PETITIONER:
UNION OF INDIA
Vs.
RESPONDENT:
M/S. GODREJ SOAPS PVT. LTD AND ANR.
DATE OF JUDGMENT12/09/1986
BENCH:
MUKHARJI, SABYASACHI (J)
BENCH:
MUKHARJI, SABYASACHI (J)
PATHAK, R.S.
CITATION:
1987 AIR 175 1986 SCR (3) 771
1986 SCC (4) 260 JT 1986 408
1986 SCALE (2)409
CITATOR INFO :
F 1987 SC 179 (2,4)
F 1987 SC1794 (14,23)
RF 1989 SC 690 (6)
RF 1992 SC 696 (5,12)
ACT:
Import Policy 1985-88:
List 8 of Part 2 of Appendix 6 - Additional licence
holders-import of 'canalised' items - Permissibility of-This
Court's order dated April 18, 1985 - 'Whether canalised or
otherwise'- Interpretation of.
HEADNOTE:
The respondents purchased certain quantity of palm
kernel fatty acid on high seas basis from a firm which had
imported it on the strength of an additional licence issued
to it pursuant to the order of this Court dated 18th April
1985 in C.A. No. 1423 of 1981 Union of India v. Rajnikant
Brothers. The Customs authorities refused to permit
clearance of the goods on the ground that they were
canalised items and could not be imported even under such
additional licences.
The respondents filed a petition under Art. 226
challenging the action of the Customs authorities. A Single
Judge of the High Court permitted the clearance of the
goods, which order was affirmed by the Division Bench.
In the appeal to this Court on behalf of the appellant-
Union of India it was contended that the direction given by
the High Court was contrary to the directions given by this
Court in Raj Prakash's and Indo Afghan Chamber's cases.
On behalf of the respondents it was contended: (1) that
the holders of the additional licences would be entitled to
import items permissible to export houses under the
additional licence category as per para 176 of the Import
Policy for 1378-73; (2) that in any event under Item 1 of
Appendix 6 (import of items under open General Licence) of
the Import Policy 1985-88, raw-materials, components and
consumables (non-iron and steel items) other than those
included in the Appendices 2, 3 Part A, 5 and 8 will be
permissible by the actual user
772
(industrial); and (3) that the respondents were actual users
(industrial) because these were used by them for their
production.
Allowing the appeal of the Union of India,
^
HELD: 1. A diamond exporter can import the items he was
entitled to import under the Import Policy 1978-79 provided
they are importable also under the Import Policy ruling at
the time of import. They are items which are open to import
by an Export House holding an Additional Licence for sale to
eligible Actual Users (Industrial). These are items which
could be directly imported, for example, the items
enumerated in Part 2 of List 8 of Appendix Vl of the Import
Policy 1985-88. These are items which are not `canalised'.
[776 F-H]
2. `Canalised' items are those items which are
ordinarily open to import only through a public sector
agency. Now although generally they are importable through a
public sector agency only, it is permissible for the Import
Policy to provide an exception to that rule, and to declare
that an importer may import a canalised item directly. [776
H; 777 A]
3. Paragraph 75(1) of the Import Policy 1985-88
entitles a Trading House holding an Additional Licence to
directly import canalised items in Appendix V Part A to the
extent laid down in that Policy. There is nothing to prevent
an Import Policy from providing in the future that an Export
House holding an Additional Licence can directly import
certain canalised items also. In that event an Export House
holding an Additional Licence will be entitled to import
items open ordinarily to direct import (non-canalised items)
as well as items directly importable although on the
canalised list. It is in that sense that the Court could
have intended to define the entitlement of a diamond
exporter. He would be entitled to import items "whether
canalised or not", if the Import Policy prevailing at the
time of import permitted him to import items falling under
each category. The Court would not know whether in the
future certain canalised items could be imported directly by
an Export House holding an Additional Licence. The
possibility of a policy being framed in the future enabling
an Export House holding an Additional Licence to directly
import items which are 'non-canalised' and also items which
are 'canalised' cannot be ruled out. It is in this light
that the Court can be said to have used the words "whether
canalised or otherwise" in its order dated 18th April, 1985.
[777 B-E]
Raj Prakash Chemical's case, [1986] 2 SCC 297 and Indo
Afghan Chamber of Commerce's case, AIR 1986 S.C. 1567,
followed.
773
4. Only such items could be imported by diamond
exporters under the Additional Licences granted to them as
could have been imported under the Import Policy 1978-79,
the period during which the diamond exporters had applied
for Export House Certificates and- had been wrongfully
refused, and were also importable under the Import Policy
prevailing at the time of import which is the present case
was the Import Policy 1985-88. These were the items which
were not specifically banned under the prevalent Import
Policy. That is the construction. The items had to pass
through two tests. These should have been importable under
the Import Policy 1978-79. These should have been importable
under the Import Policy 1985-88 in terms of the order dated
18th April, 1985. [777 G-H; 778 A-B]
5. In respect of Palm Kernel Fatty Acid which is a
canalised item listed as item 9 (v) in Appendix V Part of
the Import Policy 1985-88, there is no provision in that
Policy which permits the import of such item by an Export
House holding an Additional Licence. [779 B-C]
6. As importation of canalised items directly by
holders of additional licences are banned, it should not be
construed to have been permitted by virtue of the order of
this Court and the items sought to be imported do not come
within List 8 of Part 2 of Appendix 6 of the Import Policy
of 1985-88 against additional Licences. The goods in
question which were sought for by the respondents fall under
item 9 Part of Appendix 5 which is the canalised item and
such cannot be allowed to be imported against additional
licence granted pursuant to the order of this Court dated
18th April, 1385. [779 D-F]
7. The goods were purchased by the respondents only on
27th June, 1986 after they were aware of the judgment of
this Court in Raj Prakash's case as well as Indo Afghan
Chambers of Commerce's case. No question of any restitution
of rights arises. [779 F]
8. The acid in question comes within specific
prohibition of Item 9 in Part-B Appendix 5 being fatty acid
and acid oil which were importable only by the State Trading
Corporation of India under open General Licence on the basis
of foreign exchange released by the Government in its
favour. The actual importation was not by the respondents
but by somebody else. [780 A-B]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3418 of
1986
774
From the Judgment and order dated 22/23.7.1986 of the
Bombay High Court in Appeal No 565 of 1986.
A.K. Ganguli and Sushma Relan for the Appellant.
Soli J. Sorabjee, J.B Dadachanji, R Narain, Mrs.
A.K.Verma, D.N.Mishra, Aditya Narayan and Harish N. Salve
for the Respondents.
The Judgment of the Court was delivered by
SABYASACHI MUKHARJI, J. This is an application for
special leave to appeal against the order of the Division
Bench of the Bombay High Court dated 22nd/ 23rd July, 1986
filed on behalf of the Union of India.
M/s Godrej Soaps (P) Limited, and a shareholder and
Director of the said company, Mr A.B. Godrej who were
petitioners went before the Bombay High Court in Writ
Petition No. 1665 of 1986. The said petitioners who are
respondents herein (hereinafter described as respondents)
purchased 544.860 Metric Tonnes of Palm Kamel Fatty Acid on
high sea basis imported under an additional licence. They
challenged the action of the Customs authorities refusing to
permit the clearance of the said Palm Karnel Fatty Acid in
view of the decision of this Court in Raj Prakash Chemical’s
case [1986] 2 SCR 297 and Indo Afghan Chamber of Commerce’s
case AIR 1986 S.C. 1567
It may be mentioned that one Messrs. Dimexon a firm
carrying on business of importing rough diamonds and
exporting cut and polished diamonds were issued Export House
Certificate under the import policy for the period 1978-79
and certain additional licences in or about the month of
July, 1986 covered by the licensing period AM-79. The said
licence was claimed to have been issued in compliance with
the order of this Court dated 18th April, 1985. As the
purport of that order was the subject matter of two
subsequent decisions of this Court and the genesis of the
right of the present respondents was claimed from the said
decision, it may not be inappropriate to refer to the said
decision. The said decision was given in Civil Appeal No.
1423 of 1984. This Court held that there was no requirement
of diversification of exports as a condition for the grant
of Export House Certificates in the Import Policy for the
year 1978-79. In that appeal, this Court confirmed the High
Court’s judgment quashing the order whereby the Government
had refused Export House Certificates
775
on the ground that the petitioners in those cases had not
diversified its export and as such were not entitled to
Export House Certificates. The High Court quashed that
order. This Court confirmed that direction of the High Court
and further directed the Union of India and its employees to
issue the necessary Export House Certificates for the year
1978-79 within a period of three months from the date This
Court further directed as follows:
“Save and except items which are not specifically
banned under the prevalent import policy at the
time of import, the respondents shall be entitled
to import all other items whether canalised or
otherwise in accordance with the relevant rules.
Appeals are disposed of accordingly with no order
as to costs.” (Emphasis supplied in view of the
contentions now sought to be raised in these
proceedings).
This direction was given by a Bench of three learned judges
consisting of S. Murtaza F. Ali, A. Varadarajan and one of
us (Sabyasachi Mukharji, J.)
According to the petitioners before the Bombay High
Court in pursuance of the order of this Court, Import Trade
Control Authority issued diverse additional licences
expressly covered by the licensing period AM-79 where under
the description of the goods was as under:
“This licence is valid for import of items
permissible to export houses under additional
licence category as per para 176 of Import Policy
for 1978-79 excluding those items which were
banned in the Policy for the period 1978-79 and
which have been banned in the Import Export Policy
volume 1, 1985-88. The additional licence category
import shall be subject to the provisions of para
176 of the import policy for 1978-79.”
It was the contention of the petitioners before the
Bombay High Court that it was absolutely clear that the
holders of the said licences would be entitled to import
items permissible to export houses under the additional
licence category as per para 176 of the Import Policy for
1978-79.
It may be mentioned that the said direction of this
Court came up for consideration before this Court again in
Civil Appeal No. 4978 of 1985-Raj Prakash Chemicals Ltd. &
Anr. v. Union of India & Ors.
776
(supra) This Court clarified the decision in that case which
was rendered by a bench of three learned judges consisting
of V Tulzapurkar, J. and both of us (R.S. Pathak and
Sabayasachi Mukharji, JJ).
As this Court has observed in M/s Indo Afghan Chambers
of Commerce and another v. Union of India and other (supra)
the order dated 18th April. 1985 has been considered by this
Court in Raj Prakash Chemicals Ltd. and another v. Union of
India & others (supra) to mean that:
“only such items could be imported by diamond
exporters under the Additional Licences granted to
them as could have been imported under the Import
Policy 1978-79, the period during which the
diamond exporters had applied for Export House
Certificates and had been wrongfully refused, and
were also importable under the Import Policy
prevailing at the time of import, which in the
present case is the Import Policy 1985-88. These
were the items which had not been ‘specifically
banned’ under the prevalent Import Policy. The
items had to pass through two tests. They should
have been importable under the Import Policy 1978-
79. They should also have been importable under
the Import Policy 1985-88 in terms of the order
dated April 18, 1985.”
The Court had no occasion to consider the significance of
the words “whether canalised or otherwise” mentioned in the
order dated April 18, 1985 because that point did not arise
in the case before it The respondents rely on those words in
this case in order to justify the import of the commodity
under consideration.
What did the Court intend by those words? We have seen
that a diamond exporter can import the items he was entitled
to import under the Import Policy 1978-79 provided they are
importable also under the Import Policy ruling at the time
of import They are items which are open to import by an
Export House holding an Additional Licence for sale to
eligible Actual Users (Industrial). These are items which
could be directly imported, for example, the items
enumerated in Part 2 of List 8 of Appendix. Vl of the Import
Policy 1985-88. These are items which are not ‘canalised’
‘Canalised’ items are those items which are ordinarily open
to import only through a public sector agency. Now although
generally they are importable through a public
777
sector agency only, it is permissible for the Import Policy
to provide an exception to that rule, and to declare that an
importer may import a canalised item directly. For instance,
paragraph 75(1) of the Import Policy 1985-88 entitles a
Trading House holding an Additional Licence to directly
import canalised items in Appendix V Part A to the extent
laid down in that Policy. There is nothing to prevent an
Import Policy from providing in the future that an Export
House holding an Additional Licence can directly import
certain canalised items also. In that event, in view of the
aforesaid discussion, an Export House holding an Additional
Licence will be entitled to import items open ordinarily to
direct import (non-canalised items) as well as items
directly importable although on the canalised list. It is in
that sense that the Court could have intended to define the
entitlement of a diamond exporter. He would be entitled to
import items “whether canalised or not”, if the Import
Policy prevailing at the time of import permitted him to
import items falling under each category. The Court would
not know whether in the future certain canalised items could
be imported directly by an Export House holding an
Additional Licence. The possibility of a policy being framed
in the future enabling an Export House holding an Additional
Licence to directly import items which are ‘non-canalised’
and also items which are ‘canalised’ cannot be ruled out It
is in this light that the Court can be said to have used the
words “whether canalised or otherwise” in its order dated
18th April, 1985.
The point from a slightly different angle was
considered in writ petition No. 199 of 1986 in Indo Afghan
Chambers of Commerce with Civil Appeal No. 664 of 1986
(supra) dated 15th May, 1986 by a bench consisting of both
of us (R.S. Pathak & Sabyasachi Mukharji, JJ). There Indo
Afghan Chambers of Commerce and its President aggrieved by
the grant of additional licences to the respondents, M/s
Rajnikant Brothers and M/s Everest Gems for the import of
dry fruits came to this Court. This Court examined some of
the contentions This Court reiterated that by the order
dated 5th March, 1986, this Court has construed its order
dated 18th April, 1985 referred to hereinbefore to mean that
only such items could be imported by diamond exporters under
the Additional Licences granted to them as could have been
imported under the Import Policy 1978-79, the period during
which the diamond exporters had applied for Export House
Certificates and had been wrongfully refused, and were also
importable under the Import Policy prevailing at the time of
import which in the present case was the Import Policy 1985-
88, i e, it meant to say that those importable at the time
when licence was refused and must continue to be importable
at the time when import is sought, i.e., 1985-88. These were
the items
778
which were not specifically banned under the prevalent
Import Policy That is the construction. The items had to
pass through two tests. These should have been importable
under the Import Policy 1978-79. These should have been
importable under the Import Policy 1985-88 in terms of the
order dated 18th April, 1985. The Court examined the facts
of that case.
Regarding dry fruits, this Court observed as follows:
“In our opinion the respondents diamond exporters
are not entitled to import dry fruits under the
Import Policy 1985-88 under the Additional
Licences possessed by them. They are also not
entitled to the benefit extended by the judgment
of this Court dated 5th March, 1986 to those
diamond exporters who had imported items under
irrevocable letters of credit opened and
established before 18th October, 1985. It appears
from the record before us that the respondents
diamond exporters opened and established the
irrevocable letters of credit after that date.”
Bearing in mind the aforesaid enunciation of law, we
have to examine this case. It is the case of the
respondents, Godrej Soaps Co Ltd. and its Director that they
have purchased 544.860 Metric Tonnes of palm karnel fatty
acid (now called ‘the said acid’) on highseas basis from M/s
Dimexon. M/s Dimexon had imported the said acid on the
strength of an additional licence issued to it pursuant to
the order of this Court dated 18th April, 1985 in Civil
Appeal No. 1423 of 1984-Union of India v. Rajnikant
Brothers. The Customs authorities, according to the said
respondents, refused to permit clearance of the said acid on
the ground that the canalised items could not be imported
even under such additional licence. The respondents,
therefore, filed a writ petition in this Court requiring the
Union of India and the Customs authorities to permit
clearance of the said acid. It may be mentioned, the said
acid was not a canalised item under the Import Policy 1978-
79. It is a canalised item under the current Import Policy
1985-88.
As the Government refused to permit clearance of the
said goods because the said goods were canalised, the
learned single judge of the Bombay High Court by its order
dated 10th July, 1986 permitted the clearance of the goods
in question.
Aggrieved by the said order, Union of India preferred
an appeal before the Division Bench of the Bombay High
Court. The Division
779
Bench was pleased to, by its order dated 23rd July 1986,
allow clearance of the goods. It is the submission of the
Union of India that this direction was contrary to the
directions given in Raj Prakash’s case (supra) and Indo
Afghan Chamber’s case (supra).
In respect of Palm Karnel Fatty Acid which is a
canalised item listed as item 9(v) in Appendix V Part of the
Import Policy 1985-88, 13 there is no provision in that
Policy which permits the import of such item by an Export
House holding an Additional Licence. Therefore, the claim of
the diamond exporters, or, as in this case a purchaser from
the diamond exporter, must fail because it is not open to
import by the diamond exporter under any provision of the
Import Policy 1985-88.
Therefore, we are unable to accept the contentions of
the respondents and both on grounds of equity and
construction, we are of the opinion that this appeal must be
allowed and decision of the High Court of Bombay impugned in
this appeal must be set aside. As importation of canalised
items directly by holders of additional licences are banned,
it should not be construed to have been permitted by virtue
of the order of this Court and the items sought to be
imported do not come within List 8 of Part 2 of Appendix 6
of the Import Policy of 1985-88 against additional licences.
The goods in question which were sought for by the
respondents fall under item 9 Part of Appendix 5 which is
the canalised item and such cannot be allowed to be imported
against additional licence granted pursuant to the order of
this Court dated 18th April, 1985. As we have mentioned
hereinbefore the respondents were fully aware of the
position in law and they purchased goods on 27th June, 1986,
there is no equity in their favour.
In this case no injustice would be done by this order.
The goods were purchased by the present petitioners only on
27th June, 1986 after they were aware of the judgment of
this Court in Raj Prakash’s case (supra) as well as Indo
Afghan Chambers of Commerce’s case (supra). No question of
any restitution of rights arises.
It was further submitted that in any event under item 1
of Appendix 6 (import of items under open General Licence)
of the Import Policy, 1985-88, raw materials, components and
consumables (non-iron and steel items) other than those
included in the Appendices 2, 3 Part A, S and 8 will be
permissible by the actual user (industrial). It was
submitted that the respondents herein were actual users
(industrial) because these were used by them for their
production. This contention cannot be accepted firstly
because it comes within specific
780
prohibition of Item 9 in Part-B of Appendix S being fatty
acid and acid oil which were importable only by the State
Trading Corporation of India under open General Licence on
the basis of foreign exchange released by the Government in
its favour. Secondly the actual importation was not by the
petitioners but by somebody else is mentioned hereinbefore,
being M/s Dimexon Co. In the premises, the view of the
Bombay High Court cannot be sustained.
In that view of the matter special leave is granted.
The appeal is allowed. The order of the High Court under
challenge is set aside. The appellant is entitled to the
costs.
A.P.J. Appeal allowed.
781