Prashant Corporation vs Union Of India (Uoi)
2003 Latest Caselaw 994 Bom

JUDGMENT

V.C. Daga, J.

1. This petition is directed against the public notices bearing Nos. 225 I.T.C. (P.N.)/1985-88, dated 6th November 1987 and 235 I.T.C. (P.N.)/1985-88, dated 11th December, 1987 and also seeking declaration that the said notices are illegal, unlawful, unconstitutional and violative of Articles 14,19(1)(g) and 300A of the Constitution of India. The petitioners have also prayed that the show cause notice (Exh. 1) based on the said public notices together with consequential action be quashed and set aside.

2. The petitioners are also claiming higher percentage of entitlement of the replenishment licence as a consequence of compliance with the export obligation more than the percentage attached of the Imprest Licence which was issued to them and also raised an issue as to the quantification of the value of export obligation which was required to be discharged by the petitioners putting their own interpretation on the Public Notice No. 235 I.T.C.(P.N.)/85-88, dated 11th December 1987.

Facts :

3. The facts giving rise to the present petition are as under :

The petitioners are exporters and importers inter alia carry on business of importing rough diamonds and exporting cut and polished diamonds in terms of the Import and Export Policy framed by the respondents from time to time.

4. Under the provisions of Import-Export Policy relevant for the period April 1985 to March 1988 ("AM-88 Policy" for short) the Imprest Licensing Scheme was conceived vide para-243 read with Appendix-13 thereof. In terms of para 3(ii) of Appendix-13 a registered exporter was eligible to apply for Imprest Licence either against a valid export contract or based on his annual average past export performance. The said scheme further provided that on issuance of Imprest Licence the items as set out therein could be imported subject to fulfilling the export obligation attached thereto. On such export obligation being discharged, the petitioners were to become eligible for REP licence of a fixed percentage. Under the said Policy in terms of para 12 thereof Imprest Licence was to be issued with obligation to complete export obligation fixed at an inverse ratio of 65% The petitioners were one of the licensees having obtained licence under the said Policy as indicated hereinafter.

5. On 18th May, 1987, the petitioners applied for an Imprest Licence of CIF value of Rs. 1,05,46,521/-, in accordance with para 3(ii) of Appendix-13 of the AM-88 policy. The petitioners had requested that the said licence be granted in two instalments or in two parts. However, the Licence fee of Rs. 10,547/- was paid for one consolidated licence. On 18th June, 1987. The petitioners wrote back to respondent No. 2 seeking to amend the aforesaid application to the effect that a consolidated licence for the full CIF value be issued.

6. The respondents, however, issued a licence bearing No. P/K/W/1472443, dated 1st July 1987 for the CIF value of Rs. 52,73,260/- with corresponding export obligation attached thereto of the value of Rs. 81,12,709/-. The said licence was issued to the petitioners as merchant exporter for products to be exported and imported in terms of Product Group P 2.1 to P. 2.6 of Appendix-17 of the AM-88 Policy. The licence was valid for a period of 18 months.

7. On 13th July, 1987, on receipt of the said licence the petitioners addressed a letter to respondent No. 2 inter alia pointing out that the petitioners had amended their application and requested for issuance of a consolidated licence for the entire amount of Rs. 1,05,46,521/- and recorded their protest.

8. On 6th November, 1987, respondent No. 3 issued a Public Notice No. 225 I.T.C. (P.N.)/85-88 amending the rates of replenishment as well as the condition of minimum per carat realisation.

9. On 11th December, 1987, respondent No. 3 issued another Public Notice No. 235 I.T.C.(P.N.)/85-88 amending Paras 12 and 14(4) of Appendix 13; whereby an option was given to the exporters to the effect that the Imprest Licence as issued will be with an export obligation fixed at an inverse ratio of 50% with the actual export obligation to be determined with reference to the replenishment entitlement of the corresponding product in Appendix-17 while redeeming the export obligation against such licence or the Imprest Licence will be issued with an export obligation to be determined at an inverse ratio of 65% with an additional condition that the applicant will also be required to achieve a per carat realisation which can only entitle him to a minimum replenishment rate of 65% with reference to the rates specified in Appendix-17. In such case, the export obligation was to be determined with reference to the import replenishment entitlement of the corresponding export product in Appendix-17 while redeeming the export obligation imposed against such licence. Vide Para 3 of the said public notice a savings clause was introduced to the effect that in respect of export of cut and polished diamonds made against Imprest Licence issued prior to 6th November, 1987 the import replenishment rate shall be that which was applicable prior to the issuance of Public Notice No. 225 I.T.C.(P. N.)/85-88.

10. On 17th March, 1988, respondent No. 2 issued the balance Imprest Licence No. P/K/W/3217795, dated 17th March, 1988 in favour of the petitioners in response to the application already made by them for the balance amount of Rs. 52,73,260/- in respect of the Export Product Group P. 2.2 to P 2.6 with export obligation attached thereto in sum of Rs. 81,12,708/- being the second instalment.

11. With respect to the second instalment of the said imprest licence, the petitioners by their letter dated 3rd November, 1988 furnished to respondent No. 2 the details of exports effected by them in discharge of the export obligation. By the said letter petitioners also requested to issue excess replenishment licence to the extent of Rs. 3,52,427/-.

12. By letter dated 11th November, 1988, the respondent No. 2 informed the petitioners that they did not discharge export obligation in full. The petitioners replied to the said letter, inter alia stating that they had applied for one consolidated licence but instead of issuing one licence the department had issued the said licence in two parts or instalments, as such the public notices issued in the intergnum cannot be made applicable to the case of the petitioners. The respondent No. 2 by his letter dated 9th February 1989 informed the petitioners that the contentions raised in the application made by the petitioners for redemption of the said licence was considered and rejected. In other words, the contention raised by the petitioners did not find favour with the Licensing Authority.

13. On 29th March, 1989, the petitioners filed appeal before respondent No. 2. The respondent No. 2 vide his order dated 5th May, 1989 rejected the said appeal filed by the petitioners.

14. Being aggrieved by the aforesaid order the petitioners filed appeal against the said order before respondent No. 3. The respondent No. 3 rejected the second appeal filed by the petitioners.

15. The respondent No. 2 issued show cause notice dated 8th December 1989 alleging therein that the petitioners had not fulfilled the export obligation imposed on them in terms of Public Notice No. 235 I.T.C(P.N.)/85-8S, dated 11th December, 1987. By two letters dated 27th December 1989, the petitioners were informed that in view of the pending export obligation their applications for issuance of subsequent REP licence on the basis of entitlement cannot be considered.

16. Not being satisfied with the aforesaid orders passed by respondent Nos. 2 and 3, the petitioners filed present writ petition under Article 226 of the Constitution of India to challenge the action of the respondents mentioned in the opening part of the judgment.

The Submissions :

17. The learned Counsel for the petitioners contends that though the petitioners had initially requested for the licence to be issued in one part, the said request was subsequently amended even prior to the issuance of public notice bearing Nos. 225 I.T.C(P.N.)/85-88 and 235 I.T.C(P.N.)/85-88, dated 5th November 1987 and 11th December 1987 respectively. He, therefore, submits that the petitioners are governed by the policy as it stood prior to the issuance of public notice Nos. 225 I.T.C.(P.N.)/85-88 and 235 I.T.C.(P.N.)/85-88. The petitioners submit that their application not only related to a period prior to the issuance of the said two public notices but first instalment of the said licence was also issued in their favour prior to the issuance of the public notices. He submits that though the second instalment of the said licence was issued after the issuance of the second public notice, the same relates to the application made by the petitioners in June 1987, as such forms part of the licence issued to the petitioners in July 1987. The reliance was placed on the clarification made by the department itself vide its letter dated 19th March, 1988 (Exh. F) : wherein, while forwarding the second instalment of the licence it was mentioned in Para 4 (iv) as under :

"It has been decided to issue you licence in two equal instalments. This is the 2nd instalment. You are requested to fulfilment of E/O should be at the old rate is 65% to 87% in terms of Public Notice No. 233/86-88 dated 11-12-1987 under para P. 2.2 to P. 2.6 of APR 17 of AM 85-88 PB."

The learned Counsel for the petitioners further submits that the fact that the second instalment of the said licence was issued under the policy prevailing prior to the issuance of the said two public notices is further evident from the fact that the same has been issued in the inverse ratio of 65% with the export obligation fixed at CIF Rs. 81,12,708/-. He submits that had the department issued the said licence in terms of the second public notice No. 235 l.T.C.(P.N.)/85-88 then unless an option had been exercised by the petitioners the same ought to have been issued in an inverse ratio of 50% which was the minimum rate of replenishment being P. 2.1 in which case the export obligation would have been Rs. 1,05,46,520/-. It is, therefore, submitted that on their own volition the respondents have issued the said licence under the policy prevailing before the issuance of said two public notices, as such the department is now estopped from contending that the export obligation ought to be completed in terms of the second public notice which in the submission of the petitioners is bad in law.

Per Contra :

18. Mr. Rana, learned Counsel for the Revenue first challenged the assertion of the petitioners that on 18th June, 1987 they had addressed a letter to respondent No. 2 requesting that the Imprest Licence applied for be given to them for full amount and denied the receipt of the said letter by the respondents. After laying down foundation of denial of the letter dated 18th June, 1987, Mr. Rana went on to submit that the licence was issued as per the application made by the petitioners dated 18th May 1987, effective from 1st July 1987 for CIF value of Rs. 52,73,260/- with corresponding export obligation attached thereto of exporting goods of the FOB value in the sum of Rs. 81,12,708/-. The said licence was issued to the petitioners as merchant exporter. So far as this first licence is concerned no dispute has been raised in the petition. The CIF value of the licence in the sum of Rs. 52,73,260/- with corresponding export obligation attached thereto of the FOB value of Rs. 81,12,708/- is also not in dispute.

19. Mr. Rana urged that the second Imprest Licence No. 3217795, dated 17th March, 1988 for CIF value of Rs. 52,73,260/- came to be issued in respect of export of cut and polished diamonds showing the CIF value of Rs. 52,73,260/-. He further submits that the Ministry of Commerce, Government of India issued public notice in public interest being Public Notice No. 225 I.T.C.(P.N.)/85-88, dated 6th November 1987, which provided for amendment in the replenishment entitlement of cut and polished diamonds. He further contends that the public notice being a part and parcel of the import export policy, the moment such public notice is issued the same gets incorporated in the Exim policy as the fiscal policy requires adjustments from time to time depending upon economic developments of the country during that period.

20. Mr. Rana further pointed out that the petitioners have given legal undertaking in respect of licence dated 17th March, 1988 and, if at all, the petitioners felt aggrieved by the terms and conditions or grant of the said licence they ought to have either returned the said licence without utilising any part thereof or challenged the same in accordance with law. But having acted thereon, the petitioners cannot be allowed to contend contrary. He, thus, submits that it was obligatory on the part of the petitioners to comply with the conditions attached with the said licence.

21. Mr. Rana further submits that the Government of India issued another Public Notice No. 235 I.T.C.(P. N.)/85-88 on 11th December 1987 drawing attention in respect of Export Product Group P. 2.1. to P. 2.8 in Appendix-17 of the AM-88 Policy (Vol. I), as amended vide Public Notice No. 225 I.T.C. (P.N.)/85-88, dated 6th November, 1987 in which it was mentioned that in respect of export of cut and polished diamonds made against the Imprest Licences/ Imprest D.T.C. Licences issued prior to 6th November, 1987 the export replenishment rates shall be those which were applicable prior to the issue of the said public notice dated 6th November, 1987. In this backdrop, he submits that the second Imprest Licence dated 17th March, 1988 was issued in favour of the petitioners after 6th November, 1987 by which reduced REP rate was applicable. According to him the rate of REP entitlement applicable to the exports made in fulfilment of obligation of second licence would be the rate as prescribed in public notice dated 6th November, 1987 in view of the fact that the second licence was issued on 17th March, 1988 i.e. after 6th November, 1987. He submits that the public notice having become part and parcel of the AM-88 Policy, the petitioners were under obligation to comply with the said conditions of the public notice and the consequences flowing therefrom. In the aforesaid backdrop of the submissions, he took us through certain decided cases so as to sustain the impugned orders suffered by the petitioners and prayed for dismissal of the petition with costs. For the view, we are taking it as necessary for us to refer to the said decided cases referred by Mr. Rana.

Consideration/Findings :

22. We have heard the parties at length and have examined the material available on record in the form of documents which are not in dispute. The solitary undisputed fact emerging from record is that the petitioners did apply vide their application dated 18th May 1987 for Imprest Licence of CIF value of Rs. 1,05,46,521/- for importing diamonds in accordance with para 3(ii) of Appendix-13 of the AM-88 Policy with rate of import replenishment entitlement ranging from 65% to 85% and the petitioners did request for issue of licence LUT (Legal Undertaking) with a request that the licence should be issued in two instalments. Accordingly, it appears that the licence came to be issued in two parts. The first part of the licence was for CIF value of Rs. 52,73,260/- with corresponding export obligation attached thereto of FOB value of Rs. 81,12,709/-. The said licence was issued on 1st July, 1987. The second part of the licence came to be issued on 17th March, 1988 for CIF value of Rs. 52,73,260/- with corresponding export attached thereto in the sum of Rs. 81,12,709/- (FOB value). It is thus clear that both licences or both parts thereof were for the same value, even though the public notices reducing rate of replenishment were in the field when second part or second licence was issued.

23. Therefore, it is clear from the intrinsic evidence available on record that while issuing second part of the licence or second licence as alleged by Revenue, the same was issued on the basis of the Import Export Policy which was prevailing prior to the issuance of the public notices dated 6th November, 1987 and 11th December, 1987. In spite of the fact that second part of the licence or second licence was issued subsequent to the issuance of the public notices i.e. on 17th March, 1988, the value of licence with export obligation was calculated on the basis of the unamended policy prevailing for the period 1985-88 with rate of import replenishment ranging from 65% to 85%. In other words, it was granted ignoring the said two public notices. In this view of the undisputed fact, the submission of the Revenue is just contrary to the material available on record. The case sought to be canvassed by the Revenue that licence was issued taking into account the amended policy amended by virtue of the public notices must fall to the ground. It cannot be accepted. Had it been so, then, the export obligation would have been calculated as per the amended policy taking into account the two public notices occupying the field. The very fact that the Revenue did not calculate the export obligation on the basis of the amended policy is sufficient to demonstrate that the second part of the licence or second licence was issued on the basis of the unamended policy or the policy which was prevailing prior to the issuance of the public notices on the belief that is nothing both the second part of the same licence. In this view of the matter, the submission advanced by the Revenue that the second part of the licence or the second licence was issued on the basis of amended policy deserves to be rejected.

24. Having rejected the above contention of the Revenue, if one turns to the data produced by the petitioners in that behalf at pages 72 and 74 of the petition, the details of which are not in dispute, it would be clear that the petitioners have not only completed the export obligation but have exceeded the same by Rs. 3,52,427,12. The petitioners in the petition have prayed that the respondents be directed to issue replerishment licences to the petitioners in respect of the excess sum of Rs. 3,52,427,12. However, during the course of oral submission and considering the change in the prevailing Import Export Policy of the country, the petitioners abandoned their prayer for direction to the respondents for issuance of the replenishment licence for the excess entitlement.

25. In view of the findings recorded hereinabove. It is not necessary for us to record any finding with respect to the legality and validity of two public notices dated 6th November, 1987 and 11th December, 1987 challenged in the petition.

26. In the result, petition is allowed. The show cause notice at (sic) and the consequent orders passed by the original as well as appellate authorities confirming the said show cause notice are set aside. Rule is made absolute in terms of this order. Petition stands disposed of with no order as to costs.