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2009 DIGILAW 1079 (BOM)

Baker Gauges India Limited v. Union of India

2009-08-26

D.G.KARNIK, F.I.REBELLO

body2009
JUDGMENT FERDINO I. REBELLO, J. The 1st petitioner is carrying on business of manufacturing Precision Screw Gauges and are an export oriented company where 50% of their production is exported. For the purpose of manufacturing procedure Precision Screw Gauges they needed to import a second hand 'Plain Thread Grinding Machine" from U.K. In the Import Export Policy of April 1988 to March, 1991 Thread Grinding Machines were listed at Serial No.128 of Appendix I Part B, which Appendix covered "Capital Goods allowed under Open General Licence". Para 30(1) of Chapter 3 of the Import and Export Policy reads as under:- "Import of Second-hand machinery-30(1)Items of machinery allowed for import under Open General Licence (vide Appendix I Part B) can also be imported in second-hand condition. In such cases, however, the importer will produce to the Customs authorities at the time of clearance, a certificate from professional independent Chartered Engineer/any Institution of Engineers in the country from which import is made in the prescribed proforma given in the Hand Book of Procedures, 1988-1991." 2.In pursuance of the aforesaid policy the 1st petitioner had requested M/s.John Parker Machine Tools Ltd., U.K., who are specialists in new and used machine tools to give a quotation for a second hand Plain Thread Grinding Machine. By letter dated 4th January, 1990 M/s.John Parker Machine Tools Ltd., U.K., placed order for the aforesaid machine. The petitioners thereafter opened an irrevocable Letter of Credit through their bankers The Union Bank of India. The Letter of Credit was opened on 26th February, 1990 and was valid till 17th March, 1990. As M/s.John Parker Machine Tools Ltd., U.K., could not send the aforesaid machine within the period of the Letter of Credit on application to their bankers the Letter of Credit was extended firstly till 24th March, 1990 and subsequently on further request till 31st March, 1990. The petitioners by letter of 30th March, 1990 applied for further extension upto 30th April, 1990 as M/s.John Parker Machine Tools Ltd., U.K., were still not able to ship the said machine. 3.On 1st April, 1990 the new Import Policy for April, 1990 to March, 1993 was introduced. By this policy all second-hand machines were removed from the OGL List. The petitioners by letter of 30th March, 1990 applied for further extension upto 30th April, 1990 as M/s.John Parker Machine Tools Ltd., U.K., were still not able to ship the said machine. 3.On 1st April, 1990 the new Import Policy for April, 1990 to March, 1993 was introduced. By this policy all second-hand machines were removed from the OGL List. The petitioners relied on para.9 of OGL Order No.2/8891 issued on 30th March, 1988 as further amended by the I.T.C. Order No.59-88-91 dated 10th January7, 1990 the Import and Export Policy provided as under:- "9. Shipment of machinery and equipment which are allowed for import under Open General Licence by actual users vide Appendix I, Part B of the Policy should be made before the end of the licencing year. However, in cases where the importer enters into a firm contract but the goods cannot be shipped on account of longer delivery period involved, the shipment may be allowed upto 31st March of the following licencing year in pursuance of such firm contract provided the contract in question has been duly registered with the Foreign Exchange Dealer (Bank) on or before 31st March, during the licencing year 1988-89 and on or before the 28th of February during the licencing year 1989-90. In specific cases where the delivery period is still longer, the Chief Controller of Imports and Exports, New Delhi may allow shipment under Open General Licence upto a further extended date." 4.It is the case of the petitioners that in view of the new policy their bankers refused to extend the validity period of Letter of Credit and requested the 1st petitioner to approach the Chief Controller of Imports and Exports. The petitioners accordingly by Letter of 18th April, 1990 pointed out various facts and sought clarification that in view of Condition 9 of the OGL order the Letter of Credit to be extended as it had been registered with the Foreign Exchange Dealer prior to 28th February, 1990. The petitioners accordingly by Letter of 18th April, 1990 pointed out various facts and sought clarification that in view of Condition 9 of the OGL order the Letter of Credit to be extended as it had been registered with the Foreign Exchange Dealer prior to 28th February, 1990. By letter of 30th May, 1990 the 1st petitioners' Bankers forwarded to the 1st petitioner a copy of the letter written by the Reserve Bank of India to them and further stated that as the 1st petitioners have already taken up the matter with the CCI and E, New Delhi the matter could be taken up with the Reserve Bank of India only after receipt of the concurrence of the ITC Authorities for an extension of the said Letter of Credit. Further correspondence ensued. Thereafter by communication of 26th June, 1990 the Deputy Chief Controller of Imports and Exports, New Delhi informed the 1st petitioners that their views had already been communicated to the 1st petitioners' bankers whom the 1st petitioners should contact. In the said letter it was stated as under:- "the matter has been examined and the permission is hereby granted for the extension of Letter of Credit No.NIAR-25747 dated 26th February, 1990, established with the Union Bank of India, Bombay-400 003 for the period upto 30th September, 1990 for shipment for import of a second hand "Thread Grinding Machine" under OGL. This issues with the approval of the Chief Controller of Imports and Exports". A copy of the said order is hereto annexed and marked Exhibit "J"." 5.Subsequent to the letter the bank extended the Letter of Credit upto 30th September, 1990. The 1st petitioner requested the UK supplier to supply the said machine. The machine arrived by Air on 30th September, 1990. The petitioners specifically averred that had this permission not been given the 1st petitioners would have cancelled the contract with the U.K. Shippers and would not have imported the said machine. 6.According to the petitioners the 2nd respondent was not convinced and the 1st petitioner only informed the grounds that they are going to be urged against them by the 2nd respondent and asked whether they were interested in a formal Show Cause. As the 1st petitioner required the machine urgently and as they had been told of the grounds which they had to meet the 1st petitioner waived the requirement of a show cause notice. As the 1st petitioner required the machine urgently and as they had been told of the grounds which they had to meet the 1st petitioner waived the requirement of a show cause notice. The grounds on which the Respondent No.2 disallowed the importation have been set out. A personal hearing was granted where the petitioners pointed out the various facts leading to the import as also the clarification given by CCI and E. By an order dated 8th November, 1990 the 2nd respondent held that the goods were imported without a license and were therefore unauthorised and, therefore, purported to confiscate the goods under Section 111(d) of the Act and purported to impose a fine in lieu of confiscation of Rs.77 lacs. However, having regard to the facts the Respondents did not think fit to impose any penalty on the 1st petitioner. The petitioners have further contended that under para.24(1) of the Import and Export Policy April 1988 to March, 1990 it is specifically set out that interpretation given to the Import Policy by the CCI and E in the matter of interpretation of Policy and procedure would be final and would prevail over the clarification given by any other authority and person in the same matter. 7.It is the case of the petitioners that based on the clarification issued by CCI and E and more specifically the communication of 26th June, 1990 they placed the order and revived the Letter of Credit based upon it the goods were imported. In these circumstances it is set out that it is not open to the Respondents to have confiscated the said goods and/or imposed fine. We may also point out that the petitioners have also relied upon the order of 30th March, 1988 issued by the Chief Controller of Imports and Exports pursuant to the powers conferred by Section 3 of the Imports & Exports (Control) Act, 1947 issued by the Central Government. 8.A reply was filed on behalf of the Respondents by R.P. Meena, Deputy Commissioner of Customs. In the reply it is set out that as per the documents produced by the petitioners the machine has been shipped to India on 28th September, 1990 and import took place during the period of Import Policy AM 1990-93. 8.A reply was filed on behalf of the Respondents by R.P. Meena, Deputy Commissioner of Customs. In the reply it is set out that as per the documents produced by the petitioners the machine has been shipped to India on 28th September, 1990 and import took place during the period of Import Policy AM 1990-93. Though the machine could be imported under OGL Appendix - I Part -B it could be imported in 2nd hand condition only against a licence issued under capital goods procedure. The petitioners did not produce the requisite licence and instead sought clearance under OGL as per provisions of Import Policy AM 1988-91 based on the Letter of Credit dated 26th February, 1990 and extension thereof. It is set out that the perusal of Letter of Credit dated 26th February, 1990 it is seen that the shipment date was allowed upto 17th March, 1990 and that validity of letter of credit expired on 27th March, 1990 and extension of the shipment period in L.C. was granted on 26th June, 1990. It is then set out that the respondent No.2 has correctly held that extension of further six months in the case given by Licensing Authority is not in order as it is a fresh commitment and, therefore, clarification from C.C.I and E is of no help to the petitioners. It is not necessary to advert to the other averments in the reply. 9.Substantial time was taken to argue the effect of para.9 of the Open General License No.2/88 as also para. 8 of the General License 2/90 dated 30th March, 1990. We do not propose to reproduce the said paragraphs for the view to be taken in this petition. 10.Against the order in Original the Petitioners preferred an Appeal to CESTAT being Appeal No.C-114/ 91-BOM and CESTAT by its order dated 8th May, 1997 was pleased to dismiss the appeal. As this order was subsequent to the filing of the Petition by Chamber Summons the subsequent events have also been incorporated. The petitioners by the prayer clauses therefore, have prayed for quashing the order in original as also the order of CESTAT dated 8th May, 1996. 11.In our opinion it is not necessary for us to go into the controversy of the effect of para.9 of the OGL No.2/88 and para.7 of OGL No.2/90. The petitioners by the prayer clauses therefore, have prayed for quashing the order in original as also the order of CESTAT dated 8th May, 1996. 11.In our opinion it is not necessary for us to go into the controversy of the effect of para.9 of the OGL No.2/88 and para.7 of OGL No.2/90. In the instant case admittedly considering para.9 as the petitioners could have imported the goods having satisfied the said requirement and as in the meantime a new policy had come into force the petitioners by their communication dated 18th April, 1990 and 18th June, 1990 had called on the Chief Controller of Imports and Exports for a clarification regarding the import of the said machine. In terms of para.24 of the Import and Export Policy which is also issued under Section 3 of the Import and Export Control Act, 1947 if there was any difficulty in giving interpretation to the said policy it was left to the Chief Controller of Imports and Exports and the interpretation given was to be final and prevailing over any clarification given by any other authority or person in the same matter. The Respondents themselves had, therefore, in the matter of clarification of payment itself left it to the CCI and E to give clarification. That clarification was given by the CCI and E by communication dated 26th June, 1990 addressed to the petitioners herein. By the clarification the petitioners were informed that with the permission of the bankers to extend the Letter of Credit upto 30th September, 1990. In other words the authority in whom the power was conferred to issue a clarification understood the policy to mean and understand that if an importer satisfied the requirements of the Import and Export Policy April 1988 to March, 1991 and the Open General Licence No.2/88 even if a new import policy had come after Import and Export Policy April, 1988 to March, 1993 the clarification given would be binding on all authorities including the respondent No.2. 12.In our opinion in the circumstances it is not necessary for us to address ourselves to the issue either of promissory estoppel or for that matter about the consequences of the savings paragraphs of the two policies. 12.In our opinion in the circumstances it is not necessary for us to address ourselves to the issue either of promissory estoppel or for that matter about the consequences of the savings paragraphs of the two policies. The clarification, in our opinion, considering para.24 would result in the petitioners having acted in good faith on the said clarification and consequently the import, therefore, cannot be said to be illegal. In the light of that the impugned order in Original as also the Order of CESTAT are set aside. Petition made absolute in terms of prayer clause (a). The petitioners were allowed to remove the goods in terms of the interim order of this Court dated 26th December, 1990 on furnishing a written undertaking. In view of the order the petitioners are discharged from the said undertaking. 13.Rule made absolute accordingly. No order as to costs.