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TMI Blog1988 (4) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... r reliefs as this Hon'ble Court may deem fit and proper in the circumstances of the case. 2. The petitioner is a registered partnership firm having its head office at Phagwara and a branch office at Bangalore. It is the case of the petitioner that it is an exporter of pure silk textile goods manufactured out of 100% mulberry raw silk imported under the import licence. 3. It is contended on behalf of the petitioner that it has imported 60 bales of 100% mulberry raw silk pursuant to the advance import licence granted to it under the provisions of the Imports and Exports (Control) Act, 1947 read with Import and Export Policy for the period from April 1987 to March 1988 ; that after taking delivery of 60 bales of mulberry raw silk at Bombay Port, the same were transported to Bangalore through M/s. G. Shantilal Transport Co., for the purpose of twisting and for carrying out manufacturing process and thereafter to return the manufactured goods to Phagwara for embroidery work and thereafter to export the same out of India ; that the petitioner has complied with the conditions of the licence; therefore, the Customs Authorities have no jurisdiction either to seize or to take any action in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arise for consideration : (1) Whether the respondents have had no authority to seize 51 bales of mulberry raw silk in question? (2) Whether on obtaining duty exemption entitlement certificate and on compliance with the conditions mentioned therein, the importer would be entitled to use the material imported as indigenous material free from any control or restriction? POINT NOS. 1 AND 2 : These two points are considered together as they are inter-connected. 6. It is not in dispute that the petitioner is a registered partnership firm having its head office at Phagwara and branch office at Bangalore. It is also not in dispute that the petitioner is a manufacturer-exporter. The petitioner was granted Advance Licence No. P/L/2243588/61XX/103/Z/87 dated 7-5-1987 for importing 100% mulberry raw-silk with duty exemption on 6844.5 kg. only worth Rs. 17,46,750 on certain conditions. The conditions of import are stated in the very licence itself, which are as follows : "(1) The licence shall be subject to the conditions in force relating to the goods covered by the licence as described in the relevant Import Trade Control Policy Book, or any amendment thereof made up to and including t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of one or more export orders, from the whole of the duty of customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and from the whole of the additional duty leviable thereon under section 3 of the said Customs Tariff Act subject to the following conditions, namely:- (a) the materials imported are covered by a Duty Exemption Entitlement Certificate (hereinafter referred to as the said Certificate), issued by the licensing authority in the form specified in the schedule to this notification, in respect of the value, quantity, description, quality or technical characteristics, as specified in Part 'C' of the said Certificate ; (b) the importer at the time of clearance of the imported materials makes, - (i) a claim in writing to the Collector of Customs for such exemption and executes a bond or legal undertaking before such authority as may be approved by the Central Government for complying with the conditions specified in this notification; (ii) a declaration before the Assistant Collector of Customs binding himself to pay on demand an amount equal to the duty leviable but for the exemption, on the imported materials in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce, or as re-constituted by the Central Government from time to time ; (ii) 'exempt material' means the materials imported and specified in Part 'C' of the said Certificate and eligible for exemption from duty under this notification; (iii) 'imported against Advance Licence' includes goods imported under O.G.L. in terms of the import and export policy for the time being in force, for which at the time of clearance out of customs control, a valid Advance Licence is produced by the exporter; (iv) 'licensing authority' means an authority competent to grant a licence under the Imports (Control) Order, 1955 made under the Imports and Exports (Control) Act, 1947 (18 of 1947) ; (v) 'mandatory spares' means parts of the resultant product which are to be compulsorily supplied as spares as per the relevant export order or contract for substitution if it becomes faulty or worn out. (vi) 'materials' means goods which are raw materials, components, intermediate products or consumables used in the manufacture of resultant products and their packings, or mandatory spares to be exported along with the resultant products ; (vii) 'Obtained against Advance Release Order' means goods obtained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te where the resultant products will be manufactured. In Part-A only the address of the petitioner as "M/s. Pooja Enterprises, Bazar Bansanwala, Phagwara, P8" is mentioned. No other address or place is mentioned. No other place of manufacture is mentioned. Part-B relates to the name and addresses of the factories where the ancillaries of the resultant produce will be manufactured. In Part-B it is stated "as above" meaning as stated in Part-A. That means factory at Phagwara only. Part-C relates to the list of materials and port of Registration. In Part-C, in the second column "100% mulberry raw silk" is mentioned. In other columns, weight and value of the material are mentioned. Port of registration is mentioned as Delhi. Part-D relates to the particulars of imports of exempt materials. Part-E relates to resultant products. In Part-E it is stated that the resultant products are pure silk sarees, fabrics, dupattas made up of 100% mulberry raw silk, suit pieces weighing 5070 kgs. Part-F relates to particulars of exports in which 25 entries are made. 10. The notification issued under section 25 of the Customs Act, 1962, among other things, enables granting of advance licence for impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances. In case where such exempt materials are imported for replenishment of the materials used in the manufacture of resultant products exported and holder of an advance licence being a manufacturer-exporter may utilise the replenished materials for further production subject to actual user conditions. Similarly, the licensing authority may consider the request of holder of advance licence not being a manufacturer-exporter for transfer of the replenished materials at landed cost, to the supporting manufacturer concerned, whose name appears in the duty exemption entitlement certificate for further production, subject to actual user condition. 11. As it is already pointed out ''the actual user condition" means the imported material should be used at the place specified in the advance licence and for manufacture of resultant products for exportation. Therefore, in the instant case, the advance licence only mentioned the manufacturing place at Phagwara. Even in Part-B also the very same address is mentioned. That being so, it was not at all open to the petitioner to transport the 100% mulberry raw silk bales in question from Bombay to Bangalore, even after fulfilling the export oblig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondents that those persons from whom the bales are seized, have admitted that they have purchased them. As the mulberry raw silk in question imported under Advance Licence Scheme has been seized under section 111 of the Act, a show cause notice has also been issued under section 112 of the Act for contravention of section 111(o) of the Act. Therefore, it is neither necessary nor appropriate to express any opinion on the merits of the case. It is because of this, Sri Chandra Kumar, learned Counsel for the petitioner did not address arguments on merits. 12. However the main contention of the petitioner is that the Customs Authorities have no jurisdiction to seize as long as there is no material to show that the notification No. 44, dated 19-2-1987 issued under section 25(1) of the Act has been contravened. The fact that the goods in question are imported under the advance license issued under the Imports (Control) Order, 1955 does not in any way affect the authority or jurisdiction of the customs authorities to pursue the imported material. As such the seizure of the imported mulberry raw silk in question is in accordance with the provisions of the Act and the notifications is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v). This Court held that under that clause a licensing authority was competent to impose only such conditions as may be expedient from the administrative point of view. This Court further held that prohibiting an importer from disposing of the goods imported affects the rights of that person and therefore such a condition cannot be prescribed in the licence in the absence of a rule permitting that to be done. In the case before us, the licence has been issued under the Order of 1955. The language of sub-clause (2) of clause 5 of that order is wide and permits the imposition of a condition which was outside sub-clause (v) of clause (a) of the Order of 1948. Sub-clause (4) of clause (5) further makes it obligatory upon the licensee to comply with all the conditions imposed or deemed to be imposed under Clause 5. We therefore do not agree with the second contention and hold that the licensing authority is competent under the Order to impose the condition that the imported goods be not sold to any person and thus to affect the ordinary rights of the importer. 13A. The third contention too has no force. Sub-clause (4) of clause 5 provides that the licensee shall comply with all conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al user condition subject to which the import licence in question was granted under Advance Licence Scheme. Therefore, it is not possible to agree with the view taken by the High Court of Madras in the aforesaid case. 15. Reliance was also placed on a decision of the High Court of Bombay in Loash Chemical Works v. Messrs. Mehta, Collector of Customs (Preventive) Bombay and Others - 1981 E.L.T. 235 (Bombay), in support of the proposition that once the export obligation is fulfilled, the goods ceased to be prohibited goods as defined under Section 2(33) of the Act and therefore, the Customs Authorities have no jurisdiction to lay their hands on such goods. In this judgment, in respect of prohibited goods, it is observed thus: "The functions of the licensing authorities and the Customs Authorities operate in different fields though they may at times inter est 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods entered for home consumption are not prohibited goods and the importer has paid the import duty, if any, assessed thereon and any charges payable under that Act in respect of the same, the proper officer may make an order permitting clearance of the goods for home consumption. The effect of section 47 read with section 2(33) is that once licence is granted, the proper officer has to ascertain (i) whether the goods sought to be imported correspond to the description in the licence (ii) whether 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 views, producing a conflict between the two authorities resulting in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se there is no order passed by the proper officer under the Imports and Exports (Control) Order and the notification issued thereunder, exempting the petitioner from observing the actual user condition. 16. In fact a communication dated 6-11-1987 bearing No. 17/19/P. 5/AM. 86/ECA/ASR/820 issued by the Assistant Director, Directorate of Revenue Intelligence in connection with the goods in question is placed before me. The said communication reads thus: "Kindly refer to your letter No. 856(17) ASR/87/879 dated 13-10-1987 on the above subject. The parawise required information is as under : - (i) M/s. Pooja Exporters, Phagwara submitted in this officer certain shipping bills for FOB value of Rs. 38,96,188 in respect of exports made before issue of the said licence to them. They also submitted certain shipping bills for a FOB value of Rs. 31,11,378 in respect of exports made after issue of the said licence but before execution of bank guarantee, which was submitted for proportionately reduced amount of the bank guarantee. Photostat copies of the concerned shipping bills submitted by the firm have already been obtained by you from the concerned licence file No. Adv-128/AM. 87/EPI/AS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion which is imported under the advance licence scheme cannot be accepted. As long as the importation is on actual user condition, it has to be used in the manner provided under the Notification No. 44, dated 19-2-1987. For the purpose of transporting such material from the place mentioned in the advance licence to another place, the permission has to be obtained. No such permission was obtained and such a condition was also not waived. The petitioner has not even sought for exemption of such a condition. That it is so, is clear from the communication dated 6-11-1987 which is reproduced earlier. 19. Reliance was also placed on the public notice No. 40/87, dated 9-6-1987 relating to utilisation of indigenous material for export obligation under the advance licence. The said notice reads thus: "Attention is invited to customs Notification No. 117/78, dated 9-6-1978, which has been superseded by customs Notification No. 44/87, dated 19-2-1987 relating to duty-free import against Advance Licences. Duty-free replenishment has been allowed in terms of the said Notification. A doubt has been expressed as to whether exports made by utilising indigenous material from stock may be counte ..... 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