JUDGMENT
J.P. Devadhar, J.
1. The challenge in this petition is to the orders passed by the Customs Authorities denying duty free clearance of the goods imported by the Petitioner under the duty free advance licence granted to them by the Licensing Authorities.
2. The Petitioner is a Small Scale Industrial Unit engaged in the manufacture and export of Autohead lamps, Tail lamp, etc. It is the case of the Petitioner that for the manufacture of the aforesaid items, various raw materials and components, including die steel are required. The Petitioner accordingly applied for and obtained an advance licence in terms of EXIM policy 88-91 inter alia for import of die steel. The licensing authority has also issued duty exemption entitlements certificate/pass book so as to enable the Petitioner to import Die steel without payment of duty.
3. In the light of the advance licence, the Petitioner placed an order for imports of Die steel from Austria. On arrival of the goods, the Petitioner filed a Bill of Entry for clearance of die steel duty free as per Exemption Notification 116/1988. The Assistant Commissioner of Customs by his order dated 7.6.1989 disallowed the benefit of Notification No. 116/1988 on the ground that Die steel imported is not in the nature of raw materials for manufacture of export goods but is meant for manufacture of moulds as capital goods, which is not falling within the scope of Notification No. 116/1988. In other words, it was held that the Die steel is not directly used in the manufacture of export product and hence benefit of Notification No. 116 of 1988 cannot be attended to the Petitioner. Being aggrieved by the aforesaid order, the Petitioner filed an appeal before the Collector of Customs (Appeals), who by his order dated 15.11.1989 (Exhibit ‘G’ to the petition] dismissed the Appeal by holding the Customs authorities are not bound by the error committed by the licensing authorities. The Appellate authority held that the Petitioner cannot be allowed the benefit of the Exemption notification as the Die steel imported are raw materials for manufacture of capital goods namely mould and not raw material for the manufacture of the export goods namely autohead lamps, tail lamps, etc. Challenging the said order, the Petitioner has filed the present petition.
4. While admitting the petition and granting interim relief on 26th February, 1990, this Court allowed clearance of the goods on the Petitioner furnishing 50% bank guarantee and 50% deposit of duty. The Counsel for the Petitioner stated that on deposit of 50% of duty amount and furnishing bank guarantee for 50% the Petitioner has cleared the goods as per the interim orders of this Court. The counsel for the Petitioner further stated that the bank guarantee furnished pursuant to the interim orders of this Court have been kept alive.
5. Mr. Sanklecha, learned Counsel appearing on behalf of the Petitioner submitted that once the advance licence is granted to the Petitioner to import Die steel duty free as an item required for the export product, it is not open to the Custom Authorities to go behind the licence and refuse duty free clearance of the said goods. Mr. Sanklecha submitted that the Petitioner fulfils all the conditions set out in the Notification No. 116/1988 dated 30th March, 1988 and hence the Die steel imported by them against the advance licence is liable to be cleared duty free. Mr. Sanklecha relied upon the decision of the Apex Court in the case of Oblum Electrical Industries Pvt. Ltd. v. Collr. of Cus., Bombay in support of his contention and submitted that the word ‘materials’ in Notification No. 116 of 1988 is not only restricted to the materials which are directly used in the manufacture of export product, but also apply to the materials which are required in order to manufacture the resultant product.
6. Mr. Rao, learned Counsel for the Respondents, on the other hand submitted that the Die steel imported by the Petitioner was not used in the manufacture of the export product but it was used in the manufacture of Moulds, which in turn was used for the manufacture of export products. According to the Counsel for the revenue, the benefit of the Notification No. 116/1988 could be availed only if the imported goods are directly used in the manufacturing or production of the export goods. It was submitted that in the instance case, admittedly, the Die steel imported by the Petitioner was not directly used in the manufacture of the export goods and hence the benefit of the Notification No. 116/1988 has been rightly denied to the Petitioner.
7. Having heard the Counsel on both the sides, we are of the opinion that the Customs authorities below were not justified in refusing to allow the duty free clearance of the goods on the ground that Die steel imported by the Petitioner is capital goods and capital goods did not fall within the scope of the notification No. 116/1988. Admittedly, under the advance licence issued, the Petitioner was entitled for duty free import of Die steel as a material required in the manufacture of export product. Once the Licensing Authority has accepted that die steel is a material required in the manufacture of the export product, it is not open to the Customs Authorities to go behind the licence and deny duty free clearance of the goods. The exemption notification No. 116/1988 dated 30th March, 1988 specifically states that the materials that are required to be imported for the purpose of manufacture of resultant products shall include such items as are imported into India against the advance licence for subsequent exportation. In the instant case, the licence specifically states that the Petitioner is entitled to import Die steel as a material required for the manufacture of resultant products. The Apex Court in the case of Titan Medical Systems Pvt. Ltd. v. Coll. of Customs has held that once an advance licence is issued and not questioned by the licensing authority, the Customs authorities cannot refuse exemption on an allegations that there was any misrepresentation. In the present case also, the licensing authorities have not found fault wit the statement of the Petitioner tat the Die Steel is a material required in the manufacture of resultant product and have granted advance licence to the Petitioner. Assuming that the licensing authorities have wrongly accepted the statement of the Petitioner, so long as the licence is valid and subsisting the import of materials set out in the advance licence are liable to be cleared duty free, under Notification No. 116 of 1988 and the Customs authorities cannot deny duty free clearance of the materials set out in the licence. It is not open to the Customs authorities to sit in appeal and hold that the licensing authorities have erroneously endorsed advance licence to permit import of Die Steel as a material required in the manufacture of the resultant product. In this view of the matter, we are of the opinion that the impugned orders passed by the Customs authorities below cannot be sustained.
8. Accordingly the petition succeeds. The orders impugned in the petition are quashed and set aside and the Rule is made absolute in terms of prayer Clause (a) of the petition.
9. Since the import was for the purpose of fulfilling export obligation, the Petitioner shall place necessary materials before the Respondents and establish that the export obligation has been fulfilled and apply for refund of the amount paid by them to the Respondents pursuant to the interim orders of this Court. As and when such application is made by the Petitioner, the Respondents shall adjudicate upon the said application in accordance with law and after hearing the Petitioner, pass an order on merits within 12 weeks from the date of receipt of the application. The bank guarantee furnished by the Petitioner be returned to them within 8 weeks from today if the Petitioner establishes that the export obligation as per the Advance licence has been fulfilled.
10. Petition disposed of in the above terms, with no order as to costs.