Customs, Excise and Gold Tribunal - Mumbai
Bhilwara Spinners Ltd. vs Commissioner Of Customs (Ep) on 18 January, 2008
ORDER M.V. Ravindran, Member (J)
1. The following questions are referred by the referral Bench for consideration of the Larger Bench:
(i) Whether DGFT has powers to amend the licence including the re-validation (obviously referring of a situation where validity is expired) and whether amendment will be retrospective in nature?
(ii) Whether as to the amendment carried out by the DGFT whether right or wrong can be the subject matter of the scrutiny and challenge by the customs authorities?
2. Heard both sides at length and perused the records. The first question, which has been referred to us is whether the DGFT has powers to amend the licence and whether said amendment can be retrospective in nature or not. We find that the Central Government has framed Rules as Foreign Trade (Regulation) Rules, 1993. In the said rules, Rule 8 is as under:
Rule 8 - Amendment of licence - The licencing authority may on its own motion or on an application by the licensee, amend any licence in such manner as may be necessary or to rectify any error or omission in the licence.
On a plain reading of the above reproduced rule, it is clear that the DGFT has got powers to amend the licences issued by them. This amendment would include the revalidation of the licences also.
3. It was argued on behalf of the appellants that the provisions of para 25(a) of the Customs Apprising Manual, Vol-II provides as under.-
(a) Nature of amendment and the date of effect - All amendments including revalidation of Import Licences/CCPs should be duty dated and signed in full by an officer of the licencing authority, not below the rank of the Assistant Controller, Amendment of Licences may be in respect of description of goods, value/quantity, date of shipment, country of shipment etc. A question arises as to the date from which the endorsement made in an Import Licence/C.C.P. subsequent to its issue would become effective. The Ministry of Law to whom a reference was made in this respect by the Central Board of Excise & Customs advised that amendment to a licence takes effect as if it existed on the date on which the licence was issued. This would indicate that the importer may claim the benefit of amendments from the date of issue of the licence itself.
It was submitted that on combined reading of the above two provisions together, the DGFT has powers to amend the licences retrospectively. The ld. Advocate appearing on behalf of the appellants relied upon the judgment and order of the Tribunal in the case of Rama News Prints and Paper Ltd. v. CC , wherein the Tribunal in para 7 has held as under:
7. Whatever be the speculations on these aspects or the conclusion of the licensing authority, our decision cannot be guiding by it. The fact remains that the licence was amended by the authority competent to do so validating import of the goods made, and send by the Directorate of Revenue Intelligence. It is not possible for us to accept either on principles of law or in terms of the Policy that this amendment will not operate retrospectively. The provision of the policy pointed out by the advocate for the appellant, which we have noted in paragraph 4 above clearly permitted the licensing authority to relax any of the conditions of paragraph 28 of the policy. The licensing authority therefore had the right to issue an amendment. It is not possible to agree this right cannot be exercised retrospectively. It is no doubt true there is nothing specifically in the policy which permits retrospective application. At the same time, however, there is nothing in the policy which militates against the view that a licence cannot be issued with retrospective effect i.e. for goods already arrived for shipping. The Tribunal in its judgment in Ester Industries Ltd. v. CC, New Delhi has accepted the valuation on an amendment made to an import licence which has retrospective application.
Relying upon the above said decision and the subsequent decisions of the Tribunal, it was sought to impress that the DGFT has got powers to amend the licence retrospectively.
4. At the same time, learned SDR submits that the issue as regards the powers of DGFT to amend any licence retrospectively has been considered by the Hon'ble High Court of Punjab & Haryana in the case of Vikrant Overseas v. UOI as reported at . He specifically relies upon paragraphs 10, 11 & 12 of the said judgment, which are as under:
10. In exercise of the powers conferred by the Act, the Central Government has framed the rules called Foreign Trade (Regulation) Rules, 1993. Rule 8 is material for the purposes of this case. It provides as under:
Rule 8:
AMENDMENT OF LICENCE:
The licencing authority may on its own motion or on an application by the licensee, amend any licence in such manner as may be necessary or to rectify any error or omission in the licence.
11. On a perusal of the provisions of the Act and the rules, we do not find any power with the licensing authority to retrospectively amend a licence. Mr. Gumber, learned Counsel for the respondents has stated before us that the authority has been amending the licence retrospectively "in routine". The counsel has conceded that there is no provision which may specifically authorize the licensing authority to amend a licence retrospectively.
12. Besides the lack of an express provision, even in principle, we find it difficult to accept the contention as raised on behalf of the respondents that the authority can retrospectively amend a licence. If such a wide power was conceded, the results can be catastrophic. A licence may be granted today for the import of a 1000 Mt. tones of a particular commodity. The person may place the order. The consignment may be received one fine morning; the authority may retrospectively reduce the quantity to 1 mt. tones. Who would make good the loss? Who would be responsible for the consequences? There is no answer on behalf of the respondents. In this situation, it is not surprising that neither under the Act nor the rules any power has been reserved with the authorities to modify a licence retrospectively.
It was submitted that the very same rule, which is in dispute, was considered by the Hon'ble High Court.
5. On careful perusal of the judgment of the Hon'ble High Court, it is seen that the judgment squarely covers the issue that the DGFT authorities have no powers to modify the licence retrospectively. Respectfully following the judgment of the Hon'ble High Court of Punjab & Haryana, we answer the question No. (i) in negative i.e. that the licensing authorities do not have power to amend any licence retrospectively.
6. Now reverting to the question No. (ii) i.e. whether the customs authorities can challenge the amendment carried out by the DGFT whether right or wrong, we find that the issue is no more res integra. The Hon'ble Supreme Court in the case of Titan Medical Systems Pvt. Ltd. v. CC, New Delhi as reported at has held as under:
13. As regards the contention that the appellants were not entitled to the benefit of the exemption notification as they had misrepresented to the licensing authority, it was fairly admitted that there was no requirement, for issuance of a licence, that an applicant set out the quantity or value of the indigenous components which would be used in the manufacture. Undoubtedly, while applying for a licence, the appellants set out the components they would use and their value. However, the value was only an estimate. It is not the respondents' case that the components were not used. The only case is that the value which had been indicated in the application was very large whereas what was actually spent was a paltry amount. To be noted that the licensing authority having taken no steps to cancel the licence. The licensing authority has not claimed that there was any misrepresentation. Once an advance licence was issued and not questioned by the licensing authority, the Customs authorities cannot refuse exemption on an allegation that there was misrepresentation. If there was any misrepresentation, it was for the licensing authority to take steps in that behalf.
(Emphasis supplied)
7. We also find that the Hon'ble High Court at Judicature of Bombay in the case of Autolite (India) Ltd. v. UOI held as under:
7. Having heard the Counsel on both the sides, we are of the opinion that the Customs authorities below were not justified in refusing to allow the duty free clearance of the goods on the ground that die steel imported by the petitioner is capital goods and capital goods did not fall within the scope of the Notification No. 116/1988. Admittedly, under the advance licence issued, the petitioner was entitled for duty free import of die steel as a material required in the manufacture of export product. Once the licensing authority has accepted that the steel is a material required in the manufacture of the export product, it is not open to the Customs authorities to go behind the licence and deny duty free clearance of the goods. The exemption Notification No. 116/1988, dated 30th March, 1988 specifically states that the materials that are required to be imported for the purpose of manufacture of resultant products shall include such items as are imported into India against the advance licence for subsequent exportation. In the instant case, the licence specifically states that the petitioner is entitled to import die steel as a material required for the manufacture of resultant products. The Apex Court in the case of Titan Medical Systems Pvt. Ltd. v. Collector of Customs has held that once an advance licence in issued and not questioned by the licensing authority, the Customs authorities cannot refuse exemption on an allegations that there was any misrepresentation. In the present case also, the licensing authorities have not found fault with the statement of the petitioner that the die steel is a material required in the manufacture of resultant product and have granted advance licence to the petitioner. Assuming that the licensing authorities have wrongly accepted the statement of the petitioner, so long as the licence is valid and subsisting the import of materials set out in the advance licence are liable to be cleared duty free, under Notification No. 116 of 1988 and the Customs authorities cannot deny duty free clearance of the materials set out in the licence. It is not open to the Customs authorities to sit in appeal and hold that the licensing authorities have erroneously endorsed advance licence to permit import of die steel as a material required in the manufacture of the resultant product. In this view of the matter, we are of the opinion that the impugned orders passed by the Customs authorities below cannot be sustained.
(Emphasis supplied)
8. Further, we find that the Hon'ble High Court of Bombay in the case of CC (EP) v. Jupiter Exports 2007 (213) ELT 641 (Bom) in an identical question held as binder:
22. With regard to the issue as to whether a licence issued by the DGFT is valid or not is an issue that has to be determined by the DGFT and not the Customs authorities. It is now well settled that until the licenses are cancelled by the licensing authority they are deemed to be valid. The Hon'ble Supreme Court in the case of Titan Medical Systems Pvt. Ltd. v. Collector of Customs has held that once an advance licence is issued and not questioned by the licensing authority, the Customs authorities cannot refuse exemption on an allegations that there was any misrepresentation. If there was any misrepresentation, it was for the licensing authority to take steps in that behalf. In the present case, the licensing authority sought to cancel the licenses, but in appeal, the order was set aside and remanded for de novo consideration. No further order has been passed thereafter. In the circumstances, till today the licences are valid. Even if the licence was subsequently cancelled, the Supreme Court in the case of Sampat Raj Duggar v. Union of India , following East India Commercial Co. Ltd. v. Collector has held that on the date of the import the goods were covered by a valid licence. The subsequent cancellation of a licence is of no relevance nor does it retrospectively render the import illegal.
(Emphasis supplied)
9. The question as to whether the Customs authorities have got the powers to challenge and sit on the judgment and decision taken by the DGFT to amend the licence is answered in the negative. The Customs authorities do not have powers to sit on judgment or challenge the powers of the licensing authority to amend the licence. The ratio of the Hon'ble Supreme Court in the case of Titan Medical (supra) and decision of the Hon'ble High Court of Bombay in the case of Autolite (India) Ltd. (supra) clearly indicate that the Customs authorities do not have powers to challenge the licensing authorities' power of amendment of the licence. Hence, the answer to second question, which has been referred to us is that the Customs authorities do not have power to scrutinize and challenge the amendment carried out by the DGFT.
10. In conclusion, we answer the references as under:
(i) The licensing authorities do not have powers to amend any licence retrospectively.
(ii) The Customs authorities cannot challenge the powers of the licensing authority for amendment of the licence.
11. The reference to the Larger Bench is answered accordingly and files are sent to the referral Bench for deciding the issue on merits.
(Pronounced in Court on 18/01/08)