1984 (9) TMI 304 - HC - Indian Laws

Summary

Issues Involved:
1. Validity of REP licence and its transferability.
2. Actual user condition and its applicability.
3. Customs authorities' change of stance and withholding of goods.
4. Issuance of show cause notice and its legality.
5. Import restrictions under the Import Policy of 1977-78.

Detailed Analysis:

1. Validity of REP Licence and Its Transferability:
The petitioner, a partnership firm, imported tetracycline hydrochloride under REP licences transferred to them. These licences were originally issued under the Import Policy of 1977-78, which allowed the import of raw materials, components, consumables, stores, and packing materials. The REP licences were freely transferable and not subject to any actual user condition from 1st April 1978, as clarified by the Joint Chief Controller of Imports and Exports.

2. Actual User Condition and Its Applicability:
Paragraph 30(1) of the Import Policy of 1977-78 stipulated that the imported goods must be required for use in the licence holder's factory and subject to actual user condition. However, from 1st April 1978, REP licences became freely transferable, and the actual user condition was no longer applicable. The customs authorities had previously allowed the clearance of tetracycline hydrochloride under these licences, acknowledging their transferability and exemption from the actual user condition.

3. Customs Authorities' Change of Stance and Withholding of Goods:
The customs authorities suddenly changed their stance and withheld five consignments of tetracycline hydrochloride imported by the petitioner. The petitioner had complied with all formalities, including transferring the licence and entering into a contract with foreign suppliers. The customs authorities' previous practice was to allow clearance of such goods, but they now claimed that the import could not be allowed unless the goods were required by the importer in their own factory.

4. Issuance of Show Cause Notice and Its Legality:
The customs authorities issued a show cause notice to the petitioner, alleging that the import of tetracycline hydrochloride was in contravention of the Import Policy of 1977-78 and the Customs Act, 1962. The petitioner argued that the show cause notice was arbitrary and illegal, as the identical goods had been released on earlier occasions under similar licences. The records showed that the customs authorities had previously allowed clearance of such goods after considering various objections and obtaining clarifications from the Chief Controller of Imports and Exports.

5. Import Restrictions Under the Import Policy of 1977-78:
The Import Policy of 1977-78 included certain restrictions on the import of raw materials, components, consumables, stores, and packing materials. Annexure I contained a list of banned items, and Annexure II contained a list of export-linked-import items. Tetracycline hydrochloride was not initially included in these lists but was later added as an export-linked-import item on 27th September 1977. The customs authorities argued that the restriction should apply retrospectively, but the court held that such restrictions could not have retrospective operation.

Conclusion:
The court found that the customs authorities' sudden change of stance and issuance of the show cause notice were arbitrary and without any new facts or materials. The petitioner had complied with all formalities, and the REP licence was valid for the import of tetracycline hydrochloride under the Import Policy of 1977-78. The court directed the customs authorities to assess the bills of entry and allow clearance of the goods within 48 hours, subject to the payment of assessed customs duties. The respondents were also directed to issue full wharfage and/or demurrage rent exemption certificates for the consignments.