Customs, Excise and Gold Tribunal - Mumbai
Mewati And Co. vs Collector Of Customs on 28 July, 1995
Equivalent citations: 1996(81)ELT109(TRI-MUMBAI)
ORDER P.K. Desai, Member (J)
1. Both the appeals are directed against the common Order-in-Appeal No. 4739/87BCH of the Collector of Customs (Appeals), Bombay, confirming two orders-in-original Nos. S/10-375/86A, dated 28-10-1986 and S/10-332/86A, dated 21-8-1986 of the Dy. Collector of Customs, Bombay, confiscating Neutral Malt Spirit imported by the appellants but granting option to them to pay fine in lieu of confiscation.
2. The appellants imported two consignments of the aforementioned material and claimed clearance against REP licence No. P/L 3099077, dated 5-8-1985, held by them as the transferees. The said licence was issued against Product Group B-16.1 in Appx. 17 of the Policy Book AM 1985-88. The clearance was objected to on the ground that the Licence was in relation to product group "synthetic organic dyes including organic pigments" and the goods permitted import were dye intermediates and chemicals appearing in Appx. 3 and used in manufacture of products exported, and as per para 8 of the general conditions for import under Appx. 17, it was necessary that the item imported found its use in export product, whereas here, the goods imported not only did not match with the item required for manufacture of the export product, but were nothing but concentrated whisky. It was also felt that the item was a consumer goods hit by Sr. No. 121 of Appx. 2B of the same policy book. Show cause notices were therefore served on the appellants. They contested the objections raised by the Customs authority. On conclusion of the adjudication proceedings, the goods imported were ordered confiscation and 15 barrels containing 2761 kgs. valued at Rs. 84,139.00 were permitted to be redeemed on payment of fine of Rs. 1,60,000 (Appeal No. C/1329/87 pertains to this) whereas redemption fine assessed for 10 barrels containing 1204 litres valued at Rs. 59,748 was Rs. 1,20,000/- (subject matter in appeal No.-C/1330/87).
Mr. S.D. Nankani, the ld. advocate for the appellants submits that the REP licence, which has been lawfully transferred in favour of the appellants, is issued against the Export Product Group B 16.1 in Appx. 17 of the policy book AM 1985-88 and in column No.4 against the said product group, the items shown as permitted to be imported, include dye intermediate and chemical appearing in Appx. 3 of the same policy book and thus Ethyl Alcohol falls within the category of importable item. He submits that the item imported namely "Natural Malt Spirit" is, even according to the Customs authority, concentrated whisky, which falls within the category of Ethyl Alcohol. To substantiate his submission, the ld. advocate has relied upon the judgment of the Bombay High Court in Bussa Overseas and Properties Pvt. Ltd. v. Union of India - 1991 (53) E.L.T. 165 (Bom.). Relying on the same judgment, the ld. advocate has submitted that the issue before the High Court was identical to the one here, except that the policy period involved there was AM 1984-85 whereas here, it is AM 1985-88 but has pleaded that the relevant provisions have not undergone any material change, and hence following the ratio of the said decision, the import of the subject goods ought to be permitted under a similar type of licence. Accepting that some divergent view appears to have been taken by the same High Court in their subsequent judgment in SVA Udyog Viniyog Ltd. v. Union of India - 1993 (65) E.L.T. 20 (Bom.), the ld. advocate has pleaded that similar view expressed by the Single Judge in the same matter as reported in SVA Udyog Viniyog v. Union of India, 1991 (52) E.L.T. 212 (Bom.) has been referred to by the Bench of the same court in Re : Bussa Overseas and Properties Pvt. Ltd. (supra), and therefore, the ratio of the decision in Re : Bussa Overseas (supra) should be adopted. In his submission, even otherwise, the said High Court had before them, in Re : SVA Udyog Viniyog (supra) the issue relating to the generic entry "seeds" and item imported were Almonds in shell, whereas in Re: Bussa Overseas (supra) they dealt with the same item as the one here. The ld. advocate has then referred to the decision from this Bench in Bussa Export Corporation v. Collector of Customs, 1994 (50) E.C.R. 256 (Tribunal), where even subsequent to the decision in Re : SVA Udyog Viniyog this Bench has held the REP licence issued for Product Group B-16.1 as available for import of Whisky concentrate, under heading Ethyl Alcohol. In his submission, no differential type of approach is, therefore, warranted. As to the finding of the authority below, about the same imported item being a consumer goods, falling within Sr. No. 121 of Appx. 2B of the policy book, AM 1985-88, the ld. advocate has submitted that the item imported cannot go in the same form, directly into human consumption, and as such, the said finding is not sustainable.
4. Mr. K.P. Mishra, the ld. SDR, has however submitted that it is an undisputed fact that the item imported being whisky concentrates, is not the input for Export Product shown in column 1 of the Product Group B 16.1 and as such, has no nexus with the export product. In his submission, therefore, the ratio of the judgment of the Bombay High Court in SVA Udyog Viniyog Ltd. v. Union of India (supra), made absolutely explicit in the judgment of the Division Bench, squarely stands attracted, and the same, coming at a subsequent period of time, could not be overlooked merely because the High Court dealt with an imported item distinct from the one here, or the one which was before them in Re :. Bussa Overseas. As regards the decision of this Bench in Re : Bussa Export Corporation (supra), the ld. SDR has pleaded that the Bench have in all clear terms, observed that they were arriving at the conclusion as they have drawn, only because the same licence and the same product with the same policy period, were under consideration before the High Court, in Re: Bussa Overseas, and virtually the same party was before them, and it would not be proper to deny the benefit, by overlooking the said judgment from the High Court. He has pleaded that the Bench has been explicit in observing that but for the special circumstances as had prevailed there, they would have followed the ratio of the Bombay High Court judgment in Re : SVA Udyog Viniyog. In his submission, with same being not the position here, the Bench need not adhere to the conclusion drawn in the said matter and should follow the ratio of the subsequent decision of the same High Court, which the Bench has felt to be, even otherwise, in conformity with the policy provisions, which has also been followed in several subsequent decisions from this Bench.
5. Considering the submissions made, and going through the records, there appears no dispute over the item imported being the whisky concentrate. Going by the decision from the Bombay High Court in Re : Bussa Overseas and Properties Pvt. Ltd. v. Union of India (supra) the same has to be held as Ethyl Alcohol. The record however, clearly indicates that neither the plea is raised nor any effort at any stage is made to show that the item imported has any nexus to the export product specified under B16.1 of Appx. 17 of the policy book AM 1985-88. It may also be observed that the REP licence is not challenged on its validity, and the only objection raised is as regards its availability for import of the subject goods, firstly on account of the item being the one not permissible for import as raw material against the Export Product Group No. B 16.1 and secondly because the item [is] consumable goods hit by entry No. 121 of Appx. 2B of the policy book AM 1985-88.
6. The contention as to item being a consumer goods hit by entry No. 121 of Appx. 2B of the Policy Book AM 1985-88, could not be sustained as whisky concentrate is not the item which can straightway satisfy the human needs. The same has to undergo some further process at some distillery before the same can go to the market as consumer goods. For the purpose of the import policy, the consumer goods have been defined in para 7(13) of the policy book, and the item imported, obviously would not fit in the same. The finding given by the authorities below to that extent, therefore, is not accepted and is set aside.
7. The issue as to whether Neutral Malt Spirit, which is nothing but a whisky concentrate, falls within the category of Ethyl Alcohol, also needs no further deliberation, as the same has stood duly resolved in the Bombay High Court judgment in Re : Bussa Overseas (supra) and has been accepted by this Bench in Re : Bussa Export Corporation (also supra);
8. The material issue for determination, therefore, is whether the ratio of the decision of the Bombay High Court in Re : Bussa Overseas and Properties Pvt. Ltd. (supra), as followed by this Bench in Re: Bussa Export Corporation (also supra) should also be followed here.
9. Factual position before the High Court, in Re : Bussa Overseas and Properties Pvt. Ltd. have already been brought out earlier, and reading of paras 7 and 9 of the said judgment brings out the reasonings adopted to come to the conclusion as they have done. In para 7, after discussing as to what REP licences are, Their Lordships have observed :
"Thus strictly speaking it is not quite correct to say that the object of the scheme is only to provide to the Registered Exporters, to some extent by way of import replenishment, the essential raw material required in the manufacture of products exported. The REP licences being freely transferable can be and are sold by the Registered Exporters and they make profit out of it. The object of the scheme, to some extent, is thus diluted. Therefore, it can be reasonably inferred that the object of the scheme is not merely to provide a percentage of some of or all the raw materials used by the Registered Exporters in the product exported but also to augment their income by way of sale of REP licences issued in their favour."
In sub-para 3 of para 9 of this judgment they have further elaborated the approach as indicated above, and have concluded that the nexus of the imported goods with Export Product Group is not essential.
10. The same High Court have, in Re : SVA Udyog Viniyog (Division Bench judgment) (supra), in para 3 of their judgment, referring to conditions 7 and 8 in Appx. 17 of the import policy AM 1985-88, observed :
"The perusal of these conditions leaves no manner of doubt that the object or the intention of the policy matters was to permit import of such articles which had nexus with the articles which were exported by the licence holder."
This observation clearly brings out the divergence in interpretation of the policy provisions in relation to the REP licence. In para 5 of the judgment, an attempt is made to distinguish the earlier judgment in Re : Bussa Overseas, but that is done only on the point that the said court were, in the earlier case, dealing with specific entry of "Ethyl alcohol". Their Lordships have however not referred to their finding as to existence of nexus between the goods importable under REP licence and the Export Product. It could be a matter for anybody's guess as to what could have been the conclusion if the said angle was considered. One can thus, safely conclude that two divergent views exist on the importability of an item under REP licence.
11. When two views have been expressed, it is open for the quasi-judicial authority like this Tribunal, to follow the one which they in their opinion, find to be more in confirmity with the policy provision. The High Court, themselves, have in Re : SVA Udyog Viniyog examined relevant policy provisions. In addition thereof, it cannot be overlooked, that, such licences mostly have the shopping lists attached, and in any case, they invariably mention, conspicuously on their face, the export product group. Such a mention cannot be construed to be an empty formality and has to be taken as circumscribing the importability of an item thereunder, and make them subjected to conditions laid down in Appx. 17. Merely because such licences are made freely transferable, may not, in absence of any provision or clarification whatsoever in that regard, be read as incorporating some laxity in or dilution of the condition and reservations otherwise made applicable. The transferability only indicates that the licence holder can, if he does not himself require the items permitted thereunder, can, pass over his entitlement under the licence, to any other person similarly situated. If it cannot be disputed that he has a qualified right to import an item, namely the one which he needs for the purpose of manufacture of Export Product, then mere right to transfer the licence, neither bestows upon him nor entitles him to transfer any right more than what he possesses. The effect of making such REP licences transferable, may result in the holder of such licence earning some premium, but in absence of any specific provision, such right cannot be construed as enabling the transferee to import any item mentioned as permissible, notwithstanding its nexus with the export product for which the licence is granted. The mention of Export Product Group conspicuously on the face of the licence has to be taken as showing the limitations that the licence is subjected to. The approach of the Bombay High Court, in the judgment in Re : SVA Udyog Viniyog therefore appears to be in total conformity with the policy provisions, and there could be no hesitation in following the same.
12. This Bench have, even subsequent to the aforementioned decision of the Bombay High Court in SVA Udyog Viniyog, following the earlier decision in Re : Bussa Overseas, held, in Re : Bussa Export Corporation (supra) that such REP licence be accepted for import of concentrated whisky, when the licence was for Product Group B 16.1. In the said decision, both the members have in their separate but concurring orders, clearly expressed that they would have preferred to follow the ratio of the judgment of Re : SVA Udyog Viniyog, but for certain special circumstances, which also have been highlighted there. The main ground there was, that the same licence, which was under consideration before the Tribunal, had been considered by the Bombay High Court in Re : Bussa Overseas. It therefore became obligatory for the Tribunal not to go contrary to the finding given by the judicial authority. Though not expressly mentioned, the said judgment of the Bombay High Court was followed virtually following the principles governing "judgment in personem" (slightly loosely used, to convey the real impediment that this Bench experienced at that time). The said judgment, in any case, even at that stage was not accepted as 'judgment in rem', as laying down a ratio which ought to be followed for others who held a similar licence and caused import of similar item effected. Thus it does not become obligatory for this Bench to follow the ratio of their order in Re : Bussa Export Corporation. It may, in passing, be observed that the Customs authorities even there attempted to get the issue referred to the High Court, vide Section 130 of the Customs Act, but issue could not be so referred as their application was hit by the period of limitation, prescribed, as the same was filed even beyond the period which was within the statutory empowerment of the Tribunal to condone.
13. Here, undisputedly the nexus between the item imported and the Export Product specified in the licence is not established and hence, the import has been rightly held as not permissible. The order of confiscation is, therefore, justified and is upheld.
14. As to the quantum of redemption fine, it may be mentioned that it is not synonymous with the penalty. The idea is that none should be permitted to make any extra profit and earn a premium on their wrong doing. The item imported has its use in manufacture of whisky, and margin of profit obviously is high. The authority below appears to have kept that aspect in their view, while assessing the quantum of redemption fine. No plea is raised at the appeal stage, that profit that could have been earned is not to the extent of the quantum of redemption fine. No justifiable ground therefore exists to interfere with the same.
15. In the result, both the appeals are rejected.