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Responding to the said tender notice, the appellant, a partnership firm, through its managing partner, Mr. Manohar M. Kulkarni, an ex-army man, submitted its quotation for supply of thermocouple compensating cables and extension cables. The tender was accepted by RCF and by a purchase order dated 13th October, 1982, they agreed to purchase cables worth Rs. 17,49,000/- from the appellant.

4. In order to avail of customs duty exemption on the import of certain raw materials required in the manufacture of capital goods to be supplied to RCF, on 22nd November, 1982, the appellant applied to the Joint Chief Controller of Imports & Exports (for short `JCCI'), Bombay, for issuance of an import licence with duty exemption entitlement certificate etc. for import of raw materials free of duty or at a concessional rate of duty in terms of Import Policy Book for AM 83. According to the appellant, as they were not clear about the form on which they had to make the application, on the covering letter filed with the applications, with copies to the Advance Licensing Committee as well as to the Special Imprest Licensing Committee at New Delhi, a request was made to forward the said applications to the concerned cell so that an appropriate licence is issued for the aforesaid purpose.

5. On processing of the application, the office of JCCI, Bombay, vide their letter dated 30th November, 1982, called upon the appellant to furnish the essentiality certificate from RCF. Accordingly, the appellant obtained the essentiality certificate from the project authority i.e. RCF, to the effect that they have agreed to purchase goods valued at Rs. 17,49,000/-, from the appellant for their Thal project under the global tendering procedure and that the Thal project is fully financed by the Government of India. In the certificate issued by RCF, it was also stated that the appellant was eligible for availing concessional rate of import duty on the raw materials imported by them for manufacture of cables in terms of para 14 of Import Policy 1981-82. The appellant forwarded the said certificate to JCCI, Bombay. In spite of clear knowledge that the Thal project of RCF was fully financed by the Government of India, the Controller of Imports & Exports, Bombay issued a Special Imprest Licence (SIL), to the appellant on 30th May, 1983, under AM 84 policy, permitting the appellant to import listed raw materials, for approximate value of Rs.5,78,300/-; without payment of customs duty. However, the licence was subject to the following conditions:

7. Having thus, fulfilled the export obligation, the appellant approached the project authority, viz. RCF, for requisite endorsement on Duty Exemption Entitlement Certificate (for short `DEEC'). Initially RCF declined to make the endorsement, on the ground that the Thal Project was financed by the Government of India and not by organisations like the World Bank, OECF, ADB, etc. as contemplated under the Exemption Notification No.210/82 dated 10th September, 1982. However, later on, RCF made the requisite endorsement on the DEEC book on 2nd February, 1988 to the effect that the appellant had supplied goods valued at Rs.17,59,382/- during the period from 27th July, 1983 to 10th May, 1984.

"The appellants may have mis-comprehended the policy in force. But, they did not object when the special imprest licence under reference was granted to them under the deemed export category with specific export obligation with reference to 100% duty free imports. Since they accepted the conditions of the licence and also executed a bond to abide by the conditions of the licence which carried an export obligation, it was incumbent on them to complete formalities in support of their contention of having discharged export obligation notwithstanding that the imported goods were utilised for the execution of the project. The project they executed or supplied they made towards the execution of the RCF, Thal Project was not a project falling under the category of deemed exports. This project was not aided by IDA/IBRD. Their request for conversion of their supplies to RCF, Thal Project in the deemed category of exports was duly considered by the competent authority in the Import Trade Control Organization. Under letter dated 30.10.1985, their request was not considered as the supplies made by them to RCF, Thal Project were not covered under the category of deemed exports. They were advised to convert the special import licence into project import licence by paying the customs duty with penal interest thereon with the consent of Ministry of Finance. But they did not do so considering the fact that the appellants mis-understood the provisions of the policy in force and that there was no malafides on their part, I am inclined to take a lenient view."