ORDER
Jeet Ram Kait, Member (T)
1. This appeal filed by the appellants viz. Sabari Exim Pvt. Ltd. is directed against the Order-in-Appeal No. C.CUS. 812/2001 dated 18-12-2001 passed by the Commissioner of Customs (Appeals), Chennai whereby he has rejected the appeal filed by the appellants against the Order-in-Original No. 970/2001-GR-7, dated 24-10-2001 passed by the Deputy Commissioner of Customs (GR-7), Chennai.
2. The brief facts of the case are that two value based advance licence against F. No. 3392662, dated 7-12-1993 and F, No. 3390170, dated 27-5-93 were originally issued in favour of TATA Iron & Steel Company Ltd., Calcutta during the policy period 1992-97 and the same were transferred in favour of the appellants herein for some consideration. The appellants have imported a quantity of 107 MTs of Non-Alloy Melting scrap for the value of Rs. 5,89,614/- and they have filed Bill of Entry No. 027835, dated 19-9-2002. Import of Non-Alloy Steel Melting Scrap is figuring in Group-1 in the said licence. But the licence restricts Group-1 value to US $ 96,142.44. In the said group-1, there are two Sensitive List-III items (items for which licence shall be issued with individual quantity and value limits) namely Low Silica Lime Stone (1c) and Cooking Coal (with ash content less than 1%) or Low Ash Metallurgical Coal with ash content below 15% (1d). Item No. (1c) namely Low Silica Lime stone is issued with quantity of 595.06 MTs with the individual value cap of US $ 8925.99 and item No. (1d) with quantity limit of 959.78 MT with individual value cap of 62,385.95 US $ . In the said licence, item Melting Scrap has already been imported for a value of US $ 39,509.50 vide Bill of Entry No. 013570, dated 22-6-2001. Condition No. 3 of the said licence and the Head Note to Sensitive List-III items at the relevant time placed a restriction that the individual CIF value earmarked for Sensitive List-III items shall not be utilized for import of other items permitted in the licence. In view of this specific condition with regard to restriction imposed, the value earmarked for Sensitive List-III items totaling to US $ 71391.94 (8925.99 + 62385.95) cannot be used for importing other items in Group-1 including the item Non Alloy Steel Melting Scrap, according to the department. In terms of Condition No. 3 of the said licence, the interchangeability of value between Groups of imports shall not be allowed and hence the item Non-Alloy Steel Melting Scrap figuring in Group-1 can only be imported within the Group-1 value after deducting the value earmarked for Sensitive List-III items. As per the condition of the licence and the policy provisions, the item Non-Alloy Steel Melting scrap can be imported for total value of US $ 24,831/- (96,143.44 -71391.94). Since in the said licence, the item Non-Alloy Steel Melting Scrap has already been imported for a value of US $ 39,509.50 vide BE No. 013570, dated 22-6-2001, there was no balance CIF value left for importing the said item. Therefore, according to the department, the appellants were not eligible for importing the item under DEEC scheme. Accordingly, show cause notice was issued to the appellants and after consideration of the reply furnished by the appellants and after affording opportunity of personal hearing to their Advocate on 22-10-2001, the case was adjudicated by the original authority viz. The Deputy Commissioner of Customs by which he has denied the duty free benefit under Notification No. 203/92 for 100 MTs of Non-Alloy. Melting Scrap imported by the appellants by holding that the said quantity should be assessed on merits with rates of duty as applicable. Against the order of the original authority, party filed appeal before the Commissioner (Appeals), who upheld the order-in-original and rejected the appeal. Aggrieved by the said order of the Commissioner (Appeals), the appellants have come in appeal before us on the following grounds :
(a) The impugned order has been passed without application of mind; The lower appellate authority has misread not only the conditions of the licence but also binding effect of the circulars issued by the competent authority viz. the Licensing Authority having statutory powers under the Foreign Trade Regulation Act, 1992. (b) The licence issued by the licensing authority has to be acted upon by the Customs authorities. (c) The lower appellate authority has not appreciated the fact that the Hon'ble Apex Court has laid down demarcation of the jurisdictional aspect of the Customs Authority and the Licensing authority as held in their judgment in the case of Union of India v. Tara Chand Bros. reported in 1983 (13) E.L.T. 1456 wherein it was held that the jurisdiction of the Customs Authorities starts only from the jurisdiction so exercised by the Licensing authority. (d) The circulars issued by the Licensing authority is binding on the Customs authorities.
3. Shri G.L. Rawal, learned Sr. Counsel for the appellants vehemently argued that both the lower authorities have not appreciated the case in the right perspective. He has pleaded that the appellants are operating under the DEEC scheme. In the Group-1 category there are items which are termed as sensitive and non-sensitive. In terms of the licence issued by the Licensing Authority, value of sensitive items can be exchanged for the value of non-sensitive items and the only condition is that there cannot be any interchange of items between one group and another group. In this case there is no such interchange of items between two groups inasmuch as flexibility within the group is permissible. He has invited our attention to page 34 of the paper book wherein they have replied to the show cause notice dated 21-9-2001 and more particularly to para 14 of the reply to the show cause notice wherein they have stated that the licence produced by the appellants itself contains a specific provision that flexibility will be available for import of one or more items within the value of a particular group. He has also invited our attention to the finding portion of the order in original as also the finding portion of the order-in-appeal. He has pleaded that condition No. 3 specifically states that flexibility will be available for import of one or more items within the value of a particular group and interchangeability of value between groups of import items will not be allowed. He has also invited our attention to ALC Circular No. 20/95, dated 4-10-95. He has also referred us to the judgment rendered by the Hon’ble High Court of Delhi in the case of C.L. Jain Woollen Mills v. UOI reported in 1995 (79) E.L.T. 197 wherein it was held that Customs is not competent to go behind the licence, impinge upon jurisdiction of licensing authority and proceed against the goods and the importer. He has also referred to para 6 to 8 thereto. He has also relied upon the decision of the West Zonal Bench of the Tribunal in the case of CC, Mumbai v. A. Kumar & Company reported in 2001 (132) E.L.T. 655 wherein it was held that absence of any specific quantity restriction in the licence for the fabric did not render the licence invalid and that benefit of doubt, if any, must go to the importer and since the goods were entitled to be imported under the licence the assessees are entitled to the benefit of Notification No. 203/92-Cus. While concluding his arguments he submitted that the impugned order is completely bad as it is against the licence and the clarification issued by the competent authority which are binding on the Customs.
4. Shri A. Jayachandran, learned DR appearing on behalf of the Revenue on the other hand pleaded that so far as the items covered by the sensitive list is concerned, no interchangeability is permissible. He has also referred to licence bearing No. 3392662 according to which the individual quantity and values of specific items are indicated and import shall be restricted to that extent and the c.i.f. value shall not be utilized for import of other items. Flexibility will be available for import of one or more items within the value of a particular group. Interchangeability of value between groups of import will not be allowed. He has invited our attention to Para 48 of the Import & Export Policy for April, 1992 – March, 1997 (incorporating, amendments made up to 25th March, 1996) which reads as under :
“Advance licence is granted for the import of inputs without payment of basic customs duty. Such licence shall be issued in accordance with the policy and procedure in force on the date of issue of licence and shall be subject to the fulfilment of a time-bound export obligation and value addition as may be specified. Advance licence may be either value based or quantity based.”
He also referred to para 110 of the Exim policy as on March, 1994 dealing with Value Based Advance Licence which reads as under :
“Application for value based advance licence with complete details of quantities and value of items of import and export shall be considered only for such export products where input-output ratio and value addition norms have been published. Such value addition norms are specified in column 6 of the Handbook of procedure Vol. II.
A value based licence shall indicate the item(s) of import without individual quantities and value, except for the sensitive items where quantities and value shall also be indicated. The licence holder shall have the flexibility to import any one or more item (s) within the overall value of the licence excluding the value of sensitive items.
The value based licence shall also indicate the description of the export product both in terms of value and quantity and licensee shall discharge the obligation accordingly.”
He further submitted that the above policy as applicable as on March, 1994 was changed during March, 1996 and in terms of the para 110 of the changed policy applicable for the year as on March, 1996, if any sensitive item is not imported, the value indicated against the said item may be used for importing non-sensitive items. He therefore submitted that since the licence in the present case was issued on 7-12-1993 the policy applicable in the present case is as on March, 1994, para 110 which is extracted above. Therefore, the contention of the appellants that non-sensitive items could be imported against sensitive item, is not correct. He has also referred to the communication issued by the JDGFT, Calcutta vide No. 01/Policy/98-99/AIS-B, dated 29-6-1998 regarding utilization of Advance licence No. P/W/2284429/C, dated 15-3-96. The learned DR has submitted that this clarification relates to that particular value based advance licence issued under Exim policy for the years 1992-1997 and the said clarification cannot be made applicable to the specific licence issued in the present case, in 1993. He has further pleaded that the clarification issued is binding or not is not the question in the present case. He has also invited our attention to the finding portion of the order-in-original (internal pages 7 & 8 of the order-in-original) wherein the original authority has dealt with ALC circular 20/95, dated 4-10-95 relied upon by the learned Counsel for the appellants. He submitted that the said circular does not specifically say that the value earmarked for Sensitive List-III items can be used for importing non-sensitive items. He submits that the said clarification is applicable for the values earmarked for sensitive List-II items and not for Sensitive List III items, because the policy itself says that the values earmarked for Sensitive List-III items cannot be used for importing other non-sensitive items, whereas no such condition is there for Sensitive List-II items. He has further submitted that the clarification no where mentions that the importer can use the values earmarked for sensitive List-III items for importing non-sensitive items. The learned DR invited our attention to the decision of the Tribunal in the case of General Traders v. CCE, Calcutta reported in 2000 (124) E.L.T. 971 (T), wherein it has been held that any clarification issued by the DGFT, when found by a Court or Tribunal to be in conflict with a clear provision of the Import & Export Policy, is not binding on that Court or Tribunal. It was further held therein that while clarification from DGFT that licence is not required was correct and acceptable, the rest of the clarification that import subject to input output norms of Advance licence was not acceptable as requirement of input output norms of Advance licence is not applicable to para 7.12 of Export-Import Policy. The Tribunal took this view while agreeing with the contentions raised by the Sr. Advocate on behalf of the assessee therein.
5. The learned Counsel for the appellants in the rejoinder submitted that in the present case, the date of licence is dated 7-12-93. He has also referred to Circular No. 156/93, dated 26-8-1993 and there was a condition in the licence that flexibility will be available for import of one or more items within the value of a particular group and interchangeability of value between groups of import items will not be allowed. He further submitted that the licence issued is in terms of the policy. He also invited our attention to the judgment rendered by the Hon’ble Apex Court in the case of East India Commercial Co. Ltd., Calcutta and Anr. v. the Collector of Customs, Calcutta reported in Supreme Court Reports (1963) page 338. He has submitted that the conditions in the licence permitted the appellants to import non-sensitive items against the value of the sensitive items. He has further submitted that though the appellants are not admitting that the licence is beyond the scope of the policy, the public notice and the circular gave the appellants flexibility. He has also submitted that the Circular No. 20/95 does not state that it applies prospectively, and it deals with the earlier unutilized sensitive items. There was therefore no bar with regard to utilization of the value for the sensitive items for import of non-sensitive items. The learned Counsel also relied upon the judgment rendered by the Hon’ble Apex Court in the case of East India Commercial Co. Ltd., Calcutta v. C.C., Calcutta reported in 1983 (13) E.L.T. 1342 (S.C.) in support of his plea for allowing the appeal.
6. The learned DR in counter submitted that the public notice 156/(PN)-92-97, dated 26-8-93 relied upon by the learned Counsel is only for input output ratio and does not take away the Sensitive List-III ban and it only fixes the norm and is clearly distinguishable as the facts are not similar.
7. We have carefully considered the rival submissions and gone through the case records and the case laws relied upon by both the sides. The short question that arises for consideration in this appeal is as to whether the values earmarked for import of items listed in Sensitive List-III can be utilized for import of other items or not. The import in the present case is against a licence issued on 7-12-1993. In terms of the EXIM policy 1992-97 licences in respect of items listed in Sensitive List-III shall be issued with both the value and the quantity as limiting factors. We observe that in the subject licence there is a condition at Serial No. 3 which reads as under :
“Where the individual quantity and values of specific items are indicated, import shall be restricted to that extent and the CIF value shall not be utilized for import of other items. Flexibility will be available for import of one or more items within the value of a particular group. Interchangeability of value between groups of import items will not be allowed”.
On a reading of the above condition in the licence with which we are concerned in the present case, it is clear that where the quantity and value of specific items are indicated, CIF value cannot be utilized for import of other items. Further in terms of para 110 of the policy dealing with Value Based Advance Licence, applicable at the relevant time, i.e. as on March, 1994, which we have extracted above,” the licence holder shall have the flexibility to import any one ore more item(s) within the overall value of the licence excluding the value of sensitive items, (emphasis supplied by us). It was only later, in the policy applicable as on March, 1996 that this exclusion was removed and non-sensitive items were permitted against sensitive items. In the present case it is an admitted position that sensitive item viz. Low Silica Lime Stone (1c) issued with quantity of 595.06 MT with the individual value of US $ 8925.99 and the other sensitive item viz. Cooking coal or low ash metallurgical coke (1d) with ash content below 15% with quantity limit of 959.78 with an individual value of US $ 62,385.95 was permitted to be imported. Therefore, in respect of both of these Sensitive List-III items, both the quantity and value have been specified. While the Revenue contends that in place of both these Sensitive List-III items, non sensitive items cannot be imported, the assessee contends that there is flexibility in the licence and hence in place of the Sensitive List-III items, non sensitive items can be imported. Examining this question, we observe that the flexibility provided for in condition No. 3 of the licence is not relatable to the Sensitive List-III items in terms of the policy as applicable at the relevant time particularly in view of the clear exclusion provided in the policy applicable as on March, 1994. In the face of this specific mention in the policy regarding exclusion and in view of condition No. 3 in the licence that where the individual quantity and values of specific items are indicated, import shall be restricted to that extent and the CIF value shall not be utilized for import of other items, we do not find any reason to take a view that flexibility is available in respect of Sensitive List-III items also. We further observe that heavy reliance has been placed by the learned Counsel for the appellants on the ALC Circular No. 20/95, dated 4-10-95 issued by the Ministry of Commerce, Directorate General of Foreign Trade, New Delhi, an unauthenticated copy of which has been produced before us on the date of hearing. While we do not question the veracity of the said Circular, we find that the said copy has been produced on the letter pad of one Shakun & Company (Services) Private Ltd. It seems that this clarification has been issued to the said Company and not to the appellants herein. The said circular as presented before us is reproduced below :
Shakun & Company (Services) Private Ltd.
B-10, Gagan Deep, 12, Rajendra Place, New Delhi – 110 008, PH : 5716945,
572 2081, Grams Pubnotices
ALC CIRCULAR No. 20/95,
Dated 4th October, 1995
Utilisation of balance value of sensitive items not imported under Advance
Licences for importing non-sensitive items – regarding.
Attention is invited to paragraph 49 of Export Import Policy 1992-1997 as amended up to 31st March, 1995 and paragraph 110 of Handbook of Procedures (Vol. 1) as amended up to 30th April, 1995 relating to utilisation of value earmarked for sensitive items for importing non-sensitive items under Duty Exemption Scheme. A doubt had been raised whether this locality is available even if part of the value earmarked for sensitive item has been utilised for import of such items. It is hereby clarified that even if part value earmarked for sensitive items have been so utilised balance value available in respect of sensitive items can be utilised for import of non sensitive items.
Sd/-
(L.B. Singhal)
Dy. Director General of Foreign Trade
Issued by :
Ministry of Commerce
Directorate General of Foreign Trade
New Delhi
As could be seen from the wording of the Circular, the Circular does not specifically state about Sensitive List-III items. Further, the said clarification is issued in terms of the policy 1992-1997 as amended up to 31st March, 1995 whereas the policy applicable in the instant case is as on March, 1994. The appellants have also relied upon ALC Circular 3/95, dated 6-3-1995 wherein in para 2(iv), it is stated by the DGFT as under :
“It is clarified that once the CIF value of all imports is determined, the applicant exporter will have the flexibility to import any one or more items listed in the licence within the overall value of the licence (regardless of the quantity indicated against each item in the DEEC book) excluding the value of sensitive items (vide paragraph 110 of the Handbook). In the case of sensitive item, however, the import will be subject to the restrictions of quantity for value or both noted against the said sensitive item in the licence.”
On a reading of the above clarification it would be seen that sensitive list items have to be excluded from the value while importing one or more items of non sensitive nature and the sensitive list items shall be subject to restrictions of both in terms of quantity and value.
8. The learned Counsel for the appellants has relied upon the decision of the CEGAT, Mumbai in the case of CC, Mumbai v. A. Kumar & Company (supra). This decision is not applicable to the facts of the present case because that was a case where there was absence of any specific quantity restriction in the licence whereas in the present case, there was quantity and value restriction in regard to the Sensitive List-III items. The learned Counsel has also relied upon the judgment of the Hon’ble High Court of Delhi in the case of CL Jain Woollen Mills v. UOI reported in 1995 (79) E.L.T. 197 (Del.) in support of his plea. This case is distinguishable from the facts of the present case inasmuch as in the cited case, the question arose was jurisdiction of the Licensing authority vis-a-vis that of the Customs authority. In the case before us, the Revenue has not contested the competence of the Licensing authority. The contention of the Revenue is that import has not been made in accordance with the condition laid down in the licence granted by the licensing authority and in terms of the policy as amended as on March, 1994. It was also held in the cited judgment that “Function of the Tribunal is to see whether the impugned order is valid or not, keeping in view the Statutory Provisions (emphasis supplied by us). The General Circulars and communications cited by the learned Counsel for the appellants do not have any statutory force. The learned Counsel for the appellants has also cited the judgment of the Hon’ble Apex Court in the case of East India Commercial Co, ltd. v. Collector Customs, Calcutta reported in SC Reports 1963, page 338. This judgment has no relevance to the present case as the facts and circumstances in that case was not similar to the present one before us. That was a case where certain raw materials were imported into the country for consumption as raw material in the licence holder’s factory but instead of using the raw material as such by the factory concerned, the goods were sold in open market and the Custom department issued notice alleging breach of condition of licence and for confiscation of the goods. On appeal from the judgment of the High Court, the Customs authority was restrained from proceeding with the inquiry under Section 167(8) of the Sea Customs Act, 1878, by the Hon’ble Apex Court. Therefore, in the facts and circumstances of the present case, the cited judgment does not come to the rescue of the appellants herein. We observe that in the present case, as noted above, in terms of the policy, where the individual quantity and values of specific items are indicated, import shall be restricted to that extent and the CIF value shall not be utilized for import of other items. Therefore, we are of the considered opinion that the authorities below have rightly denied the concession under Notification 203/92 for 100 MTs of Non-Alloys Melting Scrap imported by the appellants and ordering that the said quantity should be assessed on merits with rates of duty as applicable. We do not find any infirmity in the impugned order and the attendant order-in-original calling for interference at our hands. The appeal therefore fails and is dismissed.
Sd/-
(Jeet Ram Kait)
Member (T)
S.L. Peeran, Member (J) (Oral)
9. I have gone through the order recorded by my learned brother but I could not persuade myself to agree with the findings recorded in the order.
10. The facts and the arguments have already been noted in my learned brother’s order. Ld. Sr. Counsel took us through various documents and demonstrated that the value for the sensitive goods had not been fully exhausted. It was his contention that Revenue had denied the benefit on the understanding that the imported melting scrap against the said licence figures in Group I of the list of the items as attached to the said licence and as per the existing list, two sensitive items figure in the Sensitive List III and the value thereto cannot be utilized for clearance of subject consignment and hence no value was available for the items imported in terms of licence. It was argued that the show cause notice had skipped the important aspect of flexibility in the said duty free licence and proceeded on the premise as stated and demanded duty by denying the benefit of exemption. It is his contention that during the relevant policy period, the value based advance licences were issued for import of raw material components, intermediate; if it is meant for sensitive items, Licencing Authority was required to specify the quantity or CIF value or both each of the said sensitive items. It was argued that it is the prerogative of the licensing authority to issue any licence and conditions lay thereupon but it is not within the jurisdiction of the customs authorities to go at the back of the licence. The jurisdiction of the customs authorities commences from the point where Licensing Authority exhausts/applies its jurisdiction. He also pointed out that Condition 3 of the licence gives right of flexibility to the appellant in the group itself could have been applied but though interchangeable from one group to the other is not permissible. He submitted that the appellant was entitled to take benefit of flexibility from one item to the other item in the same group i.e. Group No. 1 and it is also open to take benefit of flexibility even of value of sensitive goods in the same group. He submitted that flexibility will be available for import of one or more items giving value of a particular group. He stated that appellants were taking the benefit of flexibility in the same group viz. Group 1 as it doesn’t restrict to take benefit of the unutilized value of the item, may be sensitive or otherwise in the same group of flexibility and the benefit cannot be denied. He relied on ALC Circular No. 3/95, dated 6-3-95 issued by the Director General of Foreign Trade which had clarified that once the CIF value of all imports is determined, the exporter will have the flexibility to import any one or more items listed in the licence with the overall value of the licence, (regardless of the quantity mentioned against each items in the DEEC (book) excluding the value of sensitive items (paragraph 110 of the Handbook). In the case of sensitive item, however, the import will be subject to the restrictions of quantity or value or both noted against the said sensitive item in the licence. He also referred to ALC Circular No. 20/95, dated 4-10-95 which also clarifies as follows :-
“Attention is invited to Paragraph 49 of Export Import Policy 1992-97 as amended up to 31st March, 1995 and Paragraph 110 of Handbook of Procedures (Vol. 1) as amended upto 30th April, 1995 relating to utilization of value earmarked for sensitive items for importing non-sensitive items under Duty Exemption Scheme. A doubt had been raised whether this facility is available even if part of the value earmarked for sensitive item has been utilized for import of such items. It is hereby clarified that even if part value earmarked for sensitive items have been so utilized, balance value available in respect of sensitive items can be utilized for import of non-sensitive items.”
11. The assessee stated that in these circumstances not only the condition of the licence give benefit to the appellant but also circular so issued by the licencing authority which binds everyone as per the provisions of the policy. He also relied on a number of citations to show that the circular which is issued by the DGFT, the licencing authority, has a binding force on the revenue i.e. customs authority as in the case of C.L Jain Woollen Mills v. UOI, 1995 (79) E.L.T. 197 (Del.) and UOI v. Tarachand Gupta, 1983 (13) E.L.T. 1456. He also pointed out that the sensitive items were put in the sensitive list and that too upto March, 1995 and those were not in existence at the time of show cause notice or at the time of shipment or clearance of goods and there was also clarification issued on 29-6-98 with regard to this aspect of the matter.
12. These pleas were opposed by ld. DR and reiterated the submissions raised in the order noted by the authorities.
13. On my careful consideration of the submissions, I am agreeable with the pleas raised by the appellants in the matter. The circular issued by the licencing authority has a clear binding force as has been held in the judgments cited by ld. Sr. Counsel in the matter. The circular clearly grants flexibility and the appellants in terms of the said clarification have imported the items and those items fell within the same Group 1 which is not in dispute. It is not the case of the department that appellants are trying to seek benefit of the item which is not in the same Group. Therefore, learned Counsel clearly demonstrated that the benefit was being obtained only against the items falling in the same group irrespective of item being sensitive or non-sensitive. Therefore, in view of the clarification issued by the DGFT which had binding effect, the appellants are entitled to seek benefit of notification and hence non-grant of the same is not correct and appeal is required to be allowed by setting aside the impugned order. Ordered accordingly.
Sd/-
(S.L. Peeran)
Member (J)
POINTS OF DIFFERENCE
In view of difference of opinion arisen in the matter, the following arises for deciding the case by the Third Member :-
”Whether the appellants are not entitled for the benefit of the notification and the impugned order is required to be confirmed by dismissing the appeal of the appellants as held by the Learned Member (Technical) in his order”
(OR)
“the benefit of the notification is required to be extended to the appellants by applying the circular issued by DGFT by allowing the appeal as noted by Learned Member (Judicial) in his order.”
Sd/- Sd/- (Jeet Ram Kait) (S.L. Peeran) Member (T) Member (J) P.G. Chacko, Member (T)
14. As the relevant facts of the case have been stated in sufficient detail in the order recorded by the learned Member (Technical), I need not repeat them. However, pertinent facts will be referred to as the context may require. The dispute is in respect of 100 MTs of Non-alloy Steel Melting Scrap (in short, “NASM Scrap”) which was sought to be cleared duty-free at the Customs by the appellants in September 2001 under a duly revalidated Value Based Advance Licence No. 3392662, dated 7-12-93 which had been originally issued to M/s. TISCO Limited, Calcutta and was later on transferred to the appellants in terms of the relevant provisions of EXIM POLICY 1992-97. The admitted facts are that the licence under the DEEC Scheme had restricted duty-free import of “Group-1” goods to a total CIF value of US $ 96142.44; that, apart from NASM Scrap mentioned at “a” of the said Group-1, the list of goods annexed to the licence included three other items as mentioned at “b”, “c” and “d” of the said group; that the item mentioned at “c” viz. “Low Silica Limestone” and the one mentioned at “d” viz. “Cooking Coal (with ash content less than 12%) – or – Low Ash Metallurgical Coke (with ash content below 15%)” were sensitive items on account of both quantity and value limits having been prescribed for their duty-free importation under the DEEC Scheme; that the total value limit for duty-free importation of Group 1(c) and (d) goods under the licence was US $ 8925.99 + 62/385.95 = 71/311.94; that NASM Scrap [Group 1(a)] was a non-sensitive item with no individual quantity/value limit prescribed for its importation; and that this item had already been imported for a value of US $ 39509.50 and cleared duty-free under the licence in June, 2001. Learned Member (Technical) has upheld the Revenue’s stand that the total value limit for import of NASM Scrap by the appellants under the licence was US $ 24/800 and odd only, i.e., 96/142.44 minus 71/311.94, and the said limit had already been exceeded (with the earlier importation of NASM Scrap of value US $ 39509.50) and therefore the 100 MTs of NASM Scrap in question should be assessed to duty at Tariff rate applicable. Learned Member (Judicial) has, on the other hand, taken the view that, in the absence of importation of the Group-1 (c) and (d) goods, the value limit of US $ 71/311.94 prescribed for such goods was available for utilization in duty-free clearance of the 100 MTs of NASM Scrap in question under the DEEC Scheme under Notification No. 203/92.
15. Learned Sr. Advocate mainly banked on the following licence condition :
“Where the individual quantity and values of specific item are indicated import shall be restricted to that extent and the CIF values shall not be utilised for import of other items. Flexibility will be available for import of one or more items within the value of a particular group. Interchangeability of value between groups of import items will not be allowed.”
He submitted that both the sensitive goods were grouped along with NASM Scrap in the same Group (Group-1) of goods in the list appended to the Advance Licence and hence their total value limit was available for utilization in duty-free clearance of the non-sensitive item viz. the Scrap. It was between different groups of import items that interchangeability of value was not allowed, and not between different items of the same group. Learned counsel argued that Customs authorities were not competent to go behind the licence to deny the benefit thereof to the licence-holder. They had invariably to go by the terms of the licence as clarified or interpreted by the licensing authority (Director General of Foreign Trade). He relied on the Delhi High Court’s decision in C.L. Jain Woollen Mills v. UOI [1995 (79) E.L.T. 197 (Del.)] and the Supreme Court’s judgment in Titan Medical Systems Pvt. Ltd. v. C.C., New Delhi [2003 (151) E.L.T. 254 (S.C.) = 2003 (54) RLT 248 (S.C.)]. He also relied on ALC Circular No. 20/95, dated 4-10-95 issued by the DGFT. He submitted that the Circular which, with reference to Paragraph 49 of EXIM Policy 1992-97 as amended upto 31-3-95 and Paragraph 110 of the Handbook of Procedure (Vol. 1) as amended up to 30-4-95, clarified that, where part of the value earmarked for sensitive items had been utilized, the balance available could be utilized for import of non-sensitive items, was binding on the Customs authorities. Reliance was placed, in this connection, on the Tribunal’s decisions in the cases of Indu-Nissan Oxo Chemicals Pvt. Ltd. v. CC, Kandla [2000 (120) E.L.T. 625] and Casio India Co. Ltd. v. CC, Mumbai [2000 (121) E.L.T. 379]. Learned counsel also claimed support from the Supreme Court’s judgment in CCE, Patna v. Usha Martin Industries [1997 (94) E.L.T. 460 (S.C.)].
16. Ld. DR vehemently opposed the above arguments and, referring to the relevant provisions of EXIM Policy 1992-97, submitted that during 1993-94 (the period during which the licence had been issued) the provisions did not permit utilisation of the value of sensitive items in duty-free clearance of non-sensitive items under the DEEC Scheme. The provisions of EXIM Policy would prevail over any repugnant condition stated in any licence issued under the Policy. Value of sensitive items was not to be utilized for duty-free import of other items as per Paragraph 110 of the Handbook of Procedures (Vol. I) for 1992-97 as amended up to 31-3-1994. The licence condition cited by the learned counsel should be construed only in the light of this provision as the licence had been issued during 1993-94. It was only after 31-3-94 that para 110 ibid was amended so as to permit Value Based Advance Licence holders to use the value of sensitive items for importing non-sensitive items. What the DGFT circular dated 4-10-95 relied on by the counsel clarified was the entitlement of such licence-holders under the amended provisions of the EXIM Policy. No clarification of the DGFT on a licence-holder’s right of duty-free imports under the DEEC Scheme as on 31-3-1994 was brought on record by the appellants. Ld. DR thus argued that the DGFT circular dated 4-10-95 and the case law cited by the counsel in the context were not applicable to the instant case. Extracting from the Handbook of Procedures 1992-97 (as amended up to 31-3-94), learned DR submitted that both Limestone and Cooking Coal/Metallurgical Coke figured in List III of SENSITIVE ITEMS, for which it was stipulated that individual CIF value for import of the items was not to be utilized for import of other items permitted in the licence.
17. I have carefully considered the records and the submissions. The Advance Licence dated 7-12-93 was issued in terms of Para 110 of the Handbook of Procedures (1992-97) read with Para 48, Chapter VII, EXIM POLICY 1992-97. Para 48 of the Policy had laid down that “such licence shall be issued in accordance with the policy and procedure in force on the date of issue of the licence……..” The licence was issued during 1993-94. Para 110 of the Handbook of Procedures (1992-97) for this period contained a provision relevant to the instant case and the same reads thus :
“A value based licence shall indicate the item(s) of import without individual quantities and value, except for the sensitive item where quantities and value shall also be indicated. The licence holder shall have the flexibility to import any one or more item(s) within the overall value of the licence excluding the value of sensitive item. [Emphasis supplied].
The italicized part of the above provision is pertinent to the issue at hand and the same means only what the Revenue pleads. In other words, in the instant case, the value limit available to the appellants under the licence for import of NASM Scrap was US $ 96,142.44 (overall cap) less 71,311.94 (total limit for the sensitive items). Now one has got to examine the ambit of the licence condition which I have already extracted in para 15 of this order. The first part of the condition reads : “Where the individual quantity and values of specific items are indicated, import shall be restricted to that extent and the CIF values shall not be utilized for import of other items.” This part of the licence condition is substantially pari materia to what is provided as a note to List III of SENSITIVE ITEMS in the Handbook of Procedures (1992-97) for 1993-94. This note reads thus :
“In respect of the following items, licence shall be issued with both value and quantity as limiting factors and the individual CIF value for imports of these items shall not be utilized for import of other items permitted in the licence.”
Limestone and Cooking Coal/Metallurgical Coke were admittedly sensitive items in respect of which both quantity and value were mentioned as limiting factors in the licence. The CIF values so mentioned were not to be utilized for import of the Scrap. This condition is quite compatible with para 110 of the Handbook of Procedures for the period of issue of the licence.
18. Coming to the second part of the above licence condition, which is in the centre of dispute in this case, I am of the considered view that the same cannot be construed in a manner repugnant to the first part. It has to be construed harmoniously with the rest of the condition so as to advance the object of the Policy provisions. I think, in this context, I am supported by relevant rulings of the Apex Court vide British Airways v. UOI [2001 (139) E.L.T. 6 (S.C.) – 2001 (47) RLT 264 (S.C.)]. The second part of the licence condition says that flexibility will be available for import of one or more items within the value of a particular group. It further says that interchangeability of value between groups of import items will not be allowed. It is apparent that the second part of the licence condition provides for intra-group flexibility and rules out inter-group flexibility. The intra-group flexibility for utilization of the value of one item in a given group for importing another item in the same group should (under the harmonious construction) be understood as subject to the restriction laid down in the first part of the licence condition. The fact that NASM Scrap and the sensitive items occur in one group as per the licence cannot detract from the said restriction. In other words, the condition, when understood and construed as a whole, would mean nothing other than what para 110 ibid lays down vide its italicized part. In my view, such a construction which goes to harmonize the licence condition with the relevant provisions of the EXIM Policy is peremptory in this case. It is particularly so for want of any clarification by the licensing authority (DGFT) on the point.
19. Ld. Sr. Advocate has heavily relied on the DGFT’s circular dated 4-10-95 which has been reproduced in para (7) of the order recorded by learned Member (Tech.). The circular is on the question whether, where a part of the value earmarked for sensitive items has been utilized for import of such items, the remaining part of such value can be utilized for import of non-sensitive items. It answers the question in the affirmative. But it has to be noted that this clarification by the DGFT is not relevant to the licensing period (1993-94) under reference but to the subsequent period for which para 110 of the Handbook of Procedures had a significantly different (amended) text. The relevant part of the amended para 110 is as under :-
“Once the CIF value of all imports is determined, the applicant exporter will have the flexibility to import any one or more items listed in the licence within the overall value of the value based advance licence regardless of the quantity indicated against each item in the DEEC book excluding the value of sensitive items. In the case of a sensitive item, however, the import will be subject to the restrictions of quantity or value or both noted against the said sensitive item in the licence. If any sensitive item is not imported, the value indicated against the said item may be used for importing non-sensitive items.”
It may be noted that, as in the unamended text of para 110 relevant to the licensing period (1993-94), there is an exclusion clause in the amended para 110 also, which clause provides that the value of sensitive items shall be excluded from the overall value of the Value-based Advance Licence for fixing the value limit within which the licence-holder can import non-sensitive goods. The amended para 110 further provides that, if any sensitive item is not imported, the value indicated against the said item may be used for importing non-sensitive items. This provision apparently conflicts with the above exclusionary clause contained in the same para. Seemingly, it is this conflict which called for a clarification from the licensing authority. The DGFT, in ALC Circular No. 20/95, dated 4-10-95, clarified the position and gave full effect to the above provision contained in the last sentence of the amended para 110. A similar provision is conspicuously absent in the unamended para 110 relevant to the licensing period (1993-94) and therefore it will be a misconception to think that the DGFT’s clarification has any bearing on the issue involved in the present case. For this reason, the decisions in Indu-Nissan case, Casio India case and Usha Martin case cited by learned counsel have no relevance. On the other hand, the High Court’s decision in C.L. Jain Woollen Mills cited by him has a bearing on this case inasmuch it was held in that case that Customs authorities were not to go behind the licence issued by DGFT. In the instant case, the Customs authorities correctly understood the licence condition and rightly acted upon it. In Titan Medical Systems (supra), it was held by the Apex Court that Customs authorities were not to deny exemption to a DEEC licence-holder on the ground that the licence was obtained by misrepresentation. This case law also does not make any headway for the appellants in this case wherein the department has never had a case that they had obtained the licence fraudulently.
20. For the reasons already recorded, I must concur with the view taken by learned Brother Shri Kait. The appeal has only to be dismissed.
Sd/-
(P.G. Chacko)
Member (J)
MAJORITY ORDER
In terms of the majority order, the appeal is dismissed.