importer. It is, therefore, that the functions of the two authorities which operate in two different spheres must be kept within their proper ambit. If a licence is granted in respect of a particular item by the licensing authority the Customs authority will have no right or power to go beyond the licence and determine as to whether the said licence related to prohibited item. It is only the licensing authority who has to determine the said question at the time of granting licence.

14. Mr. Rana relied on the case of Tarachand Gupta & Bros v. Union of India - 73 Bom. L.R. 558. This judgment was upheld by the Supreme Court in Union of India v. Tarachand Gupta & Bros. : 1983(13)ELT1456(SC) . The ambit of the powers of the Customs authorities is clearly laid down in the said decision. In the said case licences were issued for import of parts and accessories of motor cycles. What the importer sought to do was to import complete motor cycles in knocked down condition with a view to ultimately assemble the same and complete motor cycles. The import of the motor cycles was prohibited. The Customs authorities sought to prevent the import of the said parts and accessories on the ground that what were sought to be imported were motor cycles which was not permissible. It was held by our High Court as follows :-

'What the Collector had to satisfy himself was whether by reference to entry 295 or to either of the two remaining entries mentioned in that licence, the articles imported by the respondents could be said to have been not covered by act of them. If he had proceeded from that point of view he could have seen that the imports were completely covered by the licence. Since the imports covered by the licence were permitted to be imported, he could not carry his enquiries any further. However, as it happened, he considered all the four indents together, came to the conclusion that excepting for tyres, tubes and paddles, the parts and accessories imported by the respondents could be utilised for assembling 30 auto cycles and that the respondents had thus in effect imported 30 auto cycles in a completely knocked down condition, though they did not possess a licence under entry 294 for importing into India auto cycles completely knocked down conditions... But that was not what the Collector had to ascertain. His duty was to satisfy himself whether the licence which the respondents possessed permitted them to import the articles indented by them and which actually arrived in India in four different consignments by four different steamers. In our opinion, therefore, the Collector's approach to the matter was wholly wrong and, therefore, the learned single judge was justified in quashing his orders.'

'Now here, the Collector no doubt held the respondents having imported into India some articles which were not permitted to be imported into India, but this conclusion was drawn by him not by reference to the licence held by the respondents, but by reference to entry 294 in column 6 by which certain restrictions have been laid down for the import into India of motor cycles in a completely knocked down condition. For one thing, what the respondents had imported was, 'parts and accessories' though under one licence under four different consignments. Again the articles imported by them were inadequate for assembling 30 complete auto cycles, for the simple reason that no tyres, tubes and peddles have been provided for the auto cycles. It is admitted before us that the tyres and tubes used on these motor cycles are not of the standard type and are not manufactured in India. There is nothing to show whether the saddles used on these motor cycles were of the standard type. In the circumstances, therefore, it could not be said that by following devious method the respondents could be said to have imported 30 motor cycles into India in a completely knocked down condition. The Collector's conclusion that, this is what the respondents intended to do, was the result of an erroneous approach to the matter and, therefore interference in the writ jurisdiction was permissible.'

It is clear that in the present case also the Collector's duty was to satisfy himself whether the licences which the petitioner possessed permitted it to import items indented by it and which actually arrived in India. He had to satisfy as to whether this item was covered by the item mentioned in the licence. Instead of doing this what the Collector has one in that he referred to the Import Control Policy and proceeded to draw conclusion not by reference to the licence given to the petitioners but by reference to the contents of the import policy that these goods were not permissible. For coming to this conclusion the Collector must necessarily come to the conclusion that the licensing authority had issued a licence without performing the function and without ascertaining whether the goods were banned or by wrongly interpreting the policy. This is not and cannot be the function of the Collector of Customs. He cannot sit in appeal over the licensing authority and he cannot have any right to go beyond the licence. His action virtually amounts to cancellation of licence or to make it ineffective without complying with Clause 10C of the Import (Control) Order. He must assume the licence to be effective unless and until cancelled by proper authorities. He must also assume that the licensing authorities understood what they had to do and that the very issue of the licence must be taken to mean that at the date of the issue of the licence the items were permissible for import. In my view, therefore, the Customs authorities were absolutely wrong in not permitting the clearance of the goods in question.

15. Mr. Dalal has contended that the licence was issued in contravention of the Import Control Policy. It is contended that the Import Control Policy amounted to direction to the officer concerned that in respect of certain goods licences could not be granted. He contends that since the licences were granted in breach of such directions the licensing authority had acted without power, and the licences were therefore void abinitio and the Customs authorities were justified in treating the licences as void. Mr. Dalal relied in support of his contention on the Supreme Court decision in J. Fernandes & Co. v. Dy. Chief Controller I. & E. : [1975]3SCR867 . I do not think that such a broad proposition is supported by this decision. The decision must be read in the light of the facts on which the same was given. In that case the petitioner was a firm of importer and was carrying on business in imported goods in Goa before its liberation. On 19/20 December, 1961, Goa was liberated. Prior to liberation import licences were granted to the citizens of Goa by the then Government. The petitioner firm as originally constituted was an importer registered with the then Government prior to December 1961. On 3-1-1962 Central Government had issued directions to the Chief Civil Administrator regarding issue of import licences to the effect that imports should be allowed only if the letter of credit had been opened before 18-12-1961 or shipment had taken place before 20-12-1961. On 16-1-1962 the petitioner had applied to the Administrator of Goa for issuing an import licence and was granted the licence on 12-2-1962. The licences granted to the firm were held to be in contravention of these directions. The said firm had already imported about 50 per cent of the goods leaving a balance of Pounds 16000 for which it had not till them opened a letter of credit. The said licence was revalidated on 2-5-1962 and letter of credit allowed to be opened in spite of the fact that on 27-2-1962 the Administrator of the Goa had suspended issue of fresh letters of credit. The petitioner was therefore able to import goods for the balance value also. The Imports and Exports (Control) Act, 1947 was made applicable to Goa from 1-10-1962. Before that only the Goa, Daman and Diu Administration Act No. 2 of 1962 and an ordinance which preceded if applied to Goa from 5-3-1962. It is, therefore, clear that no law framed by the Indian Legislature was applicable to Goa between 20-12-1961 and 5-3-1962. The only way that the Goa Daman and Diu was governed by the Government of India was by virtue of the powers conferred by Article 239 of the Constitution of India. It is therefore, pursuant to this Article that directions were issued by the Government of India and which were applicable when the licence was issued in favour of the petitioners in that case. After the Import and Export (Control) Act, 1947 was made applicable, the firm applied for issue of licence on the basis of past imports and relied on the earlier licences dated 12-2-1962 granted to it. It was while considering this application that the licensing authority held that earlier licence had been granted in contravention of the directions of the Government of India which necessarily had force of law and so the said licences and the imports thereunder cannot be considered for grant of new licences on the basis of the past performances. It is in this light that the Supreme Court held in paragraph 19 of the judgment that the Chief Civil Administrator was subordinate authority to the Government of India and was bound to obey the directions of the Central Government and that he had no authority to issue a licence in disregard of the directions of the Central Government and that such a licence would not confer any right on the firm.

16. The directions issued in the Supreme Court case referred to were the directions which clearly had force of law. There being no other applicable law prevailing in the territory of Goa it is only in this manner that the Central Government could have administrated the said territory which was newly acquired by liberation. This case has no application to the present case; firstly because it is well settled that the Import Control Policy is not a statutory document and secondly because Import Control Policy cannot be said to be the directions of the type and kind which were there in the Supreme Court case. The licences in the present case cannot be said to be contrary to any direction of the type available in the Supreme Court case. It should also be noted that in the Supreme Court case it was the licensing authority which decided about the validity of the licence issued earlier and not the Customs authority. In my view, the licences in this case are valid and in any case the Customs authority cannot decide upon the validity or invalidity of the licence but must necessarily follow the contents thereof and permit the goods if the necessary conditions set out by the section 47 are complied with.

17. Mr. Dalal contended that in case licence was granted in controvention of the policy, as in respect of banned items, it would be an invalid licence. According to him in case an item was banned nobody can issue a licence. For this he relied on Clause 6 of the order. This clause has no application at all. This clause applied to specific cases where specific directions are given by the Government or Chief Controller of Imports and Exports in respect of specific Items. Even if the licence is granted in contravention of the directions there is nothing in the order or the action which makes it invalid but it has to be cancelled under Clause 9 which specifically provides for such contingency, viz., if the licence has been granted contrary to rules or the provisions of the order it can be cancelled or otherwise rendered ineffective. The licence cannot therefore be void abinitio but have to be cancelled after complying with the order. Mr. Dalal relied on State of Punjab v. Jagdia Singh : (1966)ILLJ749SC . In the said judgment it is held that where a Government servant had no right to a post or to a particular status, though an authority under the Government acting beyond its competence has purported to give that person a status which it was not entitled to give, he will not in law be deemed to have been validly appointed to the post or given the particular status. It is only where the authority in law or because of restriction placed by law, has no competence to do a particular act, that the act done can be considered invalid. In the present case, the licensing authority had vested in it power to grant licence under the law and the licences granted cannot be considered invalid. Mr. Dalal also relied on Andhra Industrial Works v. Chief Controller of Imports and Exports = A.I.R. 1974 S.C. 1959, in support of his contention that such a policy can be changed, rescinded or altered by mere administrative orders or executive instructions issued at any time and that on the basis of a import trade policy an applicant has no absolute right to the grant of any import licence. I do not see how this position which is well established supports Mr. Dalal in any of his contentions. Here the case is of not allowing importation of goods by the customs authorities and passing of an order under Clause 10C of the Order and the question is not of granting of licence. Mr. Dalal then relied on Shaikh Mohd. Omer v. Collector of Customs, : 1983(13)ELT1439(SC) , for the proposition that prohibition includes restriction. I fail to see how this proposition has any bearing in the present case.

18. Even the contention that nicotinamide is banned or prohibited item is not supported by the relevant Import Policy. Section II of the Import Trade Control Policy for the year April 1971 to March 1972 gives list of items with the policy regarding import mentioned against it. At S. No. 109 of Part IV of Section II the item is 'drugs, medicines, all sorts, not otherwise specified in this schedule'. Column 4 says that the licence is available to actual users and the detailed policy is given in Appendix 19 at page 260. Three lists are given in the said appendix List I at page 264 relates to quota licences and is not relevant. So far as the actual users are concerned, they are governed by list II. List II states, 'The list of drugs and medicines and preparations thereof which will not be permitted to be imported against licences issued for drugs and medicines'. The list heading does not say that the items mentioned will not be allowed to be imported at all, which would be the natural expression used if these items were completely banned. The list gives an impression that there can be licences issued generally or import of drugs and medicines but that in case general licence for import of drugs and medicines is issued, the items mentioned in the list will not be permitted to be imported. Mr. Dalal contended that the heading should be read as meaning that the items mentioned will not be permitted to be imported against licences issued for manufacture of drugs and medicines. This construction cannot be accepted. The power of licensing authority is to issue an import licence and not a manufacturing licence. The licensing authority under the said Act does not issue a licence for manufacture. The licence is for import and therefore, the words, 'the licence issued for 'drugs and medicines' must mean a licence for import of drugs and medicines. Mr. Dalal sought to substantiate his contention regarding the meaning of the legend under list II, by referring to remark at the top of the licence which reads, 'End product drug and medicine.' He, therefore, sought to contend that the licence was really for manufacture of drugs and medicines and therefore nicotinamide was a banned item as on its true interpretation - the words in list II applied to the manufacture of drugs and medicines. I immediately requested Mr. Dalal to take instructions from the officer present in Court as to whether he should insist on canvassing his contention and what according to the department was the meaning of these words. After consulting the officer Mr. Dalal did not press the argument based on the words, 'End product drugs and medicines' and conceded that these words only mean that the licence being actual users' licence the actual user use to utilise the imported material for manufacturing drugs and medicines. In my view, therefore, there is no ban on the issue of licence in respect of items mentioned in this list but in a proper case a licence can be issued for any specific item. Mr. Rana drew my attention to P. 373 of the Import Policy book for April 1971/March 1972 and pointed out that when a ban was put it was so specifically stated. There, under list 'C' it is specifically stated that the Import of the items listed is not at all permissible. As against this the wording in relation to the items of drugs at page 272 under list II are clearly different.

19. Assuming that the above construction is wrong, in other words licence could not have been issued as per the policy in respect of these items. I still hold that once the licence is issued no authority can prevent import of items mentioned in the licence except by cancellation thereof in compliance with the Import (Control) Order, 1955.

20. The Import (Control) Order is a complete scheme for prohibition, restriction and control on import of goods as also for the distribution and use of goods imported. It is framed pursuant to the powers given by Import and Export (Control) Act, 1947 and therefore it is a piece of delegated legislation. No executive authority therefore has any power to act in contravention of the said order. The said order provides for issuance of licence, for refusal of licence, for amending of licence, for suspension of grant of licence and for cancellation of licence. No licence once issued can be made ineffective or cancelled except as provided by the said order. Clause 9 itself says that the Central Government or the officers mentioned therein may cancel any licence granted under the order or otherwise render it ineffective on the grounds mentioned thereunder. Clause 10 provides opportunity of being heard to be given before taking any action under Clause 9 against a licensee or an importer or any other person. As per clause 9(a), one of the grounds on which the licence can be cancelled or rendered ineffective is, if the licence has been granted through inadvertence or mistake or has been obtained by fraud or misrepresentation. The contention of the licensing authority in the present case can fall only within sub-clause (a) of Clause 9. Assuming that nicotinamide was a banned item the licence was granted, either through inadvertence or mistake of the Drug Controller and the licensing authority and if the contention of the Joint C.C.I.E. in his letter dated 27-3-1972 is to be accepted, because of the misrepresentation on the part of the petitioner. The only power to render the licence ineffective is in the said clause 9 and the petitioner cannot be prevented from importing the goods in accordance with the licence till the same is cancelled or rendered ineffective. In fact as already stated, after the petitioner gave explanation as aforesaid to the letter of the Jt. C.C.I.E. dated 27-3-1972, the licensing authority has not taken any steps against the petitioner for cancellation of the licence even though 6 years have elapsed. In the circumstances there is no reason why the petitioner should not be allowed to import goods under the said licence and to use the same in accordance with the terms and conditions of the said licence. Actually the licensing authority by issuing show cause notice under Clause 10C have confirmed the position that the goods have been imported validly and that there was no question of revocation of the said licences. It would appear that as the licensing authority had difficulty to legally cancelling licences, the licencing authority sought to prohibit the licencee from using the goods validly imported in accordance with the said licence.

21. Mr. Dalal also contends as follows : Policy statements and the public notices are not statutory documents but Government has power under Constitution to issue directions and instructions under Art. 73 of the Constitution of India which have force of law; that nobody has a right to obtain a licence and the issuance of licence will be governed by the policy in force during any given period and this policy can be altered or changed at any time by executive order or direction which may or may not be published in the gazette or otherwise at all; that Government has a right to control not only the import of goods but also its distribution and disposal; that the import policy though not a statutory documents, since the power to lay down policy is derived under Art. 73 of the Constitution of India has force of law and, therefore, the licence which is in respect of banned goods must be held to be void, though issued by Competent Officer and that no cancellation thereof under Clause 9 is necessary; that in any case by public notice dated 21-9-1972 the importers of the nicotinamide were prohibited from using the said goods in any manner; that this public notice has force of law and is issued to control the distribution and the disposal of the goods imported and therefore effectively prohibits the petitioner from using the said goods in any manner whatsoever. Some of the propositions of Mr. Dalal are unexceptional and cannot be controverted nor has Mr. Rana attempted to do so. What cannot be is the contention of Mr. Dalal when he says that the Import Control Policy and the Public Notice have force of law and that the licences can be held to be void or ineffective without any order passed in accordance with Clause 9 of the Imports (Control) Order, 1955. Mr. Dalal has strongly relied on an unreported judgment of this Court in The Union of India and others v. Indian Gem House : delivered by Kantawala C.J. and Madan J. dated 12-1-1978 in Misc. Petition No. 110 of 1967. In that case the Government had laid down the policy whereby all the applications for issue of import licences and customs clearance permits to be made to the licensing authority concerned were to be routed through the Gem & Jewellery Export Promotion Council. An omnibus provision was made through this public notice that the registered exporters under the previous scheme would be considered as having been registered for purposes of this revised policy. The registered exporter had to be a member of this Council and if he was not a member or ceased to be a member for any reason whatsoever his registration as exporter would automatically lapse and he would not be eligible for grant of licences under the policy. The petitioner in that case contended that the Government was not entitled to force them to become members of that Council and to route their applications for licence through the said Council. Various contentions were raised but so far as it is relevant to the present case, the only important submission was that according to the importer, the Central Government had no right to issue such a public notice and had no such power conferred on it by statute. While repelling this contention, it was held by the Division Bench 'this Article (i.e. Art. 73), therefore, in view of the above decision of the Supreme Court clearly confers requisite authority of law so as to empower the Union of India both to announce policy statements from time to time and to issue even the impugned circular and it is not possible for us to accept the contention of Mr. Shabha that such circular is issued without any authority of law.' This does not go to the length of saying that such policy statements and circulars have force of law but only says that they are issued under authority of law conferred on the Central Government by Art. 73 of the Constitution. Further so far as the policy and public notice are concerned the question is not at all open and is covered by several judgments including the judgments of the Supreme Court, namely, East India Commercial Co. v. Collector of Customs A.I.R. 1962 SC 1693 and J.C. of Imports & Exports v. M/s Aminchand A.I.R. 1966 SC 476 as also by the aforesaid unreported judgment of our High Court. The contention of Mr. Dalal that the policy statement and the public notice are not statutory document but nevertheless had force of law is self contradictory. A document which is not a statutory document obviously cannot have a force of law. Any document that has a force of law must necessarily be capable of creating obligations as well as conferring or creating rights and it is well settled that the policy statement and the public notices cannot confer or create an right enforceable at law. It is, therefore, obvious that such a policy statement or public notices which cannot confer or create any right cannot have force of law.

22. Again the executive instructions or directions issued under Art. 73 of the Constitution can only operate in a field which is not covered by any legislation. The executive cannot issue any directions or instructions which will have the effect contrary to the one contemplated by properly enacted legislation. As already pointed out about the field of prohibition, restriction and control of imports and as ancillary thereto use and distribution of the imported goods is already covered by legislation contained in the Imports (Control) Order, 1955 and Exports (Control) Act, 1947 and, therefore, any instruction or direction contained in a public notice which has the effect of cancellation or making ineffective the licence already granted otherwise than by following the procedure by Clause 10 and on the grounds other than those contained in Clause 9 will be ineffective. The user of the imported goods in accordance with the conditions of licence also cannot be prevented since no such power is conferred by the Act or the Rules. Mr. Dalal's contention that the public notice dated 21-9-1972 had the effect of preventing the petitioners from utilising the imported goods cannot be accepted as it has the effect of altering the terms of the licence already granted. The rights of a person to carry on business are and of acquisition, holding and disposal of the property, were protected by Art. 19 and could have been restricted only by an enactment of law and not by executive directions or instructions under Art. 73. The right to carry on business of import is restricted by law contained in the Imports Exports (Control) Act, 1947 and Imports (Control) Order, 1955 and any executive action or direction or instruction which seeks to control such right must necessarily have its foundation in one or other provisions of the said Act and Order. I do not find any support for the aforesaid action in the said Act or the Order. Mr. Dalal did contend that such a public notice has its foundation in section 3 of the Act and in Clause 6, 7, 8, 8A, 10B and 10C the Order and in the conditions of the licence itself. The particular condition which Mr. Dalal relied on is the condition mentioned on the face of the licence to the effect that the licence is without prejudice to the application of any other prohibition or regulation affecting the importation of goods which may be in force at the time of their arrival. The prohibition or regulation referred to in this condition must necessarily mean prohibition or regulation imposed by law or having force of law. It cannot mean something done by mere change in policy or by public notice, which may or may not be published or brought to the notice of a person affected adversely. An officer may issue such a public notice and keep it in his own pocket and it will still be effective as a public notice or an amendment or change in the policy but it cannot have the force of law. However, a right was acquired, and it is beyond dispute that once the licence is granted the person acquires a right, which cannot be taken away by mere executive action but such action must necessarily have its foundation either in the said Act or Order.

23. The impugned public notice dated 21-9-1972 cannot be said to be covered by any of the clauses relied upon by Mr. Dalal. Clause 6 provides for refusal of licence. In this case the licence having been granted, the question of refusal does not arise. Clause 7 provides for amendment of licence. Here also, amendment already having been granted, the question of amendment does not arise. Similarly, in the present case the licence having been already granted the question of barring the licencee from receiving licence also does not arise nor can the said public notice be said to be covered by Clause 8A which provides for power to suspend grant of licence. There can be no question of exercising the power to suspend grant of licences or allotment of imported goods if the licence has already been granted. Clause 9 provides for cancellation of licence and Clause 10 provides for hearing. These clauses cannot support issue of any public notice. Clause 10B(1) give powers to restrict the use of goods received on allotment or distribution made by the State Trading Corporation of India or other agency and, therefore, the same does not apply. Clause 10B(2) applies to the use or disposal of the goods imported against a licence on the strength of a letter of authority issued in favour of the importer. Such is not the present case and, therefore, this provision also does not apply. To the public notice in question. Clause 10C also cannot apply to issue of public notice dated 21-9-1972. Clause 10C contemplates giving of directions if the circumstances contemplated by the said clause exist, in respect of a particular person and not to give directions generally to all the importers of a particular kind of goods. Nor does it give power to impose blanket prohibition on use of goods. The powers conferred by 10C can be exercised only after giving a reasonable opportunity to the licencee of being heard in the matter. This is not the case which governs the public notice which is admittedly issued without hearing the parties and appears to be in the nature of an ad interim injunction given before any proceedings are initiated, against all the parties who imported the items mentioned therein. The mere public notice, therefore, in as for as it seeks to effect the licence holder cannot have any effect and the petitioner was and is entitled to import and use the goods in accordance with the and conditions of the licence for the manufacture of drugs and medicines. The very basis of the exercise of power mentioned in Clause 10C is the existence of the circumstances which show that the importer itself cannot utilise the goods and only if such circumstances are established that the authority can direct importer to sell those goods to the third party at a price fixed as laid down in the said clause.

24. Mr. Dalal contended that the licence is issued under the policy, that Government had power to vary the policy from time to time and so even after the goods are imported they can be banned by mere executive directions. To put it differently the licences which were issued by virtue of the policy can be altered or taken away by change of policy by mere executive action. There is a patent fallacy in this argument. The licences are not issued under the policy but licences are issued under the powers vested in the proper officers under the Act and the Order. The principles which are intended to be followed in issuing the licences are governed by the policy. The principles, as already laid down in various decisions do not have statutory effect. The policy is a mere intimation to the public regarding when, in which event and on what basis and conditions the licences would be granted under the Act and the Order. The licences, therefore, cannot be taken away or made ineffective merely by changing policy. If this was so it was unnecessary to provide in the Order, the grounds on which the licences can be cancelled or made ineffective. The very fact that such provision is made shows that licences cannot be cancelled or taken away on the mere whim of the executive but can be cancelled or taken away only in accordance with the provisions of the said Order.

25. Mr. Dalal then contended that the principles of Contract Act applies to the issue of licence and the parties were not ad-idea. He contends that the petitioners applied for licence but did not inform that it was a banned item. The licensing authorities also did not realise that it was a banned item and so licence was issued. He contends that there was no application of mind on the part of the authorities concerned. According to Mr. Dalal the licence is therefore void. There is no reason to believe that the Drug Controller and the licensing authorities did not know that nicotinamide and Niacinamide are the same. If the contention of Mr. Dalal is to be accepted it would mean that the Drug Controller is not fit enough to be Drug Controller, if he did not know that these names relate to one and the same item. If the licensing authority issued a licence in respect of any item without knowing or finding out what that item was they also would be guilty of non-application of mind and cannot be said to be fit to occupy the high post. It is further astonishing to hear an argument by respondents themselves that they or their officers did not apply their mind and they did not realise that nicotinamide/niacinomide was a banned item. Such an argument on their part cannot be accepted. If they did not apply their mind or they did not realise that the item was banned item, action may be taken against them by the Government for dereliction of duty and incompetence. In any case the principles of Contract Act cannot have any application here as this is not a case of contract but granting of permission. Apart from this none of the arguments advanced by Mr. Dalal would amount to parties not being ad idea. At the most it would amount to granting of licence through inadvertence or mistake or it having been obtained by misrepresentation. In such a case also the only remedy would have been to proceed under provisions of Clause 9.

26. Mr. Dalal initially contended that the licence was not issued by authorised officer and, therefore, invalid. This contention was later on given up by Mr. Dalal.

27. According to Mr. Dalal prayer (a) had become redundant because according to him clearance had already taken place. He says that the only right which remained now with the respondents was to enforce the bond; as no notice was given for enforcement : of bond the petitioner does not have anything to challenge and only when a notice was issued for enforcement that the question as to whether the goods were prohibited or not would arise. This argument cannot be accepted. The goods were allowed to be removed beyond the Customs barrier and the bond was given, pursuant to an interim order. That was only an interim arrangement. This being so the petition must be decided on the basis as to what would have happened if the interim arrangement was not there.

28. This bring us to the question of approbation and reprobation based on the statements alleged to have been made on behalf of the petitioner in Court. The case was first made out on behalf of the respondents in their affidavit dated 6-12-1978. The case as made out in the said affidavit is material and, therefore, it is reproduced below.

'I say that on several occasions and at several hearings including the hearing of the matter before His Lordship the Hon'ble Mr. Justice Madon on 15th September, 1978, the learned counsel for the petitioner duly instructed by their solicitors M/s. Gagrat & Co. made a statement before the Hon'ble Court that the petitioners wanted the goods in question to be diverted according to the formula prescribed under Clause 10C of the Import (Control) Order, 1955 and wanted an order to be passed under the said provision and if the price was fixed by adopting such formulas and goods ordered to be diverted, entire dispute will be over. I say that for this specific purpose the matter was adjourned from time to time. I say that the learned Advocate for the Central Government informed the authorities concerned by various letters that the petitioners wanted an order to be passed under clause 10C of the Import (Control) Order, 1955. I say that accordingly an order was passed on 25th October and 28th October 1970 and the same were duly served on the petitioners.'

Based on this allegation a contention is raised in the subsequent portion of paragraph 2 that the petitioner cannot approbate and reprobate and the said order dated 25-10-1978 as subsequently amended on 29-10-1978 should be binding. The petitioner's version regarding this is to be for the first time found in their affidavit in rejoinder dated 16-3-1979 and it is to be again found in the amendment of the petition which was carried out on 13-12-1979. I will reproduce both the versions as in my view there is some conflict between the two versions.

In paragraphs 4 and 5 of the affidavit in rejoinder it is stated as follows :-

'I deny that on several occasions and at several hearings including the hearing of the matter before His Lordship Mr. Justice Madon on 11th September 1978 the learned Counsel for the petitioners duly instructed by their Advocate M/s. Gagrat & Company made a statement before the Court that the petitioners wanted the goods in question to be diverted according to the formula prescribed under Clause 10C of the Import (Control) Order, 1955 or wanted an order to be passed under the said provision or if the price was fixed by attaching such formula and goods ordered to be diverted, the entire dispute would be over. I deny that for this specific purpose the matter was adjourned from time to time. I say that the true facts are as under :-

'I say that the said petition came up for hearing before his lordship Mr. Justice Bage on or about 11th October 1976 and the arguments continued on the said day, 12th October 1976 and 13th October 1976. I say that in the afternoon of 13th October 1976 while the court was hearing the said matter, suggestions were made for the overall settlement of the matter. I say that when the matter reached hearing on 14th October 1976, His Lordship Mr. Justice Bage was informed about the proposals for settlement viz., that there will be no proceedings against the petitioners and that after the price of the goods in question was actually agreed by the parties, the petitioners should hand over the goods to the Indian Drugs and Pharmaceuticals Limited. His Lordship was further informed that since the decision to issue notice under Clause 9 of the said Order was taken by the licensing authorities at New Delhi the matter should be adjourned for the respondents to obtain clearance from authorities at New Delhi. I say that this Hon'ble Court was therefore pleased to adjourn the matter till the reopening of the Court after the summer vacation. I say that thereafter correspondence ensured between the petitioner's Advocates and the Respondents' Advocate as also between the petitioners and the licensing authorities and/or the Indian Drugs and Pharmaceuticals Ltd., regarding the fixation of price. I say that by a letter dated 9th April 1977, the petitioners sent calculation sheet showing the costs of the said goods which is annexed as annexure 2 (Collectively) so the affidavit of Piseurlencar dated 8th December 1976. I say that the matter was adjourned from time to time since no mutually agreed price could be arrived at though the petitioners furnished all the relevant materials to the concerned authorities.'

While in the amendment to the petition what the petitioner has contended is as follows :-

'Thereafter the said petition came up for hearing before the Hon'ble Mr. Justice Bage on or about 11th October 1976 and arguments continued on 11th October 1976, 12th October 1976 and 13th October 1976. The petitioner firm says that in the afternoon of 13th October 1976 while the Court was hearing some other matter, suggestions were made for the overall settlement of the matter. The petitioner firm says that when the matter reached hearing on 14th October 1976, His Lordship the Hon'ble Mr. Justice Bage was informed about the proposals for settlement viz., that there will be no proceedings by the Customs authorities and the licensing authorities against the petitioner firm and that after the price of the goods in question under Clause 10C of the Imports (Control) Order, 1955 as amended is mutually agreed by the parties, the petitioner firm should hand over the goods to the (Indian Drugs and Pharmaceuticals Ltd. IDPL). His lordship was further informed that since the decision to issue notice under clause 9 of the said Order was taken by the licensing authorities at New Delhi, the matter should be adjourned to enable the respondents to obtain clearance from the authorities at New Delhi.'

29. Even if the version of the respondents is believed it cannot debar the petitioner from contending that the licensing authority has no power to proceed under section 10C. The argument of Mr. Dalal, based on the allegations, is that the petitioner was barred from taking up such contention on the basis of the principles of approbation and reprobation. The principles of approbation and reprobation mean that there is an agreement whereby or there is a situation wherein a person becomes entitled to some benefits and is subjected to some obligation. In these circumstances, if a person takes advantage of the benefit that may be available to him he cannot thereafter be heard to say that he will not perform his obligation. In the present case, even if the version of the respondents is fully accepted no such situation is created. Agreement is not even cleared by the respondents. The case of the respondents is not that the petitioner was given option to allow licensing authority to determine the destination of the goods under the provisions of Clause 10C on the basis that they were unable to use the said goods themselves and in return the petitioner will not be subjected to the penal proceedings under the Customs Act or other laws. If in such eventuality the petitioner had allowed the licensing authority to proceed under Clause 10C and the Government had given up the proceedings against the petitioner under the Customs Act or other similar penal proceedings, the petitioner could not have been heard to say that the order passed under 10C was invalid. However, Mr. Dalal has emphatically argued that the prayer (a) of the petition is redundant and emphatically stated that neither the Customs authority nor any other Governmental authority has given up any rights and it is still open to them to adopt proceedings against the petitioner. In the circumstances, question of approbation on reprobation cannot and does not arise. Mr. Dalal has next contended that the petitioner had acquiesced in passing of the order under Clause 10C. This contention is not supported by facts nor it is taken in any of the affidavits filed on behalf of the respondents. Mr. Dalal in support of his support of his contentions relied on some correspondence which is produced and taken on file. Even that correspondence does not show that the petitioner has given up any contention or right in respect of the proceedings under Clause 10C or otherwise. The first letter in the correspondence is dated 28-10-1976 and refers only to proposals for settlement which are referred in the letter dated 30-10-1976 as 'without prejudice proposal'. The subsequent correspondence till 26-1-1977 does not show that there was any agreement arrived at nor does it show any acquiescence or support what is stated is the affidavit of the respondents. There is a letter dated 29-1-1977 addressed by IDPL to the Dy. Chief Controller of Imports and Exports which to some extent goes to support the case of the petitioner that price was to be mutually agreed. The said letter after complaining about the petitioners not furnishing the requisite details of c.i.f. price, customs duty, demurrage and other incidentals to work out the prices at which IDPL could purchase the material states that in the absense of asked for information and party's consent to delivery the stocks at mutually agreed price, it will be possible for IDPL to draw the sample. It is, therefore, clear that what was contemplated was mutually agreed price and not the price which may be fixed under clause 10C. The Controller of Imports and Exports in his letter dated 9-12-1977... addressed to the Government's. Solicitor also does not say that the price was to be fixed under Clause 10C but only reiterates the complaint that the petitioner has not furnished details to IDPL and, therefore, IDPL cannot work out the price on which IDPL would purchase the material. The next letter of 10-2-1977 addressed by M/s. Gagrat & Co. the Solicitors for the petitioner to the Government's Solicitor also speaks about the representatives of the petitioner having approached IDPL for negotiating the price of the consignment in question. Next letter dated 9-4-1977 addressed by M/s. Gagrat & Co. to the Solicitor for the Government merely refers to Clause 10C. Next letter dated 17-6-1977 addressed by M/s. Gagrat & Co. to the Advocate for Central Government has been strongly relied on by Mr. Dalal in support of his contention. The letter dated 9-4-1977 says, 'we may further inform you that our clients have also sent details of final costs of the consignments of niacinamide as per para 10C of the Imports (Control) Order, 1955 both to Bombay office as well as to Delhi office of IDPL.' It does not establish any concluded agreement or a final settlement or acquiescence in finalisation of price under Clause 10C, but only emphasis that the mutually agreed price was to be arrived at as the basis of and keeping in mind the ingredients sanctioned in Clause 10C. Clause 10C consists of three items viz., landed goods, clearing and transport charges and any other charge which authority considers reasonable. Since it was not the authority which was deciding the matter it is clear that the last item which is obviously uncertain had to be resolved by mutual agreement and it is in this context that Clause 10C has been referred to. Similarly the reference to Clause 10C in the letter of 17-6-1977 also is in the same circumstances, particularly in view of the fact that the letter speaks of the using of good offices of the licensing authority, to see that the matter is amicably settled. It further says that the petitioner was willing to leave the finalisation of price payable by the petitioner to 'you' meaning thereby licensing authority. However, there is only an offer but there is nothing to indicate in the correspondence that the petitioner had at any time submitted to the jurisdiction of the Controller or the Dy. Chief Controller of Imports and Exports to act under Clause 10C and given up the contention that the circumstances in which the orders can be passed under Clause 10C did not assist. If the position was as contended by Mr. Dalal the petitioner had submitted to the jurisdiction of the authority acting under that Clause there was no reason why the petition should have been continued against respondent No. 4. Further there is no reason why the said fact was not got recorded in the minutes at the time of adjournment or was not recorded it any correspondence. The amendment of the petition and the affidavit on behalf of the petitioner though giving somewhat differing versions of the proposal are clear on on point that at all time the matter rested at proposal stage. This is also supported by the correspondence referred to above. In my view, therefore, the order passed under Clause 10C cannot be sustained on the basis that the petitioner has consented to it or acquiesced in it or on the principle of approbation and reprobation.

30. The factual position is that the petitioner could have utilised the goods in its factory. The reason given in the show cause notice for the petitioner being not in a position to utilise the goods imported is that nicotinamide was banned item. As is already pointed out it was not a banned item. Even if it was a banned item, the licensing authority will not derive any power to pass an order under Clause 10C. Clause 10C contemplates the directions in respect of validly imported goods or goods imported under a licence. Clause 10C speaks of physical inability to use the imported goods which are required to be utilised in factory as required by the condition of the licence. There is nothing in the show cause notice to show that the petitioner was called upon to explain its physical inability to use the goods. The petitioner in its reply dated 16-7-1973 has complained that the 4th respondent has not disclosed any evidence, material of basis to constitute the alleged reason to believe that the goods in question were not meant to be utilised for the purpose for which they had been imported. It is nowhere alleged by the respondents that the petitioner was not going to utilise the goods for the manufacture of the drug. In the said reply it is denied by the petitioner that the goods imported by them were banned item. Another letter dated 26-7-1973 is regarding the arguments which took place before the 4th respondent. It is recorded therein that it was pointed out at the hearing stage that the petitioner was willing to demonstrate that the imported goods could be used in the manufacture of drugs and medicines and for which purpose they had invited the 4th respondent to depute any person with the sample of the goods to the petitioner's factory premises. It is further recorded that in reply to this, the 4th respondent confessed that it was not the department's case that the goods imported could not be physically used by the petitioner but the case was that under the imported policy and the intention of the policy makers such goods were not intended to be permitted to be imported for such use since such goods were indigenously available. Even before this show cause notice dated 6-7-1973 was issued the petitioner had submitted to the Chief Controller of Imports and Exports a letter from the Drugs Controller, Madhya Pradesh dated 10-10-1972, which stated that the formulates of liquids, orals, and tablet preparation for which niacinamide is a main ingredient, were already approved by his office for manufacturing, and that the petitioner has increased the installed capacity of its manufacturing, and that the petitioner had increased the installed capacity of its manufactory at its new factory premises and in the light of the increased installed capacity, the quantity imported by the firm was not in excess and may be released. This also establishes that the petitioner was in a position to utilise the imported goods. The order of the 4th respondent under Clause 10C is, therefore, without jurisdiction.

31. Mr. Rana also challenged the said order on the ground that all the ingredients required to be taken into consideration for fixing the price are not taken into consideration. He says that the demurrage incurred, interest lost as a result of the capital being blocked up in the said goods till the date of its disposal should also to be taken into consideration so far as it is reasonable in determining the price. Mr. Rana fairly stated that the market price also should be kept in mind while determining reasonableness of the charges, in the sense that if the charges like interest take the price of the goods beyond the market price such interest will not be reasonable in so much as no person can be asked to purchase the goods at the price more than market price. He contends that such interest should be taken into consideration in so far as the price fixed does no go beyond the market price. Mr. Dalal strongly resisted this contention and he contended that the interest charges incurred and or paid before the goods landed cannot be considered as part of landed cost and, therefore, cannot be taken into consideration and the notional interest on the blocked capital also cannot be said to be 'Charge' and cannot be taken into consideration while fixing the price under Clause 10C(2). It is unnecessary to go into this controversy as the order is otherwise bad.

32. Mr. Rana states that I need not decide the question on godown charges at this stage. Mr. Rana does not press for godown charges provided appeal is not filed and in case appeal is filed he reserves his right to claim the same either by an application in this petition or in an application before the appeal Court.

33. The Customs authorities will abide by and carry out the agreement recorded in the minutes dated 2-8-1973.

34. In the circumstances the rule is made absolute in terms of prayers (a) and (a-1). The bond given pursuant to the order dated 2-8-1973 will also stand cancelled and discharged. The respondents to pay the costs of the petition to the petitioner. Order stayed for eight weeks from date of signing thereof. The interim order to continue for eight weeks from the date of signing of this judgment.


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