Bombay High Court
Varson Chemicals Private Limited vs Collector Of Customs, Bombay And Others on 3 February, 1986
Equivalent citations: 1986(9)ECC313, 1988(15)ECR72(BOMBAY), 1987(27)ELT55(BOM)
JUDGMENT
1. The petitioners is a company registered under the Companies Act and carries on business as manufacturer of fine chemicals such as tetracycline hydrochloride, doxycycline hyclate, vitamin B-12, etc. The Import of Export Policy for the period April-March, 1983 provided for imports of items under "OGL" and under serial no. 1 in Appendix 10, actual users (Industrial) were permitted to import raw materials, components and consumables (non-iron and steel items) other than those included in Appendices 3, 4, 5, 8, 9 and 15. The petitioners required the raw material called "pentahydroxy-methyl-N-N dimethylamine naphthacendion carboxamide carbamide" which is known as tetracycline urea complex as an intermediate in the manufacture of the drug called tetracycline hydrochloride. According to the petitioners, the raw material is not a drug, but it is a drug intermediate used in the manufacture of the drug tetracycline hydrochloride. Appendix 9 in the Import Policy for 1982-83 provides that the items set out thereunder could be imported only by the canalising agency, i.e., the State Chemicals & Pharmaceuticals Corporation of India Limitated. Item 16 of the Policy under the heading "Drugs" is tetracycline base/HCl.
2. Paragraph 218(4) of the Policy provides that in the case of drugs appearing in Appendices 3, 5 and 9, the names mentioned : (1) refer to the respective active ingredients, or (ii) are as they are commonly known. It further prescribes that each entry includes the salts and esters of the same drug, if any.
3. The petitioner placed three orders on Proter S.P.A. of Italy for import of 32,000 kgs. of tetracycline urea complex and eight consignments each of 4000 kgs. arrived in the Port of Bombay during the period February 15, 1983 and June 15, 1983. The petitioner filed the necessary bills of entry seeking clearance for home consumption. After the first two bills of entry dated January 23 and February 18, 1983 were filed, the Assistant Collector of Customs issued two show cause notices under section 124 of the Customs Act calling upon the petitioner to explain why the goods should not be confiscated as they are imported in contravention of the Import Trade Control Order. The show cause notice recites that the goods imported are covered by entry no. 16 of Appendix 9 of the Import Policy for April-March 1983 since the goods are "active ingredient of tetracycline" and could not have been imported under "OGL" item. The petitioner filed reply to the show cause notice pointing out that the imported goods do not fall under Appendix 9. The Collector of Customs, by an order dated June 22, 1983 held in respect of one consignment that the goods, cannot be imported under "OGL" and, therefore, confiscated the same under 111(d) of the Customs Act. The Collector gave an option to the petitioner to pay a fine of Rs. 8,25,000 in lieu of confiscation and clear the goods for home consumption. The petitioner preferred an appeal against the order of the Collector before the Customs, Excise and Gold (Control) Appellate Tribunal, Bombay, but the same ended in dismissal by an order dated January 6, 1984.
4. In the meanwhile, the petitioner approached this court by filing this petition on June 28, 1983 in respect of remaining 8 consignments. The petitioner sought a writ of mandamus directing the respondents to withdraw the show cause notices and to grant clearance of the consignments in question. The petition was admitted on July 8, 1983 and interim relief was granted permitting the petitioners to clear the consignment on furnishing bank guarantee for Rs. 8,25,000. The petitioner did not take advantage of the interim order. The petition came up for hearing before me in the last week and Shri Patel, learned counsel appearing on behalf petitioner, applied for amendment of the petition seeking to challenge the correctness of the order passed by the Appellate Tribunal. The amendment was granted.
5. Shri Patel submitted that the customs authorities have permitted clearance of tetracycline urea complex in the year 1981-82 and 1982-83 and for the first time, and different view was taken by the authorities in respect of the import of the petitioner. The earlier imports of identical material were at the instance of Chemicals and Aromatics - the sister concern of the petitioners, the Tata Chemicals and the petitioners themselves. The learned counsel urged that when the clearance was granted in the earlier years, there was no rationale why a different view should have been taken by the customs authorities in respect of consignments. There is considerable merit in the submission of the learned counsel.
6. Shri Rege, learned counsel appearing on behalf of the department, submitted that whatever might have transpired prior to the import of the consignment in question is not relevant and if there is no ambiguity in the Import Policy about the items canalised, then mere improper understanding of the Policy during the earlier period cannot be taken into account for granting relief to the petitioner. The learned counsel is undoubtedly right and it is necessary to examine whether there was any improper understanding in the earlier period.
7. The Appellate Tribunal has passed exhaustive order dealing with the issue and the finding is recorded that the item imported is not a canalised drug specified in Appendix 9 or its salt, or ester, or active ingredient. The tribunal recorded a clear-cut finding that active ingredient of any substance which is not a drug is not canalised under the relevant Import Policy. The Tribunal also found fault with the Collector in relying upon I.T.C. Circular dated January 3, 1983 and on the opinion of the Deputy Chief Chemist in recording finding against the petitioner. The tribunal further held that the department has not placed sufficient material to discharge the burden that the imported item falls within Appendix 9. After recording these findings, the Tribunal proceeded to consider the claim of the petitioner that tetracycline urea complex is an intermediate in the manufacture of tetracycline hydrochloride. The tribunal took into consideration the certificate issued by the Drug Controller, Government of Karnataka in that respect and thereafter observed :
"There is no doubt when urea is added to the solution of tetracycline or when tetracycline is added to the solution of urea, a solid substance is formed. This substance has the properties of the tetracycline and urea and it is a 'no bond inclusion complex."' After recording almost all the findings, in favour of the petitioner, the Appellate Tribunal curiously recorded the conclusion that the petitioner imported two separate and distinct commercial commodities, viz., tetracycline and urea and since tetracycline is one of the drugs specified in Appendix 9, the import under "OGL" was impermissible. The Tribunal has proceeded to record that finding by suggesting that tetracycline could be separated from tetracycline urea complex by a physical process and, therefore, what was imported was tetracycline in its pure and simple form and, therefore, the import was impermissible. It is impossible to agree with the findings recorded by the Tribunal and on which Shri Rege very strongly relied. On the findings recorded by the Tribunal that tetracycline urea complex is a different substance that the pure tetracycline and merely because tetracycline could be separated after a simple physical process, it cannot be concluded that the import of tetracycline urea complex fell within Appendix 9. In my judgment, the tribunal was clearly no error in holding that the imported item was not permissible as "OGL" item.
8. The perusal of the order of the tribunal indicates that the question was not free from doubt even according to the tribunal and, therefore, it is futile to suggest that the import was not in order. Shri Patel invited my attention to the Import Policy AM-84 where under paragraph 24(4), an amendment was made providing that entry in the case of drugs appearing in Appendix 9 includes the salts, esters and complexes of the same drug. Shri Patel is right is submitting that in substance the Import Policy has made it clear that even the complexes of tetracycline hydrochloride cannot be imported under OGL, but that was not the restriction in the earlier policy. In my judgment, on the plain reading of the Import Policy, it is clear that the import of the consignments made by the petitioner was not contrary to the law and should have been cleared.
9. Shri Rege urged that the tribunal passed the order on June 6, 1984 and thereafter the request of the petitioner to make reference to this court was turned down. Shri Rege submitted that the petitioner should not be permitted to amend the petition and challenge the order of tribunal after considerable delay and especially when the petitioner has not challenged the order declining to make reference. I am not inclined to accept the submission of the learned counsel for more than one reason. In the first instance, the relief sought by the petitioner in writ jurisdiction cannot be declined on the ground of limitation unless there are deliberate laches on the part of the petitioner. Secondly, the order of the tribunal deals with one consignment out of eight and as the remaining seven consignments are to be cleared in view of my decision, it would be unjust to deprive the petitioner of the advantage of only one consignment. In these circumstances, the submission of Shri Rege that as in respect of one consignment where the tribunal has concluded against the petitioner, no relief should be granted, is without any substance.
10. Accordingly, petition succeeds and rule is made absolute in terms of prayers (a), (d)(iii), and (d)(iv). In the circumstances of the case, there will be no order as to costs.