1. The petitioners, Ajay Cottons Limited, a public limited company, which manufactures and exports the commodity, viz., 'absorbent cotton wool', has filed this petition under Article 226 of the Constitution, for a writ of mandamus, directing the respondents 1 to 3 to grant to the petitioners cash compensatory support at the rate of 15% of the F.O.B. value of the exports of the 'absorbent cotton (uncarded)' in accordance with the policy of granting cash subsidy on exports laid down by the Government of India, after setting aside the order passed by the Chief Controller of Imports & Exports and the Joint Chief Controller of Imports & Exports, who are respondents 1 and 2 herein, refusing the claim of the petitioners for cash subsidy. Respondent No. 3 to the petition is the Union of India, while respondent No. 4 is the Basic Chemicals, Pharmaceuticals & Soap Export Promotion Council, which is a company limited by guarantee and registered under the Companies Act, 1956, the objects of which are to support, protect, maintain and promote the exports of various commodities including absorbent cotton. Various export promotion schemes, including cash subsidy for exports, formulated by the Government of India in respect of concerned items are canalized through the 4th respondent, to promote the exports of various commodities including the absorbent cotton.
2. The facts in so far as they are material and not in dispute need be stated:
Till April 1976, the said product, viz. 'the absorbent cotton wool (uncarded)' was being manufactured by the petitioners' predecessors Lavino Kapur Private Limited. The said Company Lavino Kapur Pvt. Ltd. was amalgamated with the petitioners' Company on April 20, 1976, and since then the petitioners are manufacturing the said product for export purposes. The entire production of the petitioners is for the purposes of export. According to the petitioners, 'absorbent cotton' is a pharmaceutical product, and in pharmaceutical trade in India as well as in International trade, 'absorbent cotton' is marketed either as carded or uncarded. In or about 1968, the Union of India formulated a Scheme of cash Subsidy, whereby exporters of absorbent cotton wool were to be granted a cash subsidy, i.e., cash compensatory support equivalent to 15% of the F.O.B. value. The petitioners applied for the necessary payment to them of the cash subsidy from time to time on their export on the basis that they had exported the absorbent cotton (uncarded) of pharmacopoeial standard, and all along, from the year 1968 till about September 1977, the petitioners wore granted the cash subsidy. The respondents 1, 2 and 4 administered the aforesaid export policy. From time to time, Handbooks of Export Policy were published by the said Export Promotion Council. Annexure Hand the item BB. 1 of the said Handbook provides that the policy of the government was to grant cash assistance against the export of products listed therein, viz. 'the absorbent cotton wool' to the extent of 15% of the F.O.B. value thereof. The petitioners produced at the time of hearing the Handbooks published in the years 1970, 1973, 1975, and so on. Annexure 11 of the said Handbook enumerates various items of export, and the incentive admissible on such products, the items with which we are now concerned, is at Serial No. BB. 1 in respect of the product 'absorbent cotton wool'. The incentive, viz., the cash subsidy granted is mentioned at 15% of the F.O.B. value of the export against the said entry. The petitioners all along specifically claimed the said cash subsidy amount on the basis that they had exported 'absorbent cotton (uncarded)'. The petitioners' predecessors also were granted the cash subsidy all along from the year 1968 to 1973 without any objection.
3. It appears that in the year 1973, a doubt was raised as to whether the petitioners are entitled to cash allowance under the entry BB. 1 on the ground that what they exported was 'absorbent cotton (uncarded)' and not 'absorbent cotton wool' as mentioned in the entry. The objection probably was that it is only the 'carded variety'' that attracted the applicability of the entry BB. 1, In view of the objection raised in the petitioners' applications for the cash subsidy in respect of the exports of 'absorbent cotton (uncarded), they were kept pending and the matter was referred to the Local Classification Committee at Bombay. A meeting of the Classification Committee which deals with the export promotion was held on January 10, 1974. It was attended by the nine members of the Classification Committee including the Controller of imports and Exports, Bombay, Senior Export Promotion Officer, the Regional Officer of the Chemical & Allied Products Export Promotion Council, the Assistant Secretary of the Basic Chemicals, Pharmaceuticals Soap & E.P. Council, and also the Accounts Officer of the office of the Joint Chief Controller of Imports & Exports and the Licensing Assistant of the Joint Chief Controller of Imports & Exports. Particular cases of various exporters came up for consideration in the said meeting. The minutes of the said meeting showed that Item No. 8 (Case No. 8) related to M/s. Laving Kapur Pvt. Limited. It was noted that the item exported had been described in Invoice dated September 4, 1973 as Absorbent Cotton Uncarded 'Silver' tyre Bleached Cotton made out of 100% Bengal Deshi, with code Number 293-4000, The minutes further show that the matter was taken up for fresh classification as the Cash Assistance Verification Unit felt that the item exported did not appear to be 'Absorbent Cotton Wool'. The Committee classified the item as falling under BB. 1 for cash assistance. The decision of this local committee was later on confirmed by the Headquarter Classification Committee held on December 2, 1974 at Delhi This Headquarter Classification Committee is working under the Government of India in its Ministry of Commerce. The minutes of the meeting show that the same was attended by the officials in the various departments, including the Chief Controller of Imports and Exports, and the Ministry of Finance. The Headquarter Classification Committee confirmed the decision of the local committee by allowing the classification of the product 'absorbent cotton (uncarded)' as falling within the entry BB. 1. This decision of the Classification Committee was accepted by the Government, and the petitioners' application for cash subsidy which was then pending was granted. This continued till about February 1977'. Since March 1977, however, the petitioners' applications for the cash subsidy have been rejected till June 1978.
The petitioners preferred first appeals and second appeals in respect of the rejection of each one of their applications which also came to be rejected. The petitioners have, therefore, filed this petition challenging the said decisions and for a writ of mandamus directing the respondents to grant to the petitioners the cash subsidy as claimed by them on the exports of 'absorbent cotton uncarded' as mentioned in their application.
4. It may also be mentioned that the petitioners had also raised a question of the increase in cash assistance from 15% to 25% in the year 1975 In their representation also they had made it clear that what they were exporting was 'absorbent cotton (uncarded)' in respect of which they were granted the subsidy only to the extent of 15% of the F.O.B. value. It appears that there was considerable correspondence between the petitioners and the respondents in that behalf, but significantly enough, it was never suggested on behalf of the respondents that the product exported by them was outside the entry BB. 1 in the policy for cash subsidy. In fact, no such controversy could be raised in view of the fact that the Classification Committee had expressly classified the product as one falling under the entry BB. 1 in the year 1974, and the proceedings were resolved in favour of the petitioners by the department and they continued to get the cash subsidy till March 1977. It appears that the Customs Department had raised another controversy in connection with the levy of export duty with the result that for February and March 1977, the petitioners were made to pay the export duty on the product. According to the Customs authorities, what was really exported by the petitioners was nothing but 'raw cotton' and not a manufactured item, and as such it attracted levy of export duty. It was only in the month of September 1978 that the Government accepted the contention of the petitioners that the product 'absorbent cotton (uncarded)' was exported by them as a manufactured item. The petitioners were thus granted the refund of export duty on the items which they had paid under protest. Of course, this controversy is not directly connected with the petitioners' claim for cash subsidy under the policy mentioned above.
5. The policy of granting cash compensatory support or cash subsidy in respect of the items falling under entry BB. 1 was withdrawn by a Notification issued by the Government of India, Ministry of Commerce dated July 30, 1977, This petition, however, relates to export made pursuant to the contract which was registered prior to that date. Withdrawal of the item BB. 1-absorbent cotton wool-by the said notification, therefore, would not affect the claim of the petitioners for the exports made pursuant to the contracts which were registered prior to the date of the notification. In this connection, reference has to be made to the provisions of the Import Trade Control Policy for April 1977-March 1978 published by the Government of India. Paragraph 44 thereof provides that-.In respect of exports made in the execution of such registered contracts, the exporters will be eligible for the same levels of support in respect of import replenishment and other benefits under the import policy for Registered Exporters, as were permissible on the date of such contracts with overseas buyers.
Similarly, paragraph 46 of the said Policy provides-
Once a contract has been registered, the registered exporter will be eligible for claiming import replenishment at the same percentage and for the import of same items as were prevailing on the date of the firm contract, provided that the bank's attested invoice which is required to be produced for the purpose of claiming import replenishment bears a further attestation from the bank to the effect that the export effected under the said invoice is against a registered contract, quoting registration number and date thereof.
It is not disputed that the petitioners are registered exporters and all other conditions such as registration of the contract and other provisions mentioned in the policy are complied with by the petitioners. The notification dated July 30, 1977, withdrawing the cash subsidy will not, therefore, apply to the exports made by the petitioners pursuant to the contracts which are registered prior to the date of the notification.
6. The short question that arises for consideration in this case is whether the product 'absorbent cotton (uncarded)' exported by the petitioners falls within the category BB. 1 under which the exporter is allowed cash subsidy of 15% on the F.O.B. value in respect of the export of the product described as 'absorbent cotton wool' in the said entry.
7. Mr. S.D. Parekh, the learned Counsel appearing for the petitioners, contended that the respondents' refusal to grant cash subsidy to the petitioners is arbitrary, illegal and unjust. He submitted that the cash subsidy is being refused by the respondents solely on the alleged ground that 'absorbent cotton wool' is a different product from 'absorbent cotton (uncarded)'. According to him, there is no difference between the two expressions. 'Absorbent cotton wool' according to him is in fact synonymous with the word 'absorbent cotton (uncarded)' and both mean the Same thing. He submitted that the words used must be given a meaning as understood by the commercial world, as the expressions 'absorbent cotton wool' or 'absorbent cotton (uncarded)' when used in export or import policy or in international contracts are not used in scientific or technical sense. The classifications made in the export policy, and particularly the one falling under entry BB. 1 must be interpreted in a commercial sense and not in a scientific or technical sense. It was also submitted by him that the words 'absorbent cotton wool' used in export and import policies and cash subsidy policies, both mean and include the types of varieties, viz. 'carded' or 'uncarded'. He also relied on the pharmaceutical standards of India, Britain and Japan and pointed out that all the other tests except with regard to the variety being 'carded' or 'uncarded' have been fully complied with in the case of their product, and he pointed out that in fact the exporters from India, the buyers from foreign countries and the Government of India had all understood the words 'absorbent cotton wool' as including the 'uncarded' variety. He also urged that right from the year 1968 till March 1977, the petitioners were allowed the cash subsidy with full knowledge that what was being exported by the petitioners was 'absorbent cotton (uncarded)'. Moreover, he submitted that the doubt, if any, was settled in favour of the petitioners by the decision of the Classification Committee in the year 1974, and the product 'uncarded' variety was given a classification as falling under BB. 1 by the said Committee which classification was accepted by the Government all along till March 1977. Lastly, he submitted that, in any event, the petitioners were never informed till July 30, 1977 that the Government wanted to revise its earlier decision to treat the item 'absorbent cotton (uncarded)' as the one falling under entry BB. 1, and as such, on the principles of 'promissory estoppel' also the petitioners were entitled to cash subsidy so far as the contracts registered prior to July 30, 1977, were concerned, as till then, the petitioners were never informed about the revision of the policy, and they entered into contracts with foreign buyers on the basis that they were entitled to get 15% cash subsidy on the F.O.B. value.
8. Mr. S.N. Parikh the learned Counsel for the respondents, tried to repell the arguments on behalf of the petitioners on the following grounds:
(1) Both the British and Indian standards as seen from the description of 'absorbent cotton wool' as mentioned in 'Pharmacopoeia of India', 1966 Second Edition, at page 554. and the British Pharmaceutical Code, 1973, at page 618, it is the 'absorbent cotton' which is synonymous with and implies the 'carded' variety. In the case of 'absorbent cotton wool', the cotton fibres must be well carded, and uncarded cotton cannot be considered as 'absorbent cotton wool' either in technical know-how or in common parlance.
(2) As admittedly what the petitioners had exported was the product called 'absorbent cotton (uncarded)', they were disentitled to cash subsidy in terms of the scheme which is available only for exports of the 'absorbent cotton wool'. From 1968 to 1977, the cash allowance was granted to the petitioners through mistake and has been discontinued since the mistake was discovered.
(4) The petitioners cannot rely on the principle of 'promissory estoppel' and claim subsidy merely because the same was wrongfully granted to them earlier, and the respondents were justified in refusing the petitioners' claim on realising the mistake. The petitioners, the Counsel submitted, had an alternative remedy of making an application for review against the order passed in their second appeal and the petition under Article 226 was not maintainable.
9. It is necessary to bear in mind some of the salient facts which are not at all in dispute. From the very beginning, the petitioners and their predecessors have been exporting the product, viz., 'absorbent cotton (uncarded)'. The fact that they were exporting the said product was clearly mentioned by them in all the documents including the applications for grant of cash subsidy under the scheme for exports of 'absorbent cotton wool'. Their claim was granted without any objection right from the year 1968 till the year 1973. When a doubt was raised whether the product 'absorbent cotton (uncarded)' would be covered by the entry BB. 1 in the export policy regarding the export of the 'absorbent cotton wool', the matter was specifically referred to firstly the Local Classification Committee. The minutes of the said Classification Committee specifically referred to the fact that they were dealing with the case of the 'absorbent cotton (uncarded)' exported by the petitioners' predecessors Messrs. Lavino Kapur Pvt. Ltd. The minutes further show that it was the Cash Assistance Verification Unit that raised the question, because it felt that the item exported did not appear to be 'absorbent cotton wool', and, therefore, the Classification Committee took up the case for fresh classification. The Company had proposed that the item should be classified or re-classified as falling under the entry BB. 1 for cash assistance. The representatives of the Council, after referring to the product 'absorbent cotton wool' in the British Pharmaceutical Codes, 1968, and to the other factors relevant for the purpose, recommended the classification of the product under entry BB. 1, which recommendation was accepted by the Committee and a decision was taken to that effect. The matter was again considered by the Headquarter Classification Committee in a meeting held on 2nd December 1974, and the minutes of the meeting show the details of the various items which were classified. One of the Items which were classified is the petitioners' product 'absorbent cotton (uncarded)'. The minutes further show that the classification made by the Committee under item BB. 1 was confirmed. This decision was not only communicated to the petitioners but was accepted and implemented by the respondents by granting the application of the petitioners for cash subsidy which was then pending with the authorities.
10. Thereafter the petitioners started making representations for increasing the cash assistance to 25% clearly mentioning that they were claiming increase in the cash assistance in respect of their product 'absorbent cotton (uncarded)'. The voluminous correspondence between the petitioners, on the one hand, and the authorities of the respondents, on the other, clearly show that the correspondence was all along proceeded on the basis that the petitioners were entitled to cash subsidy at 15% on the F.O.B. value as the item was covered under the entry BB. 1. Till March 1977, no dispute was ever raised, and the petitioners' applications for cash assistance made from time to time were duly granted. In all these applications as mentioned above, the petitioners had made it clear that the product exported by them was 'absorbent cotton (uncarded)'.
11. It was only in the month of September 1978 for the first time that the Controller of Imports and Exports denied the petitioners' claim in their application for grant of the cash assistance. This letter refers to the petitioners' application made on May 13, 1977. The only ground on which the application of the petitioners was rejected is that the goods exported were 'absorbent cotton (uncarded)' 'and not absorbent cotton wool' of pharmacopoeial standard and hence the experts did not qualify for cash assistance. In the two appeals preferred by the petitioners, the same view was confirmed and all the applications of the petitioners were rejected on the same identical grounds.
12. It is impossible to sustain the view taken by the authorities having regard to the admitted fact that as long back as in the year 1973, a dispute was raised and a decision to classify the petitioners' product as being covered by the entry BB. 1 was taken, and the said decision of the two Classification Committees was accepted and implemented by the respondents. It is, therefore, futile on the part of the authorities to rack up the matter and deny the petitioners' legitimate claim for cash subsidy. Even assuming that there is some difference between the product exported by the petitioners and the product 'absorbent cotton wool' mentioned in the entry BB. 1, that by itself would not be a ground for rejecting the petitioners' claim for cash assistance, in view of the fact that a decision had been taken to classify the product 'absorbent cotton (uncarded)' as a product falling within the entry BB.1 which relates to 'absorbent cotton wool'. It was quite possible for the Classification Committee and the respondents to add one more entry in respect of the petitioners' product. Instead of doing so, they decided to treat the petitioners' product as equivalent to 'absorbent cotton wool' or falling within the entry BB. 1. Once such a decision is taken, the authorities were bound to grant the petitioners' application so long as the policy lasts, or so long as the decision is not reversed. It is not the case of the respondents that the decision taken and implemented in the year 1974 was revoked at any time before July 30, 1977, when by a notification the respondents discontinued their policy of granting cash assistance to the items falling under the entry BB.1 itself. Under the circumstances, irrespective of the question as to whether the 'promissory estoppel' principle can apply to this case, there is no justification whatsoever for the respondents to withhold the claim of the petitioners for cash subsidy. It is also clear that the respondents clearly made a representation to the petitioners atleast from the year 1974 onwards that the product exported by them would he entitled to attract the application of the entry BB.1 and that they were entitled to get cash-subsidy of 15% of the f.o.b. value. At least till September 1978, when for the first time, the petitioners' claim was disallowed, the representation continued. It is the case of the petitioners that they entered into the export contracts with foreign buyers on the basis that they would be getting l5% cash subsidy. By their conduct, the respondents clearly held out a promise to the petitioners that they would be entitled to cash subsidy under entry BB.1 on their export product ''absorbent cotton (uncarded)'. The petitioners also acted on this representation and the promise, and, therefore, the respondents would be estopped from refusing to grant the petitioners' application for cash subsidy.
13. I have already pointed out that under the Import and Export Policy, (paragraphs 44 and 46 of the Import Trade Control Policy), once a contract has been registered, the registered exporter will be eligible for claiming import replenishment at the same percentage and for the import of the same items as were prevailing on the date of the firm contract. In this case, so far as the claim of replenishment by cash subsidy, so far as the items under the entry BB.l are concerned is withdrawn for the first time by the notification of July 30, 1977. Admittedly, the export contracts had been entered into by the petitioners in this case were registered prior to July 30, 1977. Under the circumstances, the exports in respect of which cash allowance is claimed in the present case being in respect of the earlier registered contracts, they cannot be affected by the notification of July 30, 1977. Mr. S.D. Parekh, the learned Counsel appearing for the petitioners, fairly did not dispute this legal position.
14. I do not think that the petitioners could be denied their legitimate claim on the technical plea that they should have filed review application. I do not think that the review application to the same authority against the rejection of the petitioners' appeal can be an alternative and efficacious remedy. Moreover, the scope of review application is obviously limited, therefore, reject the contention of the respondents' Counsel that this petition should not be entertained on the ground that the petitioners had other remedy of review application open to them.
15. As the petitioner's product is covered by entry BB. 1, the refusal of the authorities to deny the petitioners' application for cash subsidy is arbitrary, unjust and illegal and cannot be sustained. The respondents were in law bound to act in accordance with the decision of inclusion of the petitioners' product in entry BB. 1 taken in the year 1974, which was not reversed till the withdrawal of the policy by the Notification of July 30, 1977. The orders passed in appeal are wholly illegal and without jurisdiction as the respondents were bound to act in accordance with the decision taken in the year 1974.
16. In the result, the petition must succeed.
17. Rule is made absolute in terms of prayer (a). The orders similar to Exh. 'L' which are contained in Exh. 'G' to the affidavit of the petitioners dated January 18, 1980, are also quashed and set aside.
18. Mr. S.N. Parikh, the learned Counsel for the respondents, prays for four months' time to pay the amounts due to the petitioners. Prayer granted.
19. The respondents 1 to 3 to pay the costs of the petition to the petitioners.