Customs, Excise and Gold Tribunal - Mumbai
Collector Of Customs vs Jain Exports Pvt. Ltd. on 14 August, 1987
Equivalent citations: 1988(15)ECR363(TRI.-MUMBAI), 1990(46)ELT147(TRI-MUMBAI)
ORDER K. Gopal Hegde, Member (J)
1. The review show cause notice issued by the Government of India under Section 131/(3) of the Customs Act against the order bearing No. 917/80, dated 28-11-1980 passed by the Central Board of Excise & Customs statutorily stood transferred to the Tribunal for being heard as an appeal.
2. The undisputed facts are that the respondents M/s. Jain Exports Pvt. Ltd. as the letter of authority holders imported a consignment of Industrial crude palm oil valued at Rs. 1,88,119/- of and sought clearance against the licence bearing No. P/W/2858902, dated 24-7-1978 issued to M/s. P & S Exports Corporation.
3. The respondents had entered into a foreign contract by opening irrevocable letter of credit against the licence No. 2820001, dated 15-7-1978 and licence No. 2820676, dated 2-9-1978 both issued to M/s. Thalwar & Khuller Pvt. Ltd. and in respect of these licences the respondents were the letter of authority holders. But then, at the time of actual import the licence No. 2820001 had no balance and much of the value of licence No. 2820676, dated 2-9-1978 had also been utilised. Therefore, the respondents got the letter of authority amended on 9-9-1979 and substituted the two licences of M/s, Thalwar & Khuller Pvt. Ltd. with the licence of M/s. P & S Exports Corporation.
4. When the respondents sought clearance of the goods against the licence issued in favour of M/s. P & S Exports Corporation, the Customs objected to the clearance on the ground that in terms of para 211 of the Policy AM-80 the said licence became invalid since crude palm oil became canalised under Appendix 8 Sl. No. 57(4) of the Policy and since there had been no firm commitments made by opening irrevocable letters of credit prior to 1-5-1979. The Collector of Customs, Bombay after holding an enquiry held that the import was unauthorised. Therefore he ordered confiscation but allowed redemption on payment of fine of Rs. 90,000/-.
5. Being aggrieved by the order of the Collector, the respondents herein filed an appeal before the Central Board of Excise & Customs and the Board allowed the appeal and set aside the order passed by the Collector of Customs, Bombay. The Board took a view that since the importers had entered into a firm commitment for importing certain quantity of crude palm oil before 1-5-1979 mere substitution of one licence by another did not change the position and the goods could be allowed clearance against the substituted licence issued in the name of M/s. P & S Exports Corporation.
6. The Government of India in its show cause notice, however, tentatively took a view that the order passed by the Board was not correct. The importers being the letter of authority holders their only function was to import the goods in question for and on behalf of the licence holders. It was the firm commitment of the licence holder which was relevant under para 211 of the Policy AM-80. It could not be said that there was a firm commitment before 1-5-1979 so far as the licence of M/s. P & S Exports Corporation was concerned. Since there was no firm commitment to import palm oil on behalf of M/s. P & S Exports Corporation by the importers before 1-5-1979 the licence produced would not appear to be acceptable for the clearance of the goods.
7. During the hearing of this appeal Shri Pal the learned departmental representative submitted that the respondents herein were the letter of authority holders of the two licences issued to M/s. Thalwar & Khuller Pvt. Ltd. They were also the letter of authority holders for the licence issued to M/s. P & S Exports Corporation. But then the irrevocable letter of credit established by them prior to 1-5-1979 was in respect of licences which were issued to M/s. Thalwar & Khuller Pvt. Ltd. and not in respect of the licence issued to M/s. P & S Exports Corporation and as such there had been no firm commitment prior to 1-5-1979 by the licensee viz. M/s. P & S Exports Corpn. The firm commitment, if any, by the licensee viz. M/s. P & S Exports Corpn. took place only on 9-9-1979 when the respondents herein got the letter of credit amended and substituted the licence issued to M/s. P & S Exports Corpn. Since para 211 of the Policy AM-80 required opening of letter of credit on or before 1-5-1979 and since there was no such letter of credit opened by the licensee viz. M/s. P & S Exports Corporation the import was unauthorised and the view taken by the Board was not correct. Shri Pal drew our attention to para 6 of the Hand Book of Import-Export Procedures 1979-80 and contended that the functions of the holder of letter of authority are limited to place orders, to open letter of credit, to make remittance of payment for importing the goods, to arrange movement and to clear the same through the customs having regard to Section 147 of the Customs Act on behalf of the licensee but the ownership of the goods will not vest with the letter of authority holder. Shri Pal also relied upon a decision reported in 1986 (8) ECR 605. Shri Pal submitted that the Board's order may be set aside and the Collector's order may be resorted.
8. Shri Krishnamurthy, Consultant for the respondents made the following submissions:
(i) There is a clear distinction between a licensee and a licence holder. The letter of authority becomes a licence holder the moment the letter of authority is executed in his favour. Shri Krishnamurthy referred to definition of the "letter of authority" given in clause (h) of Section 2 of the Imports & Exports (Control) Act. Clause (h) reads : "letter of authority" means a letter authorising the licensee to permit another person, named in the said letter to import goods against the licence granted to the licensee. Shri Krishnamurthy contended that a person becomes a licence holder, even if the licence is not granted in his name, if he possesses a licence either by transfer or by letter of authority.
(ii) Admittedly the irrevocable letter of credit was opened prior to 1-5-1979 and at the time of opening the letter of credit the licences mentioned in the letter of credit were valid but then there were certain imports subsequently made and therefore the licences originally mentioned in the credit could not be utilised and as such an amendment was effected including another licence. In the said circumstances there had been compliance with para 211 of the Policy AM-80.
(iii) The customs authorities had treated the respondents as the owner of the goods. This is obvious from the fact that the show cause notice was given to the respondents and the Bill of Entry was entered by the respondents and the declaration in B/E was also made by the respondents and the Collector who gave the option to pay the fine in lieu of confiscation gave the option to the respondents. In the said circumstances to treat the respondents as a separate entity from the licensee is against the conduct of the department itself.
(iv) The licence against which the clearance was sought was during the Policy AM-78-79 and therefore any change in the subsequent Policy would not invalidate the licence. During the Policy AM-79 Crude palm oil was not canalised.
(v) The Exchange Bank which is considered as a joint holder of the licence had allowed transfer of the endorsement in the letter of credit in favour of licence dated 24-7-1978 in the name of M/s. P & S Exports Corporation and in the said circumstance there was a firm commitment by an irrevocable letter of credit before 1-5-1979.
Shri Krishnamurthy submitted that the show cause notice may be discharged and the appeal be rejected.
9. In reply Shri Pal contended that the licence was not valid because palm oil was canalised even during the Policy AM-79. In that connection Shri Pal referred to item 51 Appendix 8 of the Policy AM-79.
10. We have carefully considered the submissions made on both the sides, and perused the records of the case. Undisputedly M/s. Thalwar & Khuller Pvt. Ltd. as well as M/s. P & S Exports Corporation had executed letters of authority in favour of the present respondents. The letter of authority executed by M/s. Thalwar & Khuller Pvt. Ltd. was in respect of 2 licences dated 15-7-1978 and 2-9-1978. The letter of authority executed by M/s. P & S Exports Corporation was in respect of the licence dated 24-7-1978. The respondents by reason of letters of authority becomes the agents of the licensees. Admittedly, as the letters of authority holder the respondents can place orders, open letter of credit, make remittance of payment for importing the goods, arrange the movement and to clear the same through the customs on behalf of the licensee. He, however, would not become the owner of the goods (see para 6 of the Hand Book of Import-Export Procedures 1979-80). The respondents opened an irrevocable letter of credit dated 3-4-1979 with the Punjab & Sind Bank Ltd. New Delhi branch for US $ 4,28,000/- for the import of industrial palm oil. At the time of opening of the letter of credit the 2 licences mentioned were one dated 24-7-1978 and another dated 2-9-1978. The licences had sufficient balance when the letter of credit was opened. After the letter of credit was opened there was no sufficient balance in the 2 licences. Therefore, the bank amended the letter of credit on 9-9-1979 mentioning another licence dated 24-7-1978 which was however issued to a different licensee. But the respondents herein were the letter of authority holder. The Collector as well as the Government of India had taken a view that the opening of letter of credit on 30-4-1979 was not on or behalf of M/s. P & S Exports Corporation but it was on behalf of M/s. Thalwar & Khuller Pvt. Ltd. and therefore, there was no irrevocable letter of credit prior to 1-5-1979 by the licensee and as such the licence became invalid for the import. The Board, however, took a view that there was a firm contract by an irrevocable letter of credit prior to 1-5-1979 and the substitution of a new licence in the letter of credit became necessary because of the insufficient balance in the 2 licences and the Exchange Control Manual Vol. I permitted authorised dealers to transfer endorsements from exchange control copy of one import licence to exchange control order of another import licence held by the same importer provided the latter licence is also valid for the shipment and there is sufficient balance available on the licence.
10. In order to appreciate the view taken by the Government of India and the Collector on the one hand and the Board on the other hand, it would be necessary to refer to para 211 of the Policy AM-80. It reads:
"REP Licences already issued against exports made before 1-4-1978, except where the exporter has exercised his option for the import policy, 1978-79 under Para 211 thereof, shall not be valid for the import of items appearing in Appendix 3, 6, 8 and 9 of the Import Policy, 1979-80.This restriction will not, however, apply to the extent that the licence-holder has entered into firm commitments for import of the items thus excluded, by opening irrevocable letters of credit through authorised dealers in foreign exchange before 1-5-1979".
The above paragraph has the effect of invalidating the REP licence issued against the exports made before 1-4-1978, for the import of items appearing in Aps. 3,6,8 and 9 of Policy AM-80. It, however, carried out an exception. The exception being, if the licence holder entered into a firm commitment for import of the items excluded by opening irrevocable letter of credit before 1-5-1979, the licence will be valid for the import of the excluded items also.
11. According to the above para 211 the firm commitment by opening irrevocable letter of credit must be by the licence holder. The expression licence holder would include his agent. As a matter of fact, the heading of para 6 and 7 of the Hand Book of Import-Export Procedures 1979-80 r6ads - "Imports through Agents". The said paras permit the letter of authority holder to open letter of credit. It may be stated here that under both these policies a person effecting imports under an Open General Licence may utilise the services of an agent for the purposes of placing an order, to open letters of credit, to make remittance, to arrange movement and to clear the same through the customs.
12. During both the years 1979-80 reference is made to Section 147 of the Customs Act. Section 147 speaks of the liability of principal and agent. Sub-section (1) reads: "Where this Act requires anything to be done by the owner, importer or exporter of any goods, it may be done on his behalf by his agent". Sub-sec (3) reads - "When any person is expressly or impliedly authorised by the owner, importer or exporter of any goods to be his agent in respect of such goods for all or any of the purposes of this Act, such person shall, without prejudice to the liability of the owner, importer or exporter, be deemed to be the owner, importer or exporter of such goods for such purposes". Thus the opening of letter of credit by the respondents herein can either be treated as having been done on their own account or on behalf of the licensees. The letter of credit was opened on 30-4-1979 which was prior to 1-5-1979. Therefore, it satisfies the requirements of para 211. Undisputedly, at the time of opening of letter of credit, there was sufficient cash balance in the 2 licences appearing in the letter of credit. If at the time of import viz. at the time of shipment there had been sufficient balances in the 2 licences no objection could have been taken by the customs authorities for clearance of the goods. If that be so, the inclusion of another licence issued to another licensee but in respect of which the respondents herein was the letter of authority by way of amendment would not be sufficient to hold that there was no firm commitment by opening letter of credit before 1-5-1979. The Collector and the Government of India seem to think that there was no such firm commitment. The reasons given are that the amendment took place on 9-9-1979, after 1-5-1979 and the licence included was not the licence issued to the original licensee but to a different licensee. For the purposes of para 211 of Policy AM-80 one is not required to consider whether the licence produced at the time of clearance would be valid or not. All that is required under para 211 is entering into a firm commitment for import of the items excluded in that para by opening irrevocable letter of credit before 1-5-1979. Such a letter of credit had been admittedly opened by the respondents who were admittedly the agents of the licensees. Neither the Collector nor the Government of India had taken a view that there was no firm commitment by opening irrevocable letter of credit before 1-5-1979. The condition regarding opening of irrevocable letter of credit is intended to exclude sham and fictitious transactions and not to invalidate the genuine commitment made prior to 1-5-1979. The argument that there would be a change in the ownership of the goods was not a valid argument because if the licence was valid at the time of import viz. at the time of shipment even if it was not valid at the time of clearance the customs were accepting another licence which actually covers the import. Further the licences were issued to the export houses. They were also transferable. The original licensee viz. M/s. Thalwar & Khuller Pvt. Ltd. could have acquired the licence issued in favour of M/s. P & S. Exports Corporation so as to enable them to clear the goods. The Board has also referred to the Exchange Control Manual Vol. I which authorised the dealers to transfer endorsements from exchange control copy of one import licence to exchange control order of another import licence held by the same importer. Shri Pal did not contend that the Exchange Control Manual did not authorise transfer of endorsements from one import licence to another import licence.
13. The view taken by the Board appears correct and in confirmity with the avowed policy. The Board's order cannot be said to be improper or illegal. If the view taken by the Board is reasonably possible the Government of India in exercise of its review power cannot take a different view just because another view is also possible. The power of review has to be used sparingly and to correct manifest errors of law only.
14. In the result this appeal fails and the same is rejected.
15. K.S. Dilipsinhji, Member (T) I have given the most considered thought to the order proposed by Brother Hegde but for the reasons which follow, I am unable to agree with his conclusion and hence this differing order.
16. The brief facts of the case are that M/s. Jain Exports Pvt. Ltd. filed the Bill of Entry No. 2064, dated 7-11-1979 in their name for import of industrial palm oil in second hand drums weighing 43.320 M.T. and valued at Rs. 1,88,119 per s.s. "Guru Angad"rotation No. 1351 line No. 10. For the clearance of this consignment, they submitted licence No. 2858092, dated 14-7-1978 in the name of M/s. P & S Exports Corporation, New Delhi which was valid for import of raw materials, components, consumable stores, etc. M/s. Jain Exports Pvt. Ltd. claimed that this licence was valid for the clearance of the imported goods on the basis of para 211 of the 1979-80 Policy Book which permitted import of items appearing in Appendices 3,6,8 & 9 of the 1979-80 Policy provided the licence holder had entered into a firm commitment for the import of these items by opening of an irrevocable letter of credit before 1-5-1979. The importer's claim for the clearances was rejected by the Collector on the ground that there had been no such firm commitment by the licence holder before this critical date and hence the Collector held that the import was made in contravention of the Imports (Control) Order, and therefore he levied a fine of Rs. 90,000/- in lieu of confiscation of the goods under Section lll(d) of the Customs Act. M/s. Jain Exports Pvt. Ltd. filed an appeal under old Section 128 of the Customs Act to the Board and the Board allowed the appeal vide their order No. 197/80 under F. No. 917/80, dated 28-11-1980. The Central Government, however, felt that the Board's order was not proper, legal or correct and hence they issued a Notice No. 37/4/35/74-Cus.II, dated 20-10-81 for review of the Board's order under old Section 131(3) of the Customs Act. This is transferred to the Tribunal in terms of Section 131-B of the Customs Act and is to be treated as an appeal to the Tribunal.
17. On behalf of the Collector, Shri Pal first set out the facts of the case as mentioned above. He observed that the Respondents submitted a licence issued in the name of M/s. P & S Export Corporation, New Delhi on 24-7-1978. Along with this licence they produced a letter of authority dated 30-4-1979 from the licence holder for the clearance of the goods. Shri Pal submitted that this licence was for the period 1978-79 and in terms of para 211of the 1979-80 Policy the same was not valid for the clearance of palm oil, as under the 1978-79 Policy the import of palm oil had been canalised. However, the Policy provided for a concession to import such canalised items like palm oil to those licence holders who had made firm commitments by opening confirmed Letters of Credit before 1-5-1979. In the present case, the respondents had opened the Letter of Credit against two licences 2820001, dated 15-7-1978 and 2820676, dated 2-9-1978 both issued in favour of M/s. Thalwar & Khuller Pvt. Ltd. But when the goods arrived in India, there were no balances under these aforesaid licences to cover the goods. The appellants amended the original Letter of Credit dated 30-4-1979 on 9-9-1979 to include the licence No. 2858092 dated 24-7-1978 in the Letter of Credit. The Collector held that this was a fresh commitment entered on 9- 9-1979 on behalf of the licence holder and hence the import of industrial palm oil was hit by the provisions of para 211 of the Policy read with Appendix 8, Sr. No. 57(4) and accordingly he confiscated these goods but permitted them to be redeemed on payment of a fine of Rs. 90,000/-. Arguing on behalf of the Department, Shri Pal contended that the first commitment by opening the Letter of Credit on 30-4-1979 against the licences specified in the Letter of Credit was relevant to judge the validity of the imports. In this behalf, he read out para 211 from the Policy and emphasised that the L/C had to be opened by the licence holder. He also drew our attention to para 5 of the review show cause notice which set out that the transfer of the endorsement from one import licence to another under the Exchange Control Manual was not the same as the requirement of opening of the L/C as per para 211of the 1979-80 Policy by the licence holder. Shri Pal also relied on para 6 of the Handbook 1979-80 which set out the functions of letter of authority holder vis-a-vis the licence holder. He read out the provisions of this para. Shri Pal reiterated that the original L/C was opened against two licences of M/s. Thalwar & Khuller Pvt. Ltd., dated 15-7-1978 and 2-9-1978 and when the amendment in the L/C was made on 9-9-1979 substituting the licence dated 24-7-1978 of M/s. P & S Export Corporation, New Delhi there was a change of ownership and fresh commitment with effect from 9-9-1979. In this behalf, he relied on the Tribunal's decision in the case of Preshaw Automobile Co. - 1986 (8) ECR 605. Accordingly, Shri Pal pleaded that the Collector's order was correct and that the Board's order required to be set aside.
18. On behalf of the Respondents, Shri Krishnamoorthy also referred to para 5 of the review notice issued by the Government. He contended that the review notice had confused the licensee with the licence holder. Para 211 of the Policy Book could be divided into two parts, the first part invalidated the REP licences issued before 1-4-1978 for importing items covered by Appendices 3,6,8 & 9. The second part provided an exception to the first part which permitted import of such items provided the licence holder had entered into confirm commitments by opening irrevocable L/C before 1-5-1979. Shri Krishnamoorthy contended that the "Letter of Authority" was defined under Section 2(h) of the Imports & Exports (Control) Act, 1947 while there was no definition of the term "licence holder". Similarly, Clause 2(b) of the Imports (Control) order defined a "licence". But the Board's order equated the licensee with the licence holder. Shri Krishnamoorthy referred to para 9 of the Board's order-in-appeal. He further submitted that "import" was defined under Section 2(26) of the Customs Act. If these provisions of law were interpreted correctly, it would imply that the amendment dated 9-9-1979 in the L/C was not a fresh or new commitment. The L/C had been in existence and the commitment made thereunder was continued. The Bill of Entry for the clearance of the goods had been filed in the name of Jain Exports Pvt. Ltd. and not in the name of the licensee. The commitment was also in their name for import of the goods. They had also signed the declaration in the Bill of Entry and produced the letter of authority for the clearance of the goods. Hence the licence submitted by them was valid for the import of the goods and in these circumstances, Shri Krishnamoorthy prayed that the Board's order be maintained and the Govt. of India's review show cause notice should be dropped.
19. In reply, Shri Pal contended that the Bill of Entry contained the declaration that the licence was in the name of M/s. P & S Exports Corporation, New Delhi and that M/s. Jain Exports Pvt. Ltd. were a letter of authority holder. There was no firm commitment on the part of the licence holder, M/s. P & S Exports Corporation before 1-5-1979 and hence the import of palm oil which had been canalised in the earlier Policy, namely, 1978-79 was not covered by the import licence in question. The palm oil was covered by serial No. 51 of Appendix 8 of the 1978-79 Policy and the licence was not valid to import it as there was no firm commitment on the part of the licensee before 1-5-1979. Shri Pal, therefore, reiterated his request that the Board's order in appeal, should be set aside and the Collector's order be restored.
20. I have examined the submissions made on both the sides. The short point which calls for determination is the interpretation of the requirements of para 211 of the 1979-80 Policy Book which enjoined a firm commitment to import the goods in question by opening an irrevocable letter of credit before 1-5-1979 on the part of the licence holder. The Govt. of India has taken a tentative view that the licence holder was M/s. P & S Exports Corporation, New Delhi who did not have any firm commitment before 1-5-1979 as required by para 211 of the Policy 1979-80 and hence the import of industrial palm oil under the aforesaid licence was not valid. Before the arguments are examined further, it is necessary to refer to the Letter of Credit under which M/s. Jain Exports Pvt. Ltd. claim to have made a firm commitment for the import of palm oil in question. In this behalf, they have submitted a copy of Letter of Credit dated 30-4-1979 of the Punjab & Sind Bank Ltd., 6, Scindia House, New Delhi for the sum of U.S. dollars 4,28,000 in favour of M/s. Bentrex & Co., No. 6, Loreng Malayu, Singapore for industrial palm oil weighing 800 M/Tons. This L/C gives reference to 7 import licences against which the L/C was opened. None of these licences include the two licence Nos. 2820001, dated 15-7-1978 and 2820676, dated 2-9-1978. However, this L/C was amended on the same day namely 30-4-1979 and instead of the 7 licences, mentioned therein, a list of 20 licences was included thereunder. This covers only one of the two licences namely 2820676, dated 2- 9-1978 of M/s. Thalwar & Khuller and does not include the other licences No. 2820001, dated 15-7-1978. However, on the basis of submissions made by the learned Consultant of the Respondents, it would not make much of difference to the argument advanced by the respondents that there was a firm commitment on the part of the letter of authority holder and not necessarily on the part of the licence holder. In this behalf, they have relied on the Board's order which has equated the letter of authority holder with the licence holder. The other argument advanced by them is the relevance of Section 147 of the Customs Act. Under Section 147, the respondents argue that as agents, they have acted on behalf of the licence holder and the commitment made by them before the critical date should be accepted. Therefore, in brief, it is these two arguments which require consideration and consequent determination. As submitted by the learned Consultant on behalf of the respondent, the term "letter of authority" is defined in Section 2(h) of the Imports & Exports (Control) Act, 1947. Section 2(i) defines "licence''. A licence holder would, in normal circumstances, mean the person on whom the licence has been issued. It is not possible to equate him with the letter of authority holder. Had it been so, the requirement of para 6 of the Handbook would have been meaningless. Though, therefore, the licence holder has not been defined, the word "licensee" has been defined under Clause 2(b) of the Imports (Control) Order and this definition leaves no doubt that the licensee is the person to whom the licence is granted under the Imports (Control) Order and he is the licence holder. The definitions of 'licence' both under Section 2(1) of the Imports & Exports (Control) Act and Clause 2 (aaaa) of the Imports (Control) Order make it amply clear that the licence holder cannot be equated with the letter of authority holder. In the light of these definition the provisions of para. 211 of the Policy become very explicit and leave no scope for a different interpretation that the firm commitment has to be of the licence holder and not of the letter of authority holder. The licence holder in the present case is M/s. P & S Export Corporation, New Delhi and they did not have a firm commitment before 1-5-1979 for import of palm oil which was restricted under Serial No. 57(4) of Appendix 8 of the Policy. The other argument advanced by the Respondent is in terms of Section 147 of the Customs Act. Based on the provisions of this Section, they have contended that they were the agents on behalf of the owner and they opened the L/C on 30-4-1979 which should be held as valid in terms of Section 147 of the Customs Act. This Section has also been quoted by the respondents in reply to the show cause notice issued by the Collector during the adjudication proceedings. It is seen that the respondents have misinterpreted Section 147 of the Customs Act. Under the provisions of this Section, the agent is authorised to carry out certain acts required to be done by the owner, importer or exporter of the goods under the Customs Act only. The scope of Section 147 cannot be extended beyond the Customs Act. There is, therefore, no justification to interpret that the provisions of Section 147 of the Customs Act validate the opening of the L/C by the agent on behalf of the principal for the purposes of para 211 of the Import Policy. Besides, the provisions of Section 147 of the Customs Act have to be read in conjunction with the provisions of Section 146 ibid and the provisions of the former Section validate the actions of a Custom House Agent in terms of Section 146 only. It is in this context that the proviso to sub-section (3) of Sec. 147 would have a correct meaning. Therefore, there is no warrant to resort to Sec. 147 of the Customs Act for interpreting the provisions of the Imports & Exports (Control) Act, the Imports (Control) Order and the Import Policy as sought to be done by the respondents. The provisions of these enactments are self-contained and there is no need to go to the Customs Act for their interpretation. In these circumstances, the licence produced by the respondents is not valid to cover the goods.
21. I now turn to the arguments advanced on behalf of the Collector. The main contention advanced is that there was no firm commitment by opening an irrevocable L/C by the licence holder before 1-5-1979 in terms of para 211 of the Policy. As examined above, this contention is found to be correct. In this view, the import of the goods in question is hit by the entry in Appendix 8 Serial No. 57(4) of the Policy. The Board's reliance on the provisions of the Exchange Control Manual are not applicable to the case under consideration. They deal with an entirely different situation regarding the remittances of foreign exchange against the licences issued for the import of the goods. The provisions of the Exchange Control Manual quoted in para 9 of the Board's order provide for the substitution of one import licence by another import licence held by the same importer for the purpose of remission of money abroad. They do not cover the tetter of authority holders and there is no warrant in the Board's conclusion that the licence holder can be substituted with the Letter of Authority holder, as this is not permitted even under the Exchange Control Manual. The question of extending . . . for the purposes of clearance of the goods under the Customs Act and the Imports & Exports (Control) Act would not therefore arise at all. In this view, I find that the argument advanced by the learned S.D.R. to say that the import was unauthorised, is correct.
22. Before I conclude, it is necessary to go into yet another aspect of the importation. The Bill of Entry has been filed in the name of M/s. Jain Exports Pvt. Ltd. In other words, the Bill of Entry declares M/s. Jain Exports Pvt. Ltd. as the importer of the goods. As per the definition of "importer" under Section 2(26) of the Customs Act, the importer includes any owner or any person holding himself out to be the importer. It implies that the importer should be the owner of the goods. On the other hand, the import licence submitted for the clearance of the goods stands in the name of M/s. P & S Exports Corporation. Under Clause 5(3)(ii) of the Imports (Control) Order, the imported goods should be the property of the licensee at the time of import. The licensee in this case is M/s. P & S Corporation, New Delhi. The goods have to be their property at the time of import. On the other hand, M/s. Jain Exports Pvt. Ltd. have been shown as the importer and consequently the owner and this declaration violates the requirements of Clause 5(3) of the Imports (Control) Order. It seems to have been made with a deliberate design to overcome the provisions of para 211 of the Policy.
23. A further salient feature, which attracts attention, is the intentional misuse of para 6 of the 1979-80 Handbook. As per this para, the licensee can utilise the services of a letter of authority holder for certain purposes including opening a letter of credit. In the present case, M/s. Jain Exports Pvt. Ltd. have first opened the letter of credit and then appeared to have made a roving enquiry fishing for a licence to provide legal cover to the unauthorised import. This is quite contrary to the intent and scope of para 6 of the Handbook. This is also in stark contrast to the normal commercial practice of opening a letter of credit which precedes quotation, indent, and acceptance. The bank has also substituted 7 licences with 20 others with great alacrity and efficiency on the same day, and issued a certificate long thereafter on 4-2-1980 which covers the licence of M/s. P & S Exports Corporation, New Delhi dated 14-7-1978 and also the licence No. 2820001, dated 15-7-78 of M/s. Thalwar & Khuller Pvt. Ltd., Kanpur, against which no firm commitment had been made by opening a Letter of Credit before 1-5-79. The Bank's certificate dated 4-2- 1980, however, maintains ominous silence as to the date on which these changes were effected and therefore it provides no help to the appellants to establish their point. The appellants also produced the letter of authority dated 30-4-79 from M/s. P & S Exports Corporation though they were nowhere on the scene on that date. This also shows the appellants resourcefulness irrespective of the requirements of law, or the natural sequence of events. These circumstances further confirm that there was no firm commitment by the licence holder before 1-5-1979, and the import was unauthorised.
24. For the various reasons mentioned in my foregoing order, I hold that there was no firm commitment on the part of the licence-holder by opening an irrevocable Letter of Credit for the import of the goods in question before 1-5-1979. Therefore, the import contravenes the Imports (Control) Order and the Imports & Exports (Control) Act read with the Customs Act and the Collector's order of confiscation of the goods is proper and legal. In these circumstances, I hold that the Board's order-in-appeal is incorrect and illegal. Accordingly, I set aside the same and restore the order of confiscation and fine of the Collr. of Customs, Bombay. The present appeal, purported to have been filed on behalf of the Collector of Customs, Bombay, succeeds and is accordingly allowed.
25. Since there is difference of opinion between the two Members, the matter is referred to the President in terms of Section 129-C(5) of the Customs Act to determine the following point of difference:
"Whether in the facts and circumstances of the case the appeal of the Collector of Customs, Bombay should be rejected as held by Member (Judicial) or allowed as held by Member (Technical)."
26. G. Sankaran In view of the difference of opinion between the two Members of the West Regional Bench, who heard this appeal, the matter was referred by them to the President in terms of Section 129C(5) of the Customs Act to determine the following point of difference:-
"Whether in the facts and circumstances of the case, the appeal of the Collector of Customs, Bombay should be rejected as held by Member (Judicial) or allowed as held by Member (Technical)."
27. The President by his order dated 12-6-1987 constituted a Bench comprising of the present three Members to hear the parties on the aforesaid point of difference. Copies of the separate orders written by the two Members of the West Regional Bench were furnished to both sides.
28. On 21-7-1987, the matter was listed to be heard. Smt. J.K. Chandra, Departmental Representative for the appellant, submitted that she had not received appeal papers from her Bombay counterpart and, therefore, she prayed for a short adjournment. Shri B.N. Sharma, Consultant for the respondents, stated that he would furnish the Departmental Representative a complete set of papers in two-three days. Accordingly, the hearing was adjourned to 31-7-1987.
29. On 31-7-1987, Smt. Chandra stated that in spite of her efforts she had not been able to get the papers from her counterpart at Bombay. She stated that she would be obliged if a further short adjournment was granted. However, when it was put to her and Shri D.K. Saha, Departmental Representative (who argued the case for the Department) whether the set of papers furnished by Shri B.N. Sharma would or would not suffice for the purpose of making submissions, Shri Saha stated that it would suffice. In view of this and in view of the rather tight time schedule within which this matter had to be heard and the papers transmitted to the West Regional Bench so that they could pass final orders in the appeal before 16-8-1987 on which date one of the Members of that Bench, who first heard the matter, is due to retire, we decided to proceed with the hearing and declined the request for adjournment.
30. The facts of the case have been set out in the orders written by the Members of the West Regional Bench and need not, therefore, be repeated here. In fact, the arguments for both sides have also proceeded on the same lines as before the West Regional Bench.
31. According to para 211 of the Import Policy (April, 1979-March, 1980) REP licences already issued against exports made before 1-4-1978, except where the exporter has exercised his option for the Import Policy, 1978-79 under para 211 thereof, shall not be valid for the import of items appearing in Appendices 3, 6, 8 and 9 of the Import Policy, 1979-89. In the present case the validity of the import with reference to Import Control Law has to be judged with reference to Licence No. 2858092, dated 14-7-1978 issued in the name of P & S Exports Corporation. Appendix 8 to the Import Policy (April, 1979 - March, 1980) shows the list of items the import of which is canalised through public sector agencies. Sl. No. 57(4) thereof specifies Palm Oil (all types including Palmoline)/palm seeds. In terms of para 211 of the said Policy, therefore, the aforesaid licence would not be valid to cover the import of palm oil unless the licence holder had entered into a firm commitment for import of the goods by opening of irrevocable letter of credits through authorised dealers in foreign exchange before 1-5-1979. In the present instance, the letter of credit, copy of which is available on the record, is dated 30-4-1979 and has been issued by the Punjab & Sind Bank Ltd. The irrevocable letter of credit has been opened on account of M/s. Jain Exports (P) Ltd., the respondents, and not on account of M/s. P & S Export Corp. in whose name the licence stands. No doubt, P & S Export Corp. had issued a letter of authority in favour of M/s. Jain Exports (P) Ltd. but the question, would be whether the lifting of the restrictions in terms of para 211 would apply in the present case keeping in view the fact that the letter of credit, that is, the irrevocable commitment had been entered into not by the licence holder as such but by the letter of authority holder.
32. Section 2(h) of the Imports & Exports (Control) Act defines the expression "letter of authority" as follows:-
"Letter of authority" means a letter authorising the licensee to permit another person, named in the said letter, to import goods against the licence granted to the licensee."
Apparently, the practice of issuing letters of authority by the licensing authorities had been given up and the licence holders have been authorised by a general provision in para 6 of the Handbook of Import and Export (Procedures) 1979-80 to issue letters of authority. The said para 6 of the Handbook defines the functions of the letter of authorities holders in the following terms :-
"But the functions of the holder of such letter of authority shall be limited to place orders, to open letter of credit, to make remittances of payment for importing the goods, to arrange movement and to clear the same through the Customs having regard to Section 147 of the Customs Act, 1962, on behalf of the licensee, and any other related matters connected with the operation of the licence in question, but not its ownership."
It will be seen that the functions which the letter of authority holder is authorised to discharge are on behalf of the licensee. And, though the word "licensee" has not been defined, it admits of no ambiguity. The word means the person who has been licensed to import goods. Therefore, the letter of credit which the letter of authority holder is authorised to open in terms of para 6 of the Handbook is one on behalf of the licensee, that is, the licence holder. In the present case though the respondents hold a letter of authority from P & S Export Corp., the letter of credit against the licence issued in the name of P & S Export Corp. was not opened before 1-5-1979.
Section 147 of the Customs Act, 1962, which has been referred to in this connection by the respondents provides that where this Act (that is, the Customs Act) requires anything to be done by the owner, importer, or exporter of any goods, it may be done on his behalf by his agent. Reliance on this provision is not of any assistance to the respondents inasmuch as this provision is in respect of things which are required to be done by the owner or importer or exporter of any goods under the Customs Act. Opening of a letter of credit or entering into an irrevocable commitment for import of goods is not a thing required to be done under the Customs Act. It has relevance only to the Import Control Law.
33. It is, therefore, clear that the letter of credit constituting an irrevocable commitment to import the goods has not been entered into prior to 1-5-1979 by the respondents as letter of authority holders for and on behalf of the licence holders, namely, P & S Export Corp. The letter of credit, as it stood prior to 1-5-1979, was entered into by the respondents for and on behalf of, insofar as the present goods are concerned, M/s. Thaiwar & Khuller Pvt. Ltd. However, unfortunately for the respondents, one of the two licences of M/s. Thalwar & Khuller Pvt. Ltd. against which the letter of credit had been opened had, when the goods arrived, no balance left thereon to cover the goods and the other licence had mostly been used up. Therefore, though, there was an irrevocable commitment on behalf of M/s. Thalwar & Khuller Pvt. Ltd., there was no licence in their name against which the present goods could be cleared. And the licence in the name of P & S Export Corp. which was presented for clearance, was not one against which the firm commitment had been entered into prior to 1-5-1979.
34. It is incidentally observed from the Bill of Entry, a copy of which had been filed, that the date of the Bill of Lading is 18-7-1979. The Bill of Lading is supposed to represent the date on which the goods were loaded on board, the carrying vessel. At any rate, it represents the date on which the goods were entrusted to the ship's agents for loading. The amending of the letter of credit to include the licence of P & S Export Corp. was, as noted earlier, on 9-9-1979, that is long after the Bill of Lading date. This is yet another circumstance which goes to show that there was no firm commitment prior to 1-5-1979 to import palm oil on behalf of the licence holder, P & S Export Corp. Even the covering invoice dated 18-7-1979 shows two import licences against which the goods were ordered/imported as Import Licence No. P/W/2820001, dated 15-7-1978 and P/W/2820676, dated 2-9-1978, that is, the licences standing the name of M/s. Thalwar & Khuller Pvt. Ltd.
35. The Board, has in its Order-in-Appeal, relied on para 13A.27 of the Exchange Control Manual, Vol. I (1980 Edition), which has been extracted in the said order. It appears to us that the purport of the para is to enable authorised (foreign exchange) dealers to transfer endorsements from the exchange control copy of one import licence to the exchange control copy of another import licence held by the same importer provided the authorised dealer is satisfied that the latter licence is also valid for the shipment corresponding to endorsement requiring to be transferred and there is sufficient balance available on the licence to accommodate the transfer. The Board has considered the para to be relevant by substituting "letter of authority holder" in place of "importer". There does not seem to be any warrant for this view. The word "importer" in the context of the exchange control copies of different licences, as referred to in the said para, can, in our opinion, mean only the same importer, not the same letter of authority holder who may hold letters of authority from different licence holders who would, normally speaking, be also the importers.
36. Shri Sharma had referred to para 132 of the Import Policy (April, 1979 - March, 1980) which provides for transfer of REP licences by licence holders in favour of any other person. Such transfer is authorised to import goods permitted by the licence subject to certain stipulations contained in the paragraph. The contention of Shri Sharma is that if the benefit of lifting of the restriction in para 211 of the Policy is restricted to the licence holder, the legal transferee in terms of para 132 would be deprived of the facility of import in terms of para 132. This argument is of no assistance to the respondents. We are not concerned in the present case with the transferred licences. The respondents have not shown that the licence against which they wish to clear the goods has been transferred to them. Admittedly, the respondents were only letter of authority holders. Para 132 has, therefore, no relevance.
37. In the light of the foregoing discussions, we are of the opinion that there was no firm commitment prior to 1-5-1979 for import of the subject goods for and on behalf of M/s. P & S Export Corp. against whose licence the respondents, as letter of authority holders, wanted to clear the present goods. As such, the importation was correctly held by the Collector of Customs, Bombay to be unauthorised. The Board was in error in setting aside that order.
38. We, therefore, are of the view that, on the facts and in the circumstances of the case, the appeal filed by the Collector of Customs, Bombay should be allowed as held by Member (Technical) of the West Regional Bench, Bombay:
39. These papers may now be forwarded to the W.R.B., Bombay for final disposal of the appeal.
FINAL ORDER
40. The difference of opinion between the two Members of the West Regional Bench was referred by the President to a Bench of 3 Members in terms of Section 129C(5) of the Customs Act. The reference Bench has now recorded their findings. The appeal of the Collector of Customs, Bombay is required to be disposed of on the basis of the majority view in terms of Section 129C(5) of the Customs Act. In majority opinion, the appeal of the Collector of Customs, Bombay succeeds and is allowed. Accordingly, Board's Order No. 917 of 1980 dated 28-11-1980 is held to be incorrect and illegal and is set aside and the order No. S/10-115A/80 IIIA, dated 30-5-1980 passed by Collector of Customs, Bombay is restored. .