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TMI Blog1986 (8) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... ignment. The other two appeals registered under CD(T)233/1980 and CD431/1980 are against the orders of the Collector levying fines in lieu of confiscation of the consignments of identical goods imported by the same importers as confirmed by the Board under their Order Nos. 87-89 of 1980 dated 17-1-1980. Since these appeals raise identical issues, they were heard together and are being disposed of by this common order. Another appeal of the same appellants registered under CD(T)(BOM) 313/1980 was also heard at the same time, but a separate order is being issued in respect of that appeal. 2. The facts covered by the three appeals are identical. The appellants imported various consignments of Polyester Filament Yarns as mentioned under respective orders of the Collector and sought clearance under the import licences also mentioned in the Collector s orders. The licences were issued for raw materials, components and consumable stores and packing materials in accordance with the provisions of A.M. 78 Policy. However, the collector objected to the clearance of the aforesaid consignments on the ground that the Letter of Credit No. 23/549 dated 1-9-1977 actually opened on 5-7-1977 was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contacted the State Bank of India, Bangalore for opening the L/C and the number of L/C was also indicated in hand in the confirmation received from M/s. Shah Trading Co. Shri Harish drew our attention to the copy of the application dated 1-9-1977 made by the appellants to the State Bank of India, St. Mark s road, Bangalore-1, for the issue of the L/C in favour of M/s. Marubeni Corporation, Osaka. The Advocate also argued that the State Bank of India, Bangalore gave the L/C number on this application and he drew our attention to this endorsement vide photo copy of the application. The Advocate explained that however due to certain formalities by the bank including the procedure to be followed for issuing the letter of credit, the letter of credit was actually issued on 5-9-1977. The letter of credit was however dated, .1-9-1977. The Advocate drew our attention to the photo copy of this letter of credit it submitted in the paper book. The Advocate argued that the L/C dated 1-9-1977 was prior to the date of issue of the .Public Notice No. 67/77 of 2-9-1977. He explained that Serial No. 2 of the amendment made in the ITC policy through the aforesaid Public Notice was relevant for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n all of which were, dated 1-9-1977. Therefore, the imports were not authorised as held by the Collector and the Board. As an alternative argument, the learned Advocate contended that though the Public Notice No. 67/77 dated 2-9-1977 was dated 2-9-1977 it was published in the Gazette only on 9-9-1977 and in this behalf he relied on the letter No. GAZ/84691/78 dated 26-12-1978 of Controller of Publications, Government of India, Ministry of Works and Housing, Department of Publications, Civil Lines, Delhi - 110 054 addressed to S/Shri Bhasin Co. Advocate Supreme Court, Haley Road, (10th floor), New Delhi This letter states that the ITC P.N. No. 67/77 did not appear to have been published on 2-9-1977 and that the same appears in the Gazette dated 2-9-1977 which was made available to the Public on 9-9-1977. The Advocate also relied on the Supreme Court s decision in the case of Harla V. State of Rajasthan [AIR 1951 (467)]. In this case, the Supreme Court held that the mere passing of a resolution without promulgation or publication in the Gazette, or other means to make the Act known to the public was not sufficient to make it law. The learned Advocate further cited the decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the cases were identical. He explained that the main question hinged on the interpretation of Para 3 of Public Notice No. 67/77 dated 2-9-1977. Under this Public Notice the ITC authorities canalised the import of Polyester Filament Yarn but gave a concession in those cases where firm commitments had been made by the importers. The trade notice cast the burden on the importers to prove that they had entered into firm commitments for the imports before the crucial date. Referring to the allegations contained in the show cause notice and in the Collector s findings in his adjudication orders, the learned SDR contened that the State Bank of India, Bangalore had admitted that the licence number was not given in the application for opening of the letter of credit. He argued that it was very necessary for the supplier abroad to know that the goods being shipped by him were covered by a valid licence. Similarly, the banks also insist on this information to ensure that the exchange was not being frittered away. He further argued that on search of the premises of M/s. Shah Trading Co., the copies of the indent were seized and this copy of the indent did not bear any hand written endor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard s orders. In reply to our query, Shri Harish explained that he was not aware as to whether the banks were issuing letters of credit with retrospective dates and retrospective effect. 5. We have examined the submissions made by both the sides. The thrust of the appellant s argument is that the letter of credit issued by the State Bank of India, Bangalore on 5-9-1977 was effective from 1-9-1977 and therefore there was a firm commitment for the import of Polyester yarn before the issue of the ITC Public Notice No. 67/77 dated 2-9-1977. It is found that this argument is fallacious. Para 3 of the Public Notice makes it amply clear that the ban on the import of Polyester yarn by persons other than the STC was effective from 2-9-1977 unless a firm commitment had been made already. There is nothing in para 3 of this Public Notice to interpret that if a commitment were to be made earlier from the date of this Public Notice the yarn could be imported. Therefore even if it were to be conceded for the purpose of arguments, that the letter of credit was effective from 1-9-1977 which date is given in the L/C, it has been accepted by the appellant that the application for the issue of the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applications had been made for the-issue of the firm L/Cs. In support of this contention, the provisions of ITC P.N. No. 33/78 dated 15-5-1978 had been cited. The trade notices have to be read as such and there is no warrant to incorporate in them more to be read by analogy where the stipulations do not exist. There is therefore no warrant in the Advocate s argument that on the basis of the provisions of the ITC P.N. No, 33/78 dated 15-5-1978, some time should be allowed under P.N. No. 67/77 and therefore the L/C of the appellants should be treated as having been opened in time. This is a point which falls within the competence of the ITC authorities and it is idle to speculate that some time was allowed under one Public Notice and the same was denied under another Public Notice. In the view, we observe that the findings of the Collector and the Board that there was no firm commitment for the import of the yarn before 2-9-1977 are correct. The Advocate has put forth an alternate argument that the Trade Notice No. 67/77 dated 2-9-1977 should be made effective from 9-9-1977. In this behalf, he has relied on the letter dated 26-12-1978 of the Controller of Publications, New Delhi. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction was taken without issue of a notice to them as per the provisions of law. Since the facts of the present appeal are distinguishable, there is no substance in the Advocate s contention for relying on the ratios of these judgments. In view of these circumstances, we cannot accept the contentions of the Advocate that the Public Notice No. 67/77 dated 2-9-1977 should be made effective from 9-9-1977. The remaining plea of the Advocate is for leniency with regard to the amounts of fine and penalty. Besides submitting that these amounts are harsh, no arguments have been adduced by the Advocate for reduction of the amounts. On the other hand, the Collector and the Board have accepted the fact that the amounts of fine and penalty were levied with a view to neutralising the gains sought to be derived by the appellants through illegal imports. When we knew of the conduct of the appellants including their crude attempt to manipulate the issue of the letter of credit it leaves no scope for sympathy for the appellants. The imports appear to have been made in deliberate contravention of the Trade Control Regulations and call for no mercy. In view of these facts, we find that the orders of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot valid to cover the import having regard to the ITC Public Notice No. 67/77 which required opening of Letter of Credit on or before 2-9-1977. The consignments which were the subject matter of the other two appeals were not allowed to be cleared on the very same grounds. During the adjudication the Collector absolved the appellant as well as the State Bank of India and others from the charge of manipulation in so far as the opening of Letter of Credit is concerned. 15. Shri Harish appearing for the appellant made the following submissions : - (1) after the issue of the ITC Public Notice No. 62/77 dated 22-8-1977 the appellant placed an indent dated 1-9-1977 with M/s. Shah Trading Co., the local representatives of M/s. Marubeni Corporation, Japan, for the import of ^9.300 kgs. of Polyester Filament Yarns, Toray brand on returnable bobbins. They also opened a Letter of Credit dated 1-9-1977. Thus, there was a firm commitment by an irrevocable Letter of Credit, and therefore, merely because the bank had issued the Letter of Credit on 5-9-1977 the Collector was unjustified in holding that the imports in question were unauthorised. (2) alternatively Shri Harish argued that the Pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he goods imported, the penalty imposed or the fine levied cannot be considered unreasonable or unjust. He, therefore, prayed that the appeals should be dismissed. 17. The one and the only question that arises for consideration in all these appeals is whether there was a firm commitment for import of the consignments in question by opening irrevocable Letter of Credit on or before 2-9-1977. Before proceeding to answer the above question it is desirable to refer to few more facts, and to the order passed by the Collector. 18. The Collector had issued the show cause notices not only to the appellant but also to the State Bank of India, Bangalore, M/s. Shah Trading Co., Bombay, and M/s. Marubeni Corporation, Bombay. The State Bank of India in their explanation dated 2-7-1978 according to Collectors Order denied knowledge of the Public Notice dated 2-9-1977. They have stated that they had received the application for opening Letter of Credit on 1-9-1977. Further, opening of Letter of Credit making it effective from a date prior to the actual date was not in contravention of law and that they issued the Letter of Credit on 6-9-1977 but making it effective from 1-9-1977. M/s. Shah Tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efers to the nature of the commodity, quantity, price, dates of shipments, packing specification and it further bears the No. and the date of Letter of Credit, The Letter of Credit No. and date given was L/C No. 23/594 dated 1-9-1977 for U.S.$ 1,13,600. The State Bank of India, St. Marks Road, Bangalore, had issued a Letter of Credit dated t-9-1977. This Letter of Credit was for U.S.$ 1,13,600. It is an irrevocable Letter of Credit and it bears the No, B 23/594 dated 1-9-1977. It is thus seen that the placing of indent, the confirmation by or on behalf of the foreign suppliers and the opening of the Letter of Credit all took place on 1-9-1977. This necessarily gave rise to suspicion that the documents were manipulated by the concerned persons. In the show cause notice dated 27/28-7-1978 which was addressed to the appellant, the State Bank of India, M/s. Marubeni Corporation, M/s. Shah Trading Co. and another, it was alleged that the appellant have deliberately manipulated the date of opening of the Letter of Credit as 1-9-1977 as against 5-9-1977 to suit the imports of polyester filament yarn against the licence in question. It was further alleged that the State .Bank of India, M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Collector having agreed to drop the allegations regarding the alteration of the dates and the manipulation of the documents was not justified in relying on a circumstance that the date on the Letter of Credit had been amended and shown to be as 1-9-1977. The explanation of the Bank as well as the importer was that though the Letter of Credit document as such was issued on 5-9-1977, the Bank s commitment to the foreign suppliers was made on 1-9-1977 itself. The Bank did give the Letter of Credit No. and the amount for which it was opened on 1-9-1977 itself. This fact had been established by the other documents, namely, the confirmation letter dated 1-9-1977 written by M/s. Marubeni Corporation which contains the Letter of Credit No., the date of the Letter of Credit and the amount for which the Letter of Credit was opened. The Letter of Credit issued by the Bank corresponds to the particulars mentioned in the confirmation letter. Even if the Letter of Credit as a document came into existence only on 5-9-1977, it cannot be contended that there was no opening of the Letter of Credit on 1-9-1977. There is a distinction between opening of the Letter of Credit and the actual, issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would be that on 1-9-1977 there was not only an indent but also a confirmation of indent and also commitment on the part of the bank to the foreign suppliers. In the said circumstances the Collector s finding that no Letter of Credit was opened prior to 2-9-1977 cannot be accepted. As has been observed earlier there is a clear distinction between the opening of a Letter of Credit and issue of a Letter of Credit. There can be a commitment on the part of the Bank without issuing a formal Letter of Credit. What is important is the commitment on the part of the Bank to meet the drafts drawn against the credit by the beneficiary. It is significant to note the finding of the Collector was that the Letter of Credit as a document came into existence on 5-9-1977. The Collector did not record a finding that there had been no commitment on the part of the Bank on 1-9-1977. The Collector no doubt stated from the documents and registers maintained in the Bank and since the deposit towards the Letter of Credit was made only on 8-9-1977, the Letter of Credit as a document could not have come into existence earlier to 5-9-1977. There is a fallacy in this finding of the Collector. Even though the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cannot be said that there was any deliberate violation of the Import Control regulations, and in the said circumstances, the imposition of penalty and levy of fine was not justified. To support his contention that the Public Notice 67/77 which was printed in the Gazette was made available to the public only on 9-9-1977. Shri Harish relied on the letter No. Gaz/84691/78 dated 26-12-1978 of the Controller of Publications, Ministry of Works and Housing Department of Publications. The letter referred to by Shri Harish clearly states that the ITC Public Notice No. 67/77 had appeared in the Gazette dated 2-9-1977 which was made available to the public only on 9-9-1977. The Collector, however, in his order stated that the Gazette extraordinary is of 2-9-1977 and in any case the change in the policy had come out in the press in time. Therefore, he is unable to accept the contention that the restriction should be given effect from 8-9-1977 or 9-9-1977. In his order the Collector did not state the date or the dates on which this Public Notice appeared in the Press nor did he state whether any other mode was adopted to intimate the Public or the Trade. 26. As the Public Notice relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e must become special rule or regulation or Customary channel by or through which such knowledge can be acquired with the exercise of due and reasonable diligence. In the absence therefore of any law, rule, regulation or Custom, a law cannot come into being by merely passing a resolution without promulgation or publication in the Gazette or other means. Promulgation or publication of some reasonable sort is essential. The Supreme Court made a distinction between an Order and an Act. The Supreme Court observed : Acts of the Parliament are publicly enacted. The debates are open to the public and the Acts are passed by the accredited representatives of the people who in theory can be trusted to see that their constituents know what has been done. They also receive wide publicity in papers and now, over the wireless. Not so Proclamations and Orders of appropriate authorities. There must therefore be promulgation and publication in their cases. The mode of publication can vary. But reasonable publication of some sort there must be . 29. In (1983) 142 ITR, Kishan Lal v. Inspecting Assistant Commissioner of Income-Tax, Lucknow and Others, the Allahabad High Court ruled that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st Regional bench of this Tribunal on the following points arising in the instant appeals heard by them : (a) On the facts and in the circumstances of the case, could it be said that the imports in question were in violation of the Public Notice No. 67/77 dated 2-9-1977? (b) On the facts and in the circumstances of the case, could it be said that there was a deliberate contravention of the Public Notice No. 67/77 requiring imposition of penalties and fines. 37. The points as framed would appear to take within their compass the entire cases as adjudicated and now the subject matter of the-instant appeals. 38. The facts have been set forth in the two separate orders of my learned brethren and do not require to be recapitulated at length all over again. Suffice it to notice that : - (a) by a Public Notice dated 22-8-1977, the import policy for Registered Exporters for the period April, 1977 - March, 1978 amended so as to liberalise import of polyester Filament Yarn (the goods in question). By a further amendment made on 2-9-1977, the import of the goods in question was linked again with specified export products and canalised. An exception was, however, made in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally identical orders, all dated 18-4-1979, - (i) observed that the charge of manipulation of the dates in the aforesaid documents was not being proceeded with and it was agreed that the case could be considered only from the point of view of the validity of the I/L ; (ii) accordingly, exonerated the three alleged abettors of the appellant of the charge of abetment in the manipulation of the dates in the documents relating to the conclusion of contract and issue of the L/C; (iii) held, affirmatively, in one case that the application for the L/C was received in the Bank on 1-9-1977 while in the other two, it was observed that there is no clear evidence that the application for the L/C had not been received in the Bank on 1-9-1977; (iv) nevertheless, concluded that since the L/Cs dated 1-9-1977 were admittedly, issued only on 5-9-1977, there was no firm commitment prior to 2-9-1977 as required in terms of the Public Notice dated 2-9-1977; (v) accordingly, directed the confiscation of the goods in question subject to redemption of fines of Rs. 3,50,000 and Rs. 5,93,000 in respect of two of the notices and levied a penalty of Rs. 50,000/- in regard to the other. 39. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not communicated to M/s. Marubeni Corporation - the agents of the foreign sellers - on 1-9-1977, seeing that their letter of confirmation of that date contains those particulars which tally with those in the L/Cs. Nor is there a finding to that effect anywhere in these proceedings. Communication to the agent is communication to the principal; (e) as already mentioned, the L/Cs indisputably bore the date of 1-9-1977, notwithstanding that they were admittedly issued on 5-9-1977. 40.The questions for consideration, in the premises, are - (i) what exactly is meant by firm commitments by way of irrevocable letters of credit ? Whose commitments? How are such commitments made and when do they come into being? (ii) Does the subsequent issue of irrevocable letters of credit, pursuant to such application; relate back to the date of application and its acceptance? 41.(a) It will be noticed that it is only such cases where exporters had entered into firm commitments by way of irrevocable letters of credit to import polyester filament yarn that had been saved and excepted from the prohibition contained in the aforesaid Public Notice No. 67/77 dated 2-9-1977. (b) What exactly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a Bank irrevocably securing the payment of the price by means of an irrevocable letter of credit, a commitment that constitutes a definite undertaking by the issuing Bank provided the terms and conditions of the credit are complied with, is recognised and comprehended. Consequently the commitment of a Bank for the issue of letters of credit prior to 2-9-1977 is as much of an absolute requirement - a condition precedent - as the conclusion of contracts for the sale of the goods in question with the foreign sellers for the consequential imports, to come within the excepted category in terms of the aforesaid Public Notice. (f) How then is a letter of credit established? A credit comes into being as the result of a formal written application by the applicant, usually the buyer of the goods, which is, at the same time, a request, a mandate and an indemnity. It requests the banker to issue or open the credit, sets out the conditions on which he is to act and holds him covered in respect of his doing so . (Paget s Law of Banking - Ninth Edition - p.531). Once such an application is made and accepted by the Bank, an agreement or contract for the issue of a L/C is concluded between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of his application and its acceptance? (j) Once the Bank is committed to the issue of the L/Cs there is no question of its withdrawal just because the formal documents - the L/Cs. - have not been issued - except for fraud or other circumstances that vitiate the contract between the buyer and the Bank. 42. In the facts and circumstances of the case, it cannot but be held that - (a) a firm commitment by way of L/Cs had been made on 1-9-1977 for (i) the application was made and accepted, and (ii) the contract for the issue of the L/Cs had been communicated to the agent of the foreign seller and, thereby, the ancillary contract was also concluded; If that were not so, the particulars of the L/Cs could not have been incorporated - and there is no case and no finding that it was manipulated - in the letter of M/s. Marubeni confirming the contract; (b) the subsequent issue of the L/Cs is merely confirmatory of such commitment and, necessarily, relates back to the date of the commitment i.e. 1-9-1977; (c) there is no option for the Bank but to mention the date therein to be 1-9-1977; (d) consequently, the import in question was perfectly valid and not, by any means, vio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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