Customs, Excise and Gold Tribunal - Tamil Nadu
Southern Sea Foods Pvt. Limited vs Collector Of Customs on 24 April, 1986
Equivalent citations: 1988ECR522(TRI.-CHENNAI), 1986(26)ELT89(TRI-CHENNAI)
ORDER S. Kalyanam, Member (J)
1. This appeal is directed against the order of the Collector of Customs, Madras dated 5.2.86 imposing a fine of Rs. 30,000/- under Section 125 of the Customs Act, 1962 (hereinafter referred to as the 'Act'). The Appellants herein imported prime galvanised sheets in coils by vessel 'ex. s.s. Bhava Buti' on 26.9.85 and in respect of the goods imported M/s. A.S. Vasan and Sons, Madras filed the Bill of Entry for clearance of the same on behalf of the appellants on the basis of three Import licences (1) P/L/0434469 dated 22.3.85, (2) P/L/0434793 dated 25.4.85 and (3) P/L/0434265 dated 20.3.85. Since the licences produced for the clearance of the goods imported were issued to manufacturer/exporters for the export product frozen shrimps category F. 1.3 of Appendix 17 of AM 1984-85 and AM 85-88 Policy and since REP licences were issued to enable the exporters to import replenishment materials required for the frozen shrimps processed and exported by the appellants, the import of prime galvanised steel sheets in coils was found to be not relevant to the product exported. It is in these circumstances proceedings were instituted against the appellants by the Collector of Customs, Madras by issue of a show cause notice under the Act which ultimately culminated in the present impugned order now appealed against. Shri Habibulla Badsha, the learned counsel for the appellants submitted that the appellants have a main factory at Palavakkam at Madras-41 for processing frozen prawns, frog legs, lobster tails and cuttle fish and have a branch factory at Alandur, Madras-16 for manufacturing of corrugated sheets. It was urged that the import of 92.680 M.Ts. of prime galvanised sheets by the appellants against three licences issued under Appendix 17 of the Import Policy referred to above was for manufacturing corrugated sheets in the appellants' branch factory. The learned counsel contended that in terms of para 138(1) of Import and Export Policy for AM 1984-85 REP licences issued to manufacturer/exporters against their exports of select product manufactured by them will be valid within their overall value, for import of items of raw materials, components, consumables, spares and packing materials, as are related to the product expored or manufactured by the exporters concerned, whether manufactured in the same factory or some other factory of the same manufacturer subject to actual user condition. It was further contended that even in respect of import Policy for the year April 1985 to March 1988, a manufacturer/exporter holding a valid REP licence issued in his own name against exports of select product manufactured by him will be eligible to import within the overall value of REP licence items of raw materials, components, whether related to select product exported or manufactured by him subject to actual user condition. The reasoning of the Collector in the impugned order that the entire scheme of REP licence including the facility to trading houses and export houses lays emphasis on the import of raw materials, consumables, components etc., as are required for the product to be exported was assailed as incorrect and not in conformity with the expression in para 138 of AM 84-85 and para 204 of the Policy AM 1985-88. The learned counsel was at pains to highlight and emphasise the expression "product exported or manufactured by the exporters concerned" contending that word "exported or manufactured" is disjunctive and not conjunctive and therefore if the appellant is proved to have manufactured in his own factory corrugated sheets as in the instant case, import of prime galvanised sheets in coils either as raw materials or components or consumables or spares would be clearly permissible in terms of para 138(1) of Policy AM 1984-85. The learned counsel contended that the same reasoning would hold good and apply on all force with reference to construction of para 204 of Import Policy relating to April 1985 to March 1988. The learned counsel drew my attention to para 138(1) of AM 1984-85 Policy and contended that under that para not only materials and components, consumables etc. as are related to the product exported but also the materials as are related to other line of manufacture could be imported. The learned counsel also placed reliance in para 138(17)(d) of AM 1984-85 and contended that the items allowed for import in respect of export houses and trading houses will be those. as are required as raw materials, components, consumables, spares etc. related to the product exported by the export houses and trading houses, (emphasis supplied) When the licensing authorities themselves in terms of various other clauses have chosen to treat exporter manufacturer on a different footing in permitting him to import goods relating to his other manufacturing activity of course, subject to actual user condition and not necessarily relatable or related to the product exported, it would be unreasonable to put a strained and laboured construction on the same and equate exporter-manufacturer with trading houses and export houses in respect of the facilities conferred by a R.E.P. licence. The learned counsel also placed reliance on a communication addressed to the appellant by the Joint Chief Controller of Imports and Exports, Government of India, New Delhi dated 24.3.86 offering clarification in respect of para 138(1) of the Policy 'AM 1984-85 and para 204(1) of the Policy AM 1985-88 stating that the products imported need not necessarily be related to the product manufactured and exported. The learned counsel also assailed the correctness of the impugned order on the ground that the view of Joint Chief Controller of Imports and Exports, Bombay taken in the Joint Weekly Meeting held on 23.3.85 in a similar case referred by M.M. Carpets and Woollen Industries Pvt. Ltd., New Delhi along with similar representations from Eagle Flask Private Ltd., Chaganlal Kasturchand and Co. and Standard Batteries Ltd. has not been adverted to much less considered under the impugned order.
2. Shri Krishnan, the learned Departmental Representative urged that inasmuch as the import took place on 26.9.85 it is only Policy AM 1985-88 would be relevant and applicable and not the Policy AM 1984-85. The Departmental Representative also highlighted the difference in the language employed in the Policy in para 138(1) for the period 1984-85 and para 204(1) of the Policy AM 1985-88 and contended that in terms of the Policy AM 1985-88 the goods 'imported should be related to the select product exported or manufactured by the persons concerned in the same factory as the one from which the goods were exported against REP licence concerned or in some other factory of the same manufacturer subject to actual user condition. The learned D.R. placed considerable emphasis on the word "select product" and contended that the "select product exported or manufactured" by the party should have some relevance with the product imported inasmuch as in the licence produced by the appellants and relied upon in the instant case the product exported is mentioned as frozen shrimps and so the product imported should be related to that. The learned D.R. also placed reliance on para 129 of Chapter 17 of AM 1984-85 and contended that the object is to provide to the Registered Exporters, by way of import replenishment, the materials (all or soms) required in the manufacture of the products exported. The learned D.R. also urged that the S.S.I. Certificate relied upon by the appellants has only mentioned "corrugated sheets" without specifying the material as to whether it is iron or asbestos and contended that the SSI certificate in the circumstances cannot lend any proof to the claim of actial use by the appellants of the goods imported.
3. Shri Badsha, the learned counsel for the appellants in reply submitted that when one of the licences produced by the appellants specifically contains the endorsement expressly referring to para 138 of Policy AM 1984-85 it would be beyond the jurisdiction of Customs authorities to ignore the same and construe the scope of the licence differently. It was further urged that the distinction now sought to be introduced by the learned D.R. on the expression "select product" occurring in para 204(1) of the Policy AM 1985-88 has not been set out in the show cause notice and as such the Department would be precluded from raising this issue afresh at this belated stage without affording the appellants an opportunity for rebuttal in conformity with the principles of natural justice. Further even if the Department is entitled to urge a plea on interpretation of the expression "select product" as envisaged by Appendix 16 of the Policy AM 1985-88 Shri Badsha urged that Serial No. 1 dealing with Engineering goods in Appendix 16 would partially cover the goods manufactured by the appellants and serial No. 4.2 would cover the goods exported by the appellants and in either way the import would be clearly covered by the expression "select product".
4. I have carefully considered the submissions of the parties herein. The crux of the whole issue arising for determination in the appeal is as to whether the appellant a holder of REP licence would be entitled only to import goods relatable to the product exported in terms of the relevant Policy or not. One of the licences produced and relied upon by the appellants in this case is dated 22.3.85 bearing licence No. P/L/ 0434469 and it is expressly mentioned therein that the same is issued under para 138 13/11/of AM 85 Policy and the value of the licence is Rs. 11,63,259/- out of which the appellant has utilised Rs. 1,79,211.46 in respect of the imports concerned in this case. For the purposed of convenience I should like to extract verbatim para 138(1) of AM 1984-85 Policy. -
"138.(1) REP licences issued to manufacturer-exporters, against their exports of select products manufactured by them, will be valid within their overall value, for import of items of raw materials, components, consumables, spares and packing materials, as are related to the products exported or manufactured by the exporters concerned, whether manufactured in the same factory as the one from which the goods were exported or some other factory of the same manufacturer, subject to 'Actual User' condition. This special facility will be subject to the conditions laid down hereunder."
The expression used in para 138.1 extracted above is clear that the REP licence has been issued for import of item of raw materials, components etc. as are related to the product exported or manufactured by the exporters concerned. In my opinion the word "exported or manufactured" is clearly disjunctive and not conjunctive and keeping in mind the specific usage of the word I am inclined to hold that in terms of para 138.1 an REP licence holder would be entitled to import raw materials or components or consumables etc. as are related to the product either exported by him or manufactured by him. In the instant case the fact that corrugated sheets are manufactured by the appellant in his branch factory is not disputed and it cannot be gainsaid that out of the galvanised steel sheets corrugated sheets can be manufactured. The further question that would arise for consideration is whether para 204 clause 1 of the Policy AM 1985-88 is different in its purport from para 138(1) of AM 1984-85 as contended by the learned D.R. For purposes of convenience I should like to extract the relevant portion of para 204(1) of the Policy AM 1985-88:--
"204( 1). A manufacturer-exporter holding a valid REP licence issued in his own name against exports of select products manufactured by him will be eligible to import within the overall value of REP licence items of raw materials, components, consumables, spares and packing materials which are related to select products exported or manufactured by him either in the same factory as the one from which the goods were exported against the REP licence concerned or in some other factory of the same name of the manufacturer. However, in respect of items covered by Sub-para (2) below, import will be subject to the value restrictions indicated against the different categories of licence holders. The special facility will be subject to the following conditions:"
In terms of para 204(1) a manufacturer-exporter such as the appellants in the instant case, holding a REP licence would be entitled to import raw material, components, consumables etc., which are related to select product exported or manufactured by him. The expression "select product" would only refer to export and not to manufacture. Appendix 16 of the Policy 1985-88 gives out select list of export product and the word "select product" in my opinion does not refer to manufacture at all. In my opinion a proper construction that should be adopted on para 204 (1) of AM 1985-88 is that a manufacturer-exporter holding a REP licence would be entitled to import raw materials, components, consumables etc. which are related to select product exported by him or products manufactured by him. In the instant case as already observed by me prime galvanised sheets imported by the appellants would be utilised in the manufacture of corrugated sheets. One other important factor that should be taken note of in the context of this case is the communication addressed to the appellants by the Joint Chief Controller of Imports and Exports, Government of India, New Delhi dated 24.3.86. The said communication is very clear that item allowed for import under the facility of an endorsement under Para 138(1) of AM 1985 and para 204(1) of 1985-88 Import and Export Policy need not necessarily relate to the manufacture and export of select products against which the endorsement under these paras have been made on the REP licence. No doubt, I should confess that this particular piece of evidence was not available before the learned Collector at the time when the impugned order came to be passed. Para 274(2) of the Policy AM 1984-85 is to the effect that any interpretation of Import and Export Policy or procedure given -by the Chief Controller of Imports and Exports, New Delhi will prevail over any other clarification in the same matter given by any other authority or person. I also find a similar clause in the Policy AM 1985-88 in para 25(2). Therefore, on the basis of the wording of relevant paras referred to above and also taking into consideration the opinion expressed by the licensing authorities in respect of construction of the same, I am inclined to hold that the product imported by the appellants herein are covered by the terms of licences relied upon by them. Since I have held that on the basis of interpretation of the relevant paras and on the basis of opinion expressed by the licensing authorities imports are covered by the import licence in this case I do not feel called upon to consider various other questions argued by the parties before me. In the result the impugned order is set aside and the appeal is allowed.