Bombay High Court
The Commissioner Of Customs-Iv ... vs Lactose (I) Ltd on 8 August, 2017
Bench: A.S. Oka
25-cuapp-25-2016.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
CUSTOMS APPEAL NO.25 OF 2016
The Commissioner of Customs-IV ...Appellant
(Export), Air Cargo Complex, Sahar,
Andheri (East), Mumbai - 400 099.
Versus
Lactose (I) Ltd. ...Respondents
211, Laxmi Industrial Estate,
New Link Road, Andheri (East),
Mumbai - 400 053.
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Mr. Pradeep S. Jetly for the Appellant.
Mr. Prakash Shah a/w. Mr. Jas Singhavi i/b PDS Legal for the
Respondent.
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CORAM : A. S. OKA AND
RIYAZ I. CHAGLA, JJ.
DATE : 8 AUGUST 2017
JUDGMENT : (Per Riyaz I. Chagla, J.)
1. The Appellant being aggrieved by the impugned order
dated 15th June 2015 passed by the Customs, Excise and Service
Tax Appellate Tribunal (for short "CESTAT") has preferred the
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present Appeal on the question of law set out in paragraph No.4
of the Appeal, which reads thus:
"Whether CESTAT is right in law in holding
that the Respondents are liable to import
Lactose against DFIA licence when the same
was admittedly not used as an ingredient in the
export product?"
The Respondents (Appellant before CESTAT) had filed ex-
bills of entry seeking clearance of lactose against Duty Free
Import Authorization licence (for short "DFIA Licence")
0310597347 dated 18th October 2010 issued against export of
biscuits and against DFIA licence No.0310662278 dated 25 th
October 2010 against export of Metamitron. Sugar is
permissible as one of the input allowed to be imported against
the export of biscuits under Standard Input Output Norms (for
short "SION") vide Serial No.E-5 of (SION). The norms do not
refer to any particular category of sugar and it has been the
Respondent's understanding that lactose was eligible to be
imported duty free against DFIA presented by the Respondents.
A Policy Circular No.13/2011 dated 31st January 2011 was
issued by the Director General of Foreign Trade (for short
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"DGFT") which clarified that import of Lactose/Mannitol
Sodium Saccharine and other artificial sweetening agent is not
allowed under SION E-5 input against No.2, i.e. sugar. The
Respondents justified their claim for duty free clearance against
the DFIA. The Respondents took the plea before the
Adjudicating Authority that the licence had been issued prior to
the said circular being issued and hence was inapplicable in the
case of the Respondents. The Respondents requested for release
of the imported goods by claiming the benefit of Notification
No.98/2009. The Respondents vide their letter dated 1 st May
2013 waived issuance of show cause notice and requested for
personal hearing in the matter to decide the same on merits. A
personal hearing was allowed, wherein the consultant of the
Respondents appeared and made submissions which were
similar to those contained in letter dated 30 th April 2013
addressed by the Respondents. The consultant of the
Respondents submitted that the DFIA licence submitted by them
allows input "Sugar" and as per DGFT vide clarification letter
dated 31st July 2008 it was stated that "sugar in the form of
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lactose can be imported against DFIA licence for import of
sugar". The same was clarified in Board Circular 46/2007 dated
20th December 2007 and DGFT's Policy Circular dated 6th
January 2009. The DGFT Policy Circular dated 24 th March 2009
gave the exporter flexibility to import the alternative
input/product mentioned in the SION. The licence being issued
prior to the amending Circular dated 31 st January 2011 made
the said circular inapplicable and the import of lactose should be
allowed under the DIFA licence. This plea of the Respondents
was not accepted by the Adjudicating Authority, who held that
the Respondents were not liable to import lactose in terms of
the DGFT Circular dated 31st March 2011, as relevant date for
determining the applicability of the licence is the date of the Bill
of Lading/Airway Bill and therefore the Policy Circular which
was issued prior thereto is very much applicable. The
Adjudicating Authority by two orders dated 10 th May 2013 did
not extend the benefit of duty free import for the imported
goods. The Respondents being aggrieved by the two orders
dated 10th May 2013, preferred two appeals before the
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Commissioner of Customs (Appeals). The Commissioner of
Customs (Appeals) vide common order in Appeal dated 11 th May
2013, rejected the Appeals filed by the Respondents. The
Respondents being aggrieved by the order, preferred Appeals
before CESTAT. The CESTAT by the impugned order dated 15 th
June 2015 held that the Circular dated 31 th January 2011 was
not applicable and placed its reliance upon the judgment of the
Madras High Court in the case of Hoewitzer Organics
Chemical Ltd Organic Chemical Co. Vs. D.G.F.T., New Delhi
reported in 2013 (294) E.L.T. 7 (Mad.) which held that the
Policy Circular dated 31st January 2011 does not apply to a valid
licence, already issued prior thereto. It was held that
clarification issued by the Ministry of Commerce dated 31 st July
2008 and the DGFT Policy Circular dated 24 th March 2009 were
issued prior to issuance of licence dated 15th April 2010 and
extended the benefit of flexibility to import the alternative
input/product mentioned in the SION and hence the subsequent
circular issued after the grant of licence cannot be applicable to
the goods imported under the licence. The CESTAT accordingly
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held that the import of lactose against entry "sugar" listed in the
DFIA dated 25th October 2011 issued against export of
Metmitron is definitely not restricted by the Circular dated 31 st
January 2011. The CESTAT accordingly, held that the
Respondents are entitled to the benefit of the Notification
No.98/2009 - CUS in terms of the DFIA presented to the
Customs and set aside the order of the Adjudicating Authority,
Commissioner of Customs (Appeals). The Appellant being
aggrieved by the impugned order has preferred the present
Appeal.
2. Mr. Jetly, learned Counsel for the Appellant has
submitted that the impugned order has arrived at an erroneous
finding by placing reliance upon the judgment of the Madras
High Court in the case of Hoewitzer Organics Chemical Ltd
Organic Chemicals Co. (Supra), as the facts therein were
different from that of the present case. Mr. Jetly has submitted
that the case decided by the Madras High Court was in relation
to the said circular being issued subsequent to the date on which
the licence was issued. In the present case the licence was
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transferred on 18th February 2011 i.e. after the change in Policy
by issuance of Circular dated 31st January 2011. Hence, the
judgment of the Madras High Court would not be applicable to
the facts of the present case. Mr. Jetly has contended that the
change in Policy was known to the Respondents at the time
when they had imported the input viz lactose and claimed the
import to be duty free. The Respondents are not eligible to
import lactose against DFIA according to the changed policy as
lactose was admittedly not used as an ingredient in the export
products. Mr. Jetly has accordingly submitted that the impugned
order of CESTAT be set aside as it has erroneously held that the
Respondents are entitled to the benefit of Notification
No.98/2011 dated 11th September 2009, which provides for
Duty Fee Import Authorization.
3. Mr. Prakash Shah, learned Counsel appearing for the
Respondents has supported the impugned order and has
submitted that the policy circular issued by the DGFT will be
valid only if it is issued prior to the date of issuance of the
licence, the transferability of which is endorsed. Reliance is
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placed upon Division Bench judgment of the Bombay High Court
in the Sonia Fisheries V/s. Union of India reported in 1997
(90) E.L.T 22 (Bom.), paragraph 9 reads thus:
"Considering the aforesaid paragraphs of the
Import and Export Policy, it is apparent that to the
Petitioners quantity based Advance Licence was
given on the condition of fulfilling their export
obligations are stated in the Advance Licence. With
regard to export there is no dispute. Paragraph 51 of
the Export and Import Policy specifically provides
that in respect of quantity based Advance Licences
for which standard input-output norms have not
been published, the quantitative norms will be as
specified by the competent authority. On the basis of
the said Policy after considering the Petitioners
Application and after verifying the facts from them
the Petitioners were given Advance Licence by
reducing the quantity and also amount. One of the
conditions of the said Licence is as under:
"(i) this licence shall be subject to the
conditions in force relating to the goods
covered by the licence as described in the
relevant import Trade Control Policy Book, or
any amendment thereof made upto and
including the date of issue of the licence,
unless otherwise specified."
This term itself inidicates that the relevant date for
grant of Advance Licence is the date of issue of
licence and the licence was only subject to the
conditions relating to the goods covered by the
licence or amendment thereof made upto and
including the date of issue of the licence unless
otherwise specified. Therefore, it cannot be said that
even though the Petitioners have complied with their
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obligation of export, when the Petitioners asked for
endorsement of transferability on the basis of
complying with the conditions of exporting the
goods, the authority was entitled to withhold or
suspend it and change the material terms of the
licence, which permitted the petitioners to import
duty free goods as per the advance licence. It cannot
be said by any stretch of imagination that the norms
published on 20th January, 1995 would have
retrospective effect so as to permit the authorities to
cancel or modify the Advance Licence granted prior
to the said date, that too in cases where the the
Petitioners have fulfilled their export obligations.
Paragraph 51 of the Export and Import Policy itself
provides that where norms are not fixed the quantity
norms will be as specified by the competent
authority and in the present case the Competent
Authority after considering the Petitioners
application has granted Advance Licence in
September, 1993. That licence could not be modified
on the basis of the norms passed on 20th January
1995. This would be totally arbitrary action. That
norms cannot have any retrospective effect so as to
adversely affect the rights granted to the Petitioners
under Licence. The norms prescribed will take effect
only from the date of its publication i.e. from 20th
January 1995 and not from the earlier date."
4. Reliance is also placed upon the judgment of the
Supreme Court of India in S. B. International Limited V/s.
Assistant Director General of F.T. reported in 1996 (82) E.L.T.
164 (S.C.), paragraph 10 reads thus:
"We are, therefore, of the opinion that the
contention that a vested right accrues to an
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applicant for issuance of advance licence on the
basis of the norm obtaining on the date of
application is unacceptable. The Scheme and the
context militate against the contention. The fact
that the policy is statutory in nature (delegated
legislation) has no relevance on the question at
issue. It would be wrong to equate the filling of
an application for advance licence with the filing
of a suit where it is held that appeal being a
substantive right, the right of appeal inhering in
the party on the date of filing of the suit cannot
be taken away by a subsequent change in law."
5. Mr. Shah has therefore submitted that the impugned
order is justified in relying upon the Madras High Court
judgment in the Hoewitzer Organics Chemical Ltd Organic
Chemicals Limited (Supra) and holding that the subsequent
Policy Circular dated 31st January 2011 does not apply to a valid
licence, the transferability of which is endorsed thereon.
6. Having heard the arguments we are of the
considered view that the issue of the Policy Circular being
applicable provided it is issued prior to the date of issuance of
licence is no longer res integra. We place our reliance upon the
judgment of the Supreme Court of India in S. B. International
Limited (Supra) and the judgment of the Division Bench of this
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Court in Sonia Fisheries (Supra) which will apply to the facts
of the present case. In a recent judgment of this Court in
Commissioner of Customs (Export) V/s. USMS Saffron Co.
Inc. reported in 2016 (344) E.L.T 161 (Bom.), it was held it is
the DFIA Licence in question is material and where the DFIA
does not contain any entry restricting saffron and the Licence
Authority did not deem it proper to impose any liability, there
was no violation of any of the conditions of the DFIA and the
Notification No.98/2009 allowing the duty free import is
applicable. In the present case it is an admitted fact that the
DFIA Licence bearing endorsement of transfer was issued prior
to the issuance of the Circular dated 31 st January 2011 and
hence, the Notification No.98/2009 dated 11 th September 2009
was applicable in the case of the import of lactose. The CESTAT
upon considering the facts of the present case is justified in
arriving at the finding that the change in Policy would not be
applicable to the licence issued prior thereto and hence the
Respondents are entitled to the benefit of Notification No.
98/2009 - CUS, in terms of the DFIA present to the Customs.
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We concur with the impugned order.
7. The present Appeal is dismissed with no order as to
costs.
[RIYAZ I. CHAGLA J.] [A. S. Oka, J.]
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