Anil Dev Singh, J. ( 1 ) BY this writ petition the petitioners seek quashing of Condition No. 10 contained in the communication of the first respondent, Steel Authority of India Limited, dated 18/5/1998 25/5/1998 (Annexure P-3) inviting offers in respect of tender dated 6/5/1998 for sale of Value Based Advance Licences for duty free import of Non-alloy Steel Melting Scrap issued in favour of the former under the Export Import Policy 1992-97, Input Output Norm No. 1282 or as applicable on the date of issue of the licence (s) and Export Import Policy 1997-2002, Input Output Norm No. C512, whereby the end use of the material is sought to be restricted for meflt- ing alone. The petitioners also seek quashing of the first respondent s communication dated 22/6/1998 (Annexure P-4) requiring the tenderers to submit income-tax clearance cer- tificate from the Income-tax Department for the year 1997-98, Sales-Tax registration certificate and sales-tax assessment order in respect of 1997-98. Facts are not many and can be briefly stated thus :- THE first respondent - Steel Authority of India Limited, a Government of India Undertaking, has been securing various types of import licences including duty free advance licences for import of non-alloy Steel Melting Scrap under Export Import Policy of the Government of India as given in the Handbook of Procedure, Volume II. In the past some of the licences of the value of about Rs. 50 crores which were not utilised by the first respondent were sold by it to the second respondent who further transferred it to the fourth respondent. ( 2 ) ON May 6, 1998, the first respondent floated tenders for the sale of some of the Value Based Advance Licences secured under Input Output Norm No. 1282 of the Export Import Policy 1992-97 and Input Output Norm No. C512 of Export Import Policy 1997-2002 on the terms and conditions contained in the letter dated 18/5/1998 and 25/5/1998. As per Condition No. 10 of the tender, the licence (s) are to be used for import of Non Alloy Steel Melting Scrap in accordance with Import Tariff General Exemption No. 121, Sl. No. 109. As per Condition No. 10 of the tender, the licence (s) are to be used for import of Non Alloy Steel Melting Scrap in accordance with Import Tariff General Exemption No. 121, Sl. No. 109. ( 3 ) THE tenderers are also required to certify in advance that the licences shall be utilised for the import of non-alloy melting scrap for ultimate use by actual users only and "the savings from non-payment of the customs duty is at the concessional rate of duty applicable for the purpose". Basically the petitioners challenge the actual user condition imposed by the first respondent. ( 4 ) THE respective stands of the petitioner and the first respondent can be encapsulated as follows :- PETITIONER s stand: ADVANCE licence (s) issued in favour of the first respondent do not prescribe actual user condition in the licence (s ). But the first respondent for further transfer of the licences has prescribed actual user condition by asking the tenderers to certify that the licences shall be utilised for import of non-alloy melting scrap for ultimate use by actual users only. As is evident from the past transactions, by prescribing the actual user condition in the tender the purchasers get duty benefits of 55. 25% to 61. 46%, while the premium which the first respondent secures is much lower than what can be obtained if such a condition is not imposed. In the past after receipt of the licences the same were not even sold by the first respondent to actual users. They were sold by the first respondent to the second respondent, Metal and Scrap Trading Corporation, who in turn sold them to the fifth respondent, Baron Impex Ltd. , a non-actual user. Non-alloy steel melting scrap can be imported on duty free basis under duty free advance licences issued to exporters against their foreign exchange earnings. It can also be imported under the Open General Licence (OGL ). There are different rates of duties prescribed for import of non-alloy steel melting scrap under the OGL. The rates of duty inter alia are as follows:- 1. 55. 25% if imported for sale. 2. 61. 46 % if imported by the licensee for his own use other than for melting in arc furnace, or induction furnace, or high blast copuloa. 3. 14. 4% if imported for use in electric arc furnace, or induction furnace, or high blast copuloa. 55. 25% if imported for sale. 2. 61. 46 % if imported by the licensee for his own use other than for melting in arc furnace, or induction furnace, or high blast copuloa. 3. 14. 4% if imported for use in electric arc furnace, or induction furnace, or high blast copuloa. 4. 10% if imported for sale to another for use in electric arc furnace, or induction furnace. ( 5 ) THEREFORE, the duty chargeable would depend upon the end use of the said material. Since the licence does not prescribe that the end user must utilise the material for melting, the first respondent should not impose a condition of actual user while selling the same. If such a condition is not imposed the first respondent could fix the reserve price by linking it to the duty chargeable for use other than melting which is much higher than the duty chargeable for melting scrap. The first respondent by including the condi- tion of actual user has eliminated fair competition. The premium is deliberately kept low so that the fifth respondent is able to make a huge profit by selling the licence routed to it through the second respondent. The above modus oper- andi adopted by the first respondent is for benefiting the fifth respondent. ( 6 ) FIRST Respondent s stand: THE sale of licences has not been restricted to actual users and the same can be purchased by non-actual users. However, the final user of the material should be an actual user for melting of the scrap. Since under the O. G. L. the duty payable for import of the scrap for melting purposes in accordance with Sl. No. 123 (Sl. No. 109 in 1997-98) of exemp- tion notification 121 is 14. 4% the first respondent has been keeping 75% of the same as reserve price for the sale of the licence (s ). By following this method of sale no loss is caused to the exchequer and at the same time the buyers of such licences are prevented from misusing the licences. The first respondent has nothing to do with the fifth respondent and the allegation of conferring undue favour is false and baseless. It has never made any sale to the fifth respon- dent. The sales were made to the second respondent, a public sector undertaking owned and controlled by the Govt. of India. The first respondent has nothing to do with the fifth respondent and the allegation of conferring undue favour is false and baseless. It has never made any sale to the fifth respon- dent. The sales were made to the second respondent, a public sector undertaking owned and controlled by the Govt. of India. ( 7 ) THE conditions prescribed in the tender are based on the guidelines on advance licences and special import licences framed by the first respondent on the suggestions made by the Department of Steel, Ministry of Steel and Mines, Government of India, by their communication dated 16/6/1998. The rationale behind the inclusion of condition of actual user is that the use of the material imported against the said licence is made by the actual users of non-alloy steel melting scrap in order to ensure that no other material is imported under the said licence. The first respondent has not restricted or limited competition by inclusion of the said condition. In the past the licences in respect of non-alloy steel melting scrap were being sold to respondent No. 2 pursuant to the decision taken by the management of the first respondent on the request of the second respondent forwarded by the Government of India, Ministry of Steel and Mines, by their letter dated 6/7/1995. The first respon- dent agreed to the request of the second respondent and con- veyed its decision to the Ministry of Steel and Mines by its letter dated 19/8/1995. ( 8 ) THE first respondent is to ensure that the licences are not misused by the buyers to deprive the Government of India of its legitimate import duties. The advance licences issued to it are for import of non-alloy steel melting scrap and, therefore, it cannot charge premium beyond 14. 4%. If non-alloy steel melting scrap is imported against the advance licences and the same is actually melted, then such imports are duty free. However, when non-alloy steel melting scrap is imported against an open general licence other than the advance licence for the purpose of melting, then the maximum duty payable on the said scrap is 14. 4%, but if the same material is used for rolling or other purposes after imports (without advance licences) then the import duty for the same material would range between 55% to 61%. In case the first respondent charges premium beyond 14. 4%, but if the same material is used for rolling or other purposes after imports (without advance licences) then the import duty for the same material would range between 55% to 61%. In case the first respondent charges premium beyond 14. 4%, then in that event it would be obvious that the licence (s) would be utilised for import of scrap for use other than melting which would amount to misuse of the licences. In order to prevent such a misuse the condition of actual user is introduced by the first respondent. ( 9 ) IN a nut shell, the stand of the first respondent is that the advance licences can be purchased by non-actual users but the end user must import the material for melting purposes only. Therefore, the first respondent does not fix reserve price beyond 14. 4% and invites tenders on that basis. ( 10 ) I have considered the respective stands of the parties. I have also heard learned senior counsel represent- ing them. It needs to be noticed that since the year 1996 the Value Based Advance Licences for duty free import of Non-Alloy Steel Melting Scrap issued in favour of the first respondent have been sold to the second respondent at the request of the latter which was routed through the Government of India, Ministry of Steel. After acquiring the licences from the first respondent the second respondent sold the same to the fifth respondent. The fifth respondent not being the actual user in turn sold the licences to various parties. It is significant to note that the Government of India by its letter dated 16/6/1998 to the first respondent suggested the adoption of the guidelines for conducting the sale of advance licences. The guidelines relevant for the purposes of the writ petition are :- 1. Sale of licence (s) be done 100% through open tenders. 2. In future licence (s) be sold after obtaining transferability of the licence from the DGFT. 3. Tenderers may be asked to furnish their latest income-tax clearance certificates along with their bids. 4. If any tenderer is an actual user of the licence (s) a declaration need be obtained from it that it does not intend to sell the licence (s ). 5. A copy of the latest sales tax assessment order by concerned sales tax assessment authorities need be obtained from the tenderers. 6. 4. If any tenderer is an actual user of the licence (s) a declaration need be obtained from it that it does not intend to sell the licence (s ). 5. A copy of the latest sales tax assessment order by concerned sales tax assessment authorities need be obtained from the tenderers. 6. Reserve price for every tender be fixed which should be the basis for taking a decision on the quotation received. ( 11 ) IN view of these suggested guidelines, which appear to have been accepted by the first respondent, quotations have been invited from the parties for the purchase of the licence (s) in respect of non-alloy steel melting scrap. The last date for submission of tenders was fixed as June 15, 1998. Subse- quently, the date was extended to June 30, 1998. The peti- tioner, feeling aggrieved of the actual user condition and the other conditions mentioned above, filed the writ petition on June 29, 1998. The writ petition came up before the Vaca- tion Judge, who while issuing notice to the respondents to show cause, restrained the respondents from taking any further steps pursuant to the tender notice dated 6/5/1998. The parties have not only filed detailed pleadings but have also filed written submissions, besides advancing oral arguments. In accordance with the policy the first respon- dent is entitled to fix a reserve price for the tender in question. The main question for determination is whether the first respondent is justified in keeping the actual user condition. In case the first respondent is justified in keeping the actual user condition then the stand of the first respondent is that in view of Serial No. 123 (Sl. No. 109 in 1997-98) of the General Exemption No. 121 issued under sub-section (1) of section 25 of the Customs Act, 1962 it can not charge premium beyond 14. 4%, i. e. , the duty payable under the OGL for importing the non-alloy steel melting scrap for melting purposes. The said serial No. 123 (Sl. No. 109 in 1997-98) reads as follows :- ____________________________________________________________________________ S. No. Chapter or Description of Standard Additional Condition heading No. or goods Rate duty Rate No. sub-heading No. ____________________________________________________________________________ (1) (2) (3) (4) (5) (6) ____________________________________________________________________________ " xx xx xx ____________________________________________________________________________ ____________________________________________________________________________ 123. 72. The said serial No. 123 (Sl. No. 109 in 1997-98) reads as follows :- ____________________________________________________________________________ S. No. Chapter or Description of Standard Additional Condition heading No. or goods Rate duty Rate No. sub-heading No. ____________________________________________________________________________ (1) (2) (3) (4) (5) (6) ____________________________________________________________________________ " xx xx xx ____________________________________________________________________________ ____________________________________________________________________________ 123. 72. 04 Melting scrap of - - 17 (S. No. iron or steel 109 (other than stainless in steel or heat 1997- resisting steel) 98) for use in electric are furnace or induction furnace or melting in a hot blast cupola or for supply to a unit for use in electric are furnace or induction furnace or melting in a hot blast cupola. " ____________________________________________________________________________ xx xx xx ( 12 ) CONDITION No. 17 mentioned in Serial No. 123 (Sl. No. 109 in 1997-98) reads as follows :- ANNEXURE Condition No. and Conditions " xx xx xxx 17. If, - (A) the importer furnishes an undertaking to the Assistant Commissioner of Customs that such melting scrap will be used for the purpose specified and in the event of his failure to comply with this condition, he shall be liable to pay, in respect of such quantity of the said scrap as is not proved to have been so used, an amount equal to the difference between the duty leviable on such quantity but for the exemption under this notification and that already paid at the time of importation, and (B) the importer produces to the said Assistant Commissioner, within six months or such extended period, as that Assistant Commissioner may allow, a certificate issued by the Assistant Commissioner of Central Excise in whose jurisdiction the said melting scrap of iron and steel has been used in electric arc furnace or induction furnace or melting in a hot blast cupola, that the said melting scrap has been so used. XX xx xx " ( 13 ) UNDER the Exim Policy 1997-2002 declared on April 13, 1998 non-alloy steel melting scrap is importable under the OGL. The rate of customs duty chargeable on non-alloy steel melting scrap is prescribed under sub-heading 7204. 49 of the Customs Tariff Act. The third respondent by means of an affidavit affirmed on August 21, 1998 and filed through the Under Secretary, Government of India, Department of Rev- enue, has also taken this position. The rate of customs duty chargeable on non-alloy steel melting scrap is prescribed under sub-heading 7204. 49 of the Customs Tariff Act. The third respondent by means of an affidavit affirmed on August 21, 1998 and filed through the Under Secretary, Government of India, Department of Rev- enue, has also taken this position. The relevant part of the affidavit reads as follows :- (II) The present rate of customs duty char- geable on non-alloy steel melting scrap (sub-heading No. 7204. 49 of the Customs Tariff Act) is : (A) 30%+5% Special duty + 15% Additional duty = Total 55. 25% duty if imported for sale; (B) 30%+5% Special duty + 15% Additional Duty + 4% Special Additional duty = Total 61. 46% duty if imported for his own use other than in electric arc furnace or other than in induc- tion furnace or for use other than melting in hot blast cupola; XX xx xx (III) That non-alloy Steel Melting Scrap is going to be imported against the Advance Licence issued to SAIL where the requi- site Export Obligation is already ful- filled; the present rate of Customs duty chargeable on the above scrap on its import will be "nil" if imported for own use or 15% if otherwise. " XX xx xx ( 14 ) THUS, it is obvious from the above that under the OGL the duty on import of scrap under the above said tariff entry is between 55. 25% to 61% and in case the scrap is imported for the purposes of melting by the actual user the duty payable under the exemption notification No. 121 would be 14. 4%. Therefore, the duty payable on imports under the OGL is linked with the use of the material. But if the import of the scrap is under an advance licence, the duty payable is nil . Since the value based advance licences issued in favour of the first respondent do not prescribe the condition of actual user for the import of the scrap, it is not necessary for the first respondent to include actual user condition. The reserve price of the material, therefore, is not to be linked to duty chargeable in respect of non-alloy steel melting scrap prescribed under Serial No. 123 (Sl. No. 109 in 1997-98) of General Exemption No. 121. By link- ing it with serial No. 123 (Sl. The reserve price of the material, therefore, is not to be linked to duty chargeable in respect of non-alloy steel melting scrap prescribed under Serial No. 123 (Sl. No. 109 in 1997-98) of General Exemption No. 121. By link- ing it with serial No. 123 (Sl. No. 109 in 1997-98) of Gen- eral Exemption No. 121, the premium payable to the first respondent is being depressed unnecessarily. The premium must be linked with the duty chargeable on import of non-alloy steel melting scrap under Tariff sub-heading 7204. 49 of the Customs Tariff Act. It is important to note that the advance licences made available to the first respon- dent are freely transferable without any restriction after endorsement of transferability by the licensing authority as the export obligation has been fulfilled prior to the issue of the licence. In this regard para 67 of the Exim Policy 1992-1997 read with para 7. 19 of Exim Policy 1997-2002 and para 7. 16 of Handbook of Procedure 1997-2002 Vol. I can be noticed. These paras read as follows :- EXIM Policy 1992-97: "67. A value based Advance Licence or the materials imported against it may be freely transferable after the export obligation is fulfilled and the bank guarantee/lut redeemed. A quantity based Advance Licence (except a Special Imprest Licence) or the materials imported against it may be freely transferable after the export obligation is fulfilled and the bank guarantee/lut redeemed. " EXIM Policy 1997-2002: "7. 19 (A) A duty free licence except Special Imprest Licence and/or materials imported against it is transferable after the completion of export obliga- tion and endorsement of transferabil- ity by the licensing authority. (B) Notwithstanding anything contained in the paragraph (a) above, (I) Advance Licences issued with Actual User condition under para- graph 7. 4 (i) and/or material imported against it shall not be transferable, sold or otherwise disposed off by the licence holder under any circumstances;" HANDBOOK of Procedure 1997-2002: "7. 16 Licences granted under this scheme shall be subject to the Actual User condition till endorsement of transferability by the licensing authority. " ( 15 ) THUS it is obvious that duty free licence granted under duty exemption scheme is subject to actual user condi- tion till endorsement of transferability is given by the licensing authority. 16 Licences granted under this scheme shall be subject to the Actual User condition till endorsement of transferability by the licensing authority. " ( 15 ) THUS it is obvious that duty free licence granted under duty exemption scheme is subject to actual user condi- tion till endorsement of transferability is given by the licensing authority. This position has also been reiterated by the fourth respondent, Director General of Foreign Trade, in its affidavit filed on August 14, 1998. The relevant part of the affidavit reads as follows :- "in accordance with Para 67 of EXIM Policy 1992-97 which is annexed hereto as Annexure a and Para 7. 19 of EXIM Policy of 1997-2002, which is annexed hereto as Annexure b , a Duty Free Licence except a Special Imprest Licence and/or materials imported against it is freely transferable after Export Obligation is fulfilled. Endorsement of trans- ferability in such cases is given by the Licensing Authorities. IN accordance with Para 7. 16 of Hand-Book of Procedure, 1997-2002, Vol. 1, which is annexed herewith as Annexure c , Duty Free Licence granted under Duty Exemption Scheme shall be subject to Actual user condition till endorsement of Transferability is given by Licensing Authority. IN the light of the above mentioned EXIM Policy provision/procedure, Duty Free Advance Licences endorsed with transferability are freely transferable to any person. " ( 16 ) THUS, the stand of the Director General of Foreign Trade is that actual user condition after endorsement of transferability by the licensing authority is not necessary. Para 20 of the Export and Import Policy 1992-1997 makes the Director General of Foreign Trade the final arbiter in the matter of interpretation of provisions contained in the policy. Para 20 of the said policy reads as follows :- "20. If any question or doubt arises in respect of the interpretation of any provision contained in this Policy, the said question or doubt shall be referred to the Director General of Foreign Trade whose decision thereon shall be final and binding. FOR the removal of doubts, it is hereby declared that if any question arises whether a licence has been issued in accordance with this Policy or if any question arises touching upon the scope and content of a licence, such question shall also be referred to the Director General of Foreign Trade for a decision. FOR the removal of doubts, it is hereby declared that if any question arises whether a licence has been issued in accordance with this Policy or if any question arises touching upon the scope and content of a licence, such question shall also be referred to the Director General of Foreign Trade for a decision. " ( 17 ) THE interpretation placed by the DGFT deserves to be taken note of. It is not disputed that one of the utilised licences bearing No. P/w/2058027/c dated 27/3/1995 sold by the first respondent to the second respondent found its way to the fifth respondent who in turn transferred it to Shanti Alloys Pvt. Ltd. Shanti Alloys Pvt. Ltd. imported different quantities of melting scrap under Bill of Entry Nos. 005011 of 1998 and 005012 of 1998. Though Shanti Alloys Pvt. Ltd. is not an actual user it availed full exemption of duty. This is apparent from Part d of the Duty Exemption Entitlement Certificate attached to the licence. Column IV thereof describes the imported goods as non-alloys steel melting scrap. Column VII records the head- ing of the Customs Tariff under which the said item was imported as 7204. 49 and also describes the notification under which exemption of duty had been allowed. Column No. 8 which is provided for recording the rate of duty leviable but for exemption reads as follows :- "duty Leviable but for exemption RATE of duty (I) Basic (II) Additional (III) Auxiliary ( 18 ) THEREFORE, from the above it is clear that in case the above said licences utilised by Shanti Alloys were Open General Licences and not Advance Licences the customs would have charged duty leviable under sub-heading 7204. 49 of the Customs Tariff Act, 1975 and not under serial No. 123 (Sl. No. 109 in 1997-98) of the exemption notification number 121. The insistence of the first respondent to link the reserve price for sale of Advance Licences with serial No. 123 (Sl. No. 109 in 1997-98) of Exemption Notification 121 is unwarranted. Such a linkage affects the revenue of the first respondent adversely and does not advance its commercial interests especially when the customs but for the imports under the zero duty Advance Licences would have levied duty under Tariff sub-heading 7204. 49. No. 109 in 1997-98) of Exemption Notification 121 is unwarranted. Such a linkage affects the revenue of the first respondent adversely and does not advance its commercial interests especially when the customs but for the imports under the zero duty Advance Licences would have levied duty under Tariff sub-heading 7204. 49. It is also significant to note that despite the actual user condition imposed by the first respondent the above said licence was utilised by Shan- ti Alloys Pvt. Ltd. , for purpose other than melting of the steel alloy. Not only the high rate of duty was saved but the premium received by the first respondent on the licence was extremely low. In such a situation neither the first respondent secured the correct value for its licence nor were the Customs paid the duty. Therefore, there is no justifica- tion for imposing the condition of actual user as it causes loss of revenue to the first respondent. Such a condition is liable to be misused by the purchasers for their financial benefit at the cost of the first respondent and the Customs. The first respondent has produced on record a certificate which the second respondent had issued on May 2, 1998 for fulfilling the actual user condition. The certificate reads as follows :- " M S T C Limited (A Govt. of India Enterprise) DATE: 2/5/98 WHOMSOEVER IT MAY CONCERN REF: SALE ORDER NO. SAIL/cd/al/97-98/ MSTC DATED 12/6/1997 MSTC LTD HEREBY CERTIFY THAT THE LICENCES HANDED OVER UNDER THE ABOVE CONTRACT HAVE BEEN UTILISED FOR IMPORT OF NON-ALLOY MELTING SCRAP FOR ULTIMATE USE BY ACTUAL USERS ONLY AND THE SAVINGS FROM NON-PAYMENT OF THE CUSTOMS DUTY IS AT THE CONCESSIONAL RATE OF DUTY APPLICABLE FOR THE PURPOSE. " FOR MSTC LIMITED ( 19 ) PART d of the Duty Exemption Entitlement Certifi- cate attached to the licence sold to shanti by the fifth respondent after purchasing it from the second respondent, who had earlier obtained it from the first respondent shows, that the above said certificate (s) issued by the second respondent were in the nature of a formality and in practical terms have no meaning. Neither the first respondent nor the second respondent can keep tabs on the transferees for moni- toring the fulfilment of the actual user condition. Neither the first respondent nor the second respondent can keep tabs on the transferees for moni- toring the fulfilment of the actual user condition. There- fore, the actual user condition imposed in the tender is not only against the interests of the first respondent but is also not warranted by law. ( 20 ) THE reserve price has to be fixed by the first respondent keeping in view the public interest and from the stand point of a prudent business man. ( 21 ) LEARNED counsel for the petitioners submitted that the condition imposed by the first respondent vide its letter dated 22/6/1998 requiring income-tax clearance certifi- cate for the year 1997-98, sales tax registration certificate and sales tax assessment order for the year 1997-98 is arbit- rary. It is not necessary to consider the submission of the petitioners in as much as the learned counsel for the first respondent has submitted that in the case of Energetic Marketing Private Limited the first respondent had clarified that latest income-tax clearance certificate can be sub- mitted. It had also issued the necessary clarification with regard to sales tax registration certificate. I have no manner of doubt that in case the petitioners had sought clarification from the first respondent with regard to the conditions imposed by letter dated 22/6/1998, the same would have been clarified to the satisfaction of the peti- tioners. ( 22 ) HAVING regard to the above discussion, the writ petition succeeds and the actual user condition contained in the tender is quashed. The first respondent while fixing the reserve price for the sale of the licences shall keep in view the fact that the duty on import of non-alloy steel melting scrap under sub-heading 7204. 49 of the Customs Tariff Act is between 55. 25% to 61. 46%. Since during the pendency of the writ petition some of the advance licences issued in favour of the first respondent would have expired, it is directed that the appropriate authority shall extend their life suita- bly so that the first respondent is not put to loss and is able to sell the advance licences keeping in view the above observations. On the filing of the applications by the first respondent for extension of the life of the advance licences, the appropriate authority shall renew the same suitably with- in four weeks of the receipt of the applications. On the filing of the applications by the first respondent for extension of the life of the advance licences, the appropriate authority shall renew the same suitably with- in four weeks of the receipt of the applications. In case some advance licences issued in favour of the first respon- dent are going to expire and have not been utilised due to the pendency of these proceedings, the first respondent shall be entitled to their renewal for a suitable period provided an application is made to the appropriate authority for extension of the licences who shall renew the same suitably within four weeks of the receipt of the application. ( 23 ) WITH these observations and directions, the writ petition is disposed of.