1986 (3) TMI 230 - SC - Customs

Whether the relief granted by the High Courts should have been granted at all, not whether it should be enhanced? Held that - The date, October 18, 1985, is a critical date, because for the first time diamond exporters can be said to have been warned that the Court could possibly take a different view from that prevailing hitherto. Meanwhile, as we have said, some of the diamond exporters had already irretrievably committed themselves by opening and establishing irrevocable Letters of Credit. We think it appropriate that those diamond exporters who were granted Additional Licences under the Import Policy 1978-79 and had opened and established irrevocable Letters of Credit before October 18, 1985 should be permitted, notwithstanding the construction we have placed on the order dated April 18, 1985 of the Court, to clear the goods imported, or to be imported, by them pursuant to such irrevocable Letters of Credit. In other words, all imports effected pursuant to such Letters of Credit should be deemed to have been legally and properly made, and should entail no adverse consequences whatsoever. In taking this view we are impressed by the broad principles of justice, equity and fair play and by the need to avoid undeserved hardship, and we are not persuaded to the contrary by legal technicalities. We may point out that the validity of principle has been recognised in Paragraph 35(3) of the Import Policy 1985-88 itself, where while declaring that Additional Licences issued to Export Houses in the preceding licencing year or earlier shall cease to be valid for the import of items of spares appearing in certain Appendices, including Appendix 3, of the Import Policy for the licencing year an exception has been carved out insofar that these restrictions will not apply to the extent the licence holders have made firm commitments by irrevocable Letters of Credit opened and established.....before 1st April, 1985 , the date when the Import Policy 1985-88 came into force. Also diamond exporters who pursuant to the issue of Additional Licences under the Import Policy 1978-79 have opened and established irrevocable Letters of Credit on or after October 18, 1985 will not be entitled to the benefit of this order.

Issues Involved:
1. Import Policy and its changes over time.
2. Grant of Export House Certificates and Additional Licences.
3. Interpretation of the term "specifically banned" in the context of the Import Policy.
4. Restitution for diamond exporters who were denied Export House Certificates.
5. The impact of judicial orders on the rights to import under different Import Policies.

Detailed Analysis:

1. Import Policy and its Changes Over Time:
The case revolves around the changes in India's Import Policy from 1978-79 to 1985-88. Initially, acrylic ester monomers were allowed to be imported under Open General Licence due to the absence of indigenous production. Over the years, the Government of India moved these items to restricted and banned lists to protect domestic industries and conserve foreign exchange. The Import Policy 1981-82 placed acrylic ester monomers in Appendix 5 (List of Restricted Items) and later moved Ethyl Acrylate to Appendix 3 (List of Banned Items). Subsequent policies continued to reclassify these items, reflecting changes in economic and fiscal needs.

2. Grant of Export House Certificates and Additional Licences:
Several diamond exporters applied for Export House Certificates and Additional Licences under the Import Policy 1978-79 but were denied on the grounds of not diversifying their exports. The High Courts of Bombay and Delhi ruled that the denial was invalid and directed the issuance of the certificates and licences. The Supreme Court, in its order dated April 18, 1985, confirmed these High Court judgments, directing the issuance of Export House Certificates for the year 1978-79 and allowing the import of items, except those "specifically banned" under the prevalent import policy at the time of import.

3. Interpretation of the Term "Specifically Banned":
The core issue in this appeal is the interpretation of the term "specifically banned" as used in the Supreme Court's order dated April 18, 1985. The appellants argued that under the Import Policy 1985-88, Export Houses with Additional Licences could only import items listed in Part II of List 8 of Appendix 6, and since acrylic ester monomers were not listed, their import was "specifically banned." The respondents, however, contended that "specifically banned" should only refer to items absolutely prohibited from import, not those merely restricted or canalised.

4. Restitution for Diamond Exporters:
The diamond exporters argued that they were entitled to full restitution, meaning they should be allowed to import items as per the Import Policy 1978-79, notwithstanding changes in subsequent policies. The Supreme Court noted that the High Courts had taken into account the altered import policy framework while granting relief, balancing the need for restitution with current economic realities.

5. Impact of Judicial Orders:
The Supreme Court's order dated April 18, 1985, was interpreted in light of the High Court orders, which aimed to grant relief to diamond exporters while considering the prevailing import policies. The Court concluded that the term "specifically banned" included items listed in Appendix 3 and Appendix 2 Part A of the Import Policy 1985-88, which replaced the earlier Appendices 3 and 4 (List of Banned and Absolutely Banned Items).

Conclusion:
The Supreme Court upheld the interpretation that diamond exporters holding Additional Licences could not import items listed in Appendix 3 and Appendix 2 Part A of the Import Policy 1985-88. However, it allowed those who had opened irrevocable Letters of Credit before October 18, 1985, to clear their imports, recognizing the need for fairness and to avoid undue hardship. The appeal was disposed of with no order as to costs.

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