Andhra HC (Pre-Telangana)
Deputy Chief Controller Of Imports And ... vs I.T.C. Ltd. on 24 November, 1997
Equivalent citations: 1998(102)ELT17(AP)
Author: R. Bayapu Reddy
Bench: R. Bayapu Reddy
JUDGMENT R. Bayapu Reddy, J.
1. These two writ appeals are filed by the same appellants against the common orders dated 16-3-1995 passed by the learned Single Judge in Writ Petitions Nos : 11849 of 1993 and 11848 of 1993 respectively.
2. The respondent in the present writ appeals, which is M/s. ITC Ltd., ILTD Division, is the petitioner and the appellants herein, who are (1) the Deputy Chief Controller of Imports and Exports, Hyderabad, (2) the Joint Chief Controller of Imports and Exports, Bangalore and (3) the Director General of Foreign Trade, New Delhi, are the respondents in the above said writ petitions. The writ petitions were filed for issue of writs to quash the proceedings of the Deputy Chief Controller of Imports and Exports, Hyderabad (first appellant herein) dated 9-2-1993 and 3-2-1993 and to direct the appellants herein to grant the Special REP Entitlement Certificate in terms of the applications made by him. The respondent in the present appeals, who is the petitioner in both the writ petitions, is engaged in the manufacture and export of "unmanufactured tobacco". For the purpose of exporting such "unmanufactured tobacco", the petitioner had to import corrugated fibre board boxes of specified quality from foreign countries. By virtue of the import and export policy for the period from April, 1990 to March, 1993, if any material is imported for the purpose of manufacture and export of any commodity after adding value, no duty is chargeable on the import of such products. The importer had, however, to apply for Advance Licence which would also mention the resultant product in Part-E of Duty Exemption Entitlement Certificate Book and the Export Obligation in terms of the FOB value of the export and condition sheet attached to the licence mentions the export obligation in terms of quantity of unmanufactured tobacco.
3. Chapter XIX of the Policy Book deals with the duty exemption scheme. The object of the scheme is to make available to the registered exporters the necessary inputs needed for export production at international prices without payment of customs duty so as to make exports competitive in international market. Under paragraph 231 of the said scheme, and advance licence can be granted to registered exporters for import of duty exempt materials in terms of the relevant customs notification for manufacture and export of resultant products or to replenish the materials which have gone into the production of the resultant product already exported in anticipation of the Advance Licence. Paragraph 239 require an importer to execute a bond / legal undertaking to the effect that before clearance of the first consignment of the import, the licence holder shall execute a bond with requisite value of bank guarantee or legal undertaking as per the procedure laid down in Chapter XIX of the Hand Book. After the importer has completed the export of the value added product, he would be eligible to apply for REP licence. After completion of the export the licensing authority would be required to redeem the bond/legal undertaking and at that time he shall issue an Entitlement Certificate to the licence holder indicating the REP entitlement. The licence holder will subsequently have to prefer his application for REP licence on the basis of such Entitlement Certificate within the specified period. When once an exporter obtains the REP licence, the said licence is freely transferable in the market for premium.
4. In the first case relating to Writ Petition No. 11849 of 1993 (corresponding to Writ Appeal No. 1041 of 1995), the petitioner had applied for Advance Licence on 27-8-1990 for the import of 20160 Corrugated Fibre Board Boxes for the purpose of packing and exporting "unmanufactured tobacco The CIF value of those boxes was Rs. 54,00,000/-. It was also stated in the application that the total quantity to be exported was 40,32,000 Kgs of unmanufactured tobacco and the FOB value of the same was Rs. 8,06,40,000/-. On the basis of such application made by the petitioner, the first appellant granted Advance Licence on 7-9-1990 for importing 20,160 numbers of Corrugated Fibre Board Boxes. The said advance licence was granted subject to export obligation conditions incorporated in the sheet attached to the said licence. After the said licence was issued, the respondent herein imported 20,160 Corrugated Fibre Board Boxes. Even though the export obligation in terms of quantity was fixed at 40,32,000 Kgs., the respondent actually exported only 38,61,489 Kgs. filled in all the 20,160 imported Corrugated Fibre Board Boxes. The shortfall in terms of quantity of the export of unmanufactured tobacco was, therefore, to a tune of 1,70,511 Kgs. which amounts to 2.3% shortfall. As far as the value is concerned, even though the export obligation in terms of rupees was to a tune of Rs. 8,06,40,000/-, the actual value of the exports achieved by the respondent was to a tune of Rs. 30,40,13,000/-. Subsequently, the respondent, after completing the export of the commodities, put in an application on 28-11-1991 for redemption of legal undertaking and the customs authority issued 'no objection certificate', which was submitted to the authorities on 20-2-1992. The legal undertaking was redeemed on 11-6-1992. Thereafter, the respondent made an application on 20-7-1992 to the first respondent for grant of Entitlement Certificate under Special REP facility contained in paragraph 244 of the Policy Book. But the first appellant passed the impugned orders dated 9-2-1993 rejecting such request for grant of Special REP Entitlement Certificate stating that such request cannot be considered. Questioning the said orders, Writ Petition 11849 of 1993 was filed.
5. In the second case relating to Writ Petition No. 11848 of 1993 (corresponding to Writ Appeal No. 1591 of 1995), the respondent herein had applied for grant of Advance Licence on 23-1-1991 for the import of 35,280 Corrugated Fibre Board Boxes for the purpose of exporting unmanufactured tobacco. The Advance Licence was granted on 27-2-1991. Legal undertaking to comply the conditions of licence was furnished on 28-3-1991. Even though the Advance Licence was issued for importing 35,280 Corrugated Fibre Board Boxes, the respondent had actually availed of such facility only to the extent of 34,011 Corrugated Fibre Board Boxes which were imported. In this case, the export obligation in terms of value was Rs. 14,11,20,000/-. But the respondent exported unmanufactured tobacco of the value of Rs. 52,13,79,622/-. The export obligation in terms of quantity was 68,02,200 Kgs. of unmanufactured tobacco. But the respondent had actually exported only 65,69,490 Kgs. of unmanufactured tobacco. The shortfall in terms of quantity was, therefore, to a tune of 2,32,710 Kgs. which amounts to about which amounts to about 2.3% shortfall. In this case also all the imported Corrugated Fibre Board Boxes of 34011 numbers were utilised for exporting the unmanufactured tobacco. In this case, the legal undertaking was, however, not redeemed. The respondent's application dated 13-8-1992 made to the first appellant for issuance of entitlement certificate under Special REP facility was rejected by the impugned orders dated 3-2-1993 stating that such request cannot be considered. Questioning the said orders, the respondent herein filed Writ Petition No. 11848 of 1993.
6. Both the above said writ petitions were heard together and by the impugned common orders dated 16-3-1995 the learned Single Judge allowed both the writ petitions setting aside the impugned orders therein, holding that the writ petitioner (respondent herein) did not violate any of the conditions of licence in both the cases and as such, he is entitled for issuance of Special REP Entitlement Certificate as sought for by him. While allowing both the writ petitions, the following reliefs were granted to the respondent herein :
"1. The legal undertaking furnished by the petitioner on 28-3-1991 pursuant to the advance licence granted on 27-2-1991, stands redeemed.
2. The applications made by the petitioner on 13-8-1992 and 20-7-1992 to the first respondent for Special REP entitlement certificates pertaining to the advance licences granted on 27-2-1991 and 7-9-1990 respectively, stand allowed and consequently, the first respondent is directed to issue Special REP entitlement certificates to the petitioner pursuant to the said applications; and
3. The petitioner shall be entitled for payment of premium amounts pursuant to the applications made by it on 30-7-1993 in terms of Circular No. 11/93 dated 5-5-1993."
7. Questioning the said findings given and orders passed by the learned Single Judge, the present writ appeals are filed by the appellants, who are respondents in the writ petitions. As the point involved for consideration in both the writ appeals is the same, they are heard together and are being disposed of by this common order.
8. The factual aspects are not disputed in both the cases. The respondent is an exporter of unmanufactured tobacco and for the purpose of exporting such tobacco, he had obtained advance licences for import of Corrugated Fibre Board Boxes. Customs duty on such import of Corrugated Fibre Board Boxes will be exempted subject to the fulfilment of export obligations both regarding the quantity as well as the value of the exported commodity. If such conditions are fulfilled, the respondent will be entitled to seek for grant of entitlement certificate under Special REP facility as contained in paragraph 244 of the policy book. In the first case relating to W.P. No. 11849/93, the respondents herein had imported 20,160 Corrugated Fibre Board Boxes for packing and exporting unmanufactured tobacco. The quantity of unmanufactured tobacco which was to be exported in those boxes was 40,32,200 Kgs. and the FOB value of the same saw Rs. 8,06,40,000/-. The respondent, however, exported only 38,61,489 Kgs of unmanufactured tobacco filled in all the said 20,160 boxes and the value of the said tobacco which was exported was Rs. 30,40,13,000/- as against the FOB value of Rs. 8,06,40,000/-. Therefore, there was a shortfall of 1,70,511 Kgs. of unmanufactured tobacco as per the agreed quantity even though the value of the exported tobacco was more than the agreed value. In the second case relating to W.P. No. : 11848/93, the respondent after obtaining advance licence, had actually imported 34,011 Corrugated Fibre Board Boxes and he had to export unmanufactured tobacco of 68,02,200 Kgs. and the FOB value of the tobacco to be thus exported was Rs. 14,11,20,000/-. But he actually exported unmanufactured tobacco of 65,69,490 kgs. and the value of the same was, however, Rs. 52,13,79,622/- as against the agreed FOB value of Rs. 14,11,20,000/-. Therefore, there was a shortfall in terms of quantity to a tune of 2,32,710 Kgs. even though the value of the exported commodity was more than the agreed value. In this case also all the said 34,011 boxes which were imported were fully utilised for exporting the unmanufactured tobacco. These facts are not disputed. It is also an admitted fact that in both the cases there was a specific clause inserted in Part E of the DEEC Book governing the import and export to the effect "each carton 200 Kgs. +/- 5%". The contention of the respondent herein in both the cases is that the basic object of the advance licensing system is to ensure that Indian manufacturers and business houses earn foreign exchange for the country by the promotion of exports and for that purpose to make available to them imported raw materials and inputs which are to be used by such manufacturers and exporters for the purpose of effecting the exports; that the basic concerns and objectives of the said scheme are that the imported inputs which are imported under the advance licence and utilised for the purpose of exporting the goods; that in both the present cases such basic objectives have been realised and fulfilled inasmuch as all the Corrugated Fibre Board Boxes which were imported were in fact utilised for exporting the unmanufactured tobacco, for which purpose the boxes were permitted to be imported and that the value of such exported unmanufactured tobacco was more than the value contemplated under the advance licences granted to him and that, therefore, there is no violation of any terms and conditions imposed under the advance licensing system and he is, therefore, entitled for grant of entitlement certificate under Special REP facility claiming the benefits of Special REP facility. To this extent, the contention of the respondent is not disputed. The dispute in both the cases relates only regarding the effect of the shortfall in the quantity of the unmanufactured tobacco that was exported and the said, shortfall is to an extent of 1,70,511 Kgs. in the first case and 2,32,710 Kgs. in the second case and it amounts to about 2.3% shortfall in each case.
9. Regarding such shortfall of the quantity of the exported tobacco, the contention of the respondent is that such shortfall is within the permissible limits as per the condition attached to the Advance Licence and that, therefore, in view of such shortfall, he cannot be deprived of the benefits of the Entitlement Certificate under Special REP facility. As already stated above, there was a specific clause inserted in Part E of the DEEC Book governing the import and export to the effect "each carton 200 Kgs. +/- 5%". The learned counsel for the respondent tries to interpret the said clause, which is part of the conditions imposed when the advance licences were granted for importing the boxes, that as it is specifically provided in the DEEC Book for a margin of "+/ -5%", such margin is to be read with reference to the overall quantity of the Tobacco exported by them and it permits deviation of weight to an extent of 5% of the quantity of the commodity that had to be exported and that when it is to be so understood, the total weight of the Tobacco exported by the respondent undisputedly comes to within 5% of the stipulated weight of the commodity in both the cases and as such the export obligation even with regard to the quantity of the exported commodity is fulfilled in both the cases. He also contends that it is unjust and arbitrary to construe the clause "+/ -5%" to each carton which is utilised for exporting the Tobacco and that the overall shortfall with reference to the overall quantity of the exported commodity alone has to be taken into consideration. Such contention put forward by the respondent, who is the petitioner in both the writ petitions, found favour with the learned Single Judge, who, therefore, allowed both the writ petitions holding that the export obligations were duly fulfilled inasmuch all the Corrugated Fibre Board Boxes which were imported, were utilised for exporting the unmanufactured tobacco and that the export obligations relating to quantity as well as value of the exported commodity were fulfilled in both the cases.
10. The learned counsel for the appellants herein, however, tries to contend that the clause "each carton 200 Kgs. +/- 5%" has reference to the quantity of the goods packed in each carton and not with reference to the over all weight of the quantity that is exported; that if the intention of the authorities in introducing such clause in the Advance Licences was only with reference to the overall quantity of the exported commodity, there would not have been any necessity to refer to "each carton 200 Kgs. +/- 5%" and they would have stated in the clause that the total quantity of the exported commodity shall be "+/- 5%". He, therefore, contends that the said clause has to be interpreted so as to mean that it refers to the quantity of the commodity that is packed in each carton and not to the weight of the total commodity that is exported. Such contention of the learned counsel for the appellants has to be accepted in view of the wording used in the said clause specifying that each carton must be packed with commodity weighing 200 Kgs. but giving a margin of "+/- 5%".
11. The Advance Licences in both the cases were issued with certain conditions along with DEEC Book. The conditions stipulated in the Licences were that the exporter should export 40,32,000 Kgs. with FOB value of Rs. 8,06,40,000/- in the first case and 68,02,200 Kgs. with FOB value of Rs. 14,11,20,000/-in the second case. These conditions were incorporated in DEEC Book Part-II which enables the exporter to get the details of the exports entered by the customs in the DEEC Book as proof of export fulfilment. In the DEEC Book issued by the Licensing Authority, which is part and parcel of the import licence, in Part II under the heading "Resultant Products", the description given is as follows :
"Unmanufactured Tobacco packed in imported cartons (Corrugated Fibre Board Boxes) of 20,160 Nos. (200 Kgs. per box '+/- 5%')."
In the same DEEC Book under the heading 'Quantity and Value' the quantity indicated is 40,32,000 Kgs. and value is Rs. 8,06,40,000/-. Similarly, terms and conditions as well as the quantity and value of the commodity concerned and number of cartons are mentioned in the second case also. From such terms and conditions and the clauses incorporated in the Advance Licences, the factor "+/- 5%" can be said to have been restricted only to the individual cartons and not to the overall quantity of the exported commodity. The exporter should fulfil the stipulated export obligation relating to cartons which were allowed to be imported and also relating to the exported unmanufactured tobacco regarding the quantity as well as the value mentioned in the DEEC Book. The variation of "+/- 5%" will be applicable for packing of export product in the imported cartons and not for the total quantity of the exported product. If one carton is packed, say with 195 Kgs, the other carton should be packed with 205 Kgs. of the exported product, keeping intact the total quantity of the unmanufactured tobacco as imposed by the export obligations. The concession of "+/- 5%" is, therefore, only for packing tobacco in individual carton and cannot be said to be with regard to the overall quantity of tobacco that is exported. Therefore, in the present cases, even though the respondent has fulfilled the export obligations regarding the utilisation of the imported cartons that were used for packing the exported unmanufactured tobacco, and also regarding the value of the exported commodity, he cannot be said to have fulfilled the export obligation regarding the quantity of the commodity to be exported. As already stated above, there was a shortfall of 1,70,511 Kgs. of the exported commodity in the first case and 2,32,710 Kgs. in the second case. In view of such shortfall in the quantity of the exported commodity, the first appellant had rejected the applications made by the respondent for grant of Entitlement Certificate to claim the Special REP benefits by passing the impugned orders dated 9-2-1993 and 3-2-1993 respectively in the two cases.
12. The question that next arises for consideration in this connection is whether the first appellant was justified in rejecting the applications made by the respondent for grant of Entitlement Certificate under Special REP facility in toto on ground that there was such shortfall in the quantity of exported commodity. As already stated above, as per the terms and conditions of the Advance Licences granted to the respondent and as per the export and import policy that was prevailing during the relevant period and as per the export obligations, the respondent, who was permitted to import 20,160 Corrugated Fibre Board Boxes in the first case and 34,011 Boxes in the second case, completely utilised the said boxes for exporting the unmanufactured tobacco. Therefore, it is not a case where such imported material, on which exemption from payment of customs duty was claimed, was not utilised either in full or in part or misutilised for domestic production. It is a case where the entire quantity of the imported material, viz., Corrugated Fibre Board Boxes, was completely utilised for packing the commodity which was imported. To that extent, the export obligation regarding the utilisation of the imported material is fully satisfied. Therefore, the provisions of Paragraph 366(1) of the Hand Book of Procedures - 1990-93, on which the learned counsel for the appellants has tried to rely upon, have no application to the present cases. The said provisions will apply only to a case where the imported material, which was intended to be utilised for exporting the commodities, is not utilised either in full or in part for exporting the commodities, or misutilised for domestic production. Inasmuch as all the Corrugated Fibre Board Boxes, which were imported, were in fact utilised for exporting the unmanufactured tobacco, the respondent cannot be said to have violated the Export Obligations with regard to the utilisation of the imported material. It is also admitted that the respondent has fully complied with the Export Obligations and the terms and conditions of Advance Licences granted to him regarding the value of the exported commodity. Even though the FOB value of the material to be exported was specified at Rs. 8,06,40,000/- in the first case, the actual value of the exported commodity in that case was to a tune of Rs. 30,40,13,000/-, which is more than three times of the specified value. Similarly in the second case, the FOB value of the commodity to be exported was specified at Rs. 14,11,20,000/-, whereas the actual value of the commodity exported by the respondent in that case was Rs. 52,13,79,622/-, which is also more than three times of the specified value. Therefore, the actual value of the exported commodity in both the cases has far exceeded the specified FOB value of such commodity as per the terms and conditions of the Advance Licences granted to the respondent. The respondent has, therefore, fully satisfied the conditions relating to the value of the exported commodity. In such a case, it is quite arbitrary and unjust and not in the interests of justice to deny the Special REP benefits in toto to the respondent on the sole ground that there was some shortfall in the quantity of the commodity that was actually exported, which was only to a tune of 2.3%, and that too when the value of the exported commodity was more than three times of the specified FOB value of the commodity.
13. The basis object of the Advance Licensing System and the Duty Exemption Scheme as contained in Chapter XIX of the Import-Export Policy 1990-93, is to ensure that Indian manufacturers and business people should earn foreign exchange for the country by the promotion of exports and it is for that purpose the facility of securing imported raw materials duty free was made available. The basic concern and objective of such scheme is that of the material imported under the advance licensing system is utilised in the production of goods for exports and the manufacturers shall earn the prescribed or stipulated amount of foreign exchange from the export of the finished goods. Such objectives are duly fulfilled in the present cases inasmuch as all the imported boxes were actually utilised for exporting the unmanufactured tobacco and the value of the exported commodity far exceeded the specified FOB value of such commodity. The only lapse on the part of the respondent in exporting the commodity is shortfall in the quantity of such exported commodity. The respondent cannot be said to be motivated for such shortfall, nor can it be said that such shortfall was on account of any gross negligence or indifference on the part of the respondent in sticking on to the terms and conditions of the export policy. Each Corrugated Box had to be filled with 200 Kgs. of 'unmanufactured tobacco' with a variation of '+/- 5%'. Such variation clause was introduced evidently on account of the fact that it may not always be possible to fill each Box with exact specified quantity of 200 Kgs. The weight of the 'unmanufactured tobacco' and the space that will be occupied by it when it is filled in a Corrugated Fibre Board Box depends upon various factors, such as, the quality, moisture contents, etc. of such Tobacco. The value of the tobacco that was exported was more than three times of the specified FOB value, evidently on account of the fact that the said Tobacco was of high quality, which resulted in earning foreign exchange to an extent more than expected. Under such circumstances, no mala fides can be attributed to the respondent on account of such shortfall in the weight of the commodity that was actually exported. Under those circumstances, it is not justificable on the part of the first appellant in refusing to grant the Entitlement Certificate for claiming the benefits of Special REP facility in toto.
14. But at the same time, inasmuch as the specified quantity of 'unmanufactured Tobacco' was not actually exported as per the terms and conditions of the Advance Licences granted to him and inasmuch as the shortfall in the quantity was not negligible as it was to a tune of 1,70,511 Kgs. in the first case and 2,32,710 Kgs. in the second case, the respondent cannot be granted the Entitlement Certificate for claiming the benefits of Special REP facility to the full extent. In view of all such facts and circumstances in present cases, it will be just and proper that such Special REP facility shall be proportionately reduced commensurate with the actual shortfall in the quantity of the exported commodity. As a matter of fact, the same policy of granting proportionate benefits when there was such a shortfall in the quantity of the exported commodity, was adopted by the first appellant on an earlier occasion by his proceedings No. TOB-27/Adv. Lic./UDES/AM'87/REP. II/HYD/401, dated 1-7-1988 with reference to the Advance Licence No. P/L/3149454, dated 23-7-1986 granted to the respondent regarding export of 'unmanufactured tobacco. It will be in the fitness of things and in the interests of justice to grant similar relief to the respondent by proportionately reducing the Special REP benefits commensurate with the shortfall in the quantity of the exported commodity and grant Entitlement Certificate to enable the respondent to claim proportionate benefits of Special REP facility.
15. Both the Writ Appeals are accordingly allowed in part, but without costs, and the orders of the learned Single Judge in both the writ petitions are accordingly modified and the first appellant is directed to grant the Entitlement Certificates to the respondent to enable him to claim the benefits of Special REP facility proportionate to the actual quantity of the commodity that was exported as indicated above.