Judgment · High Court · 2007
Case at a glance
Provisions considered
Key paragraphs
- Para 1919. For the fore-going reasons, we see no reason tointerfere with the order passed by the learned single Judge and theappeals fail and the same are dismissed. However, there is no orderas to costs. Sd/Asst. Registrar/true copy/Sub Asst. Registrar uskTo1. The Secretary Ministry of Finance…
Judgment
IN THE HIGH COURT OF JUDICATURE AT MADRASDated : 17.12.2007Coram :THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIANandTHE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMANWrit Appeal Nos.1384 to 1388 of 20031. Union of India rep.by its Secretary Ministry of Finance North Block New Delhi2. The Commissioner of Customs Custom House Chennai – 600 0013. The Director General of Foreign Trade, Ministry of Commerce Udyog Bhavan, New Delhi – 110 0114. The Joint Director General of Foreign Trade, No.38 & 39, Whites Road Royapettah Chennai – 600 014. ....Appellants in all W.As v.M/s.Tamilnadu Dadha PharmaceuticalsLimited, represented by its Managing DirectorChennai – 600 014. ... Respondent in all W.AsWrit Appeal Nos.1384 to 1388 of 2003 are filed against thecommon order dated 11.9.2000 passed by the singe Judge inW.P.Nos.7888 to 7892 of 2000. For appellants: Mr.V.T.Gopalan, Addl. Solicitor General assisted by Mr.P.Wilson Asst.
Solicitor GeneralFor Respondent: Mr.A.L.Somayaji, Sr.Counsel for Mr.A.Ramesh Kumar https://hcservices.ecourts.gov.in/hcservices/ JUDGMENTK.RAVIRAJA PANDIAN, J.The correctness of the common order of the learned singleJudge dated 11.9.2000 in allowing the writ petitions filed by therespondent herein in W.P.Nos.7888 to 7892 of 2000 seeking for therelief of writ of mandamus directing the respondents/appellantsherein to complete discharge of the bonds dated 28.12.1993,20.7.1994, 8.12.1994, 12.9.1994 and 16.11.1994 executed by the writpetitioner/respondent herein for the due performance of the exportobligation under licence bearing Nos.34358, 401670, 401265, 402523and 403095 respectively dated 23.12.1993, 30.6.1994, 28.4.1994,7.9.1994 and 26.10.1994 respectively, is put in issue in theseappeals2. The facts of the case go as follows: The respondent Company was manufacturing and exporting drugsby importing certain drugs meant for manufacturing the finishedformulation for export purpose.
During the year 1992, the Government of India announced its export and import policy. UnderChapter XVII of the Export and Import Policy, for the period from1992 to 1997, duty exemption schemes were framed and explained. Under clause 49, a scheme called "Value Based Advance LicenceScheme" has been introduced. The object of the said scheme was toprovide raw materials and components to exporters duty free. Underthe said licence, any inputs specified in the licence could beimported duty free for the CIF value stated in the licence. Thelicensee is obliged to export the manufactured drugs to the valueand quantity mentioned in the licence. 3. Under the Scheme, the respondent applied for and obtainedfive licences for import of inputs stated in the licence. Under thelicences, the respondent imported the inputs upto the permittedCIF value, manufactured resultant drugs and exported the same tothe quantity and FOB value prescribed in the licence within theperiod prescribed for.
4. The respondent as required by the appellant for the dueperformance of the export obligation has executed a legalundertaking, undertaking to indemnify the Department in case ofdefault in the export obligation with the condition that on theperformance of the export obligation, the legal agreement enteredinto by the respondent would be discharged and returned back. However, in spite of repeated requests for the reasons best knownthe appellant refused to discharge and return back the legalagreement. With these averments, the respondent filed the writpetition seeking for the relief as stated supra.5. The appellant defended the case by contending that the https://hcservices.ecourts.gov.in/hcservices/ respondent as per the policy ought to have imported individualinput under separate licences and should have exported individualresultant products to the quantity and value fixed by the licensingauthority.
They defaulted in obtaining single licence for severalinputs. For this reasons, they are not entitled to get the legalundertaking discharged.6. The learned single Judge after hearing the parties and onthe reasoning that the objection of the appellant Department thatthe respondent had not filed individual applications in respect ofeach input could not be legally sustained in the absence of anysuch requirement either under the notification or in the bondsexecuted by the respondent granted the relief as prayed for. 7. Learned counsel appearing for the appellant has contendedthat as per the Export and Import policy and procedure of the year1992-97, the respondent ought to have applied for separate advancelicence for each of the input and ought to have exported theprescribed quantity of resultant products. The respondent hasapplied for several inputs in one application. The respondent intheir application given the individual CIF value for the items tobe imported.
As a matter of export promotion, the Joint DirectorGeneral of Foreign Trade issued single licence for more than oneresultant product. It is incumbent upon the respondent to fulfillthe value addition for each resultant product. It was furtherargued that as per Paragraph No.49 of the Hand Book of Procedurerelevant to the year, there could be flexibility within the rangeof products that could be imported as against an exportableproduct, but an exporter could not mix up the raw material thatcould be imported as between different exportable products. It wasfurther contended that it was the duty of the authorities to grantindividual and independent licence for each exported product. Butin this case, a compendious licence has been issued for severalexportable products based on the application of the respondent. The respondent had not specified the value addition for eachexportable product in accordance with the standard input andoutput norms.
Hence, the respondent is not entitled to getdischarged its legal agreement.8. On the other hand, the learned counsel for the respondentcontended that the the value based advance licence has been grantedby the licensing authority. As per the licence, the respondent hasimported the inputs for the licence stated value and exported theresultant products for the FOB value stated in the licence andthereby fulfilled the export obligations within the period oftwelve months granted for such fulfillment. Several conditionswere attached with the licence. All the conditions of licence havebeen complied with. There is no such condition incorporated in thelicence as contended by the Department. Hence the appellant cannotcontend otherwise now. 9. We heard the argument of the learned counsel on either https://hcservices.ecourts.gov.in/hcservices/ side and perused the materials on record. 10. The only dispute in these cases is whether therespondent has complied with the conditions incorporated in thelicence and entitled to get the letter of undertaking discharged?11.
In order to resolve the issue we have to see whetherthe conditions incorporated in the licence and any other incidentalconditions thereto have been complied with by the respondent so asto claim the relief. 12. We have taken the licence No.401265 as a typicallicence. In the said licence, the respondent was permitted toimport the following items: “(1) VINCRISTINE SULPHATE (BULK DRUG), (2) CARBAMAZEPINE (BULK DRUG), (3) RIFAMPCIN (BULK DRUG) (4) DEXASMETHASONE SODIUM PHOSPHATE (BULK DRUG).” The approximate C.I.F. value for which the respondent waspermitted to import the drug is stated as Rs.351968/-. The limitingfactor for the purpose of clearance through Customs was stated tobe the value only and the period of shipment was stated to be validfor 12 months. The FOB value has been stated as Rs.993625equivalent to US $ 31796 and the export obligation period is 12months. The other conditions attached to the licence are asfollows: "The Licencees shall export to any country other thanAfrica, south west Africa, Iraq, Fiji and Federal Republic of Yugoslavia (serbia & Montenegro) the resultant product(s) of thequantities and value specified below within a period of 12 monthsfrom the date of issue of licence.
Resultant products Qty NUMBER FOB (Rs) FOB US$)(1) VINCRISTINE 25900 NUMBER 707,125. 22,628.00 SULPHATE INJ USP TMG/1ML(2) CARBANZEPINE 780000 NUMBER170,875. 5,468.00 TABS BP 200MG(3) RIFAMPIN CAPS 100000.00 HUNDRED IN 78,125. 2,500.00 USP 150MG(4) DEXAMETHASONE 10000 NUMBER 37,500. 1,200.00 SODIUM PHOSPHAT INJ USP 4MG/ML13. Further, the following conditions are also attached tothe licence: https://hcservices.ecourts.gov.in/hcservices/ (1) The foreign exchange remittance against thislicence will be governed by the guidelines issued by the Reserve Bank of India from time to time. (2) Denier of import and export should be same, in case the import item is Natural/Manmade fibre. (3) Export will be subject to Export Policy inforce. (4) For sensitive items customs to carry outnecessary checks. (5) The licensee shall deliver or cause to bedelivered to this office within 30 days from the date ofexpiry of the export obligation period stated abovedocuments as prescribed in para 126 of hand book 1992-97from time to time as evidence to prove fulfillment ofexport obligation imposed on this licence.
(A) no import of any consignment against thislicence shall be allowed to be cleared by the customsauthorities covered unless a Legal Undertaking/Bondbacked by Bank Guarantee for a value equivalent to oneand half times the customs duty saved (para 118 of HandBook 1992-97) is executed by the licensee( and thesupporting manufacturer M/s... (which ever is necessary)with this office in the form prescribed in Appendix-XXXIV of the Hand Book of import export procedure 1992-97 and endorsement of that effect is made by this officeon the import part of the DEEC issued along with thislicence. The Licence for any extension that may begranted by this office on request from the licensee. (A) No import of any consignment against thislicence shall be allowed clearance by the customsauthority concerned unless a LEGAL-UNDERTAKING in theform prescribed in appendix-XXXIV of the hand book ofimport export procedure 1992-97 is executed by thisoffice and endorsement to that effect is made by thisoffice on the import part of the DEEC along with thislicence.
(7) The exempt goods imported against thislicence shall only be utilised in accordance with theprovision given in chapter-19 of the import exportpolicy 1992-97 and the concerned customs notificationincorporated therein. (8) In the event of the licensee failing to (A)fulfill the export obligation within the prescribed timelimit stipulated above and or (8) to produce theprescribed documents information with in the 30 daysafter the expiry of the export obligation period theBOND/LUT agreement conditions shall be enforced and thelicensee shall be liable to the different follow-up, penal actions prescribed in the import export policy andhand book of procedures 1992-97. The licensee shall also https://hcservices.ecourts.gov.in/hcservices/ pay without demur to the customs authority concernedduty on the proportionated quantity of goodscorresponding to the products not exported. Any shortfall will also be liable to the adjustment from anyapplication for licence pending in this office orreceived in future.
(9) The licence holder shall send quarterlyreport to this office giving details of import madeagainst this licence goods manufactured and the goodsexported in discharge of the export obligation on thislicence. (10) The licence holder shall maintain a true andproper account of consumption and utilisation ofimported goods as required in terms of para 130 of the Hand book 1992-97.(11) The action in clause 11 shall be withoutprejudice to any other action that may be taken againstthe licence under the foreign trade (development andregulation) act, 1992.(13) The CIF value of Import Item No.(1) i.e.,LEATHER ACCESSORIES not exceed 25% of the FOB value ofexports. (14) The CIF value of Import Item NO.(2) i.e.,CONSUMABLES restricted to percentage as specified in thefoot note against the serial NO...... of the normspecified. (15) The CIF value of import of Item No.(3) i.e.,LEATHER CHEMCIALS items should not exceed 12% of the FOBvalue of export.
(16) Interchangeability of CIF value of ItemNO.1,2, and 3 are not (repeat not) allowed(17). (1) The individual CIF value of all itemsof imports bearing Customs duty (Basic and auxillary)from zero to 10%.(17). (2) The individual CIF value of any item ofimport which constitutes upto 2% by weight/quantity inan export product shall not (repeat not) be utilised forimport of other items permitted in this licence. (18) The C.I.F. Value of Sensitive items shallnot be utilised for any other items. (19) In terms of para 109(C) of handbook ofprocedures 1992-97, the exporter shall account theimport of sensitive items allowed under this licence intheir DEEC book Part II and get attested by customsauthority. (20) This Licence is issued subject to theconditions laid under the footnote/General note givenunder the Sl.No. 0 of Product Group CHEMICALS & ALLIEDPRODUCTS of the Imports & Exports Procedures 1992-1999(Vol-II)". https://hcservices.ecourts.gov.in/hcservices/
The respondent was issued with Duty ExemptionEntitlement Certificate in which also the materials importedagainst the licence No.401265 dated 28.4.1994 are specified under Part C as stated in the licence. The Duty Exemption EntitlementCertificate further stated that the materials stated would beeligible for exemption from import duty subject to the conditionsspecified in the Notification of the Government of India, Ministryof Finance, Department of Revenue and Banking No.203/92- Cus dated19.5.1992. It is also stated therein that the legal agreement forone and half times of the customs duty saved has been executed bythe respondent. As seen from Part 'D' of the Duty ExemptionEntitlement Certificate, the respondent imported 200Kgs of Carbamazepine B.P. 88 under Bill of Entry No.6615 dated 9.2.1995 tothe C.I.F. Value of Rs.331275 assessable value of Rs.334588/- andcleared the same on 1.3.1995.
The Notification No.203/92 Customs, dated 19-5-1992referred to in the Duty Exemption Entitlement Certificate isextracted below: “Notification No.203/92-Cus., dated 19-5-1992Value based advance licence. Scheme-goods importedagainstIn exercise of the powers conferred by sub-section (1)of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary inthe public interest so to do, hereby exempts materialsimported into India, against a Value based Advance Licence(hereinafter referred to as the said licence) issued on orbefore 31st March, 1995 in terms of para 49 of the Exportand Import Policy 1 April 1992 - 31 March 1997, from thewhole of the duty of customs leviable thereon which isspecified in the First Schedule to the Customs Tariff Act,1975 (51 of 1975) and from the whole of the additional dutyleviable thereon under section 3 of the said Customs TariffAct, subject to the following conditions, namely :- (i) that the materials imported are covered by a valuebased Duty Exemption Entitlement Certificate (hereinafterreferred to as the said certificate), issued by the Licensing Authority in the form specified in the Scheduleannexed to this notification; (ii) that the importer at the time of clearance of theimported materials- (a) produces proof of having executed a bond or a https://hcservices.ecourts.gov.in/hcservices/ legal undertaking before the Licensing Authority concerned, for complying with the conditions of this notification; and(b) makes a declaration before the AssistantCommissioner of Customs or Deputy Commissioner of Customsbinding himself to pay on demand an amount equal to theduty leviable but for the exemption, on the importedmaterials in respect of which the conditions specified inthis notification have not been complied with Provided that a bond or a legal undertaking and thedeclaration shall not be necessary in respect of importsmade after discharge of export obligation in full, asevidenced by endorsement of Licensing Authority in the saidcertificate; (iii) that the said licence and the said certificateare produced before "the proper officer of customs at thetime of clearance of imported goods out of customs control.
Provided that no such imported materials shall bepermitted clearance under this notification unless a debitentry has been made, in the said licence and the saidcertificate, by the proper officer of customs; (iv) that the imports and exports are undertaken fromsea ports at Bombay, Calcutta, Cochin, Kandia, Mangalore, Marmagoa, Madras, Nhava Sheva, Paradeep, Tuticorin and Visakhapatnam, or through any of the airports at Ahmedabad, Bangalore, Bombay, Calcutta, Delhi, Jaipur, Varanasi, Srinagar, Trivandrum, Hyderabad and Madras or through anyof the Inland Container Depots at Bangalore, Coimbatore, Delhi, New Gauhati Goods Shed, Moradabad, Ludhiana and Hyderabad. Provided that the Commissioner of Customs may byspecial order and subject to such conditions as may bespecified by him, permit imports and exports from any othersea port, airport, land customs station or inland containerdepot; (v) that the export obligation is discharged, withinthe period specified in the said certificate or within suchextended period as may be granted by the LicencingAuthority, by exporting goods manufactured in India inrespect of which - (a) no input stage credit is obtained under rule 56Aor 57A of the Central Excise Rules, 1944 (hereinafterreferred to as the said rules); (b) facility, under rule 191A or rule 191B as in https://hcservices.ecourts.gov.in/hcservices/ force immediately before the 1st October, 1994, or underrule 12(l)(b) or rule 13(l)(b) of the said rules, has notbeen availed; and (c) drawback has not been claimed either undersection 74 of the Customs Act, 1962 or Customs and CentralExcise Duties Drawback Rules, 1971; (vi) exempt materials shall not be disposed of orutilised in any manner, except for utilisation in dischargeof export obligation, before the export obligation underthe said licence has been discharged in full and exportproceeds realised.
Provided that Acetic Anhydride in respect of whichthe benefit of this notification is claimed shall beutilised by the importer in his own factory or in thefactory of any other manufacturer indicated in the saidcertificate even after discharge of export obligation andrealisation of export proceeds; (vii) where benefit of the notification is sought bya person other than licencee, such benefit shall be allowedagainst the said licence and the said certificate only ifit bears endorsement of transferability by the LicensingAuthority. Provided that benefit of this notification shall notbe allowed to a transferee of licence for import of AceticAnhydride except where the licence is endorsed fortransferability before 24th November, 1993, and istransferred to an actual user who undertakes to use the Acetic Anhydride in his own factory; (viii) Notwithstanding anything contained inconditions (vi) and (vii) above, the endorsement oftransferability or disposal of materials shall be allowedin respect of licences issued for the export of all kindsof writing instruments (including gift sets andrefills/nibs) on fulfilment of export obligation only infavour of manufacture of writing instruments.
Explanations. - In this notification, - (i) "Export and Import Policy April 1992 - March1997" means the Export and Import Policy 1 April 1992 -March 1997 published vide Public Notice of the Governmentof India in the Ministry of Commerce No. 1-ITC (PN) /92-97,dated the 31st March, 1992 as amended from time to time. https://hcservices.ecourts.gov.in/hcservices/ (ii) "Licensing Authority" means an authoritycompetent to grant a licence under Imports (Control) Order,1955 made under the Imports and Exports (Control) Act, 1947(18 of 1947). (iii) "Materials" means - (a) raw materials, components, intermediates, consumables, computer software and parts required formanufacture of export product. Provided that in the case of electronic goods and allkinds of writing instruments (including gift sets andrefills/nibs), all export items covered by one serialnumber in the Standard Input Output and Value Additionnorms as contained in Handbook of Procedures, 1992-97,Volume-11, published, vide Public Notice No.
121(PN)/92-97,dated the 31st March, 1993, of the Government of India inthe Ministry of Commerce, shall be deemed to be singleexport product. Provided further that nothing contained in thisnotification shall apply to import of Acetic Anhydrideagainst licences issued after 24th November, 1993, exceptwhere such licences together with the quantity required formanufacture of the export product mentioned therein havebeen issued with the approval of Advance LicensingCommittee in the office of the Director General of ForeignTrade; (b) spares and mandatory spares, within a value limitof 5% of the value of the licence issued upto the 31stMarch, 1993, which are required to be exported along withthe export product; and (c) packaging materials required for packing ofexport product...”
On a careful perusal, we are of the considered view thatneither the licence and the conditions attached thereto extractedabove nor the Duty Exemption Entitlement Certificate nor thenotification referred in the aforesaid Certificate required thatthe licensee shall apply individual licence in respect ofindividual input. The conditions attached thereto have been dulycomplied with by the respondent. As stated supra, the respondenthas imported Carbamazepine BP 88 200 kgs for the CIF value ofRs.3,31,275/-, assessable value of Rs.3,34,588/- and got it clearedfrom the Customs Authority. It is an undisputed fact that therespondent has exported the resultant product to the FOB value ofRs.9,93,625/- and the quantity stated in the licence and thusdischarged its export obligation, both value and quantitywise. https://hcservices.ecourts.gov.in/hcservices/
The reliance of the appellant on Clause 49 of ChapterVII of Duty Exemption Scheme for the relevant year was also to theeffect that under a Value based Advance Licence, any of the inputsspecified in the licence might be imported within the total CIFvalue indicated for those inputs, except inputs specified assensitive items. The sensitive items might be imported only to theextent of the quantity or value specified in the licence. However, flexibility shall be available for the import of sensitive items inexcess to the extent of 20 percent its quantity indicated in thelicence, which the over all CIF value of a value based advance. This flexibility shall not be admissible where the importrestriction for a sensitive item is only in terms of value.
In this case, we are not concerned with the sensitiveitem as the input imported by the respondent is admittedly not asensitive item. As per Clause 49, the licence was issued forimportation of the inputs specified in the licence by stating theCIF value for those inputs. It is true that the CIF value for eachof the inputs or items allowed to be imported has not been statedin the licence. In the absence of any such prescription as to theCIF value of each of the inputs for which licence was granted, andon the contrary, the CIF value has been given without reference toeach of the inputs, the appellant cannot now impose a newcondition, which is not available either in the licence or in thenotification. It is further contended that licence should have beengranted for each of the inputs separately by specifying the CIFvalue for import of the inputs. Admittedly, in this case, thelicence has been granted by the licensing authority, who is verywell aware of the exemption scheme. If the licensing authority wasof the view that the licence has been wrongly issued, he would haveimmediately taken remedial measures either to cancel the licenceor incorporate CIF value for each of the items allowed to beimported or granted independent licences for independent inputswith necessary details as argued. Having granted a compendiouslicence for several items of inputs without specifying the CIFvalue for each one of the items, allowed to be imported and theresultant products were also allowed to be exported, now it is notavailable to the appellant to contend otherwise, particularly, whenall other conditions incorporated in the licence and thenotification have ben complied with by the respondent. https://hcservices.ecourts.gov.in/hcservices/
For the fore-going reasons, we see no reason tointerfere with the order passed by the learned single Judge and theappeals fail and the same are dismissed. However, there is no orderas to costs. Sd/Asst. Registrar/true copy/Sub Asst. Registrar uskTo1. The Secretary Ministry of Finance Union of India North Block New Delhi2. The Commissioner of Customs Custom House Chennai – 600 0013. The Director General of Foreign Trade, Ministry of Commerce Udyog Bhavan, New Delhi – 110 0114. The Joint Director General of Foreign Trade, No.38 & 39, Whites Road Royapettah, Chennai – 600 014. +1cc to Mr.P.Wilson, Advocate Sr 74576+1cc to Mr.A.Ramesh Kumar, Advocate Sr 74414VRK (CO)km/4.1. W.A.Nos.1384 to 1388 of 2003
Questions this judgment answers
Which statutory provisions did this judgment involve?
Customs Act, 1962 — ss. 25, 74; Customs Tariff Act, 1975; Imports and Exports (Control) Act, 1947.
Which court decided this case, and when?
Madras High Court, on 17 Dec 2007. The bench was K RAVIRAJA PANDIAN.
Precedent status how later indexed judgments have treated this case
No known negative treatment found in the Courts & Cases corpus.
This is a result about the indexed corpus, not a finding that the judgment remains good law. Coverage may be incomplete.