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Excel Industries Ltd. Vs. Union of India (Uoi) and anr. - Court Judgment

LegalCrystal Citation
SubjectCustoms
CourtMumbai High Court
Decided On
Case NumberMisc. Petition No. 1648 of 1975
Judge
Reported in1989(25)LC491(Bombay)
AppellantExcel Industries Ltd.
RespondentUnion of India (Uoi) and anr.
DispositionPetition allowed
Excerpt:
.....one well ask, was no thought given to this material which clinches the matter. unfortunately, the revisional authority either completely lost sight of this prima facie authentic evidence or else shut its eyes to it presumably on the basis that what is inconvenient is best ignored. this contention is at best conjecture with nothing to commend it except the ingenuity with which it is advanced. if for some reason or other the concerned authority was not satisfied with the certificates or the statement despite the fact that they were authenticated by a department of the government of india, viz. shah further urged that it was the authority which had to be satisfied according to the second condition of the notification and the first condition of the bond and as the revisional authority was..........pesticides and fungicides and if certain certificates from the directorate general of technical development are obtained and a bond is executed by the importer undertaking to pay the difference between the full duty payable and the concessional duty paid if it is not proved to the satisfaction of the assistant collector that the white and yellow phosphorus have been used for the purpose mentioned in the notification, v/2., for the purpose of manufacture of insecticides, pesticides and fungicides.2. in may 1968 the petitioner imported 336 drums containing 60 m.t. of white. phosphorus of the value of rs. 2,25,000/-. at the stage of import, the petitioner gave the certificate from the directorate general of technical development and executed a bond for rs. 66,742.50 as required.....
Judgment:

B. Lentin, J.

1. The petitioner is a public limited company which manufactures chemical products, The petitioner uses white and yellow phosphorus as raw material for manufacturing a product known as 'Phosphorus Penta sulphide', briefly known as 'P2S5'. P2S5. is supplied by the petitioner to various manufacturers of insecticides and pesticides. White and yellow phosphorus is liable to customs duty under item 28 of the Tariff Under a classification dated 1st March 1968 import of white and yellow phosphorus is allowed at a concessional rate but if they are used for the purpose of manufacture of insecticides, pesticides and fungicides and if certain certificates from the Directorate General of Technical Development are obtained and a bond is executed by the importer undertaking to pay the difference between the full duty payable and the concessional duty paid if it is not proved to the satisfaction of the Assistant Collector that the white and yellow phosphorus have been used for the purpose mentioned in the notification, v/2., for the purpose of manufacture of insecticides, pesticides and fungicides.

2. In May 1968 the petitioner imported 336 drums containing 60 M.T. of white. phosphorus of the value of Rs. 2,25,000/-. At the stage of import, the petitioner gave the certificate from the Directorate General of Technical Development and executed a bond for Rs. 66,742.50 as required under the Notification dated 1st March 1968 and paid the concessional duty. On 12th December 1969 a letter was addressed to the petitioner by the Assistant Collector of Customs calling upon the petitioner to pay Rs. 66,742.50 in terms of the bond executed by the petitioner, on the ground that the concessional duty on the imported white phosphorus could not be allowed, as the phosphorus was utilised by the petitioner for the manufacture of Pass. In reply by its letter dated 4th April 1970 the petitioner did not agree with the interpretation placed by the Assistant Collector on the Notification dated 1st March 1968 and pointed out that it was not necessary that the importer of the phosphorus should himself be the manufacturer of the insecticides or pesticides and that it is sufficient if the phosphorus is used for the manufacture of insecticides, etc. On 1 st May 1970, the Assistant Collector of Customs passed his impugned order calling upon the petitioner to pay the said amount of Rs. 66,742.50. The petitioner thereupon preferred an appeal to the Appellate Collector of Customs on 9th May 1970.

4. In November 1968 the petitioner had imported another consignment of 275 drums containing 49.896 Kgs. of yellow phosphorus of the value of Rs. 1,82,080.49. In respect of this consignment also, at the stage of import the petitioner gave the requisite certificate dated 19th November 1968 and executed the requisite bond for the sum of Rs. 54,252.90 under the Notification dated 1st March 1968 and paid the concessional duty. In respect of this consignment, on 10th April 1970 the Assistant Collector of Customs made his demand against the petitioner for Rs. 54,252.90 on the same ground as in the earlier consignment. This was followed by the Assistant Collector of Customs passing his impugned order dated 29th April 1970 calling upon the petitioner to pay the said sum of Rs. 54,252.90. The petitioner thereupon preferred an appeal to the Appellate Collector of Customs on 9th May 1970.

5. Both the appeals preferred by the petitioner in respect of the two consignments were rejected by a common order passed on 14th May 1971 by the Appellate Collector of Customs, who upheld the impugned demand orders passed by the Assistant Collector. The petitioner thereupon filed a revision application on 31st October 1971. The Revisional Authority did not agree with the Interpretation placed by the Assistant Collector and the Appellate Collector on the Notification but, however, rejected the petitioner's revision application on the ground that the petitioner-company had not proved that the PS52 manufactured by the petitioner had actually been used for the manufacture of insecticides and pesticides by the various concerns to whom the petitioner had sold the P2S5 manufactured by it. Hence, the present petition has been filed by the petitioner for appropriate writ for setting aside the impugned demand orders dated 1st May 1970 and 29th April 1970, the appellates order dated 14th May 1971 and the Revisional Order dated 23rd August 1975.

6. The bone of contention between the parties is whether the petitioner-company had established that the P2S5 manufactured by it out of the 2 consignments of phosphorus imported by the petitioner had, in fact, been utilised for the manufacture of insecticides and pesticides by the parties to whom the product manufactured by the petitioner, viz., P2Sg, was sold. It is the petitioner's grievance that the revisional authority completely ignored material and relevant documents which if it had taken into consideration it could possibly have not come to the conclusion it did. On the other hand, on behalf of the respondents, it was urged that no satisfactory proof had been adduced by the petitioner that its P2S6 product had, in fact, been made out of the imported consignments of phosphorus or that the P2S6 had been used for the manufacture of insecticides and pesticides by the various manufacturers to whom the Pass had been sold by the petitioner-company.

7. At the outset it was rightly urged by Mr. Dada that in exercise of writ jurisdiction he was not inviting me to assess or reappraise the evidence on record. What, however, Mr, Dada urged was that it was open to him to demonstrate that certain relevant, material and unimpeachable documents which went to the root of the matter and which clearly established the petitioner's contention had not been considered and had been ignored by the revisional authority thereby disclosing non-application of mind. Mr. Dada urged that if those documents had been considered, no reasonable person could have come to the conclusion which the revisional authority did.

8. At the outset it would be appropriate to analyse the Notification dated 1st March 1968. It states that:

The Central Government hereby exempts chemicals for the manufacture of insecticides and fungicides falling under this item:

(i) from so much of that portion of the duty of customs leviable thereon which is specified in the First Schedule to the Indian Tariff Act 1934, as is in excess of 10 per cent ad valorem, where the standard rate of duty is leviable; x x x x x

The exemption referred to in the foregoing paragraph shall be leviable if, and only if the following conditions are fulfilled, namely-

(i) the importer in each case produces-

(a) a certificate firm the Directorate General of Technical Development...to the effect that the chemicals are required for the aforesaid manufacture; and

(b) a certificate from the Directorate General of Technical Development to the effect that the chemicals are not produced in India.

(ii) the importer, by the execution of a bond in such form and in such sum, as may be specified by the Assistant Collector of Customs, binds himself to pay, on demand, in' respect of such quantity of the chemicals as is not proved to the satisfaction of the Assistant Collector of Customs to have been used for the aforesaid purpose an amount equal to the difference between the duty leviable on such quantity but for the exemption contained herein and that already paid at the time of importation.

Thus as far as the present controversy is concerned under this Notification the importer, viz., the petitioner, must produce a certificate from the Directorate General of Technical Development that the phosphorus is required for the manufacture of insecticides, pesticides and fungicides, as the case may be, and that the phosphorus is not produced in India. The importer, viz., the petitioner, must also execute the requisite bond as provided by the Notification. The petitioner produced the requisite certificate of the Directorate General of Technical Development and also executed the requisite bond. The bond provides that the importer shall deliver or cause to be delivered to the Assistant Collector within the prescribed or extended period a certificate duly certified by the Directorate General of Technical Development to the effect that the material which was cleared at the concessional rate of duty of 10% ad valorem provisionally pursuant to the Notification dated 1st March 1968 was, in fact, used as raw material in the industry manufacturing pesticides and shall to the entire satisfaction of the Assistant Collector adduce proof as to the use thereof in such an industry. The certificate required under the bond has also been furnished by the petitioner.

9. The P2S5 manufactured by the petitioner-company out of white and 3 yellow phosphorus by the petitioner was sold to M/s. Cyanamid India Ltd., Tata Fisons India Ltd., Pesticides India Ltd., and National Chemical Laboratories in the amounts of 13,26,160 kgs. 36,020 kgs., 27,700 kgs. and 55 kgs. respectively.

10. It is not in dispute that in respect of the first consignment of white phosphorus, the petitioner had obtained a certificate from the Directorate General of Technical Development, Government of India, the relevant excerpts whereof are as under:

It is certified that the chemicals mentioned below (together with quantities, values and import licences) are required for the manufacture of insecticides, pesticides and fungicides and are not produced in India. __________________________________________________________________________________ S. No. Chemical Qty. Value Import Licence No. anddate__________________________________________________________________________________xxx xx xxx2. White P/RM/2161096Phosphorus 60 M.T. 225,000 30/11/67_________________________________________________________________________________(R. Narasimhan)Development Officer.

11. Thus this certificate of April 1968 issued by the Directorate General of Technical Development satisfies the first requirement of the Notification, inasmuch as the Directorate General of Technical Development has certified that the 60 M.T. of white phosphorus imported by the petitioner are required for the manufacture of insecticides, etc., and also that the white phosphorus imported is not produced in India. This certificate was placed by the petitioner before the revisional authority. In addition, was also placed before the revisional authority. In addition, was also placed before the revisional authority another certificate dated 13th February 1970 also issued by the Directorate General of Technical Development, Government of India, as required by the bond executed by the petitioner, certifying that the 60 M.T. of white phosphorus of the value of Rs. 2,25,000/- imported by the petitioner-

have in fact been used as raw material for the manufacture of insecticides, pesticides and fungicides, according to evidence produced to us.

Thus this certificate makes manifest that the first consignment was in fact used as raw material for the manufacture of insecticides, etc., of which evidence was produced before the Directorate General of Technical Development.

12. In respect of the second consignment of 49.896 kgs. of yellow phosphorus of the value of Rs. 1,82,080.49 imported by the petitioner-company, the requisite certificate from Directorate General of Technical Development, Government of India, was also placed before the revisional authority. That certificate certified that-

the chemicals mentioned below (together with quantities, values and import licences) are required for the manufacture of insecticides, pesticides and fungicides and are not produced in India.... _____________________________________________________________________________________ S. Import Licence No.No. Chemical Qty. Value & date.1. Phosphorus 49.896 P/D/21650012. White/Yellow Kgs. 1,82,080.49 S/JN/28/H/27dated 30.8.68 validupto 31.3.1969______________________________________________________________________________________(R. Narasimhan)Development Officer,

This certificate therefore satisfies the requirement of the Notification dated 1st March 1968 inasmuch as this certificate issued by the Directorate General of Technical Development establishes that the 49.896 Kgs. of yellow phosphorus imported by the petitioner was required for the manufacture of insecticides, etc., and not produced in India. This certificate dated 19th November 1968 was also placed before the revisional authority.

13. Also placed before the revisional authority was another certificate dated 13th February 1970 also issued by the Directorate General of Technical Development, Government of India, as required by the bond executed by the petitioner, certifying that the imported 49,896 kgs. of yellow phosphorus covered by the earlier certificate dated 19th November 1968-

have in fact been used as raw material for the manufacture of insecticides, pesticides and fungicides, according to evidence produced to us.

Thus in respect of the 2nd consignment of phosphorus this certificate establishes that the phosphorus was in fact used as raw material for the manufacture of insecticides, etc., of which evidence was produced before the Directorate General of Technical Development

14. Also placed before the revisional authority by the petitioner-company was a detailed statement giving information regarding the consumption, production and sales of the items manufactured from the raw materials cleared at the concessional rate of import duty. For this petition only the first two items of that statement are material. They indicate inter alia the quantities of P2S5 manufactured from the imported phosphorus and sold to various manufacturers of insecticides as also the quantities of insecticides manufactured by the companies to which the P2S5 was sold. The names of the parties to whom the petitioner had sold its P2S5 have also been stated in that statement, viz., M/s. Cyanamid (India) Ltd., Tata Fisons (India) Ltd., Pesticides India Ltd. and National Chemical Laboratories. This statement was certified by the petitioner's Chartered Accountant and also by the Directorate General of Technical Development, Government of India. This statement authenticated also by the Directorate General of Technical Development corroborates, if at all corroboration is called for, the certificates issued by the Directorate General of Technical Development in respect of the two consignments as stated earlier,

15. Mr. Dada took me through the entire revisional order. There is not a solitary reference to any of these four certificates or the statement admittedly produced by the petitioner-company before the revisional authority. There is nothing to give even a slimmer of an indication that these vital and authentic documents which go to the root of the matter had been considered by the revisional authority or why it was not necessary to consider them. It cannot be said, nor was it suggested by Mr. Shah with his habitual fairness, that this documentary evidence produced by the petitioner-company was irrelevant or unreliable or not authentic Why then, may one well ask, was no thought given to this material which clinches the matter. The authenticity and the correctness of these documents are demonstrated by the fact that they are certified not by the Directorate General of Technical Development which is a wing of Government of India itself. In spite thereof, curiously enough the revisional authority has maintained an unaccountable silence in respect of these extremely relevant documents, the authenticity and correctness whereof cannot be questioned or doubter and which put the case of the petitioner beyond the pale. There is no doubt that if the revisional authority had applied its 'mind to this vital material before it, it could not have come to the finding it did. Instead the revisional authority has embarked upon extraneous grounds, some of which are not even factually correct, in straining to arrive at the finding it did. The revisional authority Bays that there is no reference to the consignment actually imported in the statement furnished by the petitioner and, therefore, it cannot be allocated to the consignment in question. This is factually not correct. In this Statement, which is nothing if not exhaustive, certified not only by the petitioner's Chartered Accountant but also by the Directorate General of Technical Development, there is a reference not only to the consignment imported but also to the manner in which the PS52 manufactured from that consignment was sold to the various parties named therein as also the quantities of insecticides, etc., manufactured by those parties from the PS52 sold to them by the petitioner. The revisional authority says that-

it is merely a statement made by the petitioner themselves without any authentication by a responsible independent authority.

Once again this is factually incorrect as is borne out by the fact that the statement has been authenticated by a responsible and independent body, namely, the Directorate General of Technical Development which is a wing of the Union of India itself. The revisional authority goes on to find fault with the statement of receipt of the material furnished by M/s. Cyanamid India Ltd. This is all besides the point in the teeth of the certificates of Directorate General of Technical Development and the statement authenticated by Directorate General of Technical Development which have all been ignored. The revisional authority finds that though the PS52 was sold to four parties there is no break-up of sale to individual buyers is also factually incorrect as demonstrated by the statement authenticated by Directorate General of Technical Development.

16. I have alluded to some of these aspects in the impugned order not by way of reappraising the evidence but merely to emphasize that if the four certificates issued and statement authenticated by the Directorate General of Technical Development had not been ignored, the digression into other aspects based on factually incorrect premises would have been unnecessary. Hence, by the utter omission on the part of the revisional authority even to take into account or consider this relevant and vital piece of evidence before it, viz., the four certificates and the statement, the revisional authority committed an error of law which merits interference with the order it passed. If this piece of evidence adduced before it had been considered and thereafter rejected for some cogent reason (which frankly 1 cannot think of) nothing need further have been said. Unfortunately, the revisional authority either completely lost sight of this prima facie authentic evidence or else shut its eyes to it presumably on the basis that what is inconvenient is best ignored. Looked at either way, non-application of mind is manifest and makes interference imperative.

17. It was urged by Mr. Shah, the learned Counsel appearing on behalf of the respondents, that the very fact that the Deputy Secretary required particulars and information from the petitioner-company by his letters dated 25th February 1972 and 17th May 1974 when the revision was pending indicated that the correctness of the certificates and the statement were not acceptable. This contention is at best conjecture with nothing to commend it except the ingenuity with which it is advanced. If for some reason or other the concerned authority was not satisfied with the certificates or the statement despite the fact that they were authenticated by a department of the Government of India, viz., the Directorate General of Technical Development, the greater the reason it should have been brought to the notice of the petitioner and that too with reasons. Nothing of the kind was done.

18. Mr. Shah further urged that it was the authority which had to be satisfied according to the second condition of the Notification and the first condition of the bond and as the revisional authority was not satisfied, that was the end of the matter. This contention of Mr. Shah must also be repelled. No authority can refuse deliberately or fail inadvertently to take into consideration material evidence that goes to the root of the matter and then claim it is not satisfied. Where a party adduces evidence which on the face of it is relevant, authentic and goes to the root of the matter, the authority cannot simply refuse to countenance such evidence or fail to take it into account and thereafter claim that satisfactory evidence had not been adduced,

19. Mr. Shah further contended that because a letter written to the petitioner had not been replied to directly by the petitioner but merely a copy of the petitioner's letter addressed to M/s. Cyanamid India Ltd. was on record, indicated that the petitioner had failed to prove to the satisfaction of the authority that the phosphorus had been used for the manufacture of insecticides, etc. With respect to Mr. Shah, this is too naive an argument to circumvent the utter disregard (deliberate or involuntary) of the cogent, material and prima fade authentic evidence placed before the revisional authority.

20. Mr. Shah finally contended that the matter be remanded to the revisional authority to enable it to. consider the certificates issued and the statement authenticated by the Directorate General of Technical Development. That is the thin end of the wedge, and an attempt on the part of the respondents to put off the evil day. This is an offer which should have come from the respondents when the petition was filed as far back as in 1975 and not at the fag end of the arguments when all else has failed. This is a contention born out of desperation and must be rejected. This is not a case where remand is called for. The proper course for Government would be to accept the situation of its own making and gracefully refund the amounts paid by the petitioner under protest.

21. In the result, the impugned orders must be set aside. The petition is allowed in terms of prayers (a) and (b). Mr. Shah states that the respondents require 3 months time to refund the sum of Rs. 1,20,995.40 mentioned in prayer (b). The respondents shall refund to the petitioner the said amount within 3 months from today. There will be no order as to costs.

22. Rule is made absolute accordingly.


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