TMI Blog1990 (10) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... own as concentrated extract for manufacture of Alcoholic Beverages at Appro. 60/61% V/V.' or more or less respectively. The issue in Writ Petition Nos. 3816 of 1987, 119,1802 and 2315 of 1988 is whether the Gin concentrate and Whisky concentrate imported by petitioners are or can be treated as 'Gin or Whisky' so as to attract higher rate of duty. In Writ Petition No. 119 of 1988 there is one more issue involved and that issue is whether wooden casks used for the import of Whisky concentrate are containers of permanent nature within the meaning of Notification No. 184/76 so as to be liable to duty. 3. Writ Petition No. 2518 of 1986 is governed by Import Trade Policy of 1983-84, Writ Petition No. 685 of 1986 is governed by 1984-85 Policy and other writ petitions are governed by 1985-88 Policy. The relevant provisions in this regard are, it is common ground, similar. For the sake of convenience while dealing with the rival contentions reference is proposed to be made to 1984-85 policy only. Writ Petition No. 119 of 1988 is governed by Customs Tariff Act, 1985-86 and Writ Petition Nos. 3816 of 1987 and 1802 and 2315 of 1988 by Customs Tariff Act, 1987-88. 4. In all cases the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rter (to whom REP licences were originally granted) in the products exported. According to Shri Chhagla this was not the function of the Customs Authorities. In any event questions such as whether the correct declaration of the raw-materials was given by the Registered Exporter, whether the REP licence was properly issued for the raw-materials actually used in the product exported and whether the REP licence was misused and if so what should be done about it all fall within the domain of the Licensing Authorities. In this context Shri Chhagla pointed out that the Customs Authorities at Bombay had themselves been clearing identical goods till 1986 without any objection. Similar goods are cleared even now by the Customs Authorities in Madras and Calcutta. A few consignments under the REP licences involved herein have also been cleared by the authorities in Bombay. It, therefore, does not lie in the mouth of the authorities now to say that the goods imported herein are not covered by 'Ethyl Alcohol' for which REP licences are admittedly issued. In support Shri Chhagla also invited the Court's attention to the adjudication orders dated 8th July 1983 in the case of Tilaknagar Distil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta J. in their respective Order/Judgment dated 20th October 1986 and 8th March 1990 in Writ Petition Nos. 2518 of 1986 and 2593 of 1988. 7. In order to appreciate rival contentions it is desirable to mention that REP licences in question were issued in favour of Registered Exporters under the relevant Import Policies. The licences thereunder are issued by the Licensing Authorities by way of replenishment of a percentage of raw-material, components or parts used by the Registered Exporters in the manufacture of the products they export. The petitioners are not Registered Exporters. They purchased the licences either direct from the Registered Exporter/s or from persons who in turn had purchased the same from the Registered Exporters. The licences though issued in the name of Registered Exporters, are not subject to "actual user" condition. Except for cases covered by paragraphs 136(2), 138, 185(2) and 186(1), these licences are freely transferable in full or part in favour of any other person. The licence holders or the transferees are entitled to import the goods covered by such licences. Thus, strictly speaking, it is not quite correct to say that the object of the Scheme is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcept items excluded in Column Nos. 4 and 5. The Registered Exporter is obliged to ensure that only those items are included in the list as are actually used as raw-materials/components/parts in the manufacture of product/s exported. The licensing authority has power to delete such item or items which on scrutiny are not found to be actually used by the Registered Exporter in the manufacture of the product/s exported. If at any time subsequent to the issue of REP licences, the licensing authority finds that the licence was issued in respect of an item or items which is/are not actually used as raw-materials/components/parts in the manufacture of product/s exported, the licence in question is liable to cancellation. If the licence has already been used by the time, irregularity or the mistake comes to the notice of the licensing authority, the licensing authority has the power to adjust the value of the licence in respect of that item against the import entitlement of the exporter in any other category without prejudice to any other action he may like to take in this behalf under the import and export contract obligation. 9. The first pertinent question is whether the goods import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it may be noted that whenever the Licensing Authorities are empowered to and consider it necessary to specify the kind of commodity with reference to the use to which it is to be put to, that is mentioned in the licence itself. But in these licences nothing of the kind is mentioned. Under the circumstances, it is not possible to accept the contention of the Customs Authorities that though the imported item is covered by the description "Ethyl Alcohol", it cannot be imported under these licences as it is not used as raw material in the product exported by the Registered Exporters. This becomes further clear when it is kept in view that all powers in this regard vest in the Licensing Authority who in terms of paragraph 8 of Appendix 17 is empowered to ensure that the REP licences are issued for the items which are used by the Registered Exporter in the manufacture of product/s they export. In case a licence is wrongly issued for an item, he has the power to cancel the licence. In case the licence has already been used before irregularity or mistake comes to his notice, the Licensing Authority can take appropriate steps against the Registered Exporter. All this, to our mind, shows th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply the correct law, it was necessary to examine the relevant provisions of Import Policy and the Customs Act to understand the correct law and that is what we have done. We also do not agree with Shri Bulchandani that the two decisions of this Court strongly relied upon by him should be taken to lay down the law in this regard. In Chawla Sons v. Union of India, Writ Petition No. 2518 of 1986 Jahagirdar J. was considering the question whether interim relief should or should not be granted. In this order dated 20th October 1986 by which he granted interim relief, he made certain observations which apparently support the department's case. It cannot, however, be ignored that his observations in that case were only tenantive. In SVA Udyog Viniyog Ltd. v. Union of India, Writ Petition No. 2593 of 1988, Mehta J. by his judgment dated 8th March 1990 held that almonds were dry fruits and not seeds inter alia observing that Chapter 12 dealt with different types of seeds and the note at the commencement of the Chapter to the effect that it does not apply to products of Heading No. 08.01 or 08.02 or to olvies (Chapter 7 or Chapter 20) made the position abundantly clear. His further ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sotms Calcutta (1987) 4 SCC 174 the Supreme Court again held that the goods imported wouldbebound inentry by the description of the goods in the REP licence. It is a different thing that a different scheme was under consideration in that case and the decision went against importer. 12. The learned Single Judge of our High Court took the view in the case of Shiv Shankar Tilakraj v. Union of India and Ors., 1987 (28) E.L.T. 342, that it was not for the Customs Authorities to find out whether the import licence issued by a competent authority was correctly given and whether the conditions precedent for the granting of import licence were satisfied in a particular case. The customs were not in law empowered to investigate into the correctness or otherwise of an import licence given by the appropriate authorities. In the case of Lokesh Chemical Works v. M.S. Mehta, Collector of Customs (Preventive) Bombay Ors., 1981 (8) E.L.T. 235 another learned Single Judge of our Court drew distinction between the functions of Customs Authorities and Licensing Authorities in this regard. He held that even if it was assumed that the licence could not have been issued as per the Policy in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly used by the Registered Exporter in the manufacture of product/s exported. The Licensing Authority could have also taken further appropriate steps in the event it was found that the licences issued were misused. No such steps were taken by the Licensing Authority. On the contrary it clarified in response to query from the Collector of Customs, Madras that the concentrated malt spirits were covered under Entry No. 156 of Appendix 3 (Ethyl Alcohol) in the Import and Export Policy for 1982-83 (Vol. I). The restriction about the concentrated beverages is also introduced for the first time in the Import and Export Policy for 1988-91. Having regard to the above facts and keeping in view the ratio of the decisions referred to by us above, we are satisfied that the goods imported herein answer the description of the goods covered in the REP licences. 14. This takes us to the next issue which arises in Writ Petition Nos. 3816 of 1987 and 119, 1802 and 2315 of 1988. That issue is whether the goods imported are Whisky or Gin classifiable under the sub-heading (2) of Heading 22.00 or sub-heading 30 or 50 of Heading 22.08 as contended by the Customs Authorities. The department's case appear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid Writ Petitions. The report of the Chief Chemist and the averments of Shri Pundir, Dy. Collector of Customs in Writ Petition No. 2031 of 1986 evidently support the petitioner's claim. The averment of the Chief Chemist in the affidavit in Writ Petition No. 2031 of 1986 referred to above to the effect that the goods imported are potable also, in our view, requires to be read in the context of earlier averment to the effect that it is not a raw material for the manufacture of Dyes and Dyes-intermediate. This becomes clear from his further averment that this product is used only by distilleries etc. Having, thus, regard to the undisputed factual position we are inclined to accept the claim of the petitioners that the concentrated Whisky or Gin imported herein is not consumable as such. These are sold to the distilleries where they undergo blending and colouring process which improves the colour and order of the products. Finally, these are bottled and enter the market as what is known as Whisky or Gin. From the fact that the distilleries have to pay excise duty on such a process, it can be assumed that the process is not just diluting the concentrated Whisky or Gin by adding water o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strength and bottle them thereafter. (viii) permits dated 11th April 1985 and 6th November, 1985 issued by the Assistant Commissioner of Prohibition and Excise to Maharashtra Distilleries Ltd. permitting to clear and transport the said goods from the Customs to their Distillery at Chikhalthana at Aurangabad under their escort and use it in the manufacture of Indian Made Foreign Liquor. (ix) Provisons of Sections 272 and 273 of the Indian Penal Code by which the sale of any goods which are injurious to health is punishable as a criminal offence." The note with the last report at page 136 is significant. It reads as under : "Note :- The strength of sample shows that it is overproof. Though this is whisky in a sense that it is potable spirit obtained by distillation of an acqueous extract of an infusion of malted Barley that has been fermented with strains of saccharomyces cerevisial, this is not whisky for retail sale as per I.S. 4449/1980 as per Maharashtra State Excise Rules. However, actual use may also be ascertained. In this connection attention is invited to T.C. No. 2249/21-2-86 on a similar point." 17. To determine the scope of the headings and sub-headings 22.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Part I and Part II for the purpose of Heading 22.09 in CCCN are found referred to in the Writ Petition No. 119 of 1988 in paragraph 4(xxiv)(xiv)(f). On reading the heading and the explanatory notes in the CCCN, it appears clear to us that the concentrated extracts which are imported herein and which are used in the manufacture of beverages would be covered by the term "compound alcoholic preparations (known as "concentrated extracts")" for the manufacture of beverages appearing in the sub-heading 3 of Heading 22.09 of the CCCN. We have already held in the earlier paragraphs that the goods imported are not and cannot be treated as Whisky, Gin or Brandy as is known in the trade. Accordingly, we hold that the goods imported herein are classifiable under Sub-heading 3 of Heading 22.09 for the purpose of Writ Petition No. 119 of 1988 and under Heading 22.08.10 for the purpose of other three writ petitions. There is no dispute that if the goods imported are classifiable under sub-heading 3 of Heading 22.09 and/or 22.08.l0, the goods are not liable to additional duty in view of the exemption Notification No. 146/76. 18. Needless to mention that in view of the Supreme Court's decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e packages or containers or the like in which the goods are packed are such as are normally used in the trade for packing such goods." Thus, the packages, containers or the like are exempt from duty under the notification provided all the three conditions referred to hereinabove are satisfied. The value of the containers is admittedly included in the value in which the goods contained therein are imported. There is no suggestion that the containers used herein are not of the kind as are normally or ordinarily used in the trade for packing the imported goods. In the circumstances, the first and second conditions are obviously satisfied. The dispute is limited to the third condition only. While the case of the Department is that the containers are strong enough to be suitable for repeated use, it is the case of the petitioners that that is not so. As stated earlier the contdsainers used for the goods are marketed by the distilleries in India to whom they have to be sold, the packing has to be in bottles. Assuming for the sake of the argument that the wooden caskets being of oak wood are strong, it cannot be accepted that such caskets are suitable for repeated use. The reason is tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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