Bombay High Court
Nck Sons Exports Private Limited vs Union Of India on 1 January, 1800
Equivalent citations: 1990(48)ELT356(BOM)
JUDGMENT
1. This petition raises a short question of the interpretation of Paragraph 30 of the Import Trade Control Policy for the year 1977-78. The facts are few and may be straightway mentioned in order to understand the point raised by the petitioners and the stand taken by the respondents.
2. The 1st petitioner is a private limited company, holding Small Scale Industry Registration for the manufacture of marble tiles among other things. The 2nd petitioner is the Director of the 1st petitioner company. The 1st respondent is the Union of India, while the 2nd and 3rd respondent are the Collector of Customs and the Assistant Collector of Customs at Bombay respectively. The petition seeks to challenge the action of the 3rd respondent in seizing the 1st petitioner insists is a valid licence. The petitioner company under a licence which the 1st petitioner insists is a valid licence. The petitioners also contend that under the said licence, the petitioner are entitled to import marble slabs for the purpose of manufacturing marble tiles in their factory, which is covered by S. S. I. Registration.
3. The 1st petitioner company is the holder of a split up licence dated 7th of July 1987, being the transferee of the same in due course. The original licence was in the name of the a firm called Cimmco International having its office at Kasturba Gandhi Marg, New Delhi. It has been mentioned that the original licence held by the said Cimmco International was for a sum of Rs. 30,00,000/- and it was subsequently split up into six licences, each having value of Rs. 5,00,000/-. This licence, a copy of which is annexed to this petition at Ex. `A', showes that it is issued to the licence holder as a "Deemed Exports - Manufacturer Exporter". It is a REP licence given in view of the fact that the original licence - holder had exported items described as A. 75(1) which are admittedly railway equipments. The goods which were allowed to be imported under this licence are raw materials,components, consumable spares and packing materials as per Paragraphs 30(1) of Volume II of the 1977-78 Import Policy. The licence also specifies that items covered under Appendix 2 of Part A of the 1985-88 Policy would not be allowed to be imported. We are not, however, concerned with this exclusion.
4. Originally, the goods imported under this licence were allowed to be cleared after payment of duty, but thereafter the 3rd respondent, namely, the Assistant Collector of Customs, issued an order seizing the goods on the ground that they are liable to seizure under Section 111 of the Customs Act, 1962. This memo of seizure is dated 20th of April 1989 and one cannot but express one's unhappiness over the language of this seizure memo because the 3rd respondent has not bothered to mention under which clause of Section 111 of the Customs Act, the goods imported by the 1st petitioner company were liable to be seized. This itself shows a non-application of mind on the part of the 3rd respondent. However, it is not necessary for me to go into this aspect of the matter because, in my opinion, the petition must succeed on a proper interpretation of Paragraph 30 referred to above.
5. Against the order of seizure, the petitioners filed the present petition and on 5th of July, 1989, Daud, J. issued the rule and granted relief in terms of prayer clause (c) which had the effect of raising the seizure and allowing the petitioners to use the goods. An appeal preferred by the respondents was dismissed by the appellant Bench by its order dated 13th of July, 1989. In the meantime, a contempt petition was taken out by the petitioner against the respondent for not complying with the order passed by Daud, J. However, Pratap, J. by his order dated 17th of August 1989 dismissed the contempt motion.
6. The respondents preferred a special leave petition to the Supreme Court which, by its order dated 18th of September, 1989, set aside the two order passed by this Court and directed the expeditions hearing of the petition. Due to the overcrowding of the board for admission before the Single Judge to whom expedited matters had been assigned, the petition could not be taken up for hearing as expeditiously as was desirable. Before the Christmas Vacation, the petition has been heard today and is being disposed of by this judgment and order.
7. The respondents' case is that under this split up import licence, which is held by the 1st petitioner company as the transferee of the original licence holder, the petitioners are not entitled to import marbles because, according to the respondents, the marbles could not have been imported by the original licence holder himself. Though at one time against the same import licence some marbles were cleared, subsequently realising that the Import licence read in the light of Paragraph 30 of the Import Trade Control Policy for the year 1977-78 could not have permitted the 1st petitioner to import marbles, the order of seizure has been passed and subsequent steps under the law are contemplated.
8. At one time, the authorities in Bombay thought that the marble goods could be imported by the 1st petitioner, the 1st petitioner being the manufacturer of marble tiles. That is why probably they had allowed clearance of some consignment earlier under the import licence. Subsequently, some doubts were raised in the department and the department sought a clarification from the office of the Chief Controller of Imports and Exports. That clarification did not come for a long time. However, ultimately by a letter dated 11th of April 1989 issued by the Deputy Chief Controller of Imports and Exports to the Collector of Customs, Bombay, certain clarification were given. The respondents contend that they are acting upon these clarifications. It is advantageous to refer to certain parts of this communication because this would dispose of at least one part of the arguments which could have been and at one time was sought to be advanced by Mr. Rege, learned Advocate appearing for the respondents. The clarification states as follows:-
"The licence has been issue in the case of M/s. Cimmco International, New Delhi, against export of railway equipment and therefore even in case where licences have been endorsed under para 30(1) of 1977-78 policy, only the items related with the manufacture of railway equipment could be imported, subject to the conditions laid down in 1977-78 policy. Another facility given under para 30(1) was that `if a manufacture - exporter obtains REP licence in his own name against his own exports, the licence will be valid for import of any raw materials, components, consumable stores and packing materials required for use in the licence holder's factory' under which even items not directly related to Export Product could be imported but these items are only those which are required by M/s. Cimmco International Ltd., and therefore transfer of an REP licence cannot have a right better than the right of the party in whose name the licence in question has originally been issued. The subsequent transferee can import only those items which have been allowed to be imported only to the original licencee and therefore import of marble by M/S. NCK Sons Pvt. Ltd., is not in accordance with the relevant Import Policy, imports are illegal, invalid and unauthorised.
Mr. Rege was fair enough to mention that this is the only ground on which he supports the seizure of the goods made by the respondents.
9. This naturally involved the interpretation of Paragraph 30 of the Import Trade Control Policy of 1977-78. While proceeding to understand the said provision, it is necessary to mention that REP licence are freely transferable. Paragraph 29 of the above mentioned Import Policy recognises such licences are freely transferable because it specifically mentions that REP licences issued to different categories of exports and their transferees will be valid for import of raw materials, components, packing materials and consumable stores as laid down in the Policy.
10. Paragraph 30, in so far as is material for the purpose of disposing of this petition, reads as follows :-
"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, consumable stores sand packing materials required for use in the licence - holder's factory. The licence shall be subject to `Actual User' condition."
11. From a bare reading of this provision, it is reasonable to infer that the holder of a REP licence can import raw materials and other things mentioned therein which are required for use in his own factory. However, it is not mentioned that the goods which he is allowed to import under the REP licence should have any relationship with the goods which he has been given exports he has been given the REP licence. In other words, the person who obtains the REP licence might have exported a particular commodity and he will be entitled to import raw materials which may go into the manufacturer of another commodity. Taking the present case itself, it is noticed that the party which originally obtained the REP licence had exported railway equipment. That did not restrict the right of the original party from importing raw materials, components, consumable spares, etc. required in the manufacture of some other commodity in the factory of the licence - holder. This is in fact recognised by the office of the Chief Controller of Imports and Exports as can be seen from the extract of the communication dated 11th of April 1989 from that office to the Collector of Customs, Bombay, which has been reproduced by me above.
12. Mr. Rege, however, insists that the other part of the opinion given by the office of the Chief Controller of Imports and Exports is equally correct because, according to him, if the original licence - holder could not have imported marbles, the transferee of the said licence cannot also import marbles. Dr. Kantawala has entered a caveat to this submission of Mr. Rege by pointing out that it has not been contended by the respondents that the original licence - holder could not have used marble in the manufacture of any product in his own factory. The burden of proving that the original licence - holder could not have used this licence for the purpose of importing marble was squarely upon the respondents, who have resorted to a drastic action under the Customs Act and there is nothing to shows that this burden has been discharged.
13. There is considerable substance in the above contention of Dr. Kantawala, especially in view of the fact that commodities which have been imported by the payment of duty after following the regular procedure has been made the subject - matter of such a serious step as seizure. Apart from this, I will consider this matter only as a question of law.
14. It is conceded, as it is indeed conceded on behalf of the respondent, that the holder of an REP licence can import raw materials and other things for the manufacture of any other article which had no connection, relation or resemblance to the article which he expected and for which he had been given the import licence. Now, the question is whether the transferee of the licence could also import any other articles which could be utillised for the manufacture of goods in his own factory of the original licence - holder. In order to find answer to this question, certain things ought to be noted. That system of annexing a shopping list attached to the REP licences has been discontinued from 1977-78. It has been so stated in Paragraph 29 of the Import Policy of 1977-78. One is not aware as to why this system was discontinued. If that system were in vogue, then naturally the transferee of the licence, the licence being freely transferable, would have been posted with the knowledge that under the licence he would be entitled to import only particular articles. If his own factory was incapable of utilising the articles in the manufacturer, then naturally he would not get the licence transferred in his name in any way. It is only when he had the facility for manufacturing an article by utilising the materials mentioned in the shopping list that the he would get the import licence transferred in his name. In such a case, it was not even necessary for him to make inquiries to find out whether the materials which were covered by the import licence were the materials which could have been utilised for the manufacturer of any article of annexing the shopping list has been discontinued. The discontinuing of this system does not restrict but rather enlarges the rights of a transferee of an import licence under Paragraph 30(1) of the Import Policy in question.
15. It cannot be disputed that the transferee of an import licence is also a licence - holder. If it is so, then the language of Paragraph 30(1) of the Policy permits him to import any raw materials,s components, consumable stores and packing materials required for use in his factory, he being the licence - holder. It would be straining the language to hold that the licence - holder land cannot mean the transferee of the original licence. The consequences of restricting the meaning of the word "licence - holder" mentioned in Paragraph 30(1) can easily be imagined. The transferee of the REP licence, the REP licence being freely transferable, would never be posted with the knowledge of the nature of the materials which he would be entitled to import under the licence which had been validly transferred to him because, sin the first place, there is no shopping list.
16. Mr. Rege thought that the import licence itself should give the transferee some indication as to what he is able to import. In my opinion, this is not correct. Taking the present case, it has already been seen that this import licencee has been given in recognition of the fact that the original licence - holder had exported railway equipment. If the transferee of this licence looked at this endorsement which is to be found on the licence, he would not be permitted to import anything except raw materials and components and consumables which could be utilissed only in the manufacture of railway equipment. I have already pointed out above that this is not even the understanding on the part of the department because the Office of the Chief Controller of Imports and Exports has clearly mentioned that any material which is unrelated to the original item of export but to be utillised in the factory of the licence - holder could be imported under the REP licence.
17. In view of this, it would be placing practically an unbearable burden on the part of a licensee of the REP licence to restrict him to import of such materials which could have been used in the factory of the original licence - holder. This is for the simple l reason that the transferee of this licence would not he able to find lout as to which raw materials, consumables and components could have been utilised in the factory of the original licence - holder. If the authorities itended that the import should be restricted only to those items which were exported, it would have been very easy for the transferee to find out the same because in the import licence the item of export is mentioned. It is the view of the department itself that the import is not restricted to only those items which went into the manufacture of the export items but imports could be made of any other articles which could be utilised for the manufacture of any other article in the factory of the licence - holder. In such a case, how would the transferee of a REP licence be posted with the knowledge of the articles which he is entitled to import under the transferred licence? The practical difficulties that would be created on a particular interpretation of a provision have got to be taken into consideration while interpreting that provision. The sheer magnitude of the inquiry that would have to be undertaken by the transferee of a REP licence, to repeat the REP licence being freely transferable, is a factor which is against the interpretation that is sought to be put by the department on the relevant provision, namely, Paragraph 30(1) of the Import Trade Control Policy of 1977-78. I must, therefore, hold that on the language of Paragraph 30(1), it is permissible for the transferee of a REP licence, he now being the licence - holder, to import raw materials, components and other things for the purpose of utilisation in his factory - whether these things could or could not have been utilised for the factory of the original licence - holder. Any other interpretation would make nonsense of the free transferability of the REP licence meaningless. It would also make nonsense of the provision which permits the use of the permitted import items in the factory of the person importing.
18. No authority in fact is necessary because by working out the consequences of the two contesting interpretations, I have arrived at the above conclusion. For the sake of record, it may be mentioned that Dr. Kantawala has brought to my notice an order passed by the Member of the Central Board of Excise and Customs on 15th of July 1982 in an appeal preferred by Jatin Electronics. The Member noted the consequence of not annexing a shopping list to the REP licence. He also noticed that the official instructions in respect of registered exporters who were also manufacturers/exporters were as follows :-
"However, since the licence in question will be transferable, the licensing authority should attach a list of items to the licence, so that the transferee does not find it difficult to utilise the licence. The list of items will be as per declarations of the concerned manufacturer - exporter giving the names of raw materials, components, consumable stores and packing materials, required for use in his factory subject to the restrictions contained in para 30(1) of Vol. II of Import Policy 1977-78."
Proceedings further, the Member pointed out that the absence of such a list, the transferee of the licence should not be made to suffer.
19. A similar view has also been taken in Impex International v. Collector of Customs, Calcutta, (1985) 4 Excise and Customs Cases 60, by the Calcutta High Court. In that case, it was held that the transferee if a REP licence could even sell the raw materials and components which he imported to the actual user. I am, however, not prepared to go to the extend of holding that the transferee of an import licence, such as the 1st petitioner company, could sell the articles to the actual user. He is entitled to import any article which can go into the manufacture of any commodity in his factory, despite the fact that this import article could not have utilised in the factory of the original licence - holder.
20. I have not thought it fit to examine other arguments of Dr. Kantawala regarding the procedural imporpriety and illegality committed by the 3rd respondent in issuing the seizure Memo.
21. In the result, the petition succeeds. Rule is made absolute in terms of prayer clauses (a) and (b) of the petition. The petitioners are entitled to deal with the goods as per the term of the import lincence interpreted by me above without any formal order of the lifting of seizure from the respondents. This order is, however, stayed till 5th of February, 1990. I direct that the respondents shall pay to the petitioners the cost of this petition which I quantify at Rs. 1500/-.