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TMI Blog1987 (8) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... and licence No. 2820676, dated 2-9-1978 both issued to M/s. Thalwar Khuller Pvt. Ltd. and in respect of these licences the respondents were the letter of authority holders. But then, at the time of actual import the licence No. 2820001 had no balance and much of the value of licence No. 2820676, dated 2-9-1978 had also been utilised. Therefore, the respondents got the letter of authority amended on 9-9-1979 and substituted the two licences of M/s. Thalwar Khuller Pvt. Ltd. with the licence of M/s. P S Exports Corporation. 4. When the respondents sought clearance of the goods against the licence issued in favour of M/s. P S Exports Corporation, the Customs objected to the clearance on the ground that in terms of para 211 of the Policy AM-80 the said licence became invalid since crude palm oil became canalised under Appendix 8 Sl. No. 57(4) of the Policy and since there had been no firm commitments made by opening irrevocable letters of credit prior to 1-5-1979. The Collector of Customs, Bombay after holding an enquiry held that the import was unauthorised. Therefore he ordered confiscation but allowed redemption on payment of fine of Rs. 90,000/-. 5. Being aggrieved by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orts Corporation the import was unauthorised and the view taken by the Board was not correct. Shri Pal drew our attention to para 6 of the Hand Book of Import-Export Procedures 1979-80 and contended that the functions of the holder of letter of authority are limited to place orders, to open letter of credit, to make remittance of payment for importing the goods, to arrange movement and to clear the same through the customs having regard to Section 147 of the Customs Act on behalf of the licensee but the ownership of the goods will not vest with the letter of authority holder. Shri Pal also relied upon a decision reported in 1986 (8) ECR 605. Shri Pal submitted that the Board's order may be set aside and the Collector's order may be resorted. 8. Shri Krishnamurthy, Consultant for the respondents made the following submissions : (i) There is a clear distinction between a licensee and a licence holder. The letter of authority becomes a licence holder the moment the letter of authority is executed in his favour. Shri Krishnamurthy referred to definition of the "letter of authority" given in clause (h) of Section 2 of the Imports Exports (Control) Act. Clause (h) reads : "letter o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as M/s. P S Exports Corporation had executed letters of authority in favour of the present respondents. The letter of authority executed by M/s. Thalwar Khuller Pvt. Ltd. was in respect of 2 licences dated 15-7-1978 and 2-9-1978. The letter of authority executed by M/s. P S Exports Corporation was in respect of the licence dated 24-7-1978. The respondents by reason of letters of authority becomes the agents of the licensees. Admittedly, as the letters of authority holder the respondents can place orders, open letter of credit, make remittance of payment for Importing the goods, arrange the movement and to clear the same through the customs on behalf of the licensee. He, however, would not become the owner of the goods (see para 6 of the Hand Book of Import-Export Procedures 1979-80). The respondents opened an irrevocable letter of credit dated 3-4-1979 with the Punjab Sind Bank Ltd. New Delhi branch for US $ 4,28,000/- for the import of industrial palm oil. At the time of opening of the letter of credit the 2 licences mentioned were one dated 24-7-1978 and another dated 2-9-1978. The licences had sufficient balance when the letter of credit was opened. After the let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the licence will be valid for the import of the excluded items also. 11. According to the above para 211 the firm commitment by opening irrevocable letter of credit must be by the licence holder. The expression licence holder would include his agent. As a matter of fact, the heading of para 6 and 7 of the Hand Book of Import-Export Procedures 1979-80 reads - "Imports through Agents". The said paras permit the letter of authority holder to open letter of credit. It may be stated here that under both these policies a person effecting imports under an Open General Licence may utilise the services of an agent for the purposes of placing an order, to open letters of credit, to make remittance, to arrange movement and to clear the same through the customs. 12. During both the years 1979-80 reference is made to Section 147 of the Customs Act. Section 147 speaks of the liability of principal and agent. Sub-section (1) reads: "Where this Act requires anything to be done by the owner, importer or exporter of any goods, it may be done on his behalf by his agent". Sub-sec. (3) reads - "When any person is expressly or impliedly authorised by the owner, importer or exporter of any goods to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he time of shipment even if it was not valid at the time of clearance the customs were accepting another licence which actually covers the import. Further the licences were issued to the export houses. They were also transferable. The original licensee viz. M/s. Thalwar Khuller Pvt. Ltd. could have acquired the licence issued in favour of M/s. P S. Exports Corporation so as to enable them to clear the goods. The Board has also referred to the Exchange Control Manual Vol. I which authorised the dealers to transfer endorsements from exchange control copy of one import licence to exchange control order of another import licence held by the same importer. Shri Pal did not contend that the Exchange Control Manual did not authorise transfer of endorsements from one import licence to another import licence. 13. The view taken by the Board appears correct and in confirmity with the avowed policy. The Board's order cannot be said to be improper or illegal. If the view taken by the Board is reasonably possible the Government of India in exercise of its review power cannot take a different view just because another view is also possible. The power of review has to be used sparingly and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he name of M/s. P S Export Corporation, New Delhi on 24-7-1978. Along with this licence they produced a letter of authority dated 30-4-1979 from the licence holder for the clearance of the goods. Shri Pal submitted that this licence was for the period 1978-79 and in terms of para 211 of the 1979-80 Policy the same was not valid for the clearance of palm oil, as under the 1978-79 Policy the import of palm oil had been canalised. However, the Policy provided for a concession to import such canalised items like palm oil to those licence holders who had made firm commitments by opening confirmed Letters of Credit before 1-5-1979. In the present case, the respondents had opened the Letter of Credit against two licences 2820001, dated 15-7-1978 and 2820676, dated 2-9-1978 both issued in favour of M/s. Thalwar Khuller Pvt. Ltd. But when the goods arrived in India, there were no balances under these aforesaid licences to cover the goods. The appellants amended the original Letter of Credit dated 30-4-1979 on 9-9-1979 to include the licence No. 2858092 dated 24-7-1978 in the Letter of Credit. The Collector held that this was a fresh commitment entered on 9-9-1979 on behalf of the licenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Exports (Control) Act, 1947 while there was no definition of the term "licence holder". Similarly, Clause 2(b) of the Imports (Control) order defined a "licence". But the Board's order equated the licensee with the licence holder. Shri Krishnamoorthy referred to para 9 of the Board's order-in-appeal. He further submitted that "import" was defined under Section 2(26) of the Customs Act. If these provisions of law were interpreted correctly, it would imply that the amendment dated 9-9-1979 in the L/C was not a fresh or new commitment. The L/C had been in existence and the commitment made there under was continued. The Bill of Entry for the clearance of the goods had been filed in the name of Jain Exports Pvt. Ltd. and not in the name of the licensee. The commitment was also in their name for import of the goods. They had also signed the declaration in the Bill of Entry and produced the letter of authority for the clearance of the goods. Hence the licence submitted by them was valid for the import of the goods and in these circumstances, Shri Krishnamoorthy prayed that the Board's order be maintained and the Govt. of India's review show cause notice should be dropped. 19. In reply, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and does not include the other licences No. 2820001, dated 15-7-1978. However, on the basis of submissions made by the learned Consultant of the Respondents, it would not make much of difference to the argument advanced by the respondents that there was a firm commitment on the part of the letter of authority holder and not necessarily on the part of the licence holder. In this behalf, they have relied on the Board's order which has equated the letter of authority holder with the licence holder. The other argument advanced by them is the relevance of Section 147 of the Customs Act. Under Section 147, the respondents argue that as agents, they have acted on behalf of the licence holder and the commitment made by them before the critical date should be accepted. Therefore, in brief, it is these two arguments which require consideration and consequent determination. As submitted by the learned Consultant on behalf of the respondent, the term "letter of authority" is defined in Section 2(h) of the Imports Exports (Control) Act, 1947. Section 2(i) defines "licence". A licence holder would, in normal circumstances, mean the person on whom the licence has been issued. It is not possibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... House Agent in terms of Section 146 only. It is in this context that the proviso to sub-section (3) of Section 147 would have a correct meaning. Therefore, there is no warrant to resort to Section 147 of the Customs Act for interpreting the provisions of the Imports Exports (Control) Act, the Imports (Control) Order and the Import Policy as sought to be done by the respondents. The provisions of these enactments are self-contained and there is no need to go to the Customs Act for their interpretation. In these circumstances, the licence produced by the respondents is not valid to cover the goods. 21. I now turn to the arguments advanced on behalf of the Collector. The main contention advanced is that there was no firm commitment by opening an irrevocable L/C by the licence holder before 1-5-1979 in terms of para 211 of the Policy. As examined above, this contention is found to be correct. In this view, the import of the goods in question is hit by the entry in Appendix 8 Serial No. 57(4) of the Policy. The Board's reliance on the provisions of the Exchange Control Manual are not applicable to the case under consideration. They deal with an entirely different situation regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of credit and then appeared to have made a roving enquiry fishing for a licence to provide legal cover to the unauthorised import. This is quite contrary to the intent and scope of para 6 of the Handbook. This is also in stark contrast to the normal commercial practice of opening a letter of credit which precedes quotation, indent, and acceptance. The bank has also substituted 7 licences with 20 others with great alacrity and efficiency on the same day, and issued a certificate long thereafter on 4-2-1980 which covers the licence of M/s. P S Exports Corporation, New Delhi dated 14-7-1978 and also the licence No. 2820001, dated 15-7-78 of M/s. Thalwar Khuller Pvt. Ltd., Kanpur, against which no firm commitment had been made by opening a Letter of Credit before 1-5-79. The Bank's certificate dated 4-2-1980, however, maintains ominous silence as to the date on which these changes were effected and therefore it provides no help to the appellants to establish their point. The appellants also produced the letter of authority dated 30-4-79 from M/s. P S Exports Corporation though they were nowhere on the scene on that date. This also shows the appellants resourcefulness irrespect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. Shri B.N. Sharma, Consultant for the respondents, stated that he would furnish the Departmental Representative a complete set of papers in two-three days. Accordingly, the hearing was adjourned to 31-7-1987. 29. On 31-7-1987, Smt. Chandra stated that in spite of her efforts she had not been able to get the papers from her counterpart at Bombay. She stated that she would be obliged if a further short adjournment was granted. However, when it was put to her and Shri D.K. Saha, Departmental Representative (who argued the case for the Department) whether the set of papers furnished by Shri B.N. Sharma would or would not suffice for the purpose of making submissions, Shri Saha stated that it would suffice. In view of this and in view of the rather tight time schedule within which this matter had to be heard and the papers transmitted to the West Regional Bench so that they could pass final orders in the appeal before 16-8-1987 on which date one of the Members of that Bench, who first heard the matter, is due to retire, we decided to proceed with the hearing and declined the request for adjournment. 30. The facts of the case have been set out in the orders written by the Members ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the licensing authorities had been given up and the licence holders have been authorised by a general provision in para 6 of the Handbook of Import and Export (Procedures) 1979-80 to issue letters of authority. The said para 6 of the Handbook defines the functions of the letter of authorities holders in the following terms :- "But the functions of the holder of such letter of authority shall be limited to place orders, to open letter of credit, to make remittances of payment for importing the goods, to arrange movement and to clear the same through the Customs having regard to Section 147 of the Customs Act, 1962, on behalf of the licensee, and any other related matters connected with the operation of the licence in question, but not its ownership." It will be seen that the functions which the letter of authority holder is authorised to discharge are on behalf of the licensee. And, though the word "licensee" has not been defined, it admits of no ambiguity. The word means the person who has been licensed to import goods. Therefore, the letter of credit which the letter of authority holder is authorised to open in terms of para 6 of the Handbook is one on behalf of the licens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oading. The amending of the letter of credit to include the licence of P S Export Corp. was, as noted earlier, on 9-9-1979, that is long after the Bill of Lading date. This is yet another circumstance which goes to show that there was no firm commitment prior to 1-5-1979 to import palm oil on behalf of the licence holder, P S Export Corp. Even the covering invoice dated 18-7-1979 shows two import licences against which the goods were ordered/imported as Import Licence No. P/W/2820001, dated 15-7-1978 and P/W7/2820676 dated 2-9-1978, that is, the licences standing the name of M/s. Thalwar Khuller Pvt. Ltd. 35. The Board, has in its Order-in-Appeal, relied on para 13A.27 of the Exchange Control Manual, Vol. I (1980 Edition), which has been extracted in the said order. It appears to us that the purport of the para is to enable authorised (foreign exchange) dealers to transfer endorsements from the exchange control copy of one import licence to the exchange control copy of another import licence held by the same importer provided the authorised dealer is satisfied that the latter licence is also valid for the shipment corresponding to endorsement requiring to be transferred and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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