Bombay High Court
Companies Act vs Union Of India on 18 September, 2009
Author: Ferdino I. Rebello
Bench: F.I. Rebello, D.G. Karnik
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mgn
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.871 OF 1994
M/s.Biotor Industries Limited )
a Company incrporated under )
the provisions of the )
Companies Act, 1956 having )
its registered office at 13, )
Sitafal Wadi, Mazgaon, Bombay )..PETITIONER
Vs,.
1.Union of India )
2.The Union Secretary )
(Drawback) Government of )
India, Ministry of Finance, )
Department of Revenue, )
having his office at Jeevan )
Deep, Parliament Street, )
New Delhi-110 001. )
3.The Commissioner (Drawback) )
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Government of )
India, Ministry of Finance, )
Department of Revenue, )
having his office at Jeevan )
Deep, Parliament Street, )
New Delhi-110 001. )
4.Assistant Collector of )
Customs, Draw Back Depart- )
-ment, having his office at )
New Customs House, Ballard )
Estate, Bombay-400 038. )
5.Agricultural Marketing )
Advisers to the Government )
of India, Directorate )
of Marketing and Inspection )
Ministry of Food and )
Agriculture, having his )
Office at Nirman Bhavan, )
Department of Rural )
Development, Room No.527 )
New Delhi. )..RESPONDENTS
Mr. Pankaj A. Sawant with Ms. Trupti M. Kapadia and Mr.
V.C. Murlidharan i/b. Joy Legal Consultants for the
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petitioner.
Mrs.S.V. Bharucha for Respondent Nos. 1 and 5.
Mr. R.G. Bhat with Mr. J.B. Mishra for Respondent Nos. 2
to 4.
CORAM : FERDINO I. REBELLO &
D.G. KARNIK, JJ.
DATED : 18TH SEPTEMBER , 2009
ORAL JUDGMENT (PER FERDINO I. REBELLO, J.):
The petitioners are exporters of Castor Oil. The Government of India framed several schemes. Under the Scheme, goods which were described in Schedule II to the Customs and Central Excise Duty Drawback Rules, 1971 (hereinafter referred to as the Drawback Rules) were entitled to a drawback on the export of such goods. The Drawback Rules have been made in exercise of the powers conferred by Section 75 of the Customs Act, 1962 and Section 37 of the Central Excise & Salt Act which hereinafter shall be referred to the Customs Act and Central Excise Act respectively.
2. By the present petition the petitioners are ::: Downloaded on - 09/06/2013 15:05:53 ::: 4 challenging the denial of duty draw back on Castor Oil exported by them for the period 22/23-6-1989 to 21st December, 1990.
3. By a Notification dated 4th July, 1964 issued by the Agricultural Marketing Adviser to the Government of India it was decided that the export of goods specified under the Schedule would not be permitted unless the goods were graded under the provisions of the Vegetable Oils Grading and Marketing Rules, 1955 and Certificate of Inspection was issued in that behalf. From the Schedule to the Notification, both "Castor Oil" and "Castor Oil for Pharmaceutical purposes" were included in the Schedule. By the Notification of 4th July, 1964 an order of prohibition was issued that effective from 15th July, 1964 export of goods specified in the Schedule would not be exported unless the the same have been graded in accordance with the provisions of the Vegetable Oils Grading and Marketing Rules, 1955 and accompanied by a certificate of inspection to the effect that they have been properly graded and sealed with the mark "Agmark".
::: Downloaded on - 09/06/2013 15:05:53 ::: 54. By Notification on 3rd October, 1964 the Government introduced with immediate effect a test for Medicinal grade Castor oil (Cold drawn) as set out on page 435 of the First Edition of Pharmacoepia of India 1955 which read as under:-
"Castor Oil processed by hot expression or by extraction with solvents Mix 5 ml with an equal volumn of carbon desulphide and ml of sulphuric acide the mixture may be coloured reddish-brown but not blackish brown".
It was further set out that all the samples of medicinal grade Castor Oil shall be subjected to such tests in future and be allowed to be graded under Agmark if they confirm to the requirements given in the test.
5. The petitioner by his application dated October 26, 1978 had applied for fixation of drawback rates on the export of Castor Oil Medicinal N.P. The Respondents by their letter of 28th March, 1979 replied that the Government had decided to allow draw back on export product Castor Oil Medicinal N.P.. under Sub-Serial No. ::: Downloaded on - 09/06/2013 15:05:53 ::: 6 1204 (b) under Drugs & Drugs Intermediates & Pharmaceuticals (Liquids & Drops) and avail an all industry rate of 2% of the F.O.B. Value.
6. Based on the test to be conducted in terms of the Circular dated 3rd October, 1964 the Castor Oil exported by the petitioners was shown under Entry 'Castor Oil Medicinal' and was accordingly exported.The petitioners based on this policy continued exporting Castor Oil (Medicinal).
7. The Respondents issued another Circular dated 22/33-6-1989 by which the Thin-layer Chromatographic Test was prescribed for identification of Cold drawn Castor Oil of medicinal grade under Agmark by substituting the earlier test.
8. On 6th December, 1989 by communication addressed by Under Secretary (Drawback) Government of India, to M/s.Jayant Oil Mills it was set out that on the basis of data provided and as verified by the Customs/Central Excise Department it had been decided to allow drawback at the rate as set out in the said Circular. The description of the goods were given as Castor Oil Medicinal and/or Castor Oil First Special. By that ::: Downloaded on - 09/06/2013 15:05:53 ::: 7 communication the petitioners were also informed of the rate fixed.
9. By communication of 3rd September, 1990 the petitioners applied for fixation of the Drawback rate against the export of Castor Oil First Special Grade in the requisite proforma.
10. By communication of 6th November, 1990 an amendment was made to the Ministry's letter dated 6th December, 1988. The existing description in para.3 was subsisted by:-
"Castor Oil Medicinal"
The other terms and conditions remained unchanged.
11. One Vithalbhai Patel, Member of Parliament also addressed a letter dated 6th January, 1992 on behalf of the industry. Attention was invited to various difficulties financially and otherwise suffered by the exporters of the Castor Oil. It was prayed that the Government should take a sympathetic view and grant draw back on export of Castor Oil. It was also requested on ::: Downloaded on - 09/06/2013 15:05:53 ::: 8 behalf of the petitioners that draw back on export of Castor Oil First Special effected from 1st July, 1989 to 20th December, 1990 be allowed by relaxing the Rule under Serial No.15 and all like.
12. The Respondents inspite the claim for drawback did not take any action. Writ Petition being Writ Petition No.2299 of 1992 came to be filed before this Court wherein Rule was issued. The petition was disposed off by order dated 10th November, 1992 with the direction to the 4th respondent to decide the claim for draw back for the period 1st July, 1989 to 21st December, 1990 within a time frame as set out therein. In the same petition a Motion was taken out. That Motion was disposed off with a direction that the respondents are directed to decide the claim of the petitioner for draw back for the period 1st July, 1989 to 21st December, 1990 on or before 29th October, 1993.
13. Pursuant to the order of the Court the Authority considered the contentions and the facts on record. The Respondent No.3 by his order dated 29th October, 1993 disposed of the application by holding that the Castor ::: Downloaded on - 09/06/2013 15:05:53 ::: 9 Oil manufactured by the petitioners was not Castor oil medicinal and accordingly could not be considered against the entry of 'other drugs and pharmaceutical product' under Serial No.1201.
14. A reply has been filed on behalf of the respondents by S.G. Gawde, then working as Deputy Commissioner of Customs (Drawback). It is the case of the affiant that the petitioners were given personal hearing on 28th October, 1993. After hearing them a detailed speaking order had been passed. Dealing with the issue as to whether the products could be termed as Castor Oil (medicinal) or Castor Oil First Grade it was held that only Castor Oil drawn by Cold Drawn process could be treated as Castor Oil (Medicinal). In other words if the Oil was extracted by the Cold Drawn method and satisfied the Thin Layer Chromatographic Test would it be treated as Castor Oil (Medicinal) and be allotted Agmark Certificate as Medicinal Grade. In respect of Castor Oil which did not pass the Thin Layer Chromatographic test it would be issued Agmark as Castor Oil First Grade. It is also pointed out that Castor Oil does not conform to BP certifications, is not of ::: Downloaded on - 09/06/2013 15:05:53 ::: 10 pharmaceutical grade and as such would not fall under Serial No.12 of the Schedule Appended to Drawback Rules, 1971. The petitioners, therefore, it is submitted were rightly denied the Drawback facility.
15. At the hearing of this petition on behalf of the petitioner it is submitted that once the petitioners were allowed to export Castor Oil as Medicinal by following the test in terms of Notification of 3 rd October, 1964 merely because another test was introduced by Circular of 22/23-6-1989, would not result in the Castor Oil which otherwise fell under Serial No.12 to the Schedule to the Rules to cease to be Castor Oil medicinal. Further, merely because the petitioners were marketing their product as Castor Oil First Grade could not deprive them of the benefit of duty draw back on export of Castor Oil. It is further submitted that once the petitioners application for fixing drawback rates were allowed by the Government communication of 6th December, 1989 for the period 1st June, 1989 to 31st May, 1990 it was not open to the respondents by subsequent communication of 6th November, 1990 to deny to them the drawback facilities by amending the letter dated 6th ::: Downloaded on - 09/06/2013 15:05:53 ::: 11 December, 1989. to include only Castor Oil medicinal.
Learned Counsel has relied upon various authorities which we shall consider at the appropriate stage.
16. On behalf of the Respondents learned Counsel submits that Castor Oil First Grade is not Castor Oil medicinal and as such would not fall under Entry No.12 or for that matter under sub-head 1201 which was drug and pharmaceutical product not provided elsewhere. No duty drawback claim could have been granted as as such the Government was right by letter of 6th November, 1990 to amend the fixation of rates by letter of 6th December, 1989.
17. To understand the controversy we may point out Rules have been framed for allowance of drawback.
Known as the Customs and Central Excise Duties Drawback Rules, 1971, hereinafter referred to as the "Drawback Rules." The Government can fix the rates in terms of Rule 3. Rule 4 confers power on the Central Government to revise the rates determined under Rule 3. In those cases where drawback has not been determined considering Rule 6 any manufacturer or exporter of such goods may ::: Downloaded on - 09/06/2013 15:05:53 ::: 12 within thirty days from the date of export of such goods apply in writing to the Central Government for determination of the amount or rate of drawback therefor, stating all relevant facts including the proportion in which the materials or components are used in the production or manufacture of goods. Power was conferred on the Government if the application was not made within 30 days and sufficient cause was shown to extend the time apply within a further period of thirty days. Rule 15 is a power conferred on the Government to relax Rules for reasons recorded in writing in the circumstances set out therein. Earlier under Schedule II under Entry 12 read as under:-
"Drugs and Pharmaceutical products" and Entry 15 read as under:
"Essential Oils, persume materials, agarbatties, toilet, polishing and cleaning preparations"
By Notification dated21st December, 1990 Castor Oil was also included under Entry 15. Thus from 21 st December, 1990 the petitioners and other exporters like the petitioners were entitled to drawback considering Serial ::: Downloaded on - 09/06/2013 15:05:53 ::: 13 No.15 of Schedule II.
18. The question that we are called upon to answer is whether the petitioners are entitled to duty drawback assuming that they did not meet the prescribed test for the exports of Castor Oil between the period 22/23-6-1989 to 20-12-1990.
19. We may consider the above argument for distinct periods, the first being 22/23-6-1989 to 31-5-1990 and second period being 1-6-1989 to 6-12-1989 and third being from 7-12-1989 to 21-12-1989.
20. As noted earlier by virtue of Rule 3 of the Drawback Rules, it is open to the Government to fix the rates of drawback duty. In so far as the petitioners are concerned the Government by their communication dated 6th December, 1989 in respect of Castor Oil medicinal and/or Castor Oil First Grade had fixed rate for the period 1-6-1989 to 31-5-1990. By a further communication of 6-11-1990 the communication of 6-12-1989 was amended by substituting the description by "Castor Oil medicinal".
Thus Castor Oil First Special Grade was excluded. The ::: Downloaded on - 09/06/2013 15:05:53 ::: 14 question that we are called upon to consider is whether it was open to the respondents by subsequent communication of 6-11-1990 to amend the communication on 6-12-1989 for the period 1-6-1989 to 31-5-1990. In our opinion the petitioners had already exported Castor Oil First Grade under the mark Castor Oil First Special Grade as they were doing earlier. It is only that the same oil then was being described as Castor Oil medicinal, pursuant to the test which was earlier being done in terms of Circular of 3rd October, 1964. That was by hot extraction or by extraction with solvents as has been described earlier. Such Castor Oil was always treated by the Government as Castor Oil medicinal. It is only pursuant to the Circular dated 22/23-6-1989 that the Thin-layer Chromatographic Test was applied for identification of Cold draw Castor Oil of Medicinal Grade. The communication of 6-12-1989 covered the period 1-6-1989 to 31-5-1990. In other words upto 22/23-6-1989 the Castor Oil undergoing the earlier test was still treated as Castor Oil medicinal. It is only subsequent to 22/23-6-1989 it had to undergo the Thin-
layer Chromatographic Test. The petitioners had been exporting Castor Oil First Grade and the Government in ::: Downloaded on - 09/06/2013 15:05:53 ::: 15 fact recognised the same by fixing the rates by letter of 6th December, 1989. Under these circumstances could the Government have withdrawn the same by the communication of 6-11-1990.
21. We may make reference to some of the judgments referred to at the Bar. In Mazda International (P) Ltd.
vs. Union of India, 1995 (77) E.L.T. 526 (Bom), the Government of India removed Gripe water from the entitlement of drawback benefit with retrospective effect. The submission before the Court was that the Authority exercising subordinate legislation could not have withdrawn the benefits with retrospective effect. A learned Division Bench of this Court accepted the said contention as unless there be a power to make subordinate legislation with retrospective effect it is not open to an Authority to give retrospective effect to a Notification. This was followed by another Division Bench in Gandhi Sons & Ors., vs. Union of India, 2002 (81) ECC 261 (Bom.) and subsequently reiterated by another judgment in Arviva Industries (I) Ltd. vs. Union of India, 2004 (167) E.L.T. 135 (Bom.). Based on these Authorities it will be clear that once the rates had ::: Downloaded on - 09/06/2013 15:05:53 ::: 16 been fixed in respect of the goods described in the communication it could not have been open to the respondents to retrospectively amend the benefit given.
Even otherwise from the reply filed on behalf of the respondents it would be clear that this was done as Castor Oil First Grade would not fall under Entry 12 namely Drugs and Pharmaceutical products. This was only because the change and nature of the test. Upto 22/23-6-1989 under the test in force the same Castor Oil could have been exported and was being exported as Castor Oil medicinal. Letter of 6th December, 1989 is recognition of this and apart from that it can also be traced to the Governmental powers under Rule 15 of the Rules to avoid hardship. Under these circumstances, in our opinion, the subsequent communication for all these reasons would be without authority of law and consequently no reliance can be placed on the letter of 6th November, 1990 amending the letter by letter dated 6-12-1989 with retrospective effect.
22. The next question is what happens in so far as subsequent period between 1-6-1989 and 6-11-1990 and/or for that matter 7-11-1990 to 20-12-1990. On behalf of ::: Downloaded on - 09/06/2013 15:05:53 ::: 17 the petitioners learned Counsel sought to place reliance on the judgment of this Court in Rajasthan Sinning and Weaving Mills Ltd. vs. Union of India, 1993 (67) E.L.T. 57 (Bom.) to contend that once under the scheme framed, cash compensatory allowance was paid as an inventive to exporters to increase exports and on that basis exporters acted and completed transactions it would not be proper and equitable to demand amount by claiming that the payment was erroneous.
23. In our opinion so far as these periods are concerned, firstly, the Government did not fix any rate.
It is only on 21st December, 1990 realising that there was large export of Castor Oil, Castor Oil was included in Schedule 2 under Item No.15. In other words the Government felt the need to grant drawback benefits to Castor Oil. However, after introduction of the new test from 22/23-6-1989 Castor Oil medicinal Castor Oil First Grade was being branded under two Agmark trade marks namely Agmark Castor Oil medicinal and Agmark Castor Oil First Grade. Castor Oil First Grade would not fall under Entry No.12 of Schedule II. In our opinion, the reasons which we have given for the period 1st June, ::: Downloaded on - 09/06/2013 15:05:53 ::: 18 1989 to 31st May, 1990 will not be available for these subsequent periods.
24. However, we find that the change in the status of Castor Oil medicinal to Castor Oil First Grade has only taken place on account of the new test introduced by the Government. The same Castor Oil was earlier being exported as Castor Oil medicinal by applying the test in terms of Circular of 3rd October, 1964. In our opinion, in these circumstances it will be open to the petitioners within sixty days from today to apply to the respondents to exercise their powers under Rule 15 of the Rules. It is for the respondents to consider the same and act according to law at any rate not later than six months from the petitioners so applying.
25. Rule to that extent made partly absolute. In the circumstances of the case there shall be no order as to costs.
(D.G. KARNIK,J.) (FERDINO I.REBELLO,J.) ::: Downloaded on - 09/06/2013 15:05:53 :::