Customs, Excise and Gold Tribunal - Mumbai
Hes Limited vs Collector Of Customs on 7 February, 1986
Equivalent citations: 1987(13)ECR320(TRI.-MUMBAI), 1986(25)ELT385(TRI-MUMBAI)
ORDER K. Gopal Hegde, Member (J)
1. The revision application filed before the Government of India against the Order No. 541 dated 23.11.1981 passed by the Central Board of Excise & Customs, statutorily stood transferred to the Tribunal for being heard as an appeal.
2. The facts necessary for the disposal of this appeal are: The appellants M/s. HES Ltd., are the manufacturer of Alarm Time pieces and Lever Clock Movements etc. They were registered with the DGTD for manufacture of Analogue Quartz Clocks. They placed two orders with the Swiss suppliers for 5,000 sets and 22,000 sets of I.C. and Quartz required for their Quartz Clocks to be supplied in August and September, 1980. The foreign suppliers despatched by air freight five thousand sets of Integrated Circuits and Quartz. In the meantime on 3rd July, 1980 by a Public Notice No. 25-ITC(PN)/80 the Integrated Circuits and Quartz Crystals came to be canalised. When the appellants sought clearance of 7,000 sets of Integrated Circuits and Quartz, the same was objected to by the Customs on the ground of they being canalised. The Additional Collector of Customs who held the enquiry ordered confiscation on the ground that the order for the supply of the goods in question was made after the Public Notice dated 3.7.1980 came into force. He, however, allowed redemption on payment of a fine of Rs. 5,000/-.
3. Feeling aggrieved by the order the appellants preferred an appeal before the Board and the Board rejected the appeal holding that the conditions of ITC Public Notice No. 25/80 dated 3.7.1980 had not been fulfilled. A Letter of Credit was opened after 3.7.1980 after the canalisation of imports.
4. During the hearing of the appeal Shri K.A. Mehta, urged the following grounds:
(a) The Public Notice No. 25/80 dated 3.7.1980 canalised only large scale Integrated Circuits, Quartz Crystals, etc. meant for Electronic Watches and not other categories.
(b) The components imported by the appellants were intended for the manufacture of -clocks and not for Electronic Watches, and therefore, the Public Notice has no application.
(c) Before placing orders the appellants had approached the DGTD. The DGTD had recommended the licensing authority to issue licence and that firm contract had been entered into with the overseas suppliers prior to issue of the Public Notice, and as such, there should not have been any confiscation or levy of fine.
(d) The authorities have not taken into consideration the unprecedent and grave explosive situation created on account of strike and lockouts which besides paralysing the production and sale prevented the appellants from entering into factory premises, and as such, requisite steps for opening of Letter of credit could not be taken earlier to 3.7.1980. In the said circumstances there was hardly any justification to levy a fine of Rs.5,000/-,
(e) The Public Notice No. 25/80 dated 3.7.1980 was amended and the amendment carried out clearly establish that the Public Notice was intended to cover the components and modules etc., of Electronic Watches. Finally, it was submitted that the licences issued was earlier to the Public Notice dated 3.7.1980, and therefore, the right conferred under the licence cannot be taken away by the Public Notice. The Public Notice has no statutory force whereas the licence was amended in exercise of a statutory order, and therefore, the order of confiscation is also bad on this ground.
5. Shri Pal appearing for the respondent Collector, however, contended that admittedly a Letter of Credit was opened after 3.7.1980 and before opening of a Letter of Credit Public Notice had been issued and under the Public Notice the goods imported became canalised items and import could be made only by the canalising agency, and in the said circumstances there is no illegality in the order passed by the Additional Collector and confirmed by the Board. Shri Pal urged that it is a prerogative of the Government to change the Policy and no importer has a vested right. Shri Pal further urged that the Additional Collector and the Board had taken a lenient view in the matter of imposition of fine, and therefore, no further leniency is called for.
6. The short question for consideration is whether the order passed by the Additional Collector and confirmed by the Board requires to be interfered with. There is no dispute that the goods imported are Quartz Crystals and Integrated Circuits. It is also not in dispute that the licence was issued to the appellants on 19.5.1980. Quartz Crystals, large scale Integrated Circuits for electronic watches came to be canalised only on 3.7.1980 by the Public Notice of even date. This Public Notice is by the Chief Controller of Imports & Exports. According to the Public Notice it was to be issued in the Gazette of India extra-ordinary Pt.I Section 1. There is no evidence as to the date of the Gazette in which this Public Notice was published and also there is no evidence as to the date on which the Gazette was made available to the public. By this Public Notice certain amendments were effected to the Policy AM.81. The amendment with which we are concerned was the one made to Appendix 8 and it reads:
"After the existing S.No. 58 the following shall be added:-'Semiconductor Complex Limited (SCL)
59. Components/Modules of Electronic watches, the following:-(emphasis is supplied by me)
(a) Complete electronic modules for electronic watches of all types.
(b) Following components of electronic watches [both for (digital) and (analogue) watches]
(c) Large scale integrated circuits/devices/chips, all types for use in watches, clocks and time pieces.
(ii) Liquid crystal display,
(iii) Quartz Crystal,
(iv) Stepper Motor.
In case of item 59 in para 2 above, namely, components/modules of electronic watches etc. import against licences already issued will be allowed only to the extent covered by irrevocable' letters of credit opened through authorised dealers in foreign exchange before the date of this Public Notice."
7. Appendix 8 of AM.79 consists of items the import of which are canalised through public sector agencies. Before the Public Notice was issued this Appendix consisted of 58 items. By the Public Notice, item No. 59 came to be included. As has been seen from the Public Notice item 59 relates to components/modules of electronic watches. It is not all components and modules of electronic watches that are included in item 59. It is only those components and modules which are set out in sub-clauses (a) and (b) alone are canalised. From the reading of item 59 it is amply clear that canalisation was only of components/modules of electronic watches and not electronic clocks or timepieces. Large scale Integrated Circuits/devices/chips all types of electronic watches which are used in watches, clocks and time pieces are also canalised. What are canalised are not Integrated Circuits and Quartz Crystals of electronic -clocks or time pieces but Integrated Circuits of electronic watches for use in clocks and time pieces. They can be imported only by the canalising agency. Item 59 of Appendix 8 has not the effect of canalising Quartz Crystals used in clocks and time pieces. If the intention of the policy makers was to canalise the components and modules of electronic watches, clocks and time pieces, item No. 59 would have been components/modules of electronic watches, clocks and time pieces, the following: but such is not the entry. I, therefore, agree with the contention of the learned Advocate that the Public Notice did not have the effect of canalising the Integrated Circuits and Quartz Crystal of clocks, whether digital or analogue. According to the order-in-original Quartz and Integrated Circuits imported are Quartz and Integrated Circuits of clocks and not Quartz and Integrated Circuits of electronic watches. In the said circumstances the Additional Collector committed an error in ordering confiscation on the ground that the goods imported are covered by the Public Notice 25/80 dated 3.7.1980. The Board also committed an error in holding that the appellant should have observed the conditions of ITC Public Notice 25/80 dated 3.7.1980. On this ground alone this appeal is required to be allowed.
8. The appellant had contended that their licence was specific, namely, for the import of Quartz Crystal and Integrated Circuits for clocks for the manufacture of which they were registered with the DGTD. Their further contention was that even if the Public Notice has the effect of canalising the Integrated Circuits and Quartz Crystal of clocks, the Public Notice being non-statutory cannot take away the right conferred in the licence which was issued in pursuance of a statutory power. Shri Pal appearing for the Collector had contended that the licencee has no vested right and it is a prerogative of the Government to change the Policy and if the Government by issue of a Public Notice had canalised a particular commodity, the licensee on the ground that his licence permitted import of the canalised item cannot be allowed to contend that his licence is valid for the import of the canalised item after coming into force of the Public Notice.
9. The Additional Collector and the Board did not record a finding that the licence dated 19.5.1980 was not for the import of the Integrated Circuits and Quartz Crystal used for the clocks for the manufacture of which the appellants were registered with the DGTD. There cannot be any quarrel as to the 'proposition contended by Shri Pal that it is the prerogative of the Government to change the Policy and it could even take away the rights conferred under the licences issued prior to the date of change of the Policy. But then in order to take away the rights conferred under the licences the Government shall have to issue notifications or orders in exercise of the powers conferred under the Import/Export Control Act or Import Control Order. The Public Notice or even the Policy are not statutory and they have no statutory force. If they are not statutory and if they have no statutory force the right vested in the licencee under the validly issued licence cannot be taken away. What the licencee is exercising is not the rights conferred under the Policy but the right conferred under the licence. Therefore, by merely changing the policy by non-statutory orders the rights conferred under the licence cannot be divested.
10. The question as to whether the Public Notice and the Policy which is more popularly known as Red Book is statutory came to be considered by the Supreme Court in East India Commercial Co. Ltd.,--Calcutta v. Collector of Customs, Calcutta, 1983 ELT, 1342 (S.C.). Before the Supreme Court it was urged that the Public Notice dated 26.7.1948 was an order in exercise of the power conferred on the Central Government under Section 3(1) of the Imports and Exports (Control) Act, 1947. The appellants in that case, however, contended that Public Notices are not such orders but only' information given to the public for their guidance. The Supreme Court after referring to the Public Notice in question and the provisions of Imports & Exports (Control) Act, observed:
"To put it differently, orders made under Section 3 of the Act, have statutory force, whereas public notices are policy statements administratively made by the Government for public information. The foreword to the Import Trade Control Handbook of Rules and Procedures, 1952, under the signature of the Secretary to the Government of India, in the Ministry of Commerce and Industry brings out this distinction thus:
"In the past the half yearly publication on Import Control, popularly known as the "Red Book" has included not only a statement of policy for the ensuing six months but also a reproduction of various notifications relating to Import Control and detailed information on points of procedure".
It is true the Chief Controller made an affidavit in the High Court that the policy-statements are issued under Section 3 of the Act. But, as we have said, that is only on information which has no support either in the form adopted or the practice followed or the matter incorporated in the notifications. We have no hesitation in holding that public notices are not orders issued under Section 3 of the Act."
11. Having regard to the above decision of the Supreme Court, the contention of the appellants that the Public Notice is non-statutory and it cannot take away the rights conferred by the licence shall have to be upheld. The licence in question is dated 19.5.1980 and it was valid for a period of 12 months and it specifically permitted import of Integrated Circuits and Quartz Crystals required for the manufacture of clocks. The import has taken place before the expiry of the licence period, and therefore, the Additional Collector had committed an error in holding that the licence was not valid to cover the import since the letter of credit was opened after the date of Public Notice 25/80. The Board also committed the same error.
12. In the result and for the reasons stated in the preceding paragraphs I allow this appeal and set aside the order of confiscation. Since I have set aside the order of confiscation, the question of setting aside the fine levied in lieu of confiscation strictly does not arise. However, I direct that the fine if paid, shall be refunded to the appellants.