TMI Blog1988 (5) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... 987. The goods should be allowed to be cleared on payment of such duties as so leviable as on 28-1-1988. The writ in the nature of certiorari do issue quashing the order of adjudication being No. 1/87, dated 7th December, 1987 passed by the Collector of Customs, Guntur including the show cause notice issued in this behalf. The writ in the nature of prohibition to be issued prohibiting the respondents from giving effect or taking any steps pursuant to the adjudicating proceeding and the show cause notice issued in this behalf and/or from taking any action against the petitioner or putting any impediment and/or obstruction in the matter of release of the palm kernel imported on the basis of the said agreement dated 10-6-1987. There will be no order as to costs." 2. This writ petition was moved by making the following prayers: - "It is, therefore, respectfully prayed as under : (a) that this Hon'ble Court may be pleased on direction the respondents to produce all the relevant records concerning and/or relating to the matters referred to above the other relevant records. (b) that this Hon'ble Court may be pleased to issue a declaration that palm kernel is a different and disti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rought into effect under the Gazette of India Extraordinary dated the 12th April, 1985. (2) The Import and Export Policy is being announced this time for the three years' period from the date of announcement till 31st March, 1988 in consonance with the Government's objection of bringing in continuity and stability of Import and Export Promotion policies. However, the Government reserves the right to make amendments/changes in this policy which may become necessary in public interest from time to time during the above period. Amendments etc., if any, will be notified, as usual, by means of public notices/amendment orders etc. issued by the Chief Controller of Imports and Exports from time to time. Provisions of this Policy Book are subject to such amendments or changes as and when notified. (3) Instructions and guidelines contained in this Book are applicable subject to such amendments/changes as may be made from time to time. (4) Although this policy is for three years' period, the licensing will continue to be on annual basis and all entitlements worked out accordingly, as hitherto. (5) Wherever the word "year" or "licensing year" appears in this policy, they should be con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07 (7) Soyabean Oil/Seeds 222.2000/423.2000 12.01/15.07 (8) Sunflower Oil; and 222.4000/423.6000 12.01/15.07 (9) Cotton Seed Oils 222.3000/423.3000 12.01/15.07 All other oils/seeds, whether edible or non-edible including vegetable fats, not specifically mentioned above or elsewhere in this policy, (but excluding Tung oil/China Wood oil and natural essential oils) will also be imported only by STC/Hindustan Vegetable Oils Corporation, New Delhi under these provisions." Item 1 of Appendix 6 is set out hereinbelow: "Raw materials, components and consumables (non-iron and steel items) other than those included in the Appendix 2,3 Part-A, 5 and 8." 7. Various other questions also arose in view of the subsequent event which we shall consider later on. The contention of the petitioners is that they are entitled to import the same as raw materials in view of the Import Trade Control Order No. 68/85-88, Open General Licence No. 1/87 dated 1st April, 1987 which provided as follows :- "Import Trade Control Orders: Import Trade Control Order No. 68/85-88 Open General Licence No. 1/87 dated 1st April, 1987. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e adhering mesocarp. The seeds are then dried by spreading them on concrete or wooden floors under shade for 2 days. Such seeds can be stored for 3-9 months at about 27°C without much reduction in validity. Palm Kernel: The FFB (Fresh Fruit Bunch) is brought to the factory sterilised by heating with steam for about 20 minutes and this helps in softening. Then fruits are separated using slotted steel drum and digested at 95°C and then passed through press to separate liquid component. The figre and nut pass to the depericarpet and separated. The nuts are shelled and kernel is obtained. Difference between Palm Kernel and Palm Seed : Palm seed is specially extracted from fruits as indicated under palm seed. Kernel is a product obtained after sterilisation, digestion at 95°C, pressing, decarping, shelling etc. The palm kernel will lose its viability due to above processes and cannot be used for germination". 10. On the 3rd February, 1987, one trader wrote a letter to the Chief Public Relations Officer, Customs House, Central Revenues Building, New Delhi, stating that they wanted to import "Palm Kernel". They wanted to know whether "Palm Kernel" would be assessed as "Palm Seeds" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customs, dated the 22nd January, 1977, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts palm seeds, rapeseeds, soyabean seeds, sun-flower seeds and ground-nut seeds, falling within Chapter 12 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), when imported into India, from the whole of the duty of customs leviable thereon which is specified in the said First Schedule." 15. On 27th July, 1987, a public notice was published by the Chief Controller of Imports and Exports to the following effect :- "Government of India Ministry of Commerce Import Trade Control Public Notice No. 205-IIC(PN)/85-88 New Delhi , Dated the 27th July, 1987 Subject: Import and Export Policy for April, 1985 - March, 1988. Attention is invited to the Import Export Policy for April, 1985 - March 1988, published under the Ministry of Commerce Public Notice No. I-IIC (PN)/85-88 dated the 12th April, 1985 as amended. The following amendment shall be made in the policy at appropriate places indicated below :- Sl.No. Page No. Reference Amendment Of Import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the palm kernel cargo in a bonded warehouse or in any other warehouse approved by the Customs Authorities till the final disposal of the case before the High Court, the said Assistant Collector passed an order on 18-10-1987 for allowing warehousing of the goods under Section 80 of the Customs Act on the writ petitioner/executing a general bond to that effect. The writ petitioner accordingly executed the bond. 21. The appeal court passed an order on the 2nd December, 1987 in the appeal referred to hereinabove preferred by the appellant herein. The appeal and the application were heard together and the records of proceedings before the first Trial Court were produced and considered. After hearing the respective submissions the appeal and the application were disposed of by the following order: "This appeal is against interim orders passed in the pending writ petition on the 28th July and the 3rd August, 1987. The learned Judge in the first court gave to liberty the petitioner to pay the full amount of Customs duty in cash, a fresh Bond for the entire value of the goods detained and thereafter to release the goods. It is stated on behalf of the respondents that the Collector of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mports and Exports (Control) Act, 1947. Accordingly, the following order was passed. "(i) I confiscate to Government the quantity of 11,570.570 MT of palm kernel, valued at U.S. $ 21,98,408.30 (Rs. 2,88,88,414/-) under Section 111(d) of the Customs Act, 1962 read with Section 3 (2) of the Import and Export Control Act, 1947 as amended. However, in terms of Section 125 of the Customs Act, 1962, I give the Importers an option to redeem the goods on payment of a fine of Rs. 90,00,000/- (Rupees Ninety lakhs only). The option should be exercised within one month of the date of this order. (ii) I also impose on the Importers, namely, M/s. Priyanka Overseas Pvt. Ltd., New Delhi, a personal penalty of Rs. 10,00,000/- (Rupees Ten Lakhs only) in terms of Section 112(a) of the Customs Act, 1962." On 17-12-1987 the petitioners exercised their option within the period specified by the Adjudicating Officer partly by taking delivery of 3935.364 MT valued at Rs. 10 crores on payment of personal penalty of Rs. 10 lakhs and on part payment of the redemption fine to the tune of Rs. 35 lakhs. It is to be pointed out that the balance amount of Rs. 55 lakhs roughly was paid by them later. It is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Customs. 25. The question before us is whether "Palm Kernel" comes under the expression "palm seeds", that is, whether it comes under Appendix 5 or Appendix 6. The contentions of the writ petitioners are that the "palm kernels" are not "palm seeds" and accordingly it is not a canalised article. According to the department "palm kernels" will come under "Palm Seeds" and it is a canalised article and no one except the authority referred to in the Appendix 5, can import the same. Alternatively, it is argued on behalf of the Writ Petition that in view of Import Control Order passed under Section 3 of the Imports and Exports (Control) Act, 1947 this being "raw material" it is allowed to be imported by the writ petitioner. On the other hand, according to the department, in any event, in view of the notification dated 27-7-1987 Item 5 of Appendix 5 Part B stands amended and the position is that any material from which oil can be extracted comes within Appendix 5 and therefore not allowed to be imported as raw material within the meaning of 1-4-1987 order. The amendment was to the following effect: "157-158 Appendix 5 Part V Item No. 5 Oils/Seeds The second parag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s therefrom which is specified in the first schedule. By notification dated 4-12-1987 the Customs Notification dated 1-7-1977 was amended and the benefit of exemption from the whole of the basic duty of customs was extended to "palm kernel" also. By notification dated 29-1-1988 the notification dated 1.7.1977 was rescinded. The result is that with effect from 29-1-1988 the exemption regarding basic customs duties in respect of the articles covered by the notification dated 1-7-1977 (as amended) the exemption was withdrawn. 31. Regarding the public notice dated 27-7-1987 it was submitted that the date of contract was 10-6-1987 regarding 35000 MT. The date of shipment was between 26th June and 25th July, 1987. The Shipment was made before. Under paragraph 79 of the Hand Book the date of importation is to be considered on the date of actual shipment and despatch of goods from supplying country and not the date of arrival of the goods at an Indian Port. 32. It was next submitted that the statutory notice cannot be amended by the public notice and accordingly the 1-4-1987 order, that is, the order passed under Section 3 of the Import Control Act cannot be changed by the public notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the question as to how it is to be categorised. He has drawn our attention to ' the entries 5 and 6 of Appendix 5 and submitted that the oil seeds specified therein are for extracting oil. Item 4 of it says "palm oil (all types, including palm ole in and other fractions)/palm seeds". Therefore, palm kernels which are also used for the purpose of extracting oil comes under entries 5 and 6 of Appendix 5. He has also drawn our attention to Clause 25 of the Import Policy and submitted that the petitioner should have asked for clarification. Clause 25 of the Policy provides as follows :- ''25.(1) In all other matters relating to Actual Users, and enquiries emanating from other persons, i.e. Export Houses, selling agents, traders, etc., as well as the interpretation of the policy proper and the procedure, the persons concerned may address the Chief Controller of Imports and Exports, New Delhi for necessary advice. Normally, clarification should be issued within a period of 15 days by the CCI E, New Delhi and Jt. CCI E at Bombay, Calcutta and Madras, where no inter-departmental consultation is required. D.G.T.D. and Department of Steel should also issue clarification normally with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of levy of excise duty or any other similar tax, the description of goods is popularly and commonly understood is to be taken as the description of the same goods in the relevant provisions of the statute or the Rules. The Supreme Court held that condensed milk and condensed skimmed milk are two different items of milk preparation. In common parlance milk means the full cream milk as milched from the cattle. It becomes skimmed milk when cream i.e. fat is extracted from Milk. Thereafter the skimmed milk can be called a form of preparation of milk as such. It was held that the Central Government when it mentioned condensed milk in the notification dated 1-3-70 it meant to exclude from exemption only condensed milk of full cream milk and not the condensed skimmed milk prepared from the skimmed milk for the purpose of levy of excise duty. Accordingly, it has held that the condensed skimmed milk was not excluded from exemption under the said notification. 42. In the case of Una Subrarao v. State of Orissa reported in (1987) 30 E.L.T.105, the question before the Division Bench of the Orissa High Court was whether sugar candy is sugar and therefore liable to sales tax un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the seeds so separated is cotton itself or part of the cotton. They are two distinct commercial goods, though before a manufacturing process the seeds might have been a part of the cotton itself. It was held that accordingly there was no warrant for the contention that cotton seed is not different from the cotton. 45. In the case of State of Madras v. Swastic Tobacco Factory reported in 17 Sales Tax Cases 306, it was held that raw tobacco and the chewing tobacco, which was by manufacturing process converted from raw tobacco, were not the same goods. The Supreme Court held that raw tobacco when converted by a process of manufacturing into chewing tobacco becomes different marketable product. There will be no comparison between the raw tobacco and the chewing tobacco in the matter of demand or even price. 46. In the case of State of Madras v. Bell Mark Tobacco Co. reported in (1967) 19 S.T.C. 129, it was held that the process of preparation of "Chewing tobacco" was as follows :- The respondents purchased raw tobacco and after sprinkling Jaggery or plain water on the bundles of tobacco, allowed the tobacco to ferment for some days. Heat was thereby generated and the tobacco w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstrued to have been permitted by virtue of the order of this Court that the items sought to be imported, do not come within the items relied upon against the additional licences. In that case, it was held that there would be no question of injustice by the final order. The goods were purchased by the petitioners after they were aware of the order and the judgment of the Supreme Court in the case of Raj Prakash Chemicals Ltd. as well as in the case of Indo Afghan Chamber of Commerce. Accordingly, the question of restitution did not arise. 50. The decision of the Supreme Court in the case of Prakash Cotton Mills Private Ltd. v. B. Sen Others, reported in AIR 1979 S.C. 675, was cited on behalf of the department on the question of interpretation of Section 15 of the Act. In that case, it was decided that it was the clear requirement of clause (b) of sub-section (1) of Section 15 of the Act that the rate of duty, rate of exchange and tariff valuation applicable to any imported goods should be the rate and valuation in force on the date on which the warehouse goods were actually removed from the warehouse. The other relevant provision is that contained in Section 68 of the Act whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted would be subject to inspection by the respondents who would be entitled to satisfy themselves whether they corresponded to the description of goods contained in the contract on which the writ petition was based and whether, if not, the petitioner-firm could be permitted to import, under OGL, the actual goods sought to be imported. With these preliminary clarifications, the Delhi High Court proceeded to discuss the three main questions posed before it. 52. The Delhi High Court accepted the petitioner's contention that the import of Stearin Fatty Acid under OGL was permissible prior to 11-11-1983. Various decisions were relied on the question of the principles of interpretation of entries and terms, such as, the one under consideration employed for description of goods commodities in taxing statutes. The Delhi High Court also referred to the decision in the case of Dunlop India Ltd. v. Union of India, reported in AIR 1977 SC 597, wherein it was held as follows: - "It is clear that meanings given to articles in a fiscal statute must be as people in trade and commerce, conversant with the subject, generally treat and understand them in the usual course. But once an article is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the Indo - Afghan case (AIR 1968 SC 718) and elaborated in the M.P. Sugar Mills' case (AIR 1979 SC 621). In addition, a decision of the Full Bench of the Delhi High Court in the case of Bansal Exports P. Ltd. v. Union of India, reported in AIR 1983 DEL 445, was also relied on. In that context, the Delhi High Court held as follows: "15. We are of opinion that the petitioner's right to import the goods in question under OGL did not cease on 11-11-1983. If, as we have held the original import policy announced for 1983-84 coupled with OGL 1/83 entitled the petitioner to import 'Stearin Fatty Acid' under OGL and, again, as we assume, if the petitioner firm had placed firm contracts with the third respondent for the import of these goods on 7.10.83 itself that right of import is no doubt liable to statutory changes but cannot be taken away to the petitioner's detriment except by another statutory instrument. In this case that has not been done, for on 11-11-1983 only a public notice has been issued. We do not see how a public notice such as one issued on 11-11-1983 which has not statutory force by itself and which is inconsistent with OGL 1/83 which has been issued under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made of plastics and that plastic torch is a distinct and different commodity commonly known in the market as torch. The Supreme Court referred to its followed earlier decisions and held as follows :- "By a catena of decisions it is settled law that an expression used in a taxing statute for describing a commodity must be given the meaning which is generally given to it by a person in the trade or in the market of commodities and should tie interpreted in the sense the person conversant with the subject-matter of statute and dealing with it would attributed to it." 57. In the case of Deputy Commissioner of Sales-tax v. A.B. Ismail, reported in AIR 1987 S.C. 1885 the facts of the case were as follows :- The goats and sheep underwent a process, namely, slaughtering and then came into existence as meat, hides and skin. The question was whether any manufacturing process was involved, the Court pointed out that - question whether 'goats and sheep' and 'mutton' are the same goods known to commercial circles and in common parlance. In this context it was observed that if a person goes to a butcher's shop and asks for mutton, he will not be given goats nor he will be satisfied with g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dity from dressed hides and skins with different physical properties), State of Madras v. Swastik Tobacco Factory (AIR 1966 S.C. 1000) (raw tobacco manufactured into chewing tobacco) and Ganesh Trading Co., Karnal v. State of Haryana (AIR 1974 S.C. 1362) (paddy dehusked into rice)...." It cannot be doubted that pineapple fruit when converted into slices does not lose its identity or becomes a new product. Both of them are known as Pineapple in the commercial circle as also in common parlance. That is not the case here." 58. Decision : The first question to be considered is whether "palm kernels" are "palm seeds". The principles of construction are settled. This shall be decided by ascertaining what is meant by these expressions by the people who deal with the same. We have quoted the relevant letters in this connection. From the letter of the Central Plantation Crops Research Institute dated 21st January 1987, it will be seen that two different processes have to be followed to obtain the "palm seeds" and "palm kernels". After specifying the same, they have pointed out the difference between the two. According to them, "palm seeds" are specially extracted from fruits as indicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another Notification dated 4th December 1987, such benefit was extended to the case of palm kernel also. From this it is quite clear that the department itself has treated palm kernel as different from palm seed. 62. Therefore, we are of the opinion that at the relevant time palm kernel was not a canalised item but that the same could be imported under Open General Licence. 63. The next point arises out of 27-7-87 Notification referred to above. By the said notification "any other material from which oil can be extracted" has been included in item 5 of Appendix 5 Part-B, i.e. it is made a "canalised" article. Therefore, no one can import any such article under open general licence from the date of the said notification coming into force. Admittedly, the goods were imported in October 1987, but it was in fact shipped before this notification came into force. It is to be remembered that by 1-4-87 notification, raw materials were allowed to be brought under Open General Licence as long as they were not covered by Appendices 2,3,5 and 8 of Import and Export Policy of 1985-86 as amended from time to time by issue of a public notice in the Official Gazette. We are unable to accept th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mportation of those goods do not fall within the mischief of 27-7-87 notification. In view of the import policy and the 1-4-87 notification, the Writ petitioners were entitled to import the same under Open General Licence and the position was not changed by the subsequent notification dated 27-7-87 because the goods were shipped before that though in fact brought into this country after such date. 66. The next question is what would be the rate of customs duty, if any, which shall be levied in respect of such importation which we have held to be valid and not being prohibited to be imported by any individual. In this case because of the strong stand taken by the Customs Authority that these were canalised goods, writ petitioners were not in a position to take delivery of the goods. They took delivery of a part, that is, 3000 M.T. by virtue of order of this Court only. The rest of the quantity imported is in bonded warehouse pursuant to the direction of the Court. It has been pointed out that the 1977 notification which grants exemption from customs duty in respect of certain articles, did nut include "Palm Kernels". Until 3-12-87 notification, which amended the 1977 notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not entitled to the exemption granted by a circular subsequent thereto, that is, December, 1987 Circular. We have relied on the basis of December, 1987 Circular to show that the Department has treated "Palm Kernel" different from palm seeds. On the same basis, the petitioners cannot be allowed to obtain any benefit which has been granted a long time after the date of actual importation. Accordingly, we hold that the writ petitioners shall pay such amount of duty at such rate as it prevailed in October, 1987. 68. The next question is with regard to the goods which have not yet been shipped, but which are the subject matter of the contract. It will be recalled that about 35,000 tonnes were sought to be imported under the contract. 69. In our opinion, it cannot be said that there was a valid O.G.L. in respect of the balance goods also. There was no shipping of any such articles before it was made a canalised item. It would be remembered that 1985-88 import policy expired on 31st March 1988. Therefore, if any shipping of palm kernel is made on any date thereafter that cannot be governed by O.G.L. of 1985-88. It cannot be said that O.G.L. would extend to the goods contracted for bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y are liable to pay duty. This amount of duty to be paid is to be ascertained and the said sum is to be adjusted against Rs. 90,00,000/- and Rs. 10,00,000/-respectively. The balance amount shall be held by them for a period of two months from this date. The writ petitioner shall be entitled to get delivery of the balance goods on payment of duty at the rate prevailing in October, 1987 or upon adjustment with the balance of the aforesaid month. But if they do not do so within a period of two months, then the respondents shall be entitled to proceed in accordance with law. We make it clear that the goods must be cleared by the Customs Authorities and allowed to be taken delivery of, within 72 hours from the time of depositing of the amount of duty in respect of the goods to be cleared along with payment of charges and expenses in accordance with law. 72. So far as the question of interest is concerned, in the facts and circumstances of this case, we are not inclined to grant any interest. 73. We also make it clear that in respect of the balance goods lying, the writ petitioner shall be entitled to clear the same at one time or from time to time. 74. Liberty to apply. 75. Le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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