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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.871 OF 1994
M/s.Biotor Industries Limited )
a Company incrporated under )
the provisions of the )
Companies Act, 1956 having )
its registered office at 13, )
Sitafal Wadi, Mazgaon, Bombay )..PETITIONER
Vs,.
1.Union of India )
2.The Union Secretary )
(Drawback) Government of )
India, Ministry of Finance, )
Department of Revenue, )
having his office at Jeevan )
Deep, Parliament Street, )
New Delhi-110 001. )
3.The Commissioner (Drawback) )
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Government of )
India, Ministry of Finance, )
Department of Revenue, )
having his office at Jeevan )
Deep, Parliament Street, )
New Delhi-110 001. )
4.Assistant Collector of )
Customs, Draw Back Depart- )
-ment, having his office at )
New Customs House, Ballard )
Estate, Bombay-400 038. )
5.Agricultural Marketing )
Advisers to the Government )
of India, Directorate )
of Marketing and Inspection )
Ministry of Food and )
Agriculture, having his )
Office at Nirman Bhavan, )
Department of Rural )
Development, Room No.527 )
New Delhi. )..RESPONDENTS
Mr. Pankaj A. Sawant with Ms. Trupti M. Kapadia and Mr.
V.C. Murlidharan i/b. Joy Legal Consultants for the
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petitioner.
Mrs.S.V. Bharucha for Respondent Nos. 1 and 5.
Mr. R.G. Bhat with Mr. J.B. Mishra for Respondent Nos. 2
to 4.
CORAM : FERDINO I. REBELLO &
D.G. KARNIK, JJ.
DATED : 18TH SEPTEMBER , 2009
ORAL JUDGMENT (PER FERDINO I. REBELLO, J.):
The petitioners are exporters of Castor Oil. The
Government of India framed several schemes. Under the
Scheme, goods which were described in Schedule II to the
Customs and Central Excise Duty Drawback Rules, 1971
(hereinafter referred to as the Drawback Rules) were
entitled to a drawback on the export of such goods. The
Drawback Rules have been made in exercise of the powers
conferred by Section 75 of the Customs Act, 1962 and
Section 37 of the Central Excise & Salt Act which
hereinafter shall be referred to the Customs Act and
Central Excise Act respectively.
2. By the present petition the petitioners are
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challenging the denial of duty draw back on Castor Oil
exported by them for the period 22/23-6-1989 to 21st
December, 1990.
3. By a Notification dated 4th July, 1964 issued by
the Agricultural Marketing Adviser to the Government of
India it was decided that the export of goods specified
under the Schedule would not be permitted unless the
goods were graded under the provisions of the Vegetable
Oils Grading and Marketing Rules, 1955 and Certificate
of Inspection was issued in that behalf. From the
Schedule to the Notification, both “Castor Oil” and
“Castor Oil for Pharmaceutical purposes” were included
in the Schedule. By the Notification of 4th July, 1964
an order of prohibition was issued that effective from
15th July, 1964 export of goods specified in the Schedule
would not be exported unless the the same have been
graded in accordance with the provisions of the
Vegetable Oils Grading and Marketing Rules, 1955 and
accompanied by a certificate of inspection to the effect
that they have been properly graded and sealed with the
mark “Agmark”.
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4. By Notification on 3rd October, 1964 the Government
introduced with immediate effect a test for Medicinal
grade Castor oil (Cold drawn) as set out on page 435 of
the First Edition of Pharmacoepia of India 1955 which
read as under:-
“Castor Oil processed by hot expression or by
extraction with solvents Mix 5 ml with an equal
volumn of carbon desulphide and ml of sulphuric
acide the mixture may be coloured reddish-brown but
not blackish brown”.
It was further set out that all the samples of medicinal
grade Castor Oil shall be subjected to such tests in
future and be allowed to be graded under Agmark if they
confirm to the requirements given in the test.
5. The petitioner by his application dated October 26,
1978 had applied for fixation of drawback rates on the
export of Castor Oil Medicinal N.P. The Respondents by
their letter of 28th March, 1979 replied that the
Government had decided to allow draw back on export
product Castor Oil Medicinal N.P.. under Sub-Serial No.
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1204 (b) under Drugs & Drugs Intermediates &
Pharmaceuticals (Liquids & Drops) and avail an all
industry rate of 2% of the F.O.B. Value.
6. Based on the test to be conducted in terms of the
Circular dated 3rd October, 1964 the Castor Oil exported
by the petitioners was shown under Entry ‘Castor Oil
Medicinal’ and was accordingly exported.The petitioners
based on this policy continued exporting Castor Oil
(Medicinal).
7.
The Respondents issued another Circular dated
22/33-6-1989 by which the Thin-layer Chromatographic
Test was prescribed for identification of Cold drawn
Castor Oil of medicinal grade under Agmark by
substituting the earlier test.
8. On 6th December, 1989 by communication addressed by
Under Secretary (Drawback) Government of India, to
M/s.Jayant Oil Mills it was set out that on the basis of
data provided and as verified by the Customs/Central
Excise Department it had been decided to allow drawback
at the rate as set out in the said Circular. The
description of the goods were given as Castor Oil
Medicinal and/or Castor Oil First Special. By that
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communication the petitioners were also informed of the
rate fixed.
9. By communication of 3rd September, 1990 the
petitioners applied for fixation of the Drawback rate
against the export of Castor Oil First Special Grade in
the requisite proforma.
10. By communication of 6th November, 1990 an amendment
was made to the Ministry’s letter dated 6th December,
1988. The existing description in para.3 was subsisted
by:-
“Castor Oil Medicinal”
The other terms and conditions remained unchanged.
11. One Vithalbhai Patel, Member of Parliament also
addressed a letter dated 6th January, 1992 on behalf of
the industry. Attention was invited to various
difficulties financially and otherwise suffered by the
exporters of the Castor Oil. It was prayed that the
Government should take a sympathetic view and grant draw
back on export of Castor Oil. It was also requested on
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behalf of the petitioners that draw back on export of
Castor Oil First Special effected from 1st July, 1989 to
20th December, 1990 be allowed by relaxing the Rule
under Serial No.15 and all like.
12. The Respondents inspite the claim for drawback did
not take any action. Writ Petition being Writ Petition
No.2299 of 1992 came to be filed before this Court
wherein Rule was issued. The petition was disposed off
by order dated 10th November, 1992 with the direction to
the 4th respondent to decide the claim for draw back for
the period 1st July, 1989 to 21st December, 1990 within a
time frame as set out therein. In the same petition a
Motion was taken out. That Motion was disposed off with
a direction that the respondents are directed to decide
the claim of the petitioner for draw back for the period
1st July, 1989 to 21st December, 1990 on or before 29th
October, 1993.
13. Pursuant to the order of the Court the Authority
considered the contentions and the facts on record. The
Respondent No.3 by his order dated 29th October, 1993
disposed of the application by holding that the Castor
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Oil manufactured by the petitioners was not Castor oil
medicinal and accordingly could not be considered
against the entry of ‘other drugs and pharmaceutical
product’ under Serial No.1201.
14. A reply has been filed on behalf of the respondents
by S.G. Gawde, then working as Deputy Commissioner of
Customs (Drawback). It is the case of the affiant that
the petitioners were given personal hearing on 28th
October, 1993. After hearing them a detailed speaking
order had been passed. Dealing with the issue as to
whether the products could be termed as Castor Oil
(medicinal) or Castor Oil First Grade it was held that
only Castor Oil drawn by Cold Drawn process could be
treated as Castor Oil (Medicinal). In other words if the
Oil was extracted by the Cold Drawn method and
satisfied the Thin Layer Chromatographic Test would it
be treated as Castor Oil (Medicinal) and be allotted
Agmark Certificate as Medicinal Grade. In respect of
Castor Oil which did not pass the Thin Layer
Chromatographic test it would be issued Agmark as Castor
Oil First Grade. It is also pointed out that Castor Oil
does not conform to BP certifications, is not of
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pharmaceutical grade and as such would not fall under
Serial No.12 of the Schedule Appended to Drawback Rules,
1971. The petitioners, therefore, it is submitted were
rightly denied the Drawback facility.
15. At the hearing of this petition on behalf of the
petitioner it is submitted that once the petitioners
were allowed to export Castor Oil as Medicinal by
following the test in terms of Notification of 3 rd
October, 1964 merely because another test was introduced
by Circular of 22/23-6-1989, would not result in the
Castor Oil which otherwise fell under Serial No.12 to
the Schedule to the Rules to cease to be Castor Oil
medicinal. Further, merely because the petitioners were
marketing their product as Castor Oil First Grade could
not deprive them of the benefit of duty draw back on
export of Castor Oil. It is further submitted that once
the petitioners application for fixing drawback rates
were allowed by the Government communication of 6th
December, 1989 for the period 1st June, 1989 to 31st May,
1990 it was not open to the respondents by subsequent
communication of 6th November, 1990 to deny to them the
drawback facilities by amending the letter dated 6th
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December, 1989. to include only Castor Oil medicinal.
Learned Counsel has relied upon various authorities
which we shall consider at the appropriate stage.
16. On behalf of the Respondents learned Counsel
submits that Castor Oil First Grade is not Castor Oil
medicinal and as such would not fall under Entry No.12
or for that matter under sub-head 1201 which was drug
and pharmaceutical product not provided elsewhere. No
duty drawback claim could have been granted as as such
the Government was right by letter of 6th November, 1990
to amend the fixation of rates by letter of 6th
December, 1989.
17. To understand the controversy we may point out
Rules have been framed for allowance of drawback.
Known as the Customs and Central Excise Duties Drawback
Rules, 1971, hereinafter referred to as the “Drawback
Rules.” The Government can fix the rates in terms of
Rule 3. Rule 4 confers power on the Central Government
to revise the rates determined under Rule 3. In those
cases where drawback has not been determined considering
Rule 6 any manufacturer or exporter of such goods may
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within thirty days from the date of export of such goods
apply in writing to the Central Government for
determination of the amount or rate of drawback
therefor, stating all relevant facts including the
proportion in which the materials or components are used
in the production or manufacture of goods. Power was
conferred on the Government if the application was not
made within 30 days and sufficient cause was shown to
extend the time apply within a further period of thirty
days. Rule 15 is a power conferred on the Government to
relax Rules for reasons recorded in writing in the
circumstances set out therein. Earlier under Schedule
II under Entry 12 read as under:-
“Drugs and Pharmaceutical products” and
Entry 15 read as under:
“Essential Oils, persume materials, agarbatties,
toilet, polishing and cleaning preparations”
By Notification dated21st December, 1990 Castor Oil was
also included under Entry 15. Thus from 21 st December,
1990 the petitioners and other exporters like the
petitioners were entitled to drawback considering Serial
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No.15 of Schedule II.
18. The question that we are called upon to answer is
whether the petitioners are entitled to duty drawback
assuming that they did not meet the prescribed test for
the exports of Castor Oil between the period
22/23-6-1989 to 20-12-1990.
19. We may consider the above argument for distinct
periods, the first being 22/23-6-1989 to 31-5-1990 and
second period being 1-6-1989 to 6-12-1989 and third
being from 7-12-1989 to 21-12-1989.
20. As noted earlier by virtue of Rule 3 of the Drawback
Rules, it is open to the Government to fix the rates of
drawback duty. In so far as the petitioners are
concerned the Government by their communication dated 6th
December, 1989 in respect of Castor Oil medicinal and/or
Castor Oil First Grade had fixed rate for the period
1-6-1989 to 31-5-1990. By a further communication of
6-11-1990 the communication of 6-12-1989 was amended by
substituting the description by “Castor Oil medicinal”.
Thus Castor Oil First Special Grade was excluded. The
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question that we are called upon to consider is whether
it was open to the respondents by subsequent
communication of 6-11-1990 to amend the communication on
6-12-1989 for the period 1-6-1989 to 31-5-1990. In our
opinion the petitioners had already exported Castor Oil
First Grade under the mark Castor Oil First Special
Grade as they were doing earlier. It is only that the
same oil then was being described as Castor Oil
medicinal, pursuant to the test which was earlier being
done in terms of Circular of 3rd October, 1964. That was
by hot extraction or by extraction with solvents as has
been described earlier. Such Castor Oil was always
treated by the Government as Castor Oil medicinal. It
is only pursuant to the Circular dated 22/23-6-1989 that
the Thin-layer Chromatographic Test was applied for
identification of Cold draw Castor Oil of Medicinal
Grade. The communication of 6-12-1989 covered the
period 1-6-1989 to 31-5-1990. In other words upto
22/23-6-1989 the Castor Oil undergoing the earlier test
was still treated as Castor Oil medicinal. It is only
subsequent to 22/23-6-1989 it had to undergo the Thin-
layer Chromatographic Test. The petitioners had been
exporting Castor Oil First Grade and the Government in
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fact recognised the same by fixing the rates by letter
of 6th December, 1989. Under these circumstances could
the Government have withdrawn the same by the
communication of 6-11-1990.
21. We may make reference to some of the judgments
referred to at the Bar. In Mazda International (P) Ltd.
vs. Union of India, 1995 (77) E.L.T. 526 (Bom), the
Government of India removed Gripe water from the
entitlement of drawback benefit with retrospective
effect. The submission before the Court was that the
Authority exercising subordinate legislation could not
have withdrawn the benefits with retrospective effect. A
learned Division Bench of this Court accepted the said
contention as unless there be a power to make
subordinate legislation with retrospective effect it is
not open to an Authority to give retrospective effect to
a Notification. This was followed by another Division
Bench in Gandhi Sons & Ors., vs. Union of India, 2002
(81) ECC 261 (Bom.) and subsequently reiterated by
another judgment in Arviva Industries (I) Ltd. vs. Union
of India, 2004 (167) E.L.T. 135 (Bom.). Based on these
Authorities it will be clear that once the rates had
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been fixed in respect of the goods described in the
communication it could not have been open to the
respondents to retrospectively amend the benefit given.
Even otherwise from the reply filed on behalf of the
respondents it would be clear that this was done as
Castor Oil First Grade would not fall under Entry 12
namely Drugs and Pharmaceutical products. This was only
because the change and nature of the test. Upto
22/23-6-1989 under the test in force the same Castor
Oil could have been exported and was being exported as
Castor Oil medicinal. Letter of 6th December, 1989 is
recognition of this and apart from that it can also be
traced to the Governmental powers under Rule 15 of the
Rules to avoid hardship. Under these circumstances, in
our opinion, the subsequent communication for all these
reasons would be without authority of law and
consequently no reliance can be placed on the letter of
6th November, 1990 amending the letter by letter dated
6-12-1989 with retrospective effect.
22. The next question is what happens in so far as
subsequent period between 1-6-1989 and 6-11-1990 and/or
for that matter 7-11-1990 to 20-12-1990. On behalf of
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the petitioners learned Counsel sought to place reliance
on the judgment of this Court in Rajasthan Sinning and
Weaving Mills Ltd. vs. Union of India, 1993 (67) E.L.T.
57 (Bom.) to contend that once under the scheme
framed, cash compensatory allowance was paid as an
inventive to exporters to increase exports and on that
basis exporters acted and completed transactions it
would not be proper and equitable to demand amount by
claiming that the payment was erroneous.
23. In our opinion so far as these periods are
concerned, firstly, the Government did not fix any rate.
It is only on 21st December, 1990 realising that there
was large export of Castor Oil, Castor Oil was included
in Schedule 2 under Item No.15. In other words the
Government felt the need to grant drawback benefits to
Castor Oil. However, after introduction of the new
test from 22/23-6-1989 Castor Oil medicinal Castor Oil
First Grade was being branded under two Agmark trade
marks namely Agmark Castor Oil medicinal and Agmark
Castor Oil First Grade. Castor Oil First Grade would not
fall under Entry No.12 of Schedule II. In our opinion,
the reasons which we have given for the period 1st June,
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1989 to 31st May, 1990 will not be available for these
subsequent periods.
24. However, we find that the change in the status of
Castor Oil medicinal to Castor Oil First Grade has
only taken place on account of the new test introduced
by the Government. The same Castor Oil was earlier
being exported as Castor Oil medicinal by applying the
test in terms of Circular of 3rd October, 1964. In our
opinion, in these circumstances it will be open to the
petitioners within sixty days from today to apply to the
respondents to exercise their powers under Rule 15 of
the Rules. It is for the respondents to consider the
same and act according to law at any rate not later than
six months from the petitioners so applying.
25. Rule to that extent made partly absolute. In the
circumstances of the case there shall be no order as to
costs.
(D.G. KARNIK,J.) (FERDINO I.REBELLO,J.)
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