JUDGMENT
Bhaskar Bhattacharya, J.
1. By this writ application, the petitioner No. 1, a unit set up under EOU Scheme, for import of used and unserviceable automotive diesel engines, has prayed for directions upon the respondents to assess duty payable on 1500 pieces of re-constructed diesel engines and allow the clearance thereof for sale of those by the petitioners in the Domestic Tariff Area in terms of permission granted by the Development Commissioner.
The case made out by the petitioners may be summarised thus :
(a) The petitioners applied before the Development Commissioner for permission to set up its unit under EOU Scheme for import of used and unserviceable automotive diesel engines, free of Customs duty for reconstructing them in its unit and exporting those after for such reconstruction. The Development Commissioner after being satisfied about the process relating to reconstruction of the imported unserviceable diesel engines, issued the letter of permission (“LOP”) as provided in Clause 7 of Chapter 9 of the Exim Policy to the petitioner No. 1 for establishment of a new undertaking for the manufacture of reconstructed diesel engines for automotive use.
(b) According to Exim Policy such 100% EOU are permitted under Sub-clause (b) of Clause 9 of Chapter 9 to sell the goods within country which is called Domestic Tariff Area (“DTA”).
(c) In accordance with the petitioners’ export performance, the petitioner company is entitled to clearance and sale of 2171 pieces of reconstructed diesel engines in the DTA on payment of appropriate Customs duty thereon and accordingly, the petitioners applied to the Development Commissioner for permission to sell 1500 pieces of such reconstructed diesel engines in DTA.
(d) By a letter dated September 24, 2001, the Development Commissioner granted permission to the petitioner for sale of 1500 pieces of reconstructed diesel engines in DTA in terms of Paragraph 9.9(b) of the Exim Policy read with Paragraph 9.24 and Appendix 42 of the Handbook of Procedures on terms and conditions mentioned therein.
(e) In view of such permission granted by Development Commissioner,the petitioners by letter dated September 26, 2001, requested the Deputy Commissioner of Customs (Bond), the Respondent No. 3 herein, for determining the applicable duty to enable the petitioners to pay the same. The Deputy Commissioner (Bond) sought clarification from the petitioners regarding the term “reconstruction”. Accordingly, the petitioner company by its letter dated October 11, 2001, requested the Development Commissioner to confirm that provision of Paragraph 9.22 of Exim Policy was not applicable and that there was no restriction of sale of such reconstructed diesel engines under Para 9.9 (b) thereof in DTA.
(f) The Development Commissioner by its letter dated October 23, 2001 duly confirmed that no import licence is required for DTA sale as permitted by him under Sub-clause (b) of Clause 9 of Chapter 9 of the said Exim Policy.
(g) After completion of export commitments in June 2003, the petitioners applied for renewal of the said permission granted by the Development Commissioner for sale of 1500 pieces of reconstructed diesel engines in the DTA by the petitioner and the Development Commissioner by letter dated July 24, 2003, extended the time for such DTA sale of 1500 pieces reconstructed diesel engines for a value up to Rs. 105 lac for a further period till September 23, 2003.
(h) Pursuant to extension of time granted by Development Commissioner for DTA sale of those 1500 reconstructed diesel engines, the petitioners approached one M/s. Himadri Overseas Corporation for sale of such reconstructed diesel engines and the said M/s. Himadri Overseas Corporation by its letter dated July 28, 2003 placed its order for supply of 1140 pieces Of such reconstructed diesel engines on terms and conditions mentioned therein. The petitioner accepted such offer of Himadri Overseas Corporation.
(i) From time to time, the petitioner although requested the Assistant Commissioner of Customs for assessing applicable duty in respect of the said 1500 pieces of reconstructed diesel engines, but Customs authority has neither assessed the applicable duty nor have they given clearance of sale.
2. Hence the writ application.
3. This writ application is opposed by the respondents and in affidavit-in-opposition the defence taken by the Development Commissioner may be stated as follows:
(a) The petitioner obtained Letter of Permission dated December 12, 2000 to set up a 100% Export Oriented Unit (“EOU”) for the manufacture of reconstructed diesel engines for automotive use. 100% EOU’s are mandatorily obliged to export their entire production for which they en- joy several facilities under Export-cum-Import Policy as notified by the Central Government from time to time. Such facilities under Policy permit 100% EOUs to sell their goods or products up to 50% of the FOB value of exports subject to fulfilment of Net Foreign Exchange performance/obligations in the Domestic Tariff Area, i.e. within the country, subject to payment of all applicable Customs and Excise duties after compliance with all statutory obligations including obtaining the per- mission of the Development Commissioner of the concerned free Trade Zone/Special Economic Zone.
(b) This facility of DTA sale is however, not available to units engaged in re-conditioning/repairing/remaking/re-engineering etc. as provided in Para 9.22 of 1997-2002 Policy and Para 6.17 of the current Policy.
(c) In terms of Para 3.31 of the Policy “manufacture” means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and includes process, such as refrigeration, repacking polishing, label- ling and segregation.
(d) The petitioner imported old diesel engines and re-exported those after repairing and reconditioning the engines. There was, thus, no manufacture as stipulated in Paragraph 3.31 of the Policy as will be evident from a copy of the order placed on the petitioner and their acceptance thereof which are annexed at pages 47 and 48 of the writ application.
(e) When the petitioner approached the Customs authorities for clearing their goods for sale in the DTA in accordance with the permission from the Development Commissioner, the Customs Authorities sought clarification as DTA sales are not permissible for reconditioned/re- paired/reengineered etc. items. In the instant case, used diesel engines were imported and reconditioned and/or reengineered, so that Paragraph 6.8 of Policy (2002-07) and (9.9b of 1997-02 Policy) was not applicable.
(f) Apart from the aforesaid fact, the petitioner has been communicated by letter dated September 22, 2003 that the permission for advance DTA sale of reconstructed diesel engines has already been cancelled.
(g) In view of the disclosure of the aforesaid letter dated September 22, 2003, canceling the previous permission, the petitioners by way of supplementary affidavit has challenged the legality of such letter dated September 22, 2003 contending that such permission of cancellation was without jurisdiction, arbitrary, unreasonable and the right accrued in favour of the petitioner by virtue of earlier permission, cannot be taken away without giving an opportunity of hearing.
4. Mr. Pal the learned Counsel appearing on behalf of the petitioners, has vehemently contended that the petitioners are engaged in reconstruction of the old engines and the said work of reconstruction cannot be equated with the word “remaking” or “reconditioning” so as to attract the provision contained in 9.22 as alleged. According to Mr. Pal, the respondent authority, thus, acted with- out jurisdiction in bringing the case of reconstruction within the purview of “re- making” or “reconditioning”. Mr. Pal next contends that the petitioner having already been granted permission to sell 1500 pieces of reconstructed diesel engines in DTA and the petitioner having acted in terms of such permission, the respondent authority could not cancel such permission without giving an opportunity of hearing. Mr. Pal further contends that even at the most, the respondent authority could pass order prescribing sale in DTA prospectively but by cancel- ling earlier permission could not take away the right of the petitioner which has accrued in their favour by virtue of export. Mr. Pal, thus, prays for setting aside the order of cancellation of permission dated September 22, 2003. Mr. Pal lastly contends that earlier direction of sale in DTA having been granted by Development Commissioner, such permission cannot be cancelled by Assistant Development Commissioner as it appears from Annexure P to the affidavit-in-opposition. He thus, prays for setting aside that order also on the ground of want of authority of the Assistant Development Commissioner.
5. The aforesaid contentions of Mr. Pal has been seriously disputed by Mr. Kapoor, the learned Additional Solicitor-General appearing on behalf of the respondents.
6. Mr. Kapoor contends that the petitioners are really engaged in re- conditioning of old engines in the name of reconstruction only to bypass the pro- visions of 9.22 and thus, the Development Commissioner rightly passed an order cancelling earlier permission which was passed in ignorance of law.
7. Mr. Kapoor lastly contends that, although in the letter annexed to the affidavit-in-opposition, the order of cancellation of permission was conveyed to the petitioners by Assistant Development Commissioner but the order itself was passed by the Development Commissioner and in support of such contention, he has placed before this Court original records showing that the Development Commissioner himself passed a direction for cancellation. Mr. Kapoor thus, prays for rejection of the writ application.
8. After hearing the learned Counsel for the parties and after going through the materials on record, I am of the view that the question whether the petitioners are really “reconstructing” the engines or are, in fact, “remaking” or “reconditioning” the engines cannot be decided by this Court on the basis of materials on record. If it appears on investigation that the real object of the petitioners is to “recondition” or to “remake” the old engines, in such a case, they are not entitled to get the benefit of sale in DTA; on the other hand, if it appears on appropriate enquiry that the petitioners are really engaged in an activity which cannot be called to be “remaking” or “reconditioning” of old engines, in such a case, they are entitled to get the benefit of DTA sale but those facts are required to be investigated by appropriate authorities on the basis of actual inspection of the nature of works. Therefore, at this stage, this Court is not in a position to investigate the aforesaid question on the basis of materials placed before this Court.
9. There is no dispute that in the past, Development Commissioner permitted the petitioners to sell in DTA by accepting their case that their activities did not come within 9.22. I, however, do not find any substance in the contention of Mr. Pal that once a permission has been given to sell in DTA, even if that permission was erroneous or in ignorance of material facts, or appropriate law, such mistake cannot, be rectified by the respondent authority. After all, if the respondent authority finds that earlier they passed wrong order permitting sale in DTA in ignorance of the provision contained in the Policy, they can surely rectify such decision, but in such a case, it should be fair to give an opportunity of hearing to the petitioners to whom already a permission was granted for sale in DTA.
10. It is apparent from the record produced by Mr. Kapoor that in revoking earlier permission of sale, no further opportunity of hearing was given to the petitioner and no detailed reason was also given in the order.
11. According to the definition of licence indicated in Section 2(g) of Foreign Trade (Development and Regulation) Act, 1992, licence means a licence to import or export and includes a Customs clearance permit and any other per- mission issued or granted under this Act. According to Section 9(4), the Director General or the officer authorises under Sub-section (2) of that section may subject to such condition as may be prescribed, for good and sufficient reasons to be recorded in writing suspend or cancel any licence granted under the Act. However, no such suspension or cancellation should be made except after giving the holder of the licence a reasonable opportunity of being heard.
12. In the instant case, it appears that before cancellation of permission which comes within the definition ‘licence’, no opportunity of hearing was given and no detailed reason was given.
13. In this case, since in the past, on the basis of same materials, the respondent authority granted permission to the petitioners to sell in DTA, in order to cancel such licence it is necessary that specific detailed reason should be given in order to rectify earlier one.
14. I, thus, find that order of cancellation which has been annexed to the affidavit-in-opposition was passed by not following the provision contained in Section 9(4) of the aforesaid Act and, as such, is liable to be set aside on that ground alone. I accordingly, quash such order and direct, the respondents to give an opportunity of hearing to the petitioners before taking fresh decision for the purpose of arriving at a just decision. The respondent authority will be free to seek explanations from the petitioners as regards their mode of activity and the respondent authority will also be entitled to inspect the entire process of so called reconstruction. After considering all those matters, the respondent authority should arrive at a conclusion and if the authorities are of the view that the activity of the petitioners amounts to “remaking” or “reconditioning” of old engines, in such a case, rather detailed reasons should be given why the same is not a case of “reconstruction”. Be that as it may, the respondent authority must arrive at a fresh decision within one month from today after giving opportunity of hearing. This order, however, will not stand in the way of the petitioners in making export in terms of permission granted to them.
15. The writ application is, thus, disposed of with the above directions.
16. In the facts and circumstances, there will be, however, no order as to costs.