9911796707
TMI Blog2012 (10) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... f Northern India and Asia and was engaged in the business of making metallic goods, including defense equipment, machine tools, textile machinery, stainless steel utensils etc. for over two decades. 4. According to the petitioner by letter dated 2nd August 1981, an order was placed for the supply of stainless steel utensils and cutlery of special specifications of the value of Rs1,38,02,000/- by M/s V. K. Topline of 40, Thomas Street, Manchester, England and in order to execute the supply order the petitioners had applied to respondent no.2 for the grant of an 'advance license' under the Duty Exemption Scheme as detailed in the Revised Import Policy for the year 1981-82, for the import of 425 metric tons of stainless steel of the CIF value of the Rs.90, 86,560/-. The intent of the petitioners was to export the utensils made out of the imported stainless steel against foreign currency with a view to fulfill the export obligation arising out of the grant of the advance license. However, despite fulfilling all the requirements for the grant of the advance license, the respondents had issued an import license to the petitioner on 5th January, 1982 for only half the quantity applied fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exchange expected to be earned by the export of utensils manufactured out of 135.34 metric tons, could not exceed Rs 53.24 lakhs after providing for the statutory permissible wastage in the process of manufacture. 5. After the receipt of the imported material the petitioners commenced the process of manufacturing the stainless steel utensils as per the specifications given by the foreign importer. The petitioners had also sent a letter dated 1st October, 1982 to M/s V & K Topline, requesting them to arrange for the Letters of Credit and/or bank draft for about Rs. 8 lakhs to enable the petitioners to ship the goods as soon as possible. However, conflict had crept between the President and the Managing Directors of M/s V & K Topline, England, which was communicated to the petitioners by letter dated 15th October, 1982, due to which reason it was requested that the shipment of the goods be delayed by a few months, and assurance was also given stating that the commitment given by them would be fulfilled. Subsequently, however, by a letter dated 18th November, 1982 the order placed with the petitioner was cancelled and a request was made to dispose of the goods to some other party or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not exceed the amount payable on import of 180 metric tons or such lesser quantity to the extent of which exports were not affected. Thereafter, the petitioner wrote a letter dated 5th October, 1984 seeking a personal hearing with regard to the exparte order passed by respondent no.3 by letter dated 21st September, 1984. 7. However, an abeyance order dated 13th December, 1984 was issued by respondent no.3 under clause 8B of the Import (Control) Order 1955 by which the petitioner company was ordered to be "kept in abeyance" for a period of six months, and along with the said order a show cause notice dated 1st January, 1985 was also sent to the petitioner. 8. Despite the question of fulfillment/non fulfillment of the export obligation by the petitioner being not answered and the petitioners' representation dated 5th October, 1984 pending against the said ex-parte order, a demand dated 30th January, 1985 against the petitioner for a sum of Rs.88,55,966.58 with 18% interest was issued by respondent no.4, Collector of Customs, on the ground that the material imported by the petitioner has become dutiable, on account of non furnishing of any proof of fulfillment of the export ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ples of natural justice. The petitioners have urged that the that the expression "deemed export" by sale to foreign tourists against foreign exchange through recognized Reserve Bank of India agents, is covered under both the REP License, as well as, the advance duty free licenses, and that there is no distinction between the two as both relate to fulfillment of export obligation. According to the petitioners the fact that there was no distinction between REP Licenses and Advance Licenses is also clear from the fact that they are inter-changeable and in this regard reliance is placed on Para 79(10) on Pg. 20 of the Hand Book of Import Export Procedure (1981-1982). It is submitted that since the objective of the policy was to earn valuable foreign exchange for the country, which was a rare commodity at the time, there was no rational basis for discriminating in the matter of fulfilling export obligations in respect of Advance Licenses between physical exports and deemed exports, both of which fulfill the same objective, namely sale of goods against the payment of foreign exchange. The petitioner had also placed reliance on the decision of Supreme Court in the case of M/s Liberty Oil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent of each other as in the former the replenishment is made after the exports are effected, whereas, under the duty exemption scheme the advance licenses are issued to import duty free inputs required to manufacture the item to be exported to the overseas buyers, as per the export obligation fixed under the said scheme and the petitioner in the present case had specifically opted for the advance license under the duty exemption scheme. The respondent further contended that in any case duty exemption scheme was not available in the case of sale to foreign tourists and that it was available only for the physical export of goods outside the country, and thus the petitioners have failed to substantiate how they have fulfilled the export obligation attached to the advance license given to them. It is submitted that that since the license was granted to the petitioner under 1981-82 Import Policy under Para 149, Appendix 19, therefore, the conditions prescribed in Appendix 19 would be applicable. It was further urged that since the scheme of 'Special Imprest License', i.e. Import allowed outside the duty exemption Scheme, was applicable in the case of supplies to projects in India again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e particulars in respect of the same are entered in the DEEC by the custom authorities and after the completion of all the import and exports in DEEC Books are duly made, the DEEC certificates are then audited by the customs departments, and only then the bank guarantee/legal undertaking furnished by the exporter is redeemed. According to the respondents the petitioners failed to submit the DEEC books for the Import and Export, duly authenticated by the Customs, which is a basic requirement of duty-free advance license, as the petitioner was required to maintain proper accountability of the duty-free imported raw materials by way of physical export of the said utensils. The respondents have further alleged that the petitioners by selling the goods to foreign tourist have acted without any authority of law and has therefore mis-utilised the license, by availing premium on the imported raw materials, and escaping the customs duty imposable on the imported raw material and diverted the goods to the local market for making undue profits, and at the same time, defrauded the government by not fulfilling the export obligation, and thereby contravened the provisions of the IMPEX Act and Cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to earn foreign exchange worth 59,30,000/- by selling the steel utensils to the foreign tourists, and therefore, they had diligently discharged their export obligations, for which reason they should not be penalized on the illegal and discriminatory ground that "deemed exports" is not covered under the advance licenses. It is also urged that since sales were made to foreign tourists there was no requirement to maintain entries of the same in the DEEC Books and get them verified by the custom authorities, which was clarified by the respondents themselves by letter dated 28th January, 1985. In any case it is submitted that the petitioners had maintained detailed account of the imported raw material, as well as, its utilization by sale to foreign tourists. The interpretation given by the respondents to the relevant clauses, as well as, the procedure contained in the Import & Export Policy was denied by the petitioners and it was asserted that the respondents have merely tried to confuse the Court, with complete disregard to the intent of the said provisions, which was to earn foreign exchange as per export obligation. The allegation of availing huge premiums on imported raw material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia where such supplies are made under the procedure of international competitive bidding: (c) Supplies made in India to United Nations Organisations or under the Aid Programmes of United Nations and other multi-national agencies, at international prices and paid for in free foreign exchange; (d) Sales to foreign shipping companies, where payment is received in foreign exchange or in Indian Rupees obtained from the exchange of foreign currency; (e) Supplies of fitment items (of Capital Goods nature) to Indian shipyards building ocean-going ships; (f) Other supplies made in India against international competitive bidding where the payment is received in free foreign exchange. Sales to foreign Tourist 157. Sales to foreign tourists in respect of the following goods will qualify for import replenishment under the import policy for Registered Exporters: (a) Gem and Jewellery, (b) Handicrafts, (c) Leather goods, namely, footwear, handbags, belts, purses, etc. (d) Carpets, Rugs, and druggist and namdahs, (e) Cotton Sarees, Cotton dress materials, Cotton table linen, bed spreads, bed covers, Cotton stoles, scarves, shawls and Cotton furnishing material, (f) Ready-made garments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is issued for the import of inputs/raw materials without the payment of basic customs duty. Such imports are subject to the fulfillment of time bound export obligations. While on the other hand in cases of REP licenses, the registered exporter, first carries out the export of the manufactured products and then claims replenishment of the duty imposed on the import of raw material utilized in the manufacture of the exported products. Therefore, it is clear that the criterion in both the licenses is to claim duty free import of certain raw materials, which are utilized for the manufacture of exportable goods. 21. While in the case of Advance License the raw materials are imported duty free i.e. before the export is made, with regard to REP Licenses, reimbursement of the duty imposed on the imported goods is sought after the export is made, and this is where the difference between the two schemes ends. Since it is clear that these licenses were designed to encourage exports with a view to bring in valuable Foreign exchange into the country. Thus the substantive intent behind the two schemes is the same, even though the procedural technicalities might differ, due to the difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med exports referred to in Para 131 will be considered on par with other exports. Learned counsel for the respondents has tried to contend that Chapter 18 applies to Export Houses and as such it would be applicable to registered exporters only. However, such a plea defies any logic and is without any rationale, since regardless of whether it is an Export House or a Registered Exporter, the meaning of export cannot be changed to apply differently on either, especially since even in the case of Export Houses there are three licenses provided i.e. Advance License, REP License and Imprest License as is in the case of Registered Exports. Thus a careful consideration of all the provisions reveal that "deemed exports" are to be considered as exports, for the purposes of Advance Licenses as well. 23. It is also important to note that it was envisioned by the policy makers themselves that there may be certain anomalies or discrimination arising in the application of the said Policy, which in such cases would be ironed out/ and or remedied, for which Para 167 of the Import Policy 1981-82 gave the Government the power to appropriately deal with the Policy relaxations on a case to case basis. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng foreign exchange worth Rs. 53,24,000/-. 25. The petitioners had also maintained detail records of all the sales made to the foreign tourists, which was done through M/s Deepamani, Bombay, a registered foreign exchange dealer duly licensed by the Reserve Bank of India. The entire sale proceeds of the manufactured material in foreign exchange was, thereafter, collected by the said authorized dealer and put into scheduled banks. Thereafter the details of the amounts of foreign exchange, the currencies in which it was received by them and the persons and parties from which it was received with their passport numbers, etc. and other relevant details in the prescribed performa was duly furnished by the petitioners, while requesting the release of the bond executed by them. The petitioners have also appended with the writ petition the formal certificates from the respective bankers, of having received the corresponding foreign currency from M/s Deepamani, Bombay, giving the details of the currency, the amount and the rupee equivalent thereof. Thus, in the present case it is clear that the hardship suffered by the petitioner was bonafide, which was verified by the respondents as well, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 59, 50,072.45/- being earned by the petitioners. 28. In the facts and circumstances it is clear that the respondents have turned a blind eye to the genuine problem faced by the petitioners, the real cause for the termination of the export order, and the subsequent foreign exchange earned by the petitioner, beyond the export obligations attached to the advance license has not been denied. Thus solely on the technical ground that the petitioners had not sought the permission of the competent authority before affecting the deemed exports, and that the DEEC Books were not maintained, such strict mechanical application of the provisions of Import and Export Policy in the facts and circumstances cannot be accepted, when the substantive intent behind the issuance of the advance license has been achieved by the petitioners. In these circumstances imposition of any penalty on the petitioners will be iniquitous and not justifiable considering the objective of the policy. 29. It is the Courts duty to harmonize the procedure with the substantive intent of the legal provisions, in order to negate arbitrariness or discrimination. Procedures cannot negate the substantive intent of the poli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 982-83 the registered export houses were entitled for revalidation and endorsement of OGL items under Para 185(4) subject to the express limitation in Clause (7). The Supreme Court after careful consideration held that Para 185(4) was intended to provide certain incentives to the export houses which, upon grant of Imprest License, fulfill their countervailing obligations in the matter of export commitments. Thus the provision was a beneficial one. It was observed that even though clauses (4) and (7) on plain wording presented certain constructional difficulties, however, on a harmonious construction it was decided to hold that Para 185(4) of the policy would not be attracted to the case of Export Houses which are granted Imprest License, since a restrictive view would otherwise curtail the scope of the beneficial provision. 33. Even though the facts of the said case are completely different from the facts of the present case however, the fact that the Apex Court had resorted to a more harmonious construction of the provisions of the Import Policy, rather than a restrictive view on the ground of procedural compliance, is in principle very pertinent to the facts of the present case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual and legal basis. The respondents rather have admitted that the RBI had accepted the foreign exchange received from the sale to the tourist with full and complete account. The there is no doubt that the petitioners had indeed made the sale of the finished goods through the authorized export house, made from the duty free imported goods, to the foreign tourists, and sale was for foreign exchange. The respondents are rather unable to show factually and legally as to how the petitioners have defrauded the government or quantified any loss caused to the Government by the alleged mis-utilization of the advance license. 36. It is curious to note that order dated 30th January, 1985 imposes a duty of Rs. 88,55,966.58 with 18% interest on the petitioners, which has been challenged by the petitioners on the ground that it appears to have been calculated on the assumption that the petitioners had actually imported the total maximum licensed quantity of 212.8 Metric Tons instead of the actual import of 180 Metric Tons. However, despite specific assertion by the petitioners, the respondents have failed to explain the calculation or the basis on which the said amount was imposed on the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable to the petitioners. In A.P. Industrial Infrastructure Corporation Ltd and Anr v. Recovery Officer, Debts Recovery Tribunal, Bangalore & Ors; AIR 2004 AP 198, the Court had declined to dismiss the writ petition which was filed challenging the sale proclamation of property by the Debts Recovery Tribunal on the ground that alternative remedy of appeal under Section 20 of the Recovery of Debts Due to Banks Act was available to the petitioners, after 5 years of admission of writ petition by the High Court. The Supreme Court had held that there are at least two well recognized exceptions to the doctrine with regard to the exhaustion of statutory remedy. It was held that doctrine has no application in a case where impugned order has been made in violation of principles of natural justice. Moreover, in a case where the Court having admitted the writ petition and having put the parties to trial normally cannot refuse to exercise its jurisdiction and dismiss the writ petition on the ground of availability of an alternative remedy. In para 69 and 70 at page 211, the Court had held as under;- "69. We are not impressed by the submission. It is a true and very well established propositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally be rejected on the ground that an appeal lies to the authorities specified under an enactment. It needs no restatement at our hands that the Court has imposed a restraint in its own wisdom on its exercise of jurisdiction under Article 226 of the Constitution where the party invoking the jurisdiction has an adequate, alternative and efficacious remedy. The availability of alternative remedies does not oust the jurisdiction of this Court. (See for the proposition: Khurai Municipality v. Kamal Kumar, MANU/SC/0227/1964: [1965]2 SCR 653, Baburam v. Zilla Parishad, MANU/SC/0399/1968: [1969]1 SCR 518, Hirday Narain v. I.T. Officer, Bareilly, MANU/SC/0268/1970: [1970] 78 ITR 26(SC), and Ram and Shyam Company v. State of Haryana, MANU/SC/0017/1985: AIR 1985 SC 1147). 41. Similarly, in the case of Ram and Shyam Company v. State of Haryana, AIR 1985 SC 1147, it was held that an appeal in all cases cannot be said to provide in all situation an alternative effective remedy keeping aside the nice distinction between jurisdiction and merits. In Coffee Board, Bangalore v. Joint Commissioner Tax Officer, Madras and Anr, AIR 1971 SC 870, it was held in a case where demand of tax was not backed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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