Bombay High Court
Baroda Rayon Corporation Limited, ... vs Union Of India And Another on 7 April, 1988
Equivalent citations: 1988(36)ELT20(BOM)
JUDGMENT
1. The petitioner is a public limited company having a factory which is licensed under the Industries (Development and Regulation) Act, 1951 to manufacture polyester filament yarn with a certain stated capacity. This petition, as was originally filed, sought to challenge the orders passed by the Customs Authorities confiscating certain goods, reference to the nature of which will be made shortly hereafter, and imposing fine in lieu of confiscation. The said goods had been imported by the petitioner company under bills of entry annexed to this petition as Exs. 'E-1', 'E-2', 'E-3' and 'F'. After the petition was filed, the order giving reasons for the confiscation and the imposition of penalty was passed and by an amendment to the petition, challenge was included to the said order of confiscation and imposition of penalty. The impugned order, which is dated 9th of November, 1981, has been annexed as Ex. 'N' to this petition.
2. As already mentioned above, the petitioners are licensed to manufacture polyester filament yarn. In June 1981, the petitioners entered into a contract with a firm in Taiwan for the purchase of Partially Oriented Yarn, hereinafter referred to as "POY" for the sake of brevity. This contract was entered into with the said Taiwan firm for importing the product in view of the fact that under the Import Policy for the year 1981-1982, this product was allowed to be imported by actual users. The petitioners' understanding was that they were actual users of this product in the manufacture of polyester filament yarn for which they had a licence. The contract was registered on 20th of July, 1981 with the Textile Commissioner at Bombay. By following the usual procedure of opening Letters of Credit the goods were imported in the months of August to November, 1981. It has been mentioned that the first three consignments were cleared, but the fourth consignment was not cleared by the petitioners.
3. In the meantime in order to fortify themselves in their contention that they were the actual users of POY, the petitioners wrote a letter to the Textile Commissioner on 5th October, 1981. In that letter, the petitioners gave certain details about themselves. By its reply dated 7th of October, 1981, the office of the Textile Commissioner informed the petitioners :
"In the circumstances you are an Actual User of Polyester Filament Yarn for texturising purpose and therefore, entitled to take advantage of import of POY yarn under Appendix 10 of the Import Policy, April, 1981 of March, 1982."
The circumstances referred to in the letter of the office of the Textile Commissioner were that the petitioner company was having two Himson Scragg Draw Texturising Machines, Type SDS-3, having POY attachment suitable for texturising POY and that the petitioner company had been manufacturing texturised polyester yarn. Obviously, therefore, the Textile Commissioner's office was informed by the petitioner company that it was manufacturing texturised polyester yarn and on that basis this letter was given by the said office.
4. Pursuant to certain queries which had been raised by the Scrutiny Appraiser, the petitioner company wrote a letter dated 15th of October 1981 to the Assistant Collector of Customs, Appraising Department, wherein the circumstances under which the petitioner company imported POY were detailed. After taking this into consideration, the Assistant Collector of customs confiscated the goods, but allowed the same to be redeemed on payment of redemption fine under Section 125 of the Customs Act, 1962. This is the order of 9th of November, 1981 which is the subject-matter of challenge in this petition.
5. Subsequent to the filing of the petition, the Textile Commissioner wrote a letter to the petitioner company on 16th of December, 1981, noting therein that the petitioner was a spinner of fibre and filament yarn registered under Item No. 19(7) of the First Schedule to the Industries (Development and Regulation) Act. It was also noted that as the petitioner company was registered by the Directorate General of Technical Development, a prior approval of the said authority was required before allowing the petitioner to import POY. In view of this, the petitioner could not be considered as an actual user (industrial) in terms of the Import Policy. The petitioner was, therefore, required to return the original contract which had been registered with the Textile Commissioner's office.
6. Mr. Bharucha, the learned Advocate appearing in support of the petition, has challenged the view taken by the Assistant Collector of Customs by contending that the Import Policy for the year 1981-1982, if properly read, would permit the petitioner to import POY as an actual user of the said product. He invited my attention to Appendix 10 of the Import Policy 1981-1982, which deals with the items under the Open General Licence. Item No. 1 in this Appendix mentions raw-materials, components and consumables other than those included in Appendices 3, 5, 8, 9 and 15. That POY could be raw-material can be safely accepted for the industrial units which actually use the same for manufacturing something out of the said raw-material. Mr. Bharucha also invited my attention to the Press Note issued on 18th of July, 1981 by the Government of India. Since considerable argument is based upon this Press Note, the necessary relevant parts of the same ought to be reproduced at this stage :-
"2. So far only such industrial undertakings including textile mills which had the facility of their own Draw Texturising machines were treated as actual users for the registration of import contracts for P.O.Y.
3. This matter has since been revised in the light of the representations received from the Industry. It is now clarified that even such textile mills who do not have the facility of their own draw texturising machines but use POY for the manufacture of fabrics will also be treated as actual users."
Paragraph 3 quoted above is not relevant for our purposes.
7. Mr. Bharucha says that if one reads paragraph 2, it is clear that apart from textile mills there were certain industrial undertakings which had the facility of their own draw texturising machines and which were allowed the import of POY as actual users. This must necessarily mean that an industrial undertaking, such as the petitioner which is also a textile mill, was originally being treated as an industrial undertaking and was allowed to import POY as actual user if it had the facility of its own draw texturising machine. Admittedly, the petitioner has its own draw texturising machines. POY is imported by industrial undertakings having their own draw texturising machines as actual users. It must necessarily follow, says Mr. Bharucha, that the petitioner, which has also its own draw texturising machines and which is licensed to manufacture filament yarn, is entitled to import POY as actual user. It is contended, and not without justification, that the texturised filament yarn is the species of the filament yarn. It is also an admitted position that the petitioner has been licensed, as already mentioned above, to manufacture man-made fibres, including regenerated cellulose-rayon, nylon and the like, an item to be found in Item No. 19(7) in the First Schedule to the Industries (Development and Regulation) Act. Since POY can be utilised and in fact utilised by the petitioner for the manufacture of filament yarn for which indisputably it has been licensed, there is no reason to hold that the petitioner is not entitled to import POY as an actual user. This is so especially because the Press Note itself says that the people who have their own draw texturising machines were entitled to import the same as actual users.
8. The Assistant Collector of Customs, in his order, has noted these facts, but has pointed out that the petitioner was registered under Item No. 19(7) of the First Schedule to the Industries (Development and Regulation) Act and was also registered under the D.G.T.D. From this it was clear to the Assistant Collector of Customs that the sponsoring authority for the petitioner's import was the D.G.T.D., New Delhi. Admittedly, no certificate had been taken from the said authority by the petitioner, certifying that the petitioner was the actual user of POY as something which was required in the manufacture of the product for which the petitioner had been licensed under the Industries (Development and Regulation) Act. Taking this view, a view which had been taken by him in another case, namely that of Modipon Limited, the Assistant Collector of Customs held that the petitioner was not entitled to import the said product as an actual user.
9. Mr. Bharucha's argument must fail in view of the fact pointed out by the Assistant Collector of Customs in his order. If one looks at the licence given to the petitioner under the Industries (Development and Regulation) Act, it is easily seen that the petitioner was allowed by the said licence to manufacture polyester filament yarn subject to the condition, among others, that the import of polyester chips would not be permitted. Another condition was also laid down, namely, that the petitioner's undertaking would have to take up the manufacture of the polyester filament yarn from the basic stage, namely, DMT, ethylene glycol. It is clear, therefore, that for the purpose of manufacturing polyester filament yarn under the terms of the industrial licence, the petitioner was not entitled to import POY or any other filament yarn. This is the reply which has been given by Mr. Bulchandani, which I accept. The simple answer to the contention raised on behalf of the petitioner is that the petitioner is not entitled to import POY for the manufacture of the yarn for which it holds an industrial licence. POY is admittedly a filament yarn. The petitioner is admittedly licensed to manufacture polyester filament yarn. It cannot be seen how the petitioner could be heard to say that it is entitled to import something as an actual user which it is actually licensed to manufacture.
10. This petition is not affected by the argument advanced by Mr. Bharucha that the petitioner has a draw texturising machine and by use of the same, the petitioner it is manufacturing texturised filament yarn. The filament yarn for which the petitioner is licensed is a genus and the texturised filament yarn is a species. If, therefore, the petitioner is licensed to manufacture filament yarn, it must also be inferred that it is licensed to manufacture texturised filament yarn. In that case, the petitioner is justified in importing POY which is undoubtedly a filament yarn for converting the same into texturised filament yarn, especially because the petitioner has its own draw texturising machines.
11. This argument is not acceptable in the first place because the petitioner has not been permitted merely to manufacture texturised filament yarn. Secondly, the conditions of the industrial licence granted to the petitioner company includes a condition that the manufacture of the polyester filament yarn shall be done from the basic stage which necessarily means that an intermediate product cannot be imported for the purpose of utilisation in the manufacture of the product for which the industrial licence was given. There is thus no merit in this petition.
12. Mr. Bharucha next argued that the penalty imposed by the Assistant collector is unduly harsh. It was pointed out to the authorities concerned that after the import of the product the prices of the polyester filament yarn came down and in fact it has resulted in a loss to the petitioner. This fact was taken into account by the Assistant Collector of Customs and it has been pointed out by Mr. Bulchandani that actually the penalty, if anything, is on the lower side. Under Section 125 of the Customs Act, the penalty could be as high as the market price of the Commodity. Looking to the bills of entry lodged by the petitioner, it is seen that the C.I.F. price of the imported commodity, was Rs. 25/- per Kg. The penalty imposed is around Rs. 12.50 per Kg. In these circumstances, it is not possible to uphold the grievance that the penalty imposed on the petitioner is unduly high.
13. In the result, the petition must fail. Rule is accordingly discharged with no order as to costs.