9911796707
TMI Blog1992 (6) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... ired standard of mutilation, by the Customs Collector, Delhi and declaring the application of the same imports made through ICD. Same to be illegal, unconstitutional and void in law. (4) Quashing of the order dated 2-8-1991 and declaring the same to be illegal, unconstitutional and void in law (5) Not to operate the Public Notice No. 11788, dated 18-4-1988 or any other identical public notice issued by any Customs Collectorate to the imports of synthetic woollen rags/shoddy wool made through ICD, Sanganer and further directing the respondents to act in accordance with the guidelines laid down by the committee and further that the rags cut into two pieces which are beyond cleaning and repair would qualify the definition of old rags as given in clause (b) of para 29(ii)(b) of the Import & Export Policy as also by Clause (ii)(b) of the Open General Licence. 2. According to the petitioners the raw material required for the manufacturing process of finished goods by the factory of the petitioner companies consist of woollen rags, shoddy wool and synthetic rags. This material is generally imported under the Open General Licence from different European countries and the United States o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Sanganer in just 40 hours. As against this, the port at Bombay being the busiest port of this country is highly congested and clearance of goods in Bombay after off-loading from ship consumes a substantial time any where between one to two weeks, and thereafter it is required to be transported to Delhi by trains, while the trains are not promptly available for the transportation of goods and normally consumes not less than one month to reach the goods to Delhi where again about a fortnight is consumed in making the goods reach the factory premises possible. It has been further submitted that restricting importation of the said goods through Bombay port and Delhi ICD would also visit the petitioners with otherwise avoidable extra costs which were never in the contemplation of the petitioners. The goods imported through Delhi ICD in containers would continue to remain under the bond of the Customs Officers and it would necessitate an extra cost. The petitioners intend to import the said goods regularly through ICD Sanganer where, according to the petitioners, all facilities exist for clearance of the said goods, including the facilities for checking and pre-mutilation and warehous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the provisions of the policy as well as Open General Licence and puts sufficient checks on any import of the synthetic rags made contrary thereto. 4. The petitioners have come with the case that prior to the Import and Export Policy, 1988-91 different Collectors of Customs at different ports had issued various public notices laying down the standard of mutilation. This gave them unbridled powers to act in a most arbitrary fashion and adopt the policy of pick and choose. The representatives of the trade impressed upon the Government of India to issue a uniform policy with regard to the standard of required mutilation so that the business community was not harassed and there should be no scope for arbitrariness and corruption. With this end in view for the first time, in the policy 1988-91, specific clause was inserted stating that mutilation must conform to the requirement specified by the Customs Authorities in their notification. Despite the assurance given by the Government of India that such notification would be issued shortly, no such notification laying down the guidelines for the required standard of mutilation has so far been issued. The Import Policy uses the expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material imported by the petitioners that the report itself describes the goods to be used and having cuts at random virtually made for two pieces 1 to 5 inches away from groin line and vertically and horizontally in four pieces. It has been further submitted that the disputes of the present nature have arisen in the past also, and the withheld goods have been ordered to be released by various High Courts viz. Bombay, Gujarat, Madras and Andhra Pradesh. Experts opinions have been obtained about the true meaning of 'mutilation' and reference has been made to the biggest suppliers of such rags of the world viz. -M/s. Minneapolis Rag Stock Company in their letter dated 22nd April, 1987 addressed to M/s. Swastika Company, G.T. Road, Panipat (Haryana) that by rendering one out horizontally or vertically across completely mutilates the garments and that this method of mutilation had been accepted world over and all the exporters in U.S.A. were adopting this method. It has been further submitted that the labour cost in U.S.A. is very high and the cost involved in mutilating the garments as required by the authorities in India would be enormous and impracticable. It has been submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and materials at the other ports and if the same is allowed, there are great chances of misuse of policy because the Government felt that some unscrupulous importers are not importing completely mutilated synthetic/woollen rags and after clearance they are repairing these goods and reselling at considerably amount of profit. Further a committee consisting of officials of Ministry of Finance, Commerce and Textiles had examined this aspect and recommended that as adequate facility for mutilation are available at Delhi ICD, Bombay, these should allowed at these two ports only and not at other ports because of non-availability of mutilation facilities. These restrictions are within the powers of the Central Government under Sec. 3(3) of the Imports & Exports (Control) Act, 1947. The ICD, Sanganer has been started very recently before issue of I.T.C. Policy and, therefore, the Government could not have considered ICD, Sanganer and even otherwise there is no discrimination in allowing the import of synthetic rags through the two Ports, i.e. Delhi and Bombay only. It has been submitted that the facilities for accumulations and mutilation are readily available at Bombay and Delhi, whereas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restrict of impose conditions on the clearance whether for home consumption or for shipment abroad, or any goods or class of goods imported into India. 9. Para 221(2), Item No. 29(i) to (iv) of the Appendix 6 of the Import & Export Policy for 1990-93 and Item No. 17(iv) and 25 of Order No. 1/90/93 OGL 1/90 dated 30-3-1990 are reproduced as under :- Para 221(2): (2) Import of items covered by Appendices 1-B and 6, List 8, Part I, will be subject to all other conditions, except the A.U. condition, as contained in the relevant OGL orders. Item No. 29(i) to (iv): (29)(i) Import of Woollen Rags/shoddy wool/synthetic Rags will be allowed only when these are imported in completely pre-mutilated condition. (ii) Definition of Woollen Rags is as follows :- (a) 'New' - Waste woollen cloth whether woven or knitted which is left after a garment had been cut out including genuine tailor cutting piece ends, discarded pattern bunches and sample bits. (b) 'Old' - Range of woollen textile fabrics (including knitted and crocheted fabrics), which are required for manufacture of shoddy yarn and may consist of articles of furnishing or clothing or other clothing so worn out, soiled or torn as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he garment (at the back and also front where warranted) separating the garment into two pieces. Still another cut should extend diagonally from one shoulder to a bottom of the other side. It should be ensured that the cuts gun through the entire length of the garment and should be haphazard and in different directions. The cuts could also be vertical or horizontal at various places but resulting in a minimum of 6 pieces. In the case of children garments, a fewer cuts (not at the seam or stitch) may be accepted. All such cuts mentioned above should render the garments totally unserviceable as cloth or garment. (b) In the case of trousers and similar garments, there should be one cut across each leg standing left to right or right to left and at least one cut horizontally across so that these should result in a minimum of 7 separate pieces. The cuts should extend through the entire length or width of the garment. The cutting should not be at the seam or stitch and should be haphazard and in different directions making the cut pieces totally unserviceable as garment or cloth. (c) Any other woollen/sy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. The relevant OGL order has been issued on 30-3-1990. It has been placed on record in Swastika Woollen Industries Writ case No. 5125/1990 as Annexure/1 of the paper book. Entry No. 590 of Appendix 6 List 8 Part-1 of the Import and Export Policy (April 1990 to March, 1993) is as under :- Entry 590:- "Woollen rags/synthetics rags/shoddy wool in completely pre-mutilated form only. 12. Shri Sudhir Gupta sought to raise the controversy that the items imported in the cases at hand are not even rags what to walk of the same being in completely pre-mutilated condition. He has referred to the Words and Phrases of Central Excise and Customs by S.B. Garkar and submitted that as per the meaning of hosiery given therein, the imported items are as good as hosiery rather than being rags. He has placed reliance on Orient Woollen Textiles Mills v. Collector of Customs & Central Excise [1990 (50) E.L.T. 36]. In this case, which was decided by the Tribunal, the Collector had given a positive finding that the garments in two pieces could be re-stitched and altered to make them serviceable and, therefore, the items were held to be the one which were not beyond cleaning or repair and were not unser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is not a contract made between two parties in India but relates to offers for goods which is made with parties outside this country. Admittedly it was for the STC to import rags and by reason of a letter of authority that right was given to the petitioners for and on behalf of the STC. If that be the position, the person exporting the 'rags' would naturally give the meaning which is well-known in the trade in his own country and that is the most natural thing to do. If the Union Government desired any restriction on importation then express definition of the item should have been made. If for example, the import of a particular item otherwise well known to the trade was to be prohibited the item itself must contain some statutory prohibition or a special definition given, which of course would then be known to the party importing and also to the party exporting. In any other case, the ordinary meaning as known to the trade must be applied. This is not to accept the conclusion of the 1st Respondent (i.e. Collector of Customs, Bombay) that hosiery or garments discarded in richer countries and implying thereby that they are 'rags' only in richer countries and are 'second hand cloth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed in the gazette and widely circulated. The amendment made by the Bombay Collectorate on 14-2-1986 permitting 2 and 4 pieces, the Bombay public notice dated 2-5-1990 adopting the old public notice under new/current ITC and a further amendment permitting two pieces clearly shows that different views have been taken at different places and in Jain Shudh Vanaspati Ltd. v. Collector of Customs [1990 (49) E.L.T. 179], at para 18, it has been held that public notices are only administrative in nature and cannot affect the OGL order. In East India Commercial Co. Ltd., Calcutta v. Collector of Customs, Calcutta [1983 (13) E.L.T. 1342 (SC)], the distinction between notification and notice has been pointed out in para 33 at page 1358, as under :- "33. Firstly, the said notice does not purport to have been issued under Section 3(1) of the Act, whereas the orders referred to earlier, that is, notification Nos. 23-ITC/43 and 2-ITC/48 and similar others, were issued by the Central Government in exercise of the power conferred on it by sub-rule (3) of Rule 84 of the Defence of India Rules or Section 3(3) of the Act, as the case maybe. The Central Government itself makes a clear distinction in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be used only for the purpose for which they have been imported and, thus, there should not be any difficulty in releasing the goods. 18. In view of the details of the conditions of OGL as quoted above, the following questions have to be examined :- 1. What is meant by completely pre-mutilated condition? 2. Whether the requirements to which the mutilation must conform should be as specified by Customs authorities in the notification or as per the public notices issued by the Customs Department at Delhi, and who are to be regarded as Customs Authorities for the purpose and what is meant by notification. 3. Whether the import of Woollen rags/synthetic rags/shoddy wool is to be allowed through the two ports viz. Bombay and Delhi ICD only and not through ICD Sanganer and, as to whether the condition that the same can be imported through the two ports namely Delhi and Bombay ICD only is arbitrary, unreasonable and discriminatory. 19. In order to examine as what is meant by completely pre-mutilated condition, reference may be made to the Public Notice No. 11/88 referred to hereinabove. 20. As per condition 29 Appendix 6 of the Import & Export Policy 1990-93 when the completely pre- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tilation. Reference was made by Shri Sudhir Gupta to Section 222 of the Customs Act at page 386 and 387 of the Commentary on Customs Act by Mukherjee and, it has also been submitted that in the commentary of the aforesaid book there is reference to Customs authorities at Note No. 9. Reference was also made to Note 2 of the aforesaid book at page 54, under Section 11. Neither dictionaries can be treated as the dictator of statute nor commentators can confer the status of Customs authority on any officer. Now, the question arises that in a situation like this when no customs authorities as such can be identified as the Customs authorities and admittedly, when no such notification has been issued by any customs authority, whether the public notice issued by the Collector of Customs should be regarded as the notification issued by the Customs authorities for the purpose. Strictly speaking, the Collector of Customs cannot be brought to the status of Customs authorities in the absence of a clear provision in this regard, lest it would amount to substituting the words "Collector of Customs" instead of "Customs authorities" in condition No. 29(ii)(c). It cannot be presumed that the framers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is also a submission not without force. Looking to the totality of the matter and the span of controversy in this regard, I am of the opinion that for the purpose of determining as to whether the imported items are in completely pre-mutilated condition or not, the general sense of completely pre-mutilated condition' should be applied without insisting upon the plurality of the number of cuts, and the touch-stone on which the completely pre-mutilated condition is to be tested is that the woollen rags/shoddy wool and synthetic rags should be as under :- "RAGS SHOULD BE SO WORN OUT OR SOILED THAT IT MUST APPEAR TO BE BEYOND CLEANING OR REPAIR; IT SHOULD NOT BE CAPABLE OF BEING RE-USED AS A GARMENT WITHOUT INSISTING UPON PLURALITY OF NUMBER OF CUTS IT IS TO BE SEEN THAT THE ITEM SUFFERS FROM CUTS IN SUCH A WAY SO THAT IT NO MORE REMAINS CAPABLE OF BEING SERVICEABLE AS A GARMENT OR CLOTH." 21. This is the test which is to be applied by the respondents on the items which have been imported and are in question in the cases at hand. So far as the items which were shown to me by Shri Sudhir Gupta so as to demonstrate that they were not completely mutilated rags, Shri B.L. Sharma has sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icuously missing and it shows that for the purpose of import there is no question of selection of port. Sub-section (3) of Section 3 of the said Act does not cover the choice of ports for the goods which have been imported into India. This provision, therefore, covers a situation of post-importation. The submissions were also made with reference to the practical difficulties which the importers have to face in case the import is restricted through the selected ports only. It was also submitted that the importation of goods by ICD Sanganer was more convenient and cheaper as the Shipping Corporation of India has entered into an agreement with the Rajasthan Small Industries Corporation Ltd., Jaipur and they are generally responsible for unloading of the goods and loading it into trucks for the purpose of transporting the goods from Bombay to Sanganer in just 40 hours. I am not mentioning here the details of these submissions as the same have already been given in the earlier part of this judgment while narrating the case of the petitioner. Shri Sudhir Gupta has submitted that the ICD Sanganer at Jaipur was started vide notification dated 24th May, 1988. He has submitted that under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive machination, for effective control and in order to plug loopholes perpetrated by unscrupulous traders. In Calcutta case (supra) support has been taken from Abdul Aziz v. State of Maharashtra (AIR 1963 SC 1470) so as to uphold the restrictions to two particular ports only. True it is that the powers conferred under Section 3(1) is not restricted merely to prohibiting or restricting imports at the time of point of entry of goods, but extends also the subsequent disposal of the goods imported and it is not for the courts to decide the policy matters and, therefore, on the authority of the Calcutta High Court and applying the principle laid down in Abdul Aziz's case (supra) decided by the Supreme Court the power of restriction is there under Section 3 of the Act - but the mere clothing with the power is not the complete answer to the questions raised before me. Since power has to be exercised in accordance with the provisions of law and cannot be exercised in an arbitrary manner. The power has to be exercised and the orders are accordingly required to be issued for cogent and sound reasons which are germane to the object sought to be achieved. 25. The Madras High Court in Tandon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods through ICD, Sanganer is more convenient and cheaper to the importers. Shipping Corporation of India and Rajasthan Small Industries Corporation are jointly responsible for unloading of the goods and loading it into trucks engaged by them for the purpose of transporting the goods from Bombay are such glaring facts which cannot be lost sight of. The factual position pointed out by the petitioners that Bombay being the busiest port in the country is highly congested and clearance of goods in Bombay and after off-loading from the ship consumes a substantial time between one or two weeks and thereafter it is required to be transported from Delhi by trains while the trains are not promptly available for transportation and sufficiently long time of about one month is taken in such transportation and it takes further time to reach the factory premises, is also relevant. The facilities of clearance, pre-mutilation, warehousing etc. cannot be considered as impossible tasks. I have also considered the Schedule-A included in SBCW No. 5352/1991 R.A. Spinning Mills case, which is a chart showing comparative expenses incurred with respect to gateway port Bombay, dry port Delhi and ICD S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Swastika Woollen Industries, counsel for the petitioner pointed out that the total demurrage up to 1-5-1992 comes to Rs. 40.59 lacs. These figures were pointed out by him in an application dated 1-5-1992 filed before this Court and the orders thereon were passed on 13th May, 1992. In these circumstances, it was also argued that in the event of goods not being cleared for the reasons not attributable to the importers, the practice is to issue detention certificate by the Customs Collector and upon such certificate being issued the custodians have to consider the question of waiving the demurrage charges. It was also pointed out that such certificates have also been issued by the Customs Collector, Calcutta. In this view of the matter, when the writ petitions have been partly allowed and it is found that the imported items were detained by applying the standards of pre-mutilation, as contained in the Public Notice which has been declared to be illegal, the concerned Customs Collector may issue the detention certificates and thereupon the custodians may consider the question of waiving the amount of demurrage either wholly or partly depending upon the facts and circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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