M/s The Waterbase LimitedRep. by its General ManagerP.K. Ramachandran v. Union of IndiaRep. by Secretary to Government of IndiaMinistry of FinanceNew Delhi

IN THE HIGH COURT OF JUDICATURE AT MADRASDated 30..6..2008Coram:The Hon'ble Mr. Justice K.CHANDRUW.P. Nos. 19287 of 1996 and 5128 of 1997andW.P.M.P. No. 10572 of 2004 in W.P. No. 19287 of 1996M/s The Waterbase LimitedRep. by its General ManagerP.K. Ramachandran.. Petitioner in both W.Ps. vs.1.Union of IndiaRep. by Secretary to Government of IndiaMinistry of FinanceNew Delhi2.The Assistant Commissioner of Customs(APPS) Group – 7by Assistant Commissioner],Customs HouseChennai-1... Respondents in both W.Ps.W.P. No. 19287 of 1996 filed under Article 226 of the Constitutionof India seeking for issuance of writ of Mandamus directing thesecond respondent and his men, agents, servants, successors in hisoffice, not to invoke 51 bank guarantees furnished to the secondrespondent by the petitioners between the period of 04.02.1994 and21.12.1994 for the purpose the petitioners clearing items of importwhich were raw materials, components, consumables, packingmaterials, drawing samples and prototypes, etc. related to the 100%export oriented activity carried on by the petitioners pursuant tothe letter of indent issued by the first respondent in its letterNo. LI/ EOB/67/88/EO/24/88/Comp dated 06.9.1988.W.P. No. 5128 of 1997 filed under Article 226 of the Constitutionof India seeking for issuance of writ of Mandamus directing thefirst respondent and his men, agents, servants, successors torefund the sum of Rs. 11,42,191 which amount the second respondenthad received by on invocation of the bank guarantees that arefurnished to the petitioner and as set out herein.Bank guarantees issued by The State Bank of Hyderabad Madras-86. https://hcservices.ecourts.gov.in/hcservices/ -------------------------------------------------------------------S.No.Bank guarantee No.Date Amount-------------------------------------------------------------------A.56/94-9515.10.1994Rs. 43,595/-B.42/94-9501.10.1994Rs. 61,029/-c.48/94-9504.10.1994Rs. 61,613/-D.43/94-9501.10.1994Rs. 96,758/-E.49/94-9504.10.1994Rs. 1,25,078/-F.47/94-9504.10.1994Rs. 2,072/-G.57/94-9515.10.1994Rs. 1,16,103/-H.55/94-9515.10.1994Rs. 1,09,361/-I.54/94-9510.10.1994Rs. 16,863/-Bank guarantees issued by State Bank of India, Madras-1.J.LG/8/46804.02.1994Rs. 3,62,908/-K.LG/29/60005.04.1994Rs. 67,606/-L. LG/19/609404.08.1994Rs. 79,210/- -----------TotalRs.11,42,191/- -----------between the period of 04.02.1994 and 21.12.1994 for the purpose thepetitioners clearing items of import which were raw materials,components, consumables, packing materials, drawing samples andprototypes, etc. as the second respondent is entitled under law toinvoke such bank guarantees.For Petitioner: Mr. R. Thiagarajan, SC for Mr. S.A. RajanFor Respondents: Mr. J. Madanagopal, SCGSCC O M M O N O R D E RHeard the arguments of the learned counsel for the parties andperused the records.2.The prayer in W.P. No. 19287 of 1996 is for a directionto the second respondent not to invoke 51 Bank Guarantees furnishedby the petitioner between 04.02.1994 and 21.12.1994 for the purposeof clearing items of import which were raw materials, components,consumables, packing materials, drawing samples and prototypesrelated to 100% export oriented activity carried on by thepetitioners pursuant to the letter of indent issued by the firstrespondent.3.In W.P. No. 5128 of 1997, the prayer is for refund of Rs.11,42,191, which was given as a bank guarantee for the purposementioned in the earlier writ petition. https://hcservices.ecourts.gov.in/hcservices/

4.Mr. R. Thiagarajan, learned Senior Counsel appearing forthe petitioners submitted that the Government of India exemptedgoods specified in Notification No. 13 / Customs – 81 dated09.02.1981 when imported into India for the purpose of manufactureof articles for export out of India or for being used in connectionwith the production or packaging of goods for export out of Indiaby 100% export oriented undertaking as approved by the Board. Thetable appended to the Notification included 12 described goodswhich included raw materials also. 5.Subsequently, the said Notification was amended byNotification No. 188 / Customs - 93 dated 27.12.1993 when importedto India for the use in an integrated acquaculture farm inconnection with its operational requirement of the acquaculturefarm and for export of acquaculture products produced therefrom by100% export oriented undertaking approved by the Board. In thatnotification, the table furnished six items of goods eligible forexemption from payment of duty of excise. 6.Apart from these items, in paragraph 5 of the saidnotification, a non-obstante clause was also provided which is asfollows:-"notwithstanding anything contained in thisnotification the exemption contained herewith shallalso apply to those goods which on importation intoIndia are used for the purposes of production ofacquaculture products within hundred per centexport-oriented undertakings approved by the saidBoard of Approvals for hundred per cent export-oriented undertakings and such products (includingrejects, waste and scrap material arising in thecourse of production) even if not exported out ofIndia, are allowed to be sold in India, under and inaccordance with the Export and Import Policy, April1992, March 1997, published under the Ministry ofCommerce Public Notice No. 1-ITC(PN)/92-97, datedthe 31st March 1992, as amended from time to time,and in such quantity and subject to such otherlimitations and conditions as may be specified inthis behalf by the Development Commissioner, onpayment of duty of excise leviable on such articlesunder Section 3 of the Central Excises and Salt Act,1944 (1 of 1944)."7.Once again, by a Notification No. 196/94, similarexemption was given. In paragraph 9, it is stated as follows:-"(i)the notification No. 188-Customs/93 dated the27th December 1993 of the Government of India inthe Ministry of Finance, Department of Revenue https://hcservices.ecourts.gov.in/hcservices/ is hereby rescinded.(ii)Notwithstanding such rescission, anything doneor action taken under the notification sorescinded shall be deemed to have been done ortaken under the corresponding provisions ofthis notification."8.The petitioner established a factory at Ananthapuram forproducing culture of prawns with 100% export oriented. Itcommenced production during June / July 1993. The factory wasconfined to bonded area under the control of the Central Excise,Nellore (AP). Therefore, the goods produced can be taken out onlywith the written permission of the Central Excise authorities.When the petitioner wanted to rely upon the 1981 Notification forimporting certain goods, the respondent authorities placed relianceupon the 1993 Notification for importing the raw materials,components, consumables, packaging materials, drawing samples andprototypes demanded bank guarantee to the extent of 20% of theCustoms Duty. When it was pointed out that the 1993 Notificationdid not make any change in the earlier 1981 Notification in thedescription of the goods found in the table appended to theNotification and further, paragraph 5 provides for a non-obstanteclause and there is no doubt about the exemption available to theimported goods, they submitted that the subsequent Notification No.196/94 rescinded the 1993 Notification and, therefore, throughout,they are eligible for exemption for the goods imported by them inconnection with their business. However, the respondents did notagree to the same and wanted to interpret the 1993 notification asif there was a change in the 1981 Notification. According to therespondents under the 1993 Notification, duty on raw materials wasnot allowed and the benefit of 1993 Notification was not availableto them and since the bank guarantees furnished by the petitionerswere encashed, they have no case and are liable for the duty.9.Mr. R. Thiagarajan, learned Senior Counsel for thepetitioner contended that from 1981 to 1994, there is no change inthe policy of the Central Government and it is the authorities whoare giving an artificial meaning to the 1993 Notification. Herelied upon paragraph 5 of the 1993 Notification as well as the1994 Notification. The contention of the learned Senior Counselwas that the 1994 Notification uses the word 'rescind' means toabbrogate or to annul or to cancel as given by the Law Lexicon.10.He also placed reliance upon the judgment of the SupremeCourt in Johnson & Johnson Ltd. v. Commissioner of CentralExcise, Aurangabad [1997 (9) SCC 681] and placed reliance upon thefollowing passage found in paragraph 10 of the judgment.Para 10:"Mr Subba Rao contended that needle by itself couldhave fallen within Item 90.18 as an appliance but https://hcservices.ecourts.gov.in/hcservices/ the needle along with the suturing material couldnot be said to be a surgical appliance and would notbe attracted (sic covered) by the said item becausesuturing material stood specifically covered by Note3 of Chapter 30 and would, therefore, fall withinEntry 3005, namely, pharmaceutical goods notelsewhere specified and would be attracted by theresiduary clause in Item 3005.90. We find itdifficult to accept the contention urged on behalfof the Revenue. If the needle by itself fell withinEntry 90.18 as a surgical appliance we find itdifficult to conclude that if suturing material isaffixed thereto, it ceases to be a surgicalappliance and would fall within the term suturingmaterial in Note 3 of Chapter 30. Suturing materialby itself may have attracted that item but thecomposite item comprising the needle as well as thesuturing material appended thereto could not fallwithin the expression suturing material and wouldnot be outside the expression surgical appliances.At the relevant point of time these two wereseparately dealt with, needle simpliciter fallingwithin the Entry 90.18 and suturing materialsimpliciter falling within clause ‘(a)’ of Note 3 ofChapter 30 and consequently under Item 3005.90. Butwhen the suturing material and the needle form anintegrated single item used for surgical purposes itwould not be proper to adopt a narrow constructionto place it under the heading of suturing materialremoving it from the broader terminology of surgicalappliance under Item 90.18. It was possibly for thisreason that by the subsequent notifications theposition was made clear and the ambiguity wasremoved. We are, therefore, of the opinion that theitems produced by the appellant Company would fallwithin Entry 90.18 as the terminology surgicalappliances has a broader compass than theterminology suturing appliances of Chapter 30 of theExcise Tariff. As far as the decision in JainEngineering is concerned, the facts show that thenotification provided that the article specified inthe table annexed to the notification and fallingunder Heading 84.06 were exempt from payment ofcertain portion of customs duty. The table not onlymentions internal combustion piston engines formingthe subject-matter of Heading 84.06 but alsomentions “parts thereof”. It was construed that thenotification intended to grant exemption to theparts also. The Court, therefore, turned down theRevenue’s contention that the notification was https://hcservices.ecourts.gov.in/hcservices/ inapplicable to parts of the excisable itemmanufactured by the appellant. The Tribunalextracted para 7 of the judgment but merely statedthat in the facts of the case the ratio was notapplicable. We are afraid that the Tribunal failedto come to grips with the question. The submissionwas that the notification not only intended to grantexemption to internal combustion piston engines butalso to parts thereof and once this intention wasclear it was unreasonable to take a narrow view ofthe notification and to refuse to extend the benefitto the manufacturer. In the instant case also, weare of the opinion that the intention of theauthorities was to grant exemption to certain life-saving and sight-saving articles manufactured in thecountry and once this intention is clear from thesubsequent notifications issued under Section 5-A ofthe Act of 1995, we do not see any reason why weshould take a narrow view to confine the two itemsproduced by the appellants to Entry 3005.90 ratherthan place them in the wider connotation of surgicalappliances in Entry 90.18 of Chapter 90."11.The contentions raised by the learned counsel is well-founded. Even though in the counter affidavit dated 21.10.2002filed by the respondents, it is stated that Notification No. 196 of1994 is not retrospective, that argument is not correct because thepurpose of the said notification is to rescind the 1993Notification. Even otherwise, paragraph 5 of the 1994Notification provides for a non-obstante clause by which the rawmaterials are liable for exemption by the said Notification. Anharmonious reading of all the Notifications will show that thepetitioners are entitled for exemption for the period in question.12.In view of the same, the writ petitions will standallowed and the respondents are directed to refund the amountencashed by invoking the bank guarantees furnished by thepetitioner for import of the consignment in question covered by thetwo writ petitions. However, there will be no order as to costs.Connected Miscellaneous Petition is closed.Sd/-Asst. Registrar./true copy/Sub Asst. Registrar.gri https://hcservices.ecourts.gov.in/hcservices/ To1.The Secretary to Government of IndiaMinistry of FinanceNew Delhi2.The Assistant Commissioner of Customs(APPS) Group – 7by Assistant Commissioner]Chennai.+ 1 CC To Mr. S.A. Rajan, Advocate SR NO.33233Delivery Common Order in W.P. Nos. 19287 of 1996 & 5128 of 1997BK {CO}TP/8.7.08.