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impex International Vs. the Collector of Customs and ors. - Court Judgment

LegalCrystal Citation
SubjectCustoms
CourtKolkata High Court
Decided On
Judge
Reported in1985(4)ECC60
Appellantimpex International
RespondentThe Collector of Customs and ors.
DispositionApplication allowed
Excerpt:
customs - import and export control--rep licence--petitioner buying rep licence from original licensee, importing tetracycline hydrochloride and selling tetracycline hydrochloride to actual user--registered contract entered into before april, 1978--several consignments imported--customs authorities allowing clearance of such consignments during 1982-83--several consignments of other parties also in similar circumstances allowed to be cleared--five consignments imported by petitioner not allowed to be cleared on ground that petitioner was not actual user and item was canalized--illegal--show cause notice for violation of imports (control) act and customs act and for confiscation of imported goods--without jurisdiction and void--customs act (52 of 1962), sections 111(d), 112--imports &.....orderajit kumar sengupta, j.1. the petitioner is a partnership firm which carries on the business, inter alia, of importing various raw materials, components, consumables, stores, etc., from foreign countries and selling the same to actual users in india. one of the items which is being imported by the petitioner and sold to the actual users on high seas sale basis to m/s. deys medical stores (. is tetracycline hydrochloride bp (harmless pharmaceuticals). the said material is used for manufacture of tetracycline capsules/syrup/tablets, etc., which are all life saving medicines. the import of the tetracycline hydrochloride has been made by the petitioner under rep licences issued by the import trade control authorities. such rep licences were at all material times and till now transferable.....
Judgment:
ORDER

Ajit Kumar Sengupta, J.

1. The petitioner is a partnership firm which carries on the business, inter alia, of importing various raw materials, components, consumables, stores, etc., from foreign countries and selling the same to actual users in India. One of the items which is being imported by the petitioner and sold to the actual users on high seas sale basis to M/s. Deys Medical Stores (. is tetracycline hydrochloride BP (harmless pharmaceuticals). The said material is used for manufacture of tetracycline capsules/syrup/tablets, etc., which are all life saving medicines. The import of the tetracycline hydrochloride has been made by the petitioner under REP licences issued by the Import Trade Control authorities. Such REP licences were at all material times and till now transferable under the relevant import policies. The petitioner imported the said tetracycline hydrochloride under such REP import licence which was transferred in his favour after complying with the required formalities. For some time the petitioner imported the aforesaid materials under REP licence. The said REP licence permitted import of raw materials, components, consumables, stores and packing materials in accordance with paragraph 30(1) of Part B, Section I of Volume II of the Import Policy 1977-78.

2. The said paragraph 30(1) of Part B, Section I of Volume II of Import Policy of 1977-78 is set out hereinbelow for the sake of convenience:

30(1).--If a manufacturer-exporter obtains the REP licence in his own name against his own exports the licence will be valid for import of any raw materials, components, consumables, stores and packing materials required for use in the licence holder's factory. The licence shall be subject to 'actual user' condition. The import shall be subject to the following restrictions:

(a) Annexure I to this part contains a list of banned items. The list is in two parts, viz., Part I and Part II. Items appearing in Part I of the list can be imported for a total value not exceeding 10 per cent of the value of the licence, and, within this limit, the import of a single item should not exceed Rs. One lakh in value within the overall value of the licence. Items appearing in Part II of the list will not be allowed to be imported.

(b) In respect of items permissible to actual users on a restricted basis as appearing in appendix 55 in Volume I of the Red Book, the import should not exceed 20 per cent of the value of the REP licence and, within this limit, the import of a single item should not exceed Rs. 2 lakhs in value, within the overall value of the licence.

(c) Annexure II to this Part contains export-linked-import list of items. The items appearing in this list will be allowed to be imported only against exports of the products indicated against each. These items will not be allowed to be imported against export of other products.

3. Although paragraph 30(1) of the Import Policy of 1977-78 provides inter alia, that the goods being required for use in the licence holders' factory and the licence being subject to actual user condition from 1st April, 1978, all the REP licences are freely transferable and the same are also not subject to any actual user condition. Provisions in this regard are contained in all the import policies from the year 1978-79. A circular dated 26th June, 1980, was issued from the office of the Joint Chief Controller of Imports and Exports clarifying, inter alia, that the REP licences issued against exports made in pursuance of the registered contracts entered into prior to 1st April, 1978, where such exports were made available on or after 1st April, 1978, would not be subject to actual user condition and would be freely transferable. Similarly, Joint Chief Controller of Imports and Exports had issued clarifications to several importers from time to time.

4. The petitioner is not an actual user of the said tetracycline hydrochloride. The customs authorities all along had allowed the clearance of the said item under the REP licences for the last many years to the petitioner. Some of the bills of entry for home consumption showing the clearance of the said item by the customs authorities from time to time had been annexed to the writ application. The said clearance was allowed by the customs authorities by accepting the fact that the REP licence issued in respect of the contracts registered prior to 1st April, 1978, and in respect of the exports made after the said date, would not be subject to actual user condition and would be freely transferable as provided in the Import Policies from the year 1978-79 and also clarified by the Chief Controller of Imports and Exports as stated hereinbefore.

5. The grievance of the petitioner in this application is that the customs authorities all on a sudden have changed their stand and five consignments of tetracycline hydrochloride imported by the petitioner from the foreign suppliers had not been allowed clearance. The said five consignments were imported by the petitioner from Hongkong between 26th June, 1984, and 26th July, 1984. All the aforesaid five consignments have been sold by the petitioner on high seas sale basis to M/s. Deys Medical Stores (. The said goods have been imported by the petitioner under import licence bearing No. P/L/2966519 dated 31st May, 1983, issued in favour of Messrs. Braithwaite and Company, a Government of India Undertaking. The said licence was transferred by Messrs. Braithwaite and Company to Messrs. C.V. Enterprises who in turn transferred the same in favour of the petitioner. Upon such transfer, the petitioner entered into a contract on 21st December, 1983, with the foreign suppliers Messrs. Unico and Company, Hongkong, for import of tetracycline hydrochloride under the said licence. The petitioner also opened an irrevocable letter of credit in favour of the foreign suppliers on 30th May, 1984. The foreign suppliers thereafter despatched the said consignments of the said materials to the petitioner. The said licence dated 31st May, 1983, is a transferable REP licence and the same was issued under the registered contract No. FC/REGN/ 198/76 dated 15th October, 1976. The export period of the said licence was 1980-81. The said licence permits importation of raw materials, components, consumables, stores and packing materials required for use in the licence holders' factory subject to the restrictions contained in paragraph 30(1) of Volume II of Import Policy 1977-78. The said licence is similar to the other REP licence against which the petitioner had Imported earlier the identical goods and mentioned in annexure A to the petition.

6. After the arrival of the first three consignments the petitioner filed three bills of entry for consumption for taking clearance thereof. The said three bills of entry were noted by the import clerk on 5th July, 1984. The bills of entry in respect of remaining two consignments have been filed on 16th August, 1984. For the reasons best known to the respondents the said goods have not been released and the said goods are still lying at the airport. It may be mentioned that no show cause notice has been issued upon the petitioner.

7. It has been alleged in the writ application that the Assistant Collector of Customs has informed the clearing agent of the petitioner that the customs authorities are now of the opinion that the import of raw materials, consumables, stores, etc., in accordance with paragraph 30(1) of the 1977-78 Import Policy cannot be allowed unless the goods are required by the importer in his own factory. The petitioner was further informed that although the consignments of tetracycline hydrochloride were released to the petitioner in the past under the import licence issued under pargraph 30(1) of the Import Policy of 1977-78, due to the change of view of the customs authorities, the said five consignments imported by the petitioner cannot be allowed to be cleared under the said import policy. The petitioner has challenged in this writ application the withholding of the said consignments by the respondents as being arbitrary and illegal. The petitioner has given various instances where the identical item was cleared by the customs authorities.

8. This application was moved on 24th August, 1984, upon notice to the Collector of Customs, Calcutta and Deputy Collector of Customs, Air Cargo-Complex (Import), Dum Dum Airport. The respondents were directed to produce the records. The records have been produced. It appears from the records that on 16th July, 1984, the Appraiser has given a note to the following effect:

The licence has been issued against registration of contract dated 15th October, 1976. The policy applicable for import of items is as were prevailing on the date of the firm contract, i.e., 15th October, 1976, Tetracycline HCL was included in export-linked-import item on 27th September, 1977, vide PN. 78-ITC(PN)-77 dated 27th September, 1977. Therefore, it appears that the imported item tetracycline HCL BP is covered within the validity of import licence submitted by the party.

For opinion and order please.

9. A note was thereafter given by the Assistant Collector (CCI) to the following effect:

(1) Few months back similar consignment was allowed clearance as per order of the DC(N). Please link the file.

(2) An instruction has recently been received from the Bd. reg. clearance of canalised items against additional/REP licences. Please examine if the cases fall under the category mentioned therein.

Sd/- Illegible

16th July, 1984.

10.Thereafter a detailed note was submitted by the Assistant Collector of Customs, Air Cargo-Complex, to the Deputy Collector of Customs. In the said note it was, inter alia, stated as follows:-

If earlier decision is taken into consideration, then importation of the item, tetracycline hydrochloride under cover of three bills of entry against import licence No. P/L 2966519/C/XX/87/C/83 dated 31st May, 1983, is valid.

It may not be out of place to mention here that recently a letter has been received from Central Board of Excise and Customs, New Delhi, bearing F. No. 389/192-84 A.U. dated 18th July, 1984, wherein the Board has called for all the files where canalised items were allowed clearance against REP and additional licences issued prior to the date of canalisation. So far as the present case is concerned, the item tetracycline hydrochloride was in the list of canalised items during AM 78 period also vide Serial. No. 37, Section III, Group C, Volume I of AM of 78. Therefore, strictly speaking this case does not fall within the purview of the Board's letter as mentioned above inasmuch as the item has not been included in the list of canalised items after the issue of the licence.

Under the circumstances the file is submitted for orders whether the three consignments may also be allowed clearance on the basis of the order passed in file No. S. 60(Misc.)-134/84-CCI which is linked herewith.

Sd/- S. Chakraborty

A.C.C.I.

11. After considering the said note, the Deputy Collector of Customs made the following observations:

Who is the licence holder in this case? Do they require the goods for use in their factory In an identical case in Grade I, Collector ordered to issue S.C.N. We may therefore issue S.C.N. in this case also.

12. The file where the Collector made the said order (M/s. Hansmukh Kundalia) has also been placed before me.

13. In that case (Hansmukh Kundalia), The Assistant Collector, Appraiser, Group I, gave the following note:

Appraiser's note above may please be seen. M/s. Hansmukh Kundalia, Calcutta, have imported 100 cartons tetracycline HCL CIF Rs. 2,00,507.61. The party has produced licence No. P/L/2983496 dated 1st December, 1982, issued in the name of M/s. Tata Engineering and Locomotive Company Limited with L/A in favour of the importer. The licence is also endorsed for the import policy AM 81. The licence is also endorsed with the following remarks: The licence issued against registered contract will however, not be available for OGL imports of the item under OGL on the date of contract. (The licence is transferable in terms of paragraph 140 and 141 of AM 83 Policy Book)'. Party has sought clearance of tetracycline in terms of import policy period AM 78 as per registration of contract entered into during AM 78. According to ITC Policy, Volume I, Section III, page 94 tetracycline HCL was a canalised item. Tetracycline HCL is also not an OGL item. According to the extract of the contract registered with the Bank produced by the party indicates that the contract was registered on 5th August, 1977. On the date of contract the goods imported were a canalised item and not an OGL item and also not a linked item as per annexure II, Part B of ITC Policy Volume II of 77-78 Policy. According to paragraph 33 of ITC Policy, Volume II of 77-78, REP licences issued to manufacturer-exporters, nominee manufacturer-exporters and export houses can import directly canalized items. The licence issued to manufacturer-exporters as in this case can import directly canalised item in terms of ITC Policy 77-78 in view of the registration of contract made on 5th August, 1977. In this connection Collector's order in linked File No. S. 33-14/83-A at note sheet XIX to XXIII may please be seen, wherein, similar goods were imported but the benefit of the registration of contract has not been extended as the licences produced by the importer were not endorsed regarding registration of contract. As in this case the licence has been endorsed with the registration of contract, the goods may be released allowing the benefit of registration of contract by applying the policy prevailing on the date of contract i.e., 5th August, 1977 (77-78 Policy).

14. The Deputy Collector did not agree with the view of the Assistant Collector, Appraiser, Group I. The Collector, thereafter discussed the matter with the officers and after considering the various aspects of the matter, the Collector directed the Assistant Collector to consider the question in the light of the clarification given by the Joint Chief Controller of Imports and Exports regarding the import of such item under the REP licence. Thereafter, the Assistant Collector gave the following note:

Collector's observation above. In this connection my notes at note sheet V may please be seen. According to paragraph 33 of ITC Policy, Volume II, 77-78, REP licence issued to manufacturer-exporters, nominee manufacturer and export house can import directly canalised items. According to the clarification issued by the J.C.C.I. & E. Office dated 31st August, 1983 (flag A) issued to the present importer tetracycline HCL, a canalised item during the 77-78 Policy (prior to 29th September, 1977) can be imported against REP licences. The licence submitted by the party was issued under REP policy as manufacturer-exporter under registered contract made on 5th August, 1977.

In view of the clarification issued by the J.C.C.I. & E. party's contention appears to be correct.

15. The then Collector approved the said note and directed the release of the goods. It appears from the records that the licensing, authorities by their letter dated 31st August, 1983, informed that prior to 27th September, 1979, tetracycline HCL was canalised and in terms of paragraph 33(1) manufacturer-exporters, nominee manufacturers, export houses holding REP licences were allowed to import the items in question though canalised as per the terms and conditions laid down in the said paragraph. Accordingly the then Collector allowed clearance of tetracycline HCL against identical licence.

16. In respect of another consignment the following notes appear in the file.

While going through the records of the case, it is seen however that Shri T. S. Swaminathan, the then Collector of Customs has already accepted these licences allowing clearance of a consignment of tetracycline HCL on the basis of the above decision, it appears that a few more consignments of tetracycline HCL were allowed clearance against identical licences.

In one of the last meetings Collector informed me that no case of canalised goods should be allowed clearance without the notice of the Collector. In the circumstances, the file is submitted for Collector's orders as to whether we should go for review of the orders of Shri T.S. Swaminathan and issue show cause notice for the goods under clearance.

Submitted for orders.

Collector SCN may be issued. Sd/-D.C.(N) 5th July, 1984.Sd/-Illegible 28/7

17. Thereafter, the Assistant Collector directed the appraiser in the following terms:

(1) Please issue show cause notice urgently for all the three cases as desired by DC(N).

(2) Please ask the party to submit licence copy of the BS/E, already allowed clearance. In case it is decided to prefer appeal in those cases, T9C of one year should be adhered to. Please take urgent action.

18. It is, therefore, evident that in terms of the direction of the Collector, the Deputy Collector directed the Assistant Collector to issue a show cause notice to the petitioner.

19. From the file it appears that when the matter is pending before me a show cause notice dated 20th August, 1984, was sought to be issued to the petitioner by the Assistant Collector of Customs, Air Cargo-Complex (Import). The grounds taken in the said show cause notice are, inter alia, as follows:

In terms of ITC Public Notice No. 77/78 dated 27th September, 1977, tetracycline, its salts and derivatives were allowed to be imported against the export of drugs and drug intermediates N.O.S. (excluding however ayurvedic and unani medicine/-51. B. 11.1. In other words, the item tetracycline, its salts derivatives have been included in the export-linked-imports item and their imports are allowed against licences issued against the export products group B.11.1 which covers drugs and drug intermediates.

In the instant case the licence bearing No. P/L/2966519/C/XX/87/C/33 A. 91 dated 31st May, 1983, has been issued against the export product grouped under Serial A.91. The product group A is for engineering goods as it is evident from page 57 of the aforesaid policy book and not against export product group B which covers chemicals and allied products including drugs and drug intermediates.

Therefore, in terms of the condition stipulated under sub-paragraph (C) of paragraph 30(1) the imported tetracycline HCL which is a salt of tetracycline cannot be imported against the licence tendered, inasmuch as the restriction contained in the Public Notice No. 78/79 was imposed on 27th September, 1977, whereas the licence was issued on 31st May, 1983. The importers were therefore well aware of the restrictions and as such have intentionally infringed the provisions of the ITC Policy by importing wrong goods.

Further, the licence has been issued on 31st May, 1983, and policy period applicable is AM 1983-84. As already mentioned, the licence has been issued against the registration of export contract. The details of policy and procedure are available under Appendix 20 of the aforesaid policy book. Paragraph 7 of appendix 20 is very much relevant. It has been clarified in that paragraph that protection against registered contracts is only with regard to the rate of imports replenishment and items of import allowed as replenishment in column 4 against the relevant export products of appendix 17. No such protection is available for import of any other items which may be allowed to be imported against REP licences by way of flexibility. As already mentioned the licence in question has been issued against the export of engineering goods the importation of drugs cannot be allowed by extending the flexibility as provided under sub-paragraph 7 of appendix 20. The importation is not covered by the licence tendered on this ground also.

In view of the aforesaid it appears that the goods valued at Rs. 3,21,891.90 for three consignments (Rs. 1,07,297.30 each) have been imported in contravention of Clause 3(1) of Imports (Control) Order, 1955, as amended, read with Section 3 of Imports and Exports (Control) Act, 1947, as amended. You are, accordingly, called upon to show cause in writing to the Collector of Customs within 10 days from the date of issue of this notice as to why the contravening goods should not be confiscated under Section 111(d) of Customs Act, 1962, and penalty should not be imposed on you under Section 112 ibid. If you wish to be heard in person in the matter you may appear before the adjudicating officer in office by prior appointment.

Sd/-

Assistant Collector of Customs

Air Cargo-Complex (Import)

Dum Dum Airport, Calcutta.

20. Before I deal with the grounds taken in the said show cause notice it is necessary to place certain facts which are borne out from the records. These records relate to the identical item which was released by the Calcutta Customs on earlier occasions in respect of the petitioner and other importers.

21. One M/s. Pacific Export imported identical goods. There the same Deputy Collector and the Assistant Collector of Customs considered the release of the identical goods and after such consideration the Deputy Collector directed to release the goods on 9th April, 1984. In the case of M/s. Pacific Export the licences were similar to the present one and the clearance of the consignments were allowed. The records of the said case have also been produced before me. There is another case of M/s. Natvarlal & Company where the identical goods were brought. In that case the Deputy Collector of Customs made a note in the following terms:

As per paragraph 44(1) and 46 of Part A, Section 1 of the Import Trade (Control) Policy, Volume II (April 1977-March 1978) in respect of exports made in the execution of such registered contract, the exporters will be eligible for the same levels of export 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. Once a contract has been registered, the registered exporters 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.

In the instant case it is seen from the endorsement on the face of the licence in question that the contracts were dated 2nd August, 1977. Hence the policy applicable to the licence in question is the policy in force on 2nd August, 1977. Now the question is whether the goods in question, namely, tetracycline HCL BP imported by the importers is a permissible item against the licence in question. The licence is endorsed as valid for import of raw materials, etc., in accordance with the provisions made in paragraph 30(1) of the Part B Section 1 of Import Policy Book, Volume II for 1977-78. Goods in question are raw materials not falling under Clause (a), (b) and (c) of sub-paragraph 1 of paragraph 30 of AM 1978 Policy Book, Volume II. Hence the licence in question is valid to cover the goods in question. Tetracycline HCL BP was included in the export-linked-import list only on 27th September, 1977, whereas the contract in question is dated 2nd August, 1977. Hence on the date of registration of the contract, i.e., 2nd August, 1977, the goods in question were not under the export-linked-import list. It has already been held in a series of decisions of the Board and the Ministry that any amendment made in the policy cannot have retrospective application. Hence the amendment in question will not affect the validity of the licence.

Though as per paragraph 30(1) of Part A Section 1 of AM 1977-78 Policy (Volume II) only the manufacturer-exporter who obtains the REP licence in his own name against his own exports is entitled to the facilities contained in paragraph 30(1) referred to above and though the licence shall be subject to actual user's condition, the licensing authorities have made the licence transferable. When the licence is transferable, it is not possible to comply with the conditions that the licence shall be subject to actual user's condition. Similarly, it is also not possible to say that only such of those goods which are required for use in the licence holder's factory can only be allowed to be imported. The licensing authorities should have made the licence non-transferable when they endorse the licence with paragraph 30(1) of Part B Section 1 of the Import Policy Book 1977-78, Volume II. It is thus seen that on the one hand the licensing authorities have made the licence as transferable and on the other hand they have endorsed the licence as valid for importing items covered under paragraph 30(1) of Part B, Section 1 of Import Policy Book, Volume II for 1977-78. It automatically follows that since the licence is endorsed as transferable, the licence holder will be eligible to import the goods as per the description given in the licence. When the licence is freely transferable, we cannot compel the persons, holders of the licence to import only those items which are required for use in the original licence holder's factory. By making the licence transferable and by applying paragraph 140 of the A.M. 1983 Policy the licence automatically gets escaped from the actual user's conditions.

Paragraph 33 of AM 1977-78 Policy, Volume II is not relevant here as the licence is otherwise valid to import the goods in question and also since the goods in question was not a canalsed item at the time when the contract in question was registered.

In the circumstances, I am of the opinion that the licence in question is valid to cover the goods in question and accordingly they may be released. (if otherwise in order)

Sd/- Illegible

(D.C. (N)) 1st September, 1983.

22. It appears that the Assistant Collector of Customs did not agree with the view of the Deputy Collector. After discussing, the Deputy Collector gave a note on 7th September, 1978.

Discussed with DC (P), ACA Gr IV AO Gr I and AC/ACC I. It is brought to my notice that the practice followed by the Customs House hitherto has been to accept such licence especially in view of the fact that 'all' conditions are withdrawn vide paragraph 140 of AM 83 Policy. This is also endorsed on the reverse of the licence. In the C.H. and Air Cargo-complex we had allowed clearance of a number of consignments accepting such licence.

Once the licence is made transferable, the 'licence holder' is the person in whose name the licence is transferred and not the original licence holder who had sold it absolutely to the present holder. When there is no 'all' condition, he is free to import goods covered by paragraph 30(1) of AM 1977-78 Policy Volume II subject to the restriction contained therein. Similarly paragraph 33(1) of AM 78 Policy Volume II permits import of canalised items against such licences. Restrictions (a), (b) and (c) in paragraph 30(1) do not cover import of canalised items.

In the above circumstances and considering the practice in vogue, there is difference in opinion between AC/DCC I & DC the file is put up to Collector for perusal and orders.

Submitted.

Sd/-Illegible

7th September, 1983.

The licence has been issued in JN 83 Policy, date of issue is 31st March, 1983, when the item is not permissible for import. The description of the goods in the licence point out there as per paragraph 30(1). So the permissible items there as per the description.

Sd/-Illegible.

23. The Collector thereafter directed to issue show cause notice and the goods were directed to be stored in the warehouse. After the show cause notice issued to the said M/s. Natvarlal & Company, the clearing agents sent a letter to the Deputy Collector of Customs, dated 27th September, 1983, wherein it was, inter alia, pointed out as follows:

We now refer you to one consignment of the same item 'tetracycline HCL' (your File No. S. 34 GR I(P) 42/83A), which has been passed and released by the Hon'ble Collector of Customs against a Registered Contract Licence No. P/L/2983496/C dated 1st December, 1983. You will observe that the licence submitted by us stand at par with the licence duly considered by the Hon'ble Collector recently.

24. The Deputy Collector thereafter submitted the said letter before the Collector with a comparative statement. The Deputy Collector thereafter made the following note:

As per paragraph 8 of appendix 20 of AM 82 Policy onwards, it was clarified that protection against registered contract is only with regard to rate of import replenishment and the items of import allowed as replenishment in Column 4 against the relevant report products in appendix 17. No such protection is available for import of any other items which may be allowed to be imported against REP licence by way of flexibility.

In the instant case the importers are claiming clearance of the goods as per description of the goods endorsed on the licence the raw materials, etc., as per paragraph 30(1) of Part B of Section 1 of AM 77-78 Policy Volume II and not by way of any flexibility. Moreover during AM 77-78 Policy period, there was no system of allocating items of import to such licences as are done in AM 17 of the recent Import Policies. This clarification is furnished as desired by the Collector.

The importers want ph also,

Re-submitted.

Sd/-Illegible

26th October, 1983.

In such an event where is the case of adjudication? Let the goods be released against the licence produced.

Sd/-Illegible

Collector

27th October, 1983.

25. Thereafter, the goods were released. It appears from the records of that case that in the case of another transfer of a REP licence, (Hansmukh Kundalia, Calcutta) the identical article was released by the customs authorities. In the case of Natvarlal & Co. the licence was dated 31st March, 1983, and in the case of Hansmukh Kundalia the licence is dated 1st December, 1982. The petitioner's licence is dated 31st May, 1983. In the case of Natvarlal & Co., Bombay and Hansmukh Kundalia, Calcutta where the identical goods were released, the endorsements made in the said licences as regards the description of the goods were as follows:

Raw materials, components, consumable, stores and packing materials required for use in the licence holders' factory contained in paragraph 30(1) of Part B, Section 1 of Import Policy of 1977-78, Volume II.

26. The petitioner's licence also contains identical endorsement as regards the description of the goods. The aforesaid licences in the cases of Natvarlal & Co. and Hansmukh Kundalia were also issued against the registered contract, the date of contract being 7th August, 1977, and 5th August, 1977. In the case of petitioner, the contract was registered on 16th October, 1976.

27. In the case of another transfer of REP licence, D. K. Exporters, Bombay, the identical goods were released on 10th August, 1981. The Deputy Collector of Customs made the following note after considering the various suggestions and objections raised by the departmental officers:

Considering the goods allowed for import in the description column, and similar cases handled in the C. House in the past (when we even took up the matter with C.C. & I) I am afraid there is no escape but to allow the goods as the goods were permissible for import in 1977-78 Policy period.

Sd/-Illegible

23rd July, 1983.

28. I have set out from the records elaborately only to emphasis the manner in which the respondents are proceeding. They have been trying to make out a case knowing fully well that the show cause notice was issued only for the purpose of withholding the goods. The facts which are ascertained from the records bear ample testimony that the show cause notice is tailor-made. None of the grounds taken in the show cause notice has any legs to stand. The licence in question although issued on 13th May, 1983, is endorsed for the raw materials required for the use in licence holder's factory subject to the restrictions contained in paragraph 30(1) of Volume II of Import Policy 1977-78. The said licence is a REP licence available against export. Paragraph 44(1) of the Import Trade Control Policy of 1977-78 for registered exporters of Volume II, inter alia provides that for greater stability for the growth of export a scheme was introduced for registration of contracts. In respect of exports made in the execution of such registered contracts, the exporters are 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 contract with overseas buyers. Under paragraph 46 of the said Policy once a contract has been registered, the registered exporters 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. In this case, the contract was registered on 15th October, 1976. The licence is endorsed for raw materials, components, etc., subject to the restrictions contained in paragraph 30(1) of Part B, Section 1 of Volume II of the Import Policy 1977-78. The licence holder, therefore, is entitled to import items and is entitled to the rate of replenishment in accordance with the policy of 1977-78. If there is any restriction for import of any items such restriction must be on the basis of the Policy of 1977-78.

29. Paragraph 30(1) provides that the raw materials, etc., to be imported are required in the use of the licence holder's factory and the licence would be subject to 'actual user' condition. However, the said restriction is no longer there and since 1st April, 1978, the REP licence is freely transferable and such REP licence is not subject to 'actual user' condition.

30. The provisions in this regard are contained in all the Import Policies for the year 1978-79. Licensing authority issued clarification from time to time on the licences (REP) issued to registered exporters. If the REP licence issued against exports made in pursuance of registered contracts entered into prior to 1st April, 1978, but the exports are made after 1st April, 1978, the said licence will not be subject to actual user condition and will be freely transferable.

31. There are certain restrictions in import of items of raw materials, components, etc., under paragraph 30(1) annexure I to Volume II of 1977-78 Policy which contains a list of banned items. The list is in two parts, viz., Part I and Part II. Items appearing in Part I of the list can be imported for a total value not exceeding 10 per cent of the value of the licence. Thus there is a restriction regarding quantum of import. Items appearing in Part II of the said list would not be allowed to be imported. There are 17 items mentioned in Part II which are not allowed to be imported against the REP entitlement at all. Tetracycline hydrochloride is not one of such items. Annexure II contains list of export-linked-import items. The items appearing in this list would be allowed to be imported only against the export of the products indicated against each. These items would not be allowed to be imported against export of other products. There is an exhaustive list of items in annexure II which will be allowed against REP entitlement only against export of products mentioned against each and to the extent indicated in the said list. Tetracycline HCL was not one of such items mentioned as item of import in the said list and as such the said item tetracycline HCL was not an export-linked-import item. By a subsequent notification issued on 27th September, 1977, the export-linked-import list was widened to include various drugs and related items. One of such export-linked-import items is tetracycline, its salts and derivatives. Such restriction was imposed only with effect from 27th September, 1977. Though the licence has been issued during 1983-84 Policy period, the description in the licence, namely, raw materials, components, etc., subject to the restriction contained in paragraph 30(1) of 1977-78 Policy makes it quite clear that the policy applicable therein would be that in force on the date of registration of the contract. The item tetracycline hydrochloride was neither banned nor restricted or export-linked-import item prior to 27th September, 1977. The 1977-78 policy came into effect on 27th April, 1977, and the restriction of import of tetracycline was imposed on 27th September, 1977. The question therefore is when such restriction will be operative in respect of the item permitted to be imported under the policy of 1977-78. It is now well-settled that the restriction imposed by notification cannot have any restrospective operation. Hence an importer will be eligible to the benefit of 1977-78 Policy as it stood on date of policy for the purpose of import of an item under paragraph 30(1) of 1977-78 Policy. It is also the case of the customs department as would appear from the note that the crucial date during 1977-78 Policy which should be applicable for determining the validity of the import of the item is the first day of the issue of the policy, i.e., 27th April, 1977, and on that day. The Assistant Collector of Customs who issued the show cause notice has himself admitted the said fact in his following note in the file:

In respect of the crucial date during AM 77-78 which should be applicable for the item tetracycline hydrochloride, it was held that in such cases, the Policy in force on the first date of AM 77-78 is the Policy applicable to the licence. In that event, the restrictions imposed under ITC P/N 78 (PN)/77 dated 27th September, 1977, are not applicable in view of the fact that the item tetracycline hydrochloride was included in export-linked-import items only w.e.f. 27th September, 1977, and from the first date of issue of the policy, i.e., 27th April, 1977, when the item was not included in the export-linked-import items.

32. Thus, it is immaterial whether the licence was issued during 1983-84 Policy or earlier. The relevant Policy of 1977-78 which is endorsed in the licence. The restrictions regarding import of the items are governed by the Policy 1977-78 and not by the policy when the licence was issued. Otherwise when a licence is issued in 1983-84 there could not have been any endorsement in respect of 1977-78 Policy. Even under the 1977-78 Policy whether there is any restriction or not has to be determined with reference to the first day of the Policy period, that is to say, 27th April, 1977, when the Policy came into force.

33. Even assuming that the 'actual user's' condition is to be made applicable to the licence issued in the Policy period 1983-84, it would appear from the records that the goods have been sold to an actual user, that is, M/s. Deys Medical Stores (Manufacturing) Limited who are manufacturers of tetracycline drugs. In the case of Hansmukh Kundalia, it appears from the drug licence kept in the records that the consignment of tetracycline have been sold to Mercury Laboratories Private Limited, an actual user for the manufacture of tetracycline capsules. In that view of the matter, there cannot be any objection to release of the goods to the actual users who are manufacturing tetracycline drugs or capsules.

34. The other ground is that the protection against the registered contract is only with regard to the rate of import replenishment and items of import allowed as replenishment in Volume IV against the relevant export product of appendix 17 in view of the provisions contained in paragraph 7 of appendix 2. Paragraph 7 of appendix 20 of 1983-84 Policy is in the following terms:

7. Against contracts under the scheme, a registered exporter will be eligible to claim import replenishment at the same rate and for the same items as were permissible on the date of contract, under the relevant import policy for registered exporters. If the rate/items of replenishment, as per the policy in force on the date of contract, are different from those on the date of export, he may claim the benefit as on either date only, i.e., both the rate and items must relate to the same date. It is clarified that protection against registered contracts is only with regard to the rate of import replenishment and the items of import allowed as replenishment to column 4 against the relevant export product in appendix 17. No such protection is available for import of any other items which may be allowed to be imported against REP licence by way of flexibility.

35. Appendix 17 of 1983-84 Policy specifies import policy for registered exporters. In Appendix 17 at column 2 the export product is mentioned, at column 3 import replenishment percentage is mentioned and at column 4 the materials permitted for import against the export of the product are mentioned. It is true that the licence in this case was issued against the export of engineering goods and column 4 of the said appendix does not permit import of any drugs. But what the respondents deliberately ignored is that the rate of replenishment and items of import allowed as replenishment must be in terms of paragraph 30(1) of 1977-78 Policy. 1977-78 Policy did not have any column 4 in the relevant appendix in respect of the items not otherwise export-linked-import item. As a matter of fact paragraph 30(1) is the self contained procedure for import of items. The contention that unless items imported come in column 4 as against export product such item cannot be accepted. This will make the entire licence given to the registered exporters completely meaningless. There cannot be any such limitation as was sought to be made when the item was not export-linked-import under 1977-78, on the relevant date, i.e., the date of issue of the Policy, 27th April, 1977. Restriction may be imposed in the policy period when the licence was issued cannot be made applicable to such a licence endorsed for items under 1977-78 Policy. Had it been so, the licensing authority could not have endorsed the licence under paragraph 30(1) of 1977-78 Policy. The intention is clear. The item which was not export-linked-import can be imported under the licence issued in 1983-84 subject to the restriction, if any, applicable under paragraph 30(1) of the said 1977-78 Policy. The last ground taken is that there has been a violation and contravention of Clause 3(1) of the Import (Control) Order, 1955, and Section 111(d) of the Customs Act, 1962. In my judgment, the said contention is untenable. I have already set out the views of the departmental officers where they have stated that the licence is valid for import of the item in question. Section 111(d) of the Customs Act enables confiscation provided the import is contrary to any prohibition imposed by or under this Act or under any law for the time being in force. Calcutta Customs have cleared and released several consignments of tetracycline hydrochloride during the last five years against the REP licences issued against export by the registered exporters, contract having been registered prior to 27th September, 1977. They released the said consigments as they were of the view that the licence permitted the import of the item in question. They considered the implication of such licences and also obtained clarification of the Chief Controller of Imports and Exports. If, on the same facts, they purport to take a different view or different stand or if there is any doubt whether the licence is covered for import of the goods in question or not, it cannot be said that the import of such goods was in contravention of the provision of Section 111(d) of the Customs Act, 1962, or is liable to confiscation. In the case of the petitioner, earlier several consignments of this item were released more than once. Several consignments have been released in other cases. The importer can certainly rely on the stand taken by the customs authorities in releasing various consignments of the identical item in several cases and can reasonably believe that such item is permitted for import. If that be the position, then it cannot be said that the goods are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being imported contrary to any provision imposed by or under Customs Act, 1962, or any other law for the time being in force. Neither the customs authorities nor the Chief Controller of Imports and Exports made any public notification that such an item cannot be imported by REP licence endorsed under 1977-78 Policy. An importer is entitled to know where his right and obligation stand under the licence. It involves international trade and before the importer can enter into a contract or open a letter of credit he must know the exact position regarding the import of the particular item. If the policy interpretation and the stand of the department changed with the change in the incumbent in the post of Collector of Customs there will be utter chaos and confusion. What is permitted to be imported by one Collector on an interpretation of the licence and the relevant rules and notification is not permitted by the successor-in-office on an another interpretation on the same set of facts. This will create an atmosphere of uncertainty and insecurity to the REP licence holder or the transferees thereof.

36. Having regard to the facts and circumstances and the materials produced before me I am of the view that there is no justification in this case for issuing any show cause notice. The identical goods had been released on many earlier occasions after considering the various objections raised by the departmental officers. There are no materials to come to the conclusion that the consignments in question have been imported in contravention of Clause 3(1) of the Import (Control) Order or the Customs Act, 1962. None of the grounds taken by the authorities issuing show cause notice is sustainable either on law or on fact. The said show cause notice is deliberate move to stop the release of the goods. It is not that the customs authorities cannot change their opinion but they cannot act on the basis of change of opinion unsupported by new facts or materials or information hitherto unknown to officers. They have discussed pros and cons of the implications of such licences in other cases as well as in the case of the petitioner on earlier occasions. They have found that the release of the goods could not be withheld. But nontheless, this time, without there being any new or fresh materials they have sought to detain the goods.

37. On the facts and circumstances appearing in the records which had been set out hereinabove, it must be held that there is a complete non-application of mind by the officer who issued the impugned show cause notice in this case. It is without jurisdiction or in excess of jurisdiction. In issuing the show cause notice, the officer concerned surrendered his own judgment and acted as an instrument to carry out the order of the Collector and the Deputy Collector. It was a command performance the Assistant Collector having put up a note himself that if the earlier decision is taken into consideration, then the import of the item under cover of the bills of entry against the import licence is valid. It is not known how the same Assistant Collector could issue a show cause notice saying that the importation of the goods under the licence is not valid. This is how the customs authorities are proceeding and it is a fit case where the Court should interfere and prevent the abuse of power or colourable exercise of power by certain officers of the department. The right of a citizen to carry on business cannot be taken away by some ipse dixit of certain officers and the Court cannot overlook such over-zealousness on the part of certain officers to act without caring for consequences at the behest of superior officers.

38. In that view of the matter this application succeeds. The respondents are directed to forthwith assess the said five bills of entry and to allow clearance of the said goods covered under the import licence dated 31st May, 1983, subject to the petitioner's paying the assessed customs duties. All formalities shall be completed and the goods shall be released within 48 hours from the date of communication of this order. The respondents Nos. 1, 2 and 3 are directed to issue full wharfage and/or demurrage rent exemption certificates formalities in respect of said consignments from the respective dates of filing of the bills of entry till the date of clearance.

39. Let a plain copy of this order, counter-signed by Assistant Registrar (Court) be handed over to the learned Advocates appearing for the parties concerned.


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