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TMI Blog1980 (4) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... ning such licence or having the same amended is that in case the importer is a small scale industry, the importer has to apply to the sponsoring authority, the Drug Controller for issue of essentiality certificate. It is only after such a certificate is granted that application for licence or amendment thereof may be considered by the licensing authorities. 3. The Import Trade Control Hand Book of Rules and Procedure (1971 Edition) at page 55 paragraph 80(3) provides, inter alia, that the sponsoring authorities will make their recommendations for licences subject to the conditions laid down. The conditions inter alia are that the sponsoring authorities will not recommend import of any item which is not licensable to actual users in terms of the relevant import policy. Paragraph 80(1) provides that the licensing authorities will consider the items mentioned therein which include recommendation of the sponsoring authority, availability of foreign exchange and policy in respect of the items sought to be imported. This paragraph falls in Chapter IV which is headed as "Actual Users (industrial)". It is, therefore, a duty and obligation of the Drug Controller and the licensing authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This letter makes a strange reading. If the contention of the licensing authority was that the nicoinamide and niconimide being same were banned items under relevant policy why did it grant such an amendment of the licences. A person has a right to and may apply for import licence for any item he may desire and no fault can be found with the applicant for applying for importing any of them. It is the duty of the authorities concerned to check as to whether an import licence could and should be granted in respect of a particular item or not, to ascertain the nature of the item applied for and its permissibility for import. If it is the duty of the person applying for licence to ascertain whether a particular item is a banned item and accordingly to interpret the policy, it would be unnecessary to have high officers with large staff to consider applications and issue licences. It is the Drug Controller and the licensing authority who should have known or should have tried to ascertain wheeler nicotinamide was a banned item before issuing the licence. If at all there is a default it is on the part of authorities in granting the amendment of the licences without understanding what the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 12-7-1972 intimated the Attorneys of the petitioner that the Chief Controller of Imports & Exports, New Delhi had been requested to expedite decision in the matter. Even after this request for expedition neither the licensing authority took any steps for cancellation of the licence nor did Customs Authorities issue any show cause notice. Non-issuance of the show cause notice by the Customs authorities is obviously for the reason, that they were aware that in case of the valid licence produced before them, they had no option but to permit the clearance of the goods. With a view to get out of the difficulty the Customs authorities adopted an attitude of sitting tight on the goods and driving petitioners to adopt some proceedings. Taking advantage of this delay the Chief Controller of Imports and Exports, New Delhi issued a public notice dated 21-9-1979 whereby it was inter alia stated (i) that according to the import policy for the period April 1972/March 1973, the import of the nicotinamide was not permissible to actual users, (ii) that import licence that might have been issued shall not be valid for shipment of that item against the unutilised a value of such licences, (iii) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deal with or dispose of the goods, except with the order of the Court and on giving a personal bond for the market value of the goods. The respondents were directed to permit immediate clearance of the goods on payment of customs duty. The respondents further agreed to issue a detention certificate for remission and refund of demurrage charges in the event of the petitioner succeeding in the petition and the proceedings arising out of notice under Clause 10C dated 6th July, 1973. The latter directions were granted as after the filing of the petition a notice under Clause 10C was issued bearing the aforesaid date. 9. Thereafter there were some negotiations of settlement between the petitioner and the respondents. When the matter reached hearing on 14-10-1976 some statement was made before the Court regarding the settlement of the matter. There is controversy as to what exactly were the proposals for settlement. However, it is clear from the minutes dated 14-10-1976 that at that stage there were only proposals for settlement and that no agreement was arrived at and the matter was adjourned to 3-11-1976 for consideration of the proposals. On 9-4-1977 the petitioner submitted before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms Authority has further brought to the notice of the office that Niacinamide which you have imported is the same as Nicotinamide which is banned for import under the Licensing Policies for the licensing periods April 1969/March 1970 and April 1970/March 1971 to which the licences in question relate vide List II of Appendix 19 of the Red Books for the said Licensing Periods. You are an established actual user and hence you were knowing that niacinamide is the same as nicotinamide and that it was a banned item as per the Import Policy. AND WHEREAS since there was no intention of allowing import of any banned item to you and as you have got the item niacinamide endorsed on your licences by deliberately suppressing from this office the vital information that niacinamide in name as nicotinamide which was a banned item there is reason to believe that the goods in question imported by you being of banned category were not meant to be utilised for the purpose for which they have been imported". This show cause notice clearly states and proceed on the basis that the petitioner had already imported the goods. It is difficult to understand as to how the goods which were not even allowed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordance with the Imports (Control) Order, 1955. He contended that in any event the 4th respondent had no jurisdiction to take proceedings under Clause 10C and issue show cause notice and the order passed under Clause 10C is invalid and void. 13. The functions of the licensing authorities and the Customs authorities operate in different fields though they may at times interest so as to operate in some common area. The function of the licensing authorities is to consider whether any particular item should be allowed to be imported or not, looking to various circumstances such as the requirement of the item, the amount of foreign exchange involved, permissibility for import and other relevant factors. If satisfied about the feasibility and permissibility of import it is their function to permit the import by grant of licence and impose such conditions as they find necessary. This granting of licence may be dependent upon a policy enunciated in advance by the Government or may even be made to depend on the individual judgment of the licensing authority. Such a policy may be published for the convenience of the importers or kept confidential and made known only to the officers concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the conditions imposed in the licence and required to be complied with by the importer have been complied with by the importer and if his finding on the aforesaid issues is in the affirmative he is bound to allow clearance of the goods on payment of duty. It is not for the Customs authorities to interpret licensing policy or to enforce the same once a valid licence is produced. This function is of the licensing authority. If this bifurcation of function is not adhered to there is every likelihood of utter confusion. The licensing authority may interpret the policy one way and the Customs authorities may take contrary view producing a conflict between the two authorities resulting in harassment to the importer. It is, therefore, that the functions of the two authorities which operate in two different spheres must be kept within their proper ambit. If a licence is granted in respect of a particular item by the licensing authority the Customs authority will have no right or power to go beyond the licence and determine as to whether the said licence related to prohibited item. It is only the licensing authority who has to determine the said question at the time of granting licen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India, but this conclusion was drawn by him not by reference to the licence held by the respondents, but by reference to entry 294 in column 6 by which certain restrictions have been laid down for the import into India motor cycles in a completely knocked down condition. For one thing, what the respondents had imported was, `parts and accessories' though under, one licence under four different consignments. Again the articles imported by them were inadequate for assembling 30 complete auto cycles, for the simple reason that no tyres, tubes and paddles have been provided for the auto cycles. It is admitted before us that the tyres and tubes used on these motor cycles are not of the standard type and are not manufactured in India. There is nothing to show whether the saddles used on these motorcycles were of the standard type. In the circumstances, therefore, it could not be said that by following devious method the respondents could be said to have imported 30 motor cycles into India in a completely knocked down condition. The Collector's conclusion that, this is what the respondents intended to do, was the result of an erroneous approach to the matter and, therefore interference in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this decision. The decision must be read in the light of the facts on which the same was given. In that case the petitioner was a firm of importer and was carrying on business in imported goods in Goa before its liberation. On 19/20 December, 1961, Goa was liberated. Prior to liberation import licences were granted to the citizens of Goa by the then Government. The petitioner firm as originally constituted was an importer registered with the then Government prior to December 1961. On 3-1-1962 Central Government had issued directions to the Chief Civil Administrator regarding issue of import licences to the effect that imports should be allowed only if the letter of credit had been opened before 18-12-1961 or shipment had taken place before 20-12-1961. On 16-1-1962 the petitioner had applied to the Administrator of Goa for issuing an import licence and was granted the licence on 12-2-1962. The licences granted to the firm were held to be in contravention of these directions. The said firm had already imported about 50 per cent of the goods leaving a balance of £ 16000 for which it had not till then opened a letter of credit. The said licence was revalidated on 2-5-1962 and letter o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be said to be the directions of the type and kind which were there in the Supreme Court case. The licences in the present case cannot be said to be contrary to any direction of the type available in the Supreme Court case. It should also be noted that in the Supreme Court case it was the licensing authority which decided about the validity of the licence issued earlier and not the Customs authority. In my view, the licences in this case are valid and in any case the Customs authority cannot decide upon the validity or invalidity of the licence but must necessarily follow the contents thereof and permit the goods if the necessary conditions set out by Section 47 are complied with. 17. Mr. Dalal contended that in case licence was granted in contravention of the policy, as in respect of banned items, it would be an invalid licence. According to him in case an item was banned nobody can issue a licence. For this he relied on Clause 6 of the order. This clause has no application at all. This clause applied to specific cases where specific directions are given by the Government or Chief Controller of Imports and Exports in respect of specific items. Even if the licence is granted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Part IV of Section II the item is "drugs, medicines, all sorts, not otherwise specified in this Schedule". Column 4 says that the licence is available to actual users and the detailed policy is given in Appendix 19 at page 260. Three lists are given in the said appendix List I at page 264 relates to quota licences and is not relevant. So tar as the actual users are concerned, they are governed by list II. List II states, the list of drugs and medicines and preparations thereof which will not be permitted to be imported against licences issued for drugs and medicines". The list heading does not say that the items mentioned will not be allowed to be imported at all, which would be the natural expression used if these items were completely banned. The list gives an impression that there can be licences issued generally for import of drugs and medicines but that in case general licence for import of drugs and medicines is issued the items mentioned in the list will not be permitted to be imported. Mr. Dalal contended that the heading should be read as meaning that the items mentioned will not be permitted to be imported against licences issued for manufacture of drugs and medicines. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amed pursuant to the powers given by Import and Export (Control) Act, 1947 and therefore it is a piece of delegated legislation. No executive authority therefore has any power to act in contravention of the said order. The said order provides for issuance of licence, for refusal of licence, for amending of licence, for suspension of grant of licence and for cancellation of licence. No licence once issued can be made ineffective or cancelled except as provided by the said order. Clause 9 itself says that the Central Government or the officers mentioned therein may cancel any licence granted under the order or otherwise render it ineffective on the grounds mentioned thereunder. Clause 10 provides opportunity of being heard to be given before taking any action under Clause 9 against a licensee or an importer or any other person. As per Clause 9(a), one of the grounds on which the licence can be cancelled or rendered ineffective is, if the licence has been granted through inadvertence or mistake or has been obtained by fraud or misrepresentation. The contention of the licensing authority in the present case can fall only within sub-clause (a) of Clause 9. Assuming that nicotinamide was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereof under Clause 9 is necessary; that in any case by public notice dated 21-9-1972 the importers of the nicotinamide were prohibited from using the said goods in any manner; that this public notice has force of law and is issued to control the distribution and the disposal of the goods imported and therefore effectively prohibits the petitioner from using the said goods in any manner whatsoever. Some of the propositions of Mr. Dalal are unexceptional and cannot be controverted nor has Mr. Rana attempted to do so. What cannot be accepted is the contention of Mr. Dalal when he says that the Import Control Policy and the Public Notice have force of law and that the licences can be held to be void or ineffective without any order passed in accordance with Clause 9 of the Imports (Control) Order, 1955. Mr. Dalal has strongly relied on an unreported judgment of this Court in The Union of India and Others v. Indian Gem House : delivered by Kantawala C.J. and Madan J. dated 12-1-1978 in Misc. Petition No. 110 of 1967. In that case the Government had laid down the policy whereby all the applications for issue of import licences and customs clearance permits to be made to the licensing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be capable of creating obligations as well as conferring or creating rights and it is well settled that the policy statement and the public notices cannot confer or create any right enforceable at law. It is, therefore, obvious that such a policy statement or public notices which cannot confer or create any right cannot have force of law. 22. Again the executive instructions or directions issued under Article 73 of the Constitution can only operate in a field which is not covered by any legislation. The executive cannot issue any directions or instructions which will have the effect contrary to the one contemplated by properly enacted legislation. As already pointed out about the field of prohibition, restriction and control of imports and as ancillary thereto us and distribution of the imported goods is already covered by legislation contained in the Imports (Control) Order, 1955 and Exports (Control) Act, 1947 and, therefore, any instruction or direction contained in a public notice which has the effect of cancellation or making ineffective the licence already granted otherwise than by following the procedure by Clause 10 and on the grounds other than those contained in Clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said to be covered by any of the clauses relied upon by Mr. Dalal. Clause 6 provides for refusal of licence. In this case the licence having been granted, the question of refusal does not arise. Clause 7 provides for amendment of licence. Here also, amendment already having been granted, the question of amendment does not arise. Similarly, in the present case the licence having been already granted the question of barring the licencee from receiving licence also does not arise nor can the said public notice be said to be covered by Clause 8A which provides for power to suspend grant of licence. There can be no question of exercising the power to suspend grant of licences or allotment of imported goods if the licence has already been granted. Clause 9 provides for cancellation of licence and Clause 10 provides for hearing. These clauses cannot support issue of any public notice. Clause 10B (1) give powers to restrict the use of goods received on allotment or distribution made by the State Trading Corporation of India or other agency and, therefore, the same does not apply. Clause 10B (2) applies to the use or disposal of the goods imported against a licence on the strength of a le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n what basis and conditions the licences would be granted under the Act and the Order. The licences, therefore, cannot be taken away or made ineffective merely by changing policy. If this was so it was unnecessary to provide in the Order, the grounds on which the licences can be cancelled or made ineffective. The very fact that such provision is made shows that licences cannot be cancelled or taken away on the mere whim of the executive but can be cancelled or taken away only in accordance with the provisions of the said Order. 25. Mr. Dalal then contended that the principles of Contract Act applies to the issue of licence and the parties were not ad-idea. He contends that the petitioners applied for licence but did not inform that it was a banned item. The licensing authorities also did not realise that it was a banned item and so licence was issued. He contends that there was no application of mind on the part of the authorities concerned. According to Mr. Dalal the licence is therefore void. There is no reason to believe that the Drug Controller and the licensing authorities did not know that nicotinamide and niacinomide are the same. If the contention of Mr. Dalal is to be acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondents in their affidavit dated 6-12-1978. The case as made out in the said affidavit is material and, therefore, it is reproduced below. "I say that on several occasions and at several hearings including the hearing of the matter before His Lordship the Hon'ble Mr. Justice Madon on 15th September, 1978, the learned counsel for the petitioner duly instructed by their solicitors M/s. Gagrat & Co. made a statement before the Hon'ble Court that the petitioners wanted the goods in question to be diverted according to the formula prescribed under Clause 10C of the Import (Control) Order, 1955 and wanted an order to be passed under the said provision and if the price was fixed by adopting such formulas and goods ordered to be diverted entire dispute will be over. I say that for this specific purpose the matter was adjourned from time to time. `I say that the learned Advocate for the Central Government informed the authorities concerned by various letters that the petitioners wanted an order to be passed under Clause 10C of the Import (Control) Order, 1955. I say that accordingly an order was passed on 28th October and 25th October 1970 and the same were duly served on the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Hon'ble Court was therefore pleased to adjourn the matter till the reopening of the Court after the summer vacation. I say that thereafter correspondence ensued between the petitioner's Advocates and the Respondents' Advocate as also between the petitioners and the licensing authorities and/or the Indian Drugs and Pharmaceuticals Ltd. regarding the fixation of price. I say that by a letter dated 9th April, 1977, the petitioners sent calculation sheet showing the costs of the said goods which is annexed as annexure 2 (Collectively) so the affidavit of Piseurlencar dated 8th December 1976. I say that the matter was adjourned from time to time since no mutually agreed price could be arrived at though the petitioners furnished all the relevant materials to the concerned authorities." While in the amendment to the petition what the petitioner has contended is as follows :- "Thereafter the said petition came up for hearing before the Hon'ble Mr. Justice Bage on or about 11th October, 1976 and arguments continued on 11th October,1976, 12th October,1976 and 13th October, 1976. The petitioner firm says that in the afternoon of 13th October 1976 while the Court was hearing some other mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en heard to say that the order passed under 10C was invalid. However, Mr. Dalal has emphatically argued that the prayer (a) of the petition is redundant and emphatically stated that neither the Customs authority nor any other Governmental authority has given up any rights and it is still open to them to adopt proceedings against the petitioner. In the circumstances, question of approbation on reprobation cannot and does not arise. Mr. Dalal has next contended that the petitioner had acquiesced in passing of the order under Clause 10C. This contention is not supported by facts nor it is taken in any of the affidavits filed on behalf of the respondents. Mr. Dalal in support of his contentions relied on some correspondence which is produced and taken on file. Even that correspondence does not show that the petitioner has given up any contention or right in respect of the proceedings under Clause 10C or otherwise. The first letter in the correspondence is dated 28-10-1976 and refers only to proposals for settlement which are referred in the letter dated 30-10-1976 as `without prejudice proposal'. The subsequent correspondence till 26-1-1977 does not show that there was any agreement ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considers reasonable. Since it was not the authority which was deciding the matter it is clear that the last item which is obviously uncertain had to be resolved by mutual agreement and it is in this context that Clause 10C has been referred to. Similarly the reference to Clause 10C in the letter of 17-6-1977 also is in the same circumstances, particularly in view of the fact that the letter speaks of the using of good offices of the licensing authority, to see that the matter is amicably settled. It further says that the petitioner was willing to leave the finalisation of price payable by the petitioner to `you' meaning thereby licensing authority. However, there is only an offer but there is nothing to indicate in the correspondence that the petitioner had at any time submitted to the jurisdiction of the Controller or the Dy. Chief Controller of Imports and Exports to act under Clause 10C and given up the contention that the circumstances in which the orders can be passed under Clause 10C did not assist. If the position was as contended by Mr. Dalal that the petitioner had submitted to the jurisdiction of the authority acting under that Clause there was no reason why the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ple of the goods to the petitioner's factory premises. It is further recorded that in reply to this, the 4th respondent confessed that it was not the Department's case that the goods imported could not be physically used by the petitioner but the case was that under the imported policy and the intention of the policy makers such goods were not intended to be permitted to be imported for such use since such goods were indigenously available. Even before this show cause notice dated 6-7-1973 was issued the petitioner had submitted to the Chief Controller of Imports and Exports a letter from the Drugs Controller, Madhya Pradesh dated 10-10-1972, which stated that the formulates of liquids, orals, and tablet preparation for which niacinamide is a main ingredient, were already approved by his office for manufacturing, and that the petitioner had increased the installed capacity of its manufactory at its new factory premises and in the light of the increased installed capacity, the quantity imported by the firm was not in excess and may be released. This also establishes that the petitioner was in a position to utilise the imported goods. The order of the 4th respondent under Clause 10C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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