Union of India (Uoi) and ors. Vs. Godrej Soaps (P) Ltd. and anr. - Court Judgment

Excerpt:
itc: am 78-79 - appendix 2, 3 & 4--canalised items unless specifically banned, can be imported under additional licenses; canalisation by itself is no impediment. hence palm kernel oil import valid. - s.p. bharucha, j.1 the respondents to this appeal (the original petitioners ) purchased 554860 metric tonnes of palm kernel fatty acid (now called 'the said acid') on high-seas basis from the m/s. dimexon. m/s. dimexon had imported the said acid on strength of an additional licence issued to it pursuant to the order of the supreme court dated 18th april, 1985 in civil appeal no. 1423 of 1984. union of india v. rajnikant brothers. the customs authorities at bombay refused to permit clearance of the said acid on the ground that canalised items could not be imported even under additional licence. the respondents, therefore, filed a writ petition in this court requiring the union of india and the customs authorities forthwith to permit clearance of the said acid. the petition came up for admission and interim relief before pendse, j., on 10th july, 1986. the learned judge issued a rule and directed the union of india and the customs authorities to clear the said acid within 4 days.2. this appeal, filed by the union of india and the customs authorities, impugns the order dated 10th july, 1986 in so far as it directs clearances of the said acid at the interim stage.3. the said acid was not a canalised item under the import policy 1978-79. it is a canalised item under the current import policy, i.e. the import policy 1985-88.4. the genesis of the dispute is briefly stated, this: diamond exporters (such as m/s. dimexon) had been denied export house certificates under the import policy 1978-79. they filed writ petition in this court and the delhi high court. the high court ruled that the ground upon which the export house certificates has been refused was untenable and directed the issued of such certificates as also the consequent additional licenses. while defining the right of such diamond exporters to import items under the additional licenses, the high courts took into account the import policy prevailing at the time of import5. the orders of the high courts were taken in appeal to the supreme court by the union of india. on 18th april, 1985 the supreme court delivered the judgment. thus was in rajnikant's case referred to above. it is a short judgment and read thus :'we have heard counsel for the parties and have gone through the judgments of the high courts of bombay and delhi. we are unable to find, in the facts and circumstances of the case any requirement of diversification of exports as a condition for the grant of export house certificates in the import policy for the year 1978-79. while confirming the high court's judgment quashing the order impugned in the writ petitions in the high court we direct the appellants to issue the necessary export house certificates for the year 1978-79. the export house certificates shall be granted within 3 months from this date. save and except items which are specifically banned under the prevalent import policy at the time of import, the respondents shall be entitled to import all other items whether canalised or otherwise in accordance with the relevant rules. the appeals are disposed of accordingly with no order as to costs.'6. the judgment in rajnikant's case was construed by the supreme court in the case of raj prakash chemicals ltd. v. union of india, : 1987(30)elt45(sc) . in the context of this appeal, paragraphs 11 of the judgment in rajprakash case needs to be extracted :'it is admitted between the parties in this appeal that the fundamental question for consideration is the true meaning and scope of the order dated april 18, 1985 made by this court. there is no dispute that the diamond exporters enjoying the benefit of the order are entitled to the issue of export house certificates under import policy 1978-1979 and to the facilities flowing from such grant. there can also be no dispute that the consideration whether the items sought to be imported by such diamond exports are canalised cannot act as an impediment to the import directly by them. the order declares further that such diamond exporters shall be entitled to import all items 'save and except items which are specifically banned under the prevalent import policy at the time of import.' the controversy between the parties centres around the meaning of the expression 'specifically banned', specially in the context of an additional licence granted to such diamond exporter.'the supreme court held in paragraph 20, after nothing counsels' argument, that 'the additional licenses to be issued to diamond exporters entitled them to import items permissible to export houses under such licence under the import policy 1978-79 excluding those items which fell within appendices 3 and 4 of the import policy 1978-79 and also excluding items which fell in appendix 3 and appendix 2 part a of the import policy 1984-85... where the import policy prevailing at the time of import is the import policy 1985-88, the items excluded are those enumerated in the corresponding appendix 3 and appendix 2 part a of that import policy.' the supreme court noted in paragraph 21 the argument on behalf of the exporters that if the order in rajnikant's case was so construed, it would nullify the restitution envisaged by it. the supreme court was unable to subscribe to that view and pointed out that in the import policies 1984-85 and 1985-88 items open to import under open general licence were set forth in appendix 6 and part ii of list b thereof enumerated in fairly long detail the items allowed to be imported by export houses holding additional licenses. this, it held, was the entitlement of the holder of an additional licence under paragraph 265(4) of the import policy 1985-88. it was, it said, conscious that the right of the diamond exporters to additional licenses did not issue from paragraph 265 of the import policy 1985-88 and that the import house certificates granted to the diamond exporters pursuant to the orders of the supreme court were those envisaged under the import policy 1978-79. for the purpose of granting relief in their favour, however, the supreme court had (in rajnikant's case) taken in to account the conditions prevailing at the time of import. the provisions of the import policy 1985-88 had, therefore, become relevant for construing the terms in which the relief had been granted.7. the judgment in raj prakash's case came to be considered by the supreme court in writ petition no. 199 of 1986, m/s. indo-afghan chambers of commerce v. union of india. this was a case in which a diamond exporter who had been granted an additional license pursuant to the orders in rajnikant's case imported dry fruits. the indo-afghan chambers of commerce was an association of dealers engaged in the business of selling dry fruits in northern india. it protested against such import by filing the writ petition. in the indo afghan chambers of commerce case, the supreme court noted that the judgment in raj prakash's case, construing the judgment in rajnikant's case, had explained the significance of the words 'specifically, banned'. raj prakash's case determining the range of items open to import by diamond exporters holding additional licenses. it was there declared that the items excluded from export by diamond exporters under the additional licenses under the import policy 1985-88 were the items enumerated in appendix 3 and appendix 2 part a of that import policy. appendix 2 part a was the successor of appendix 4 ( list of absolutely banned items) of the import policy 1978-79. the question that arose was whether appendix 2 part 8 of the import policy 1985-88 could also be regarded as a successor to appendix 4 of the import policy 1978-79. form the material placed before the supreme court, it appeared to it that it was. the supreme court said :'on the reasoning which found favour with this court in its judgment dated march 5, 1986 we hold that diamond exporters holding additional licenses were not entitled to import goods enumerated in appendix 2, part b of the import policy 1985-88. on that ground also the respondents diamond exporters are not entitled to take advantage of item 121 of appendix 2 part b for the purpose of importing dry fruits. as held by this court in its judgment dated march 5, 1986, holders of additional licenses are entitled to import only those goods which are included appendix 6, part 2, list 8 of the import policy 1985-88. dry fruits are not included in the list and, therefore, they cannot be imported under additional licenses.'(underlining supplied.)8. the appellant's entire case is based on the sentence which we have underlined in the above quotation. it was submitted by mr. bulchandani, learned counsel for the appellants, that this sentence could only be construed to mean that diamond exporters granted additional licenses by virtue of the supreme court's order in rajnikant's case were entitled to import only those goods which were included in appendix 6, part 2, list 8 of the import policy 1985-88 and nothing else. the said acid was canalized and it did not fall within appendix 6, part ii, list 8 of the import policy 1985-88. it was, therefore, not an item which m/s. dimexon could validly import under the additional licence granted to it pursuant to the order in rajnikant's case.9. the order in rajnikant's case was that, under the additional licenses issued to diamond exporters thereunder, such diamond exporters would be entitled to import all items 'whether canalised or otherwise', save and except items which were specifically banned under the prevalent import policy at the time of import. the words 'whether canalised or not' are of great significance to the issue in this appeal.10. the controversy between the parties in raj prakash's case centred around the meaning of expression 'specifically banned' used in rajnikant's case. there was in raj prakash's case 'no dispute that the consideration whether the items sought to be imported by such diamond exporters are canalised cannot act is an impediment to the import directly by them' raj prakash's case held that such diamond exporters were entitled to import under the additional licenses issued to them pursuant to the order in rajnikant's case such item as were permissible to export houses under additional licenses under the import policy 1978-79, excluding (a) items which fell within appendices 3 and 4 thereof and (b) items enumerated in appendix 2 part a and appendix 3 of the import policy 1985-88. raj prakash's case, therefore, permitted such diamond exporters to import on the strength of their additional licenses all items save those specifically mentioned therein, whether canalised or not.11. in the indo-afghan chambers of commerce's case the question of canalization did not come up for consideration. the only question before the court was in regard to an item falling under appendix 2 part b of the import policy 1985-88. on the reasoning which found favour in raj prakash's case, it was held that such diamond exporters were also not entitled to import goods enumerated in appendix 2, part b of the import policy 1985-88.12. the position, therefore, still is that canalization is, by itself, not an impediment to import by such diamond exporters.13. the sentence in the indo-afghan chambers of commerce's case which is relied upon by the appellants refers to what was said in paragraph 22 of raj prakash's case. in paragraph 20 thereof the supreme court had already held that such diamond exporters were entitled to import items permissible to export houses under additional licenses under the import policy 1978-79 excluding those items which fell within appendices 3 and 4 of the import policy 1978-79 and appendix 2, part a and appendix 3 of the import policy 1985-88. in paragraph 22 the supreme court was dealing with the argument on behalf of such diamond exporters that the construction which it was inclined to place upon the order in rajnikant's case would nullify the restitution which was contemplated by that order. in repelling that argument the supreme court noted that in the import policy 1985-88 items open to import under open general licenses were set forth in appendix 6, and part ii of list 8 thereof enumerated in fairly long detail, the items that could be imported by export houses holding additional licenses. this, the supreme court made clear, was the entitlement of the holder of an additional licence under paragraph 265(4) of the import policy 1985-88 and, in the first sentence of paragraph 23, also made clear that it was conscious that the right of the diamond exporters to additional licenses did not issue from that paragraph or that import policy.14. it is, therefore, patent that the observations of the supreme court in paragraph 22 of raj prakash's case were not intended to restrict the entitlements of diamond exporters to additional licenses pursuant to the judgment of the supreme court in rajnikant's case.15. the sentences in the indo-afghan chambers of commerce's case relied upon by the appellants is itself clear. it deals with 'holders of additional licenses' as contrasted with 'diamond exporters holding additional licenses' used in the prior sentence. 'diamond exporters holding additional licenses', the supreme court held, in the prior sentence, were not entitled to import in additions to the items enumerated in appendix 2 part a and appendix 3 of the import policy 1985-88, the items enumerated in appendix 2 part b of that import policy. no other restriction was placed by the judgment in the indo-afghan chambers of commerce's case upon the entitlements of diamond exporters issued with additional licenses pursuant to the judgments of the supreme court in rajnikant's case.16. in the result, we find that the refusal of the appellants to clear the said acid was unjustified. the order of the learned single judge directing the appellants to clear the said acid must, accordingly, stand. such clearance shall now be effected before 5 p.m. on 28th instant.17. mr. vahanvati, learned counsel for the respondents, states that the respondents have incurred demurrage, payable to the bombay port trust, in respect of the said acid during the days that the clearance thereof was not effected by reason of the pending appeal. he submits that, in the circumstances, the appellants should be directed to issue in favour of the respondents a detention certificate for the period 14th july, 1986 till the date upon which the clearance is, in fact, effected. this seems us to be an eminently reasonable application. we direct the appellants to issue such certificate for the aforementioned period.18. the appellants shall pay to the respondents the costs of the appeal.19. mr. bulchandani applies for stay of the order for a period of 4 weeks. in the view which we have already expressed, stay is declined.

Judgment:
S.P. Bharucha, J.

1 The respondents to this appeal (the original petitioners ) purchased 554860 metric tonnes of palm kernel fatty acid (now called 'the said acid') on high-seas basis from the M/s. Dimexon. M/s. Dimexon had imported the said acid on strength of an additional licence issued to it pursuant to the order of the Supreme Court dated 18th April, 1985 in Civil Appeal No. 1423 of 1984. Union of India v. Rajnikant Brothers. The Customs authorities at Bombay refused to permit clearance of the said acid on the ground that canalised items could not be imported even under additional licence. The respondents, therefore, filed a writ petition in this Court requiring the Union of India and the Customs authorities forthwith to permit clearance of the said acid. The petition came up for admission and interim relief before Pendse, J., on 10th July, 1986. The learned judge issued a rule and directed the Union of India and the Customs authorities to clear the said acid within 4 days.

2. This appeal, filed by the Union of India and the Customs Authorities, impugns the order dated 10th July, 1986 in so far as it directs clearances of the said acid at the interim stage.

3. The said acid was not a canalised item under the import Policy 1978-79. It is a canalised item under the current Import Policy, i.e. the Import Policy 1985-88.

4. The genesis of the dispute is briefly stated, this: Diamond exporters (such as M/s. Dimexon) had been denied export house certificates under the Import Policy 1978-79. They filed writ petition in this Court and the Delhi High Court. The High Court ruled that the ground upon which the export house certificates has been refused was untenable and directed the issued of such certificates as also the consequent additional licenses. While defining the right of such diamond exporters to import items under the additional licenses, the High Courts took into account the import policy prevailing at the time of import

5. The orders of the High Courts were taken in appeal to the Supreme Court by the Union of India. On 18th April, 1985 the Supreme Court delivered the judgment. Thus was in Rajnikant's case referred to above. It is a short judgment and read thus :

'We have heard Counsel for the parties and have gone through the judgments of the High Courts of Bombay and Delhi. We are unable to find, in the facts and circumstances of the case any requirement of diversification of exports as a condition for the grant of Export House Certificates in the Import Policy for the year 1978-79. While confirming the High Court's judgment quashing the order impugned in the Writ Petitions in the High Court we direct the appellants to issue the necessary Export House Certificates for the year 1978-79. The Export House Certificates shall be granted within 3 months from this date. Save and except items which are specifically banned under the prevalent import policy at the time of import, the respondents shall be entitled to import all other items whether canalised or otherwise in accordance with the relevant rules. The appeals are disposed of accordingly with no order as to costs.'

6. The judgment in Rajnikant's case was construed by the Supreme Court in the case of Raj Prakash Chemicals Ltd. v. Union of India, : 1987(30)ELT45(SC) . In the context of this appeal, paragraphs 11 of the judgment in Rajprakash case needs to be extracted :

'It is admitted between the parties in this appeal that the fundamental question for consideration is the true meaning and scope of the order dated April 18, 1985 made by this Court. There is no dispute that the diamond exporters enjoying the benefit of the order are entitled to the issue of Export House Certificates under Import Policy 1978-1979 and to the facilities flowing from such grant. There can also be no dispute that the consideration whether the items sought to be imported by such diamond exports are canalised cannot act as an impediment to the import directly by them. The order declares further that such diamond exporters shall be entitled to import all items 'save and except items which are specifically banned under the prevalent Import Policy at the time of import.' The controversy between the parties centres around the meaning of the expression 'specifically banned', specially in the context of an Additional Licence granted to such diamond exporter.'

The Supreme Court held in paragraph 20, after nothing Counsels' argument, that 'the Additional licenses to be issued to diamond exporters entitled them to import items permissible to Export Houses under such Licence under the Import Policy 1978-79 excluding those items which fell within Appendices 3 and 4 of the Import Policy 1978-79 and also excluding items which fell in Appendix 3 and Appendix 2 Part A of the Import Policy 1984-85... Where the Import Policy prevailing at the time of import is the Import Policy 1985-88, the items excluded are those enumerated in the corresponding Appendix 3 and Appendix 2 Part A of that Import Policy.' The Supreme Court noted in paragraph 21 the argument on behalf of the exporters that if the order in Rajnikant's case was so construed, it would nullify the restitution envisaged by it. The Supreme Court was unable to subscribe to that view and pointed out that in the Import Policies 1984-85 and 1985-88 items open to import under open General Licence were set forth in Appendix 6 and part II of List B thereof enumerated in fairly long detail the items allowed to be imported by export houses holding additional licenses. This, it held, was the entitlement of the holder of an additional licence under paragraph 265(4) of the Import Policy 1985-88. It was, it said, conscious that the right of the diamond exporters to additional licenses did not issue from paragraph 265 of the Import Policy 1985-88 and that the import house certificates granted to the diamond exporters pursuant to the orders of the Supreme Court were those envisaged under the Import Policy 1978-79. for the purpose of granting relief in their favour, however, the Supreme Court had (In Rajnikant's case) taken in to account the conditions prevailing at the time of import. The provisions of the Import Policy 1985-88 had, therefore, become relevant for construing the terms in which the relief had been granted.

7. The judgment in Raj Prakash's case came to be considered by the Supreme Court in Writ Petition No. 199 of 1986, M/s. Indo-Afghan Chambers of Commerce v. Union of India. This was a case in which a diamond exporter who had been granted an additional license pursuant to the orders in Rajnikant's case imported dry fruits. The Indo-Afghan Chambers of Commerce was an association of dealers engaged in the business of selling dry fruits in northern India. It protested against such import by filing the writ petition. In the Indo Afghan Chambers of Commerce case, the Supreme Court noted that the judgment in Raj Prakash's case, construing the judgment in Rajnikant's case, had explained the significance of the words 'specifically, banned'. Raj Prakash's case determining the range of items open to import by diamond exporters holding additional licenses. It was there declared that the items excluded from export by diamond exporters under the additional licenses under the Import Policy 1985-88 were the items enumerated in Appendix 3 and Appendix 2 part A of that Import Policy. Appendix 2 part A was the successor of Appendix 4 ( List of Absolutely Banned Items) of the Import Policy 1978-79. The question that arose was whether Appendix 2 Part 8 of the Import Policy 1985-88 could also be regarded as a successor to Appendix 4 of the Import Policy 1978-79. Form the material placed before the Supreme Court, it appeared to it that it was. The Supreme Court said :

'On the reasoning which found favour with this Court in its judgment dated March 5, 1986 we hold that diamond exporters holding Additional licenses were not entitled to import goods enumerated in Appendix 2, Part B of the Import Policy 1985-88. On that ground also the respondents diamond exporters are not entitled to take advantage of Item 121 of Appendix 2 Part B for the purpose of importing dry fruits. As held by this Court in its judgment dated March 5, 1986, holders of Additional licenses are entitled to import only those goods which are included Appendix 6, Part 2, List 8 of the Import Policy 1985-88. Dry Fruits are not included in the List and, therefore, they cannot be imported under Additional licenses.'

(Underlining supplied.)

8. The appellant's entire case is based on the sentence which we have underlined in the above quotation. It was submitted by Mr. Bulchandani, learned Counsel for the appellants, that this sentence could only be construed to mean that diamond exporters granted additional licenses by virtue of the Supreme Court's order in Rajnikant's case were entitled to import only those goods which were included in Appendix 6, Part 2, List 8 of the Import Policy 1985-88 and nothing else. The said acid was canalized and it did not fall within Appendix 6, Part II, List 8 of the Import Policy 1985-88. It was, therefore, not an item which M/s. Dimexon could validly import under the additional licence granted to it pursuant to the order in Rajnikant's case.

9. The order in Rajnikant's case was that, under the additional licenses issued to diamond exporters thereunder, such diamond exporters would be entitled to import all items 'whether canalised or otherwise', save and except items which were specifically banned under the prevalent import policy at the time of import. The words 'whether canalised or not' are of great significance to the issue in this appeal.

10. The controversy between the parties in Raj Prakash's case centred around the meaning of expression 'specifically banned' used in Rajnikant's case. There was in Raj Prakash's case 'no dispute that the consideration whether the items sought to be imported by such diamond exporters are canalised cannot act is an impediment to the import directly by them' Raj Prakash's case held that such diamond exporters were entitled to import under the additional licenses issued to them pursuant to the order in Rajnikant's case such item as were permissible to export houses under additional licenses under the Import Policy 1978-79, excluding (a) items which fell within Appendices 3 and 4 thereof and (b) items enumerated in Appendix 2 Part A and Appendix 3 of the Import Policy 1985-88. Raj Prakash's Case, therefore, permitted such diamond exporters to import on the strength of their additional licenses all items save those specifically mentioned therein, whether canalised or not.

11. In the Indo-Afghan Chambers of Commerce's case the question of canalization did not come up for consideration. The only question before the Court was in regard to an item falling under Appendix 2 Part B of the Import Policy 1985-88. On the reasoning which found favour in Raj Prakash's case, it was held that such diamond exporters were also not entitled to import goods enumerated in Appendix 2, Part B of the Import Policy 1985-88.

12. The position, therefore, still is that canalization is, by itself, not an impediment to import by such diamond exporters.

13. The sentence in the Indo-Afghan Chambers of Commerce's case which is relied upon by the appellants refers to what was said in paragraph 22 of Raj Prakash's case. In paragraph 20 thereof the Supreme Court had already held that such diamond exporters were entitled to import items permissible to export houses under additional licenses under the Import Policy 1978-79 excluding those items which fell within Appendices 3 and 4 of the Import Policy 1978-79 and Appendix 2, Part A and Appendix 3 of the Import Policy 1985-88. In paragraph 22 the Supreme Court was dealing with the argument on behalf of such diamond exporters that the construction which it was inclined to place upon the order in Rajnikant's case would nullify the restitution which was contemplated by that order. In repelling that argument the Supreme Court noted that in the Import Policy 1985-88 items open to import under Open General licenses were set forth in Appendix 6, and Part II of List 8 thereof enumerated in fairly long detail, the items that could be imported by export houses holding additional licenses. This, the Supreme Court made clear, was the entitlement of the holder of an additional licence under paragraph 265(4) of the Import Policy 1985-88 and, in the first sentence of paragraph 23, also made clear that it was conscious that the right of the diamond exporters to additional licenses did not issue from that paragraph or that Import Policy.

14. It is, therefore, patent that the observations of the Supreme Court in paragraph 22 of Raj Prakash's case were not intended to restrict the entitlements of diamond exporters to additional licenses pursuant to the judgment of the Supreme Court in Rajnikant's case.

15. The sentences in the Indo-Afghan Chambers of Commerce's case relied upon by the appellants is itself clear. It deals with 'holders of additional licenses' as contrasted with 'diamond exporters holding additional licenses' used in the prior sentence. 'Diamond exporters holding additional licenses', the Supreme Court held, in the prior sentence, were not entitled to import in additions to the items enumerated in Appendix 2 Part A and Appendix 3 of the Import Policy 1985-88, the items enumerated in Appendix 2 Part B of that Import Policy. No other restriction was placed by the judgment in the Indo-Afghan Chambers of Commerce's case upon the entitlements of diamond exporters issued with additional licenses pursuant to the judgments of the Supreme Court in Rajnikant's case.

16. In the result, we find that the refusal of the appellants to clear the said acid was unjustified. The order of the learned Single Judge directing the appellants to clear the said acid must, accordingly, stand. Such clearance shall now be effected before 5 p.m. on 28th instant.

17. Mr. Vahanvati, learned Counsel for the respondents, states that the respondents have incurred demurrage, payable to the Bombay Port Trust, in respect of the said acid during the days that the clearance thereof was not effected by reason of the pending appeal. He submits that, in the circumstances, the appellants should be directed to issue in favour of the respondents a detention certificate for the period 14th July, 1986 till the date upon which the clearance is, in fact, effected. This seems us to be an eminently reasonable application. We direct the appellants to issue such certificate for the aforementioned period.

18. The appellants shall pay to the respondents the costs of the appeal.

19. Mr. Bulchandani applies for stay of the order for a period of 4 weeks. In the view which we have already expressed, stay is declined.