Case: Priyanka Overseas Private Limited and Another Vs. Union of India and Others

3. Facts relating to the question of Import Policy and that the Government of India framed Import Policy for the years 1985-88 under which import of items under Open General Licence (in short OGL) have been mentioned under Appendix 6 Entry (1) as under(1) Raw materials, components and consumables (non-iron and steel items) other than those those included in the Appendices 2, 3 Part (a), 5 and 8Appendix 5 Part-B provides for petroleum products, fertilizers, drugs, feature films, video films, oil/seeds, cement, cereals, newsprint, photo assistance etc. Under the head oils/seeds Item No. 5 reads as underIn the case of the following items, whether edible or non edible, import will be made by the State Trading Corporation (STC)/Hindustan Vegetables Oil Corporation, New Delhi (a Government of India Undertaking) under Open General Licence on the basis of foreign exchange released by the government in its favour, imports, distribution and their pricing will be made by the State Trading Corporation/Hindustan Vegetables Oil Corporation, New Delhi as per the connected policy of the government in the Ministry of Food and Civil Supplies, Department of Civil Supplies. *Out of the 9 items under this head, we are concerned with Sl. No. 4 which provides as underPalm Oil (all types including Palmolein and other factions)/Palm seedsThus according to the above provision palm seeds were canalised items falling under Appendix 5 Part B of the said Policy. The Imports and Exports (Control) Act, 1947 empowers the Central Government to prohibit, restrict or otherwise control imports and exports. In exercise of the powers conferred in the above Act, the Imports (Control) Order, 1955 has been issued. Schedule I(1) to the said Order contains the list of articles of which imports are controlled. The import of such items is prohibited except : (i) under and in accordance with a licence or a customs clearance permit issued under the said Order, or (ii) if they are covered by an OGL (subject too such conditions as may be stipulated), or (iii) if they are covered by the semi-clause (ii) of the Imports (Control) Order4. Open General Licence No. 1/87 dated April 1, 1987 provided as followsImport Trade Control Orders Nos. 68/85-88, OGL No. 1/87 dated April 1, 1987 in exercise of the powers conferred by Section 3 of the Import and Export (Control) Act, 1947, the Central Government hereby gives general permission to import into India from any country, except the Union of South Africa/South-West Africa, raw materials, components and consumables by actual users (industrial) subject to the following conditionsThe item to be imported are not covered by Appendices 2, 3, 5 and 8 of Import and Export policy for the year 1985-88 Vol. I as amended from time to time by issue of a Public Notice in the official Gazette. *Such goods are shipped on through consignment to India on or before March 31, on the licensing order or, in the case of actual users (industrial), on or before June 30 of the following licensing year against firm order for which irrevocable letters of credit are opened and established on or before last date of February of the licensing year, without any grace period whatsoever. *5. M/s. Priyanka Overseas Private Limited (hereinafter referred to as the appellant) made a contract for import of 35, 000 MT of Palm Kernel on June 10, 1987 with the foreign suppliers. The contract was entered as an agent on behalf of various actual users. On July 27, 1987 the Chief Controller of Imports and Exports issued a Public Notice No. 205-ITC(PN)/85-88 canalising import of any other material from which oil can be extracted. Under the above contract 11, 570.570 MT of Palm Kernal was shipped by the foreign seller from Nigeria to the appellant company under different Bills of Lading on June 26, 1987 and July 25, 1987. As regards the above quantity of goods the Collector Customs in his Adjudication Order No. 1/87 dated December 7, 1987 has observed as underFurther, as reported by the Assistant Collector, Kakinada, the actual quantity landed and bonded, as per the share weighment under customs supervision as well as under the supervision of the surveyor was only 10681.832 MT involving a short landing to the extent of 888.730 MT. *Thus we take this figure of 10681.832 MT as correct6. Since the customs authorities professed to the appellant not to clear the goods it filed a Write Petition No. 3265 of 1987 before a Single Judge of the Calcutta High Court. Learned Single Judge passed an interim order in favour of the appellant on July 28, 1987. The interim order was granted in terms of prayers (e) and (f) of the petition, on certain conditions. The above order dated July 28, 1987 was modified on August 3, 1987 to the extent that the interim order was granted on the condition that the appellant shall pay the entire customs duty as may be determined and demanded by the respondents in cash and shall furnish a bond for the entire value of the goods. The order for furnishing bank guarantee was recalled. It was made clear that the customs authority shall not release the goods unless the entire customs duty as may be determined and demanded by them was fully paid by the appellant in cash. The Collector of Customs filed an appealed before the Division Bench against the aforesaid order7. The Division Bench of the Calcutta High Court on September 18, 1987 passed the following orderWe direct that in case the write petitioner-respondent chooses to import the Palm Kernel pursuant to the order of the learned trial Judge under under appeal, the imported goods will be kept in a bonded warehouse or any other warehouses availed by the customs authorities and until further orders the respondent being the writ petitioner in the above matter, would not take delivery of the same. *8. On October 2/3, 1987 the imported goods entered into the territorial waters of India and arrived at the port of Kakinada. On the application moved by the appellant on October 15, 1987, to the Assistant Collector of Customs, Kakinada for allowing it to keep the Palm Kernel cargo in a bonded warehouse or any other warehouse approved by the customs authorities till the final disposal of the case before the High Court, the Assistant Collector passed an order on October 18, 1987 for allowing warehousing of the goods under Section 50 ofthe Customs Act, 1962 (hereinafter referred to as the Act) on the appellant executing a general bond to the effect. The appellant accordingly executed the bond9. Since the Collector of Customs had already issued notice under Section 1234 of the Customs Act initiating proceedings for confiscation of the goods, the appellant approached the Collector and filed representation against the proposed confiscation. In view of these circumstances the parties were heard on December 2, 1987 by the Division Bench of the High Court and with the consent of the parties the interim orders of the Single Judge were set aside and the proceedings initiated under Section 124 of the Customs Act, before the Collector of Customs were expedited, without prejudice to the rights and contentions of the parties in the pending writ petition before the learned Single Judge. The Division Bench, further issued the following direction for the expeditious disposal of the write petition pending before the Single JudgeAffidavit in opposition to the write petition to be filed by December 22, 1987, affidavit in reply if any to be filed by January 10, 1988. Liberty is given to the parties to apply before the first court for early disposal of the write petition. It is expected that the matter will be disposed of expeditiously by the first court, We make it clear that we have not adjudicated on the merits of the disputes and the parties will be at liberty to adjust all their claims and contentions before the Collector of Customs and in the pending write petition. *10. The Collector of Customs by adjudication order passed on December 7, 1987 held that the items Palm Kernel was prohibited item for import except through canalisation by the State Trading Corporation in terms of the Import Policy, and, consequently the import of 11, 570.570 MT of Palm Kernel of Nigeria origin valued at Rs. 2, 88, 88414/CIF value without a valid licence was in contravention of the provisions of Section 3(i)(a) of the Customs Act read with Section 3(ii) of the Imports and Exports (Control) Act, 1947. The Collector in these circumstances directed the confiscation of the entire goods and gave the importer an option to redeem the goods on payment of a fine of Rs. 90 lakhs. The option was to be exercised within one month of the order. The Collector also imposed on the importer i.e. the appellant a personal penalty of Rs. 10 lakhs in terms of Section 112(a) of the Customs Act. On December 17, 1987 the appellant exercised is option within the aforesaid period of one month and took delivery of part of the goods of 3935.360 MT on payment of personal penalty of Rs. 10 lakhs and also part payment of the redemption fine to the tune of Rs. 35 lakhs. On January 28, 1988 the appellant filed the bills of entires before the authority concerned. It may also be mentioned that the customs duty as applicable on the date of the arrival of the ships i.e. October 2/3, 1987 was 105 per cent. The said customs duty was withdrawn by a Notification dated December 4, 1987 and as such there was nil duty on Palm Kernal and this position remained up to January 28, 1988. By a Notification dated January 29, 1988, the exemption from customs duty was withdrawn and as a result of which the earlier duty of 105 per cent came into operation. The customs duty was further increased in the Budget submitted on February 29, 1988 and as such from March 1, 1988 the new customs duty was levied at 245 per cent. The appellant removed the balance of the goods also on June 17, 1988 under the orders of this Court dated June 2, 198811. Learned Single Judge by order dated April 19, 1988 held that the Palm Kernel was an item different and distinguished from Palm seeds and the same could be imported under OGL as the same was covered under Items No. 1, Appendix 4 of the Import Policy. Learned Single Judge also directed the customs authorities to clear the goods immediately which were imported pursuant to the contract dated June 10, 1987 and to allow the appellant (petitioner in the High Court) to import the goods, already arrived or likely to arrive pursuant to the contract dated June 10, 1987. The goods were ordered to be allowed to be cleared on payment of such duties as leviable on January 28, 1988. The orders of adjudication dated December 7, 1987 passed by the Collector of Customs, Guntur including the show cause notices were quashed. The customs authorities were further prohibited from giving effect or taking any steps pursuant to the adjudication proceeding or in pursuance to the show cause notices or putting any impediment or obstruction in the matter of release of Palm Kernel imported on the basis of agreement dated June 10, 198712. The Collector of Customs aggrieved against the judgment of the Single Judge dated April 19, 1988 filed a Letter Patent Appeal before the Division Bench of the Calcutta High Court. The Division Bench by order dated May 20, 1988 also affirmed the order of the trial court so far as the setting aside of the adjudication order was concerned. The appellant was allowed the refund of the sum of Rs. 90 lakhs as redemption fine and Rs. 10 lakhs as penalty subject to the following conditionThey have already cleared three thousand tons approximately without payment of duty. We have held that they are liable to pay duty. This amount of duty to be paid is to be ascertained and the said sum is to be adjusted against Rs. 90 lakhs and Rs. 10 lakhs respectively. The balance amount shall be held by them for a period of two months from this date. The writ petitioner shall be entitled to get delivery of the balance goods on payment of duty at the rate prevailing in October, 1987 or upon adjustment with the balance of the months. But, if they do not do so within a period of two months, then respondents shall be entitled to proceed in accordance with lawWe make it clear that the goods must be cleared by the customs authorities and allowed to be taken delivery of, within 72 hours from the time of depositing of the amount of duty in respect of the goods to be cleared along with payment of charges and expenses in accordance with lawSo far as the question of interest is concerned, in the facts and circumstances of the case we are not inclined to grant any interestWe also make it clear that in respect of the balance goods allowing, the write petitioner shall be entitled to clear the same at one time or from time to time13. The above judgment was given on May 17, 19 and 20, 1988 and as already mentioned above the petitioner removed the remaining goods also on june 17, 1988 by paying nil duty14. Both the parties have come in appeal before this Court Special leave, aggrieved against the order of the High Court

Court's reasoning:
31. We have given our careful consideration to the arguments advanced by the learned counsel for the parties and have thoroughly perused the record. We have to first consider whether Palm Kernel and palm seed were two different commodities or Palm Kernel was included in Palm seed for the purpose of import. The difference between palm seed and Palm Kernel has been explained in the letter of the Central Plantation Crops Research Institute dated January 21, 1987 (placed on record), it reads as underThe difference between Palm Kernel and palm seeds has also been pointed out in the aforesaid letter according to which palm seed is specially extracted from fruits while kernel is a product obtained after sterilisation, digestion at 95 Degree Celsius, pressing, decarpting, shelling etc. The Palm Kernel will lose its viability due to the above processes and cannot be used for germination. *Under Appendix 5 Part (b) Item 5 of the Import Policy under the heading Oils/seeds only Palm oil/Palm seeds have been mentioned. We agree with the view taken by the High Court in this regard that Palm Kernel cannot be included under the item palm seeds and the two commodities were different as understood in commerce or trade. We do not want to burden this judgment by citing those authorities which have already been considered for deciding this controversy by the High Court. We do not see any force in the contention of the learned Solicitor General in this regard that the government had only made a clarification vide Notification dated July 27, 1987 by introducing in Appendix 5 Part (b) Item No. 5 all other oils/seeds/any other material from which oil can be extracted. It is significant that in the aforesaid notification published in the Gazette of India Extraordinary para (1) Section 121, it was clearly mentioned that the same was issued as an amendment to the earlier Notice No. 1-ITC(PN)/85-88 dated April 12, 1985. The notification stated that the following amendment shall be made in the Policy at proper places indicated below and then under the head amendment the new provision which included all other seeds from which oil can be extracted was mentioned. It is therefore evident that the Government of India itself, realised the difference in the two commodities therefore it amended is previous policy. We are therefore of the opinion that prior to July 27, 1987 Palm Kernel was not a canalised item and the High Court rightly held that Palm Kernel was not included with in the entry of palm seed32. Since Palm Kernel was not included within palm seed the customs authorities had no legal justification to confiscate or impose redemption fine, or penalty, as the goods had already been shipped on various dates i.e. on June 26, 1987 and July 25, 1987. It is no longer in dispute that if the Palm Kernel was not a canalised item before July 27, 1987 then it could have been imported under the OGL before that date. The crucial dates in this regard are June 26, 1987 and July 25, 1987 when the goods were actually loaded in the ship and not the date of arrival of the ship in the territorial waters of India40. The High Court has overlooked that on October 15, 1987 the petitioner had only applied for warehousing of the goods on the direction of Division Bench of High Court. The Single Judge had passed an interim order for clearing the goods after payment of customs duty, but the department went in appeal and the Division Bench by its order dated September 18, 1987 directed the imported goods to be kept in a bonded warehouse or any other warehouse approved by the customs authorities and until further orders the appellant was directed not to take delivery of the same. The appellant submitted the bills of entry on January 28, 1988 and admittedly no duty was payable on that date. Moreover where goods imported are kept in a warehouse under a bond, the date of arrival of such goods in India is not relevant for determining the duty; therefore the High Court committed error in holding the appellant was liable to pay duty as in force on the date of arrival of goods42. There is no dispute that the remaining goods were also stored in a private warehouse and the appellant had filed the bills of entry and complied with all the required formalities for debonding and clearance of the goods on January 28, 1988, therefore the appellant was entitled to an order cancelling the licence of the private warehouse enabling it to remove the goods. Had the customs authorities passed order in accordance with the law the same result would have followed as had been done on December 17, 1987. The Central Manual published by the Director of Publications, Customs and Central Excise contains directions for determining the actual date of removal of goods from warehouse in terms of Section 15(1)(b) of the Act. The functioning of private warehousing has been elaborated therein. Clause 10 of the Manual prescribes the type of buildings which can be approved as private warehouses under Section 58 of the Act. Para 15 of the Manual provides for purposes of Section 15(1)(b) of the Act, that if the goods are in private warehouse the date of cancellation of the licence of the private warehouse should be taken as the actual removal of the goods for the purposes of Section 15(1)(b) of the Act. Para 15 as already stated was followed in the appellants own case on December 17, 1987 in releasing the goods. There is no valid reason as to why the same procedure should not have been followed in respect of the remaining goods in respect of which the bills of entry were filed on January 28, 1988 for debonding and clearance of goods. Merely because the officer failed to discharge his duties by making illegal demand for deposit of redemption fine, the appellant could not be held liable to pay duty. The appellant is therefore entitled to the delivery of goods without paying any duty as on January 28, 1988 on duty was payable on the goods