1986 (9) TMI 203 - SC - Indian Laws

Whether under item 1 of Appendix 6 (import of items under Open General Licence) of the Import Policy, 1985-88, raw materials, components and consumables (non-iron and steel items) other than those included in the Appendices 2, 3 Part A, 5 and 8 will be permissible by the actual user (industrial)? Held that - This contention above cannot be accepted firstly because it comes within specific prohibition of Item 9 in Part-B of Appendix 5 being fatty acid and acid oil which were importable only by the State Trading Corporation of India under Open General Licence on the basis of foreign exchange released by the Government in its favour. Secondly the actual importation was not by the petitioners but by somebody else as mentioned hereinbefore, being M/s Dimexon Co. In the premises, the view of the Bombay High Court cannot be sustained. Appeal allowed.

Issues Involved:
1. Refusal of Customs authorities to permit clearance of Palm Karnel Fatty Acid.
2. Validity of additional licences issued under the Import Policy 1978-79.
3. Interpretation of the Supreme Court's order dated 18th April, 1985.
4. Applicability of Import Policy 1985-88 to items imported under additional licences.
5. Entitlement of diamond exporters to import canalised items under additional licences.
6. Equity considerations in the importation of canalised items.

Issue-Wise Detailed Analysis:

1. Refusal of Customs authorities to permit clearance of Palm Karnel Fatty Acid:
The respondents purchased 544.860 Metric Tonnes of Palm Karnel Fatty Acid on a high sea basis under an additional licence. The Customs authorities refused clearance based on the Supreme Court's decisions in Raj Prakash Chemical's case and Indo Afghan Chamber of Commerce's case. The refusal was because the said acid was a canalised item under the Import Policy 1985-88, even though it was not canalised under the Import Policy 1978-79.

2. Validity of additional licences issued under the Import Policy 1978-79:
The respondents argued that their additional licences, issued pursuant to the Supreme Court's order dated 18th April, 1985, allowed them to import items permissible under the Import Policy 1978-79. The Supreme Court had previously ruled that there was no requirement for diversification of exports as a condition for granting Export House Certificates for the year 1978-79.

3. Interpretation of the Supreme Court's order dated 18th April, 1985:
The Supreme Court clarified that items importable under the Import Policy 1978-79 and also under the Import Policy prevailing at the time of import (1985-88) could be imported. The Court emphasized that the items must pass two tests: they should have been importable under both policies and not specifically banned under the current policy.

4. Applicability of Import Policy 1985-88 to items imported under additional licences:
The Court reiterated that only items permissible under both the 1978-79 and 1985-88 policies could be imported. The Palm Karnel Fatty Acid, being a canalised item under the 1985-88 policy, did not meet these criteria. The Court noted that the Import Policy 1985-88 did not permit the import of canalised items by an Export House holding an Additional Licence.

5. Entitlement of diamond exporters to import canalised items under additional licences:
The respondents, as purchasers from the diamond exporter, claimed entitlement to import the canalised item. The Court rejected this claim, stating that the Import Policy 1985-88 did not allow such imports. The Court emphasized that the entitlement to import items "whether canalised or otherwise" depended on the prevailing import policy at the time of import.

6. Equity considerations in the importation of canalised items:
The Court found no equity in favor of the respondents, as they were aware of the legal position and the Supreme Court's judgments in Raj Prakash's and Indo Afghan Chambers of Commerce's cases. The respondents purchased the goods after these judgments, and no restitution of rights was warranted. The Court also rejected the argument that the respondents, as actual users (industrial), could import the items under Open General Licence, noting the specific prohibition in the Import Policy 1985-88.

Conclusion:
The Supreme Court allowed the appeal, setting aside the Bombay High Court's order. The Court held that the importation of canalised items directly by holders of additional licences was banned and that the items sought to be imported by the respondents did not meet the criteria set out in the Import Policy 1985-88. The appeal was allowed with costs awarded to the appellant.

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