Steel Marketing Co. Of India And ... vs Union Of India (Uoi) And Ors.
2003 Latest Caselaw 233 Del

JUDGMENT

A.K. Sikri, J.

1. In this writ petition the petitioners are seeking to challenge the action of the respondents in not allowing the petitioners to release skimmed milk powder imported by the petitioners. The case of the petitioners is that two concerns, viz. M/s. Ventura, Greater Kailash, New Delhi and M/s. Saraf Textiles Pvt. Ltd. who were recognized and established Export Houses were issued initial licenses. The respondents permitted the imports to be made by the license holder through their agents in whose name letter of authority were issued by the licensing authority. The petitioners at the request of license holder have been issued Letters of Authority for the import of permissible items on the basis of said Letter of Authority.

2. The petitioners entered into an Agreement with M/s. A.H. Gandhi for the import of skimmed milk powder valued at Rs.9 lakhs. In order to ensure the payment of the same, two Letters of Credit both dated 1.4.1978 were opened. The goods so imported arrived at Bombay Port in July,1978. The petitioners on 28.7.1978 filed different Bill of Entries as there were different Bills of Lading. It is stated that as per Notification dated 2.8.1976 issued by the Customs Authorities skimmed milk powder is required to have a fat content more than 4 per cent. Milk which was imported by the petitioners was got examined by the Customs Authorities and it was found to contain fat contents less than 4 per cent and as such it was skimmed milk powder as per the Notification. Respondent No. 3 was of the view that powder milk and skimmed milk powder was one and the same thing and the same could not be imported by the petitioners against the initial licenses under the Import Control Policy of 1977-78. The respondent No. 3 desired that clarification should be obtained from the Office of respondent No. 2. The petitioners thus wrote a letter dated 17.10.1978 to respondent No. 2 detailing the facts. It was also stated in the letter that vide Notification dated 2.8.1976 the Government had exempted the levy of customs duty on skimmed milk powder whereas custom on other milk powder is leviable @ 60 per cent. Ultimately, the clarification which was given was that:

"Petitioners have imported skimmed milk powder under earlier period import licenses issued against the exports of products unconnected with the use of milk powder. Under the policy in force only the milk powder and not a skimmed milk powder could be imported against exports of certain specified products such as biscuits and confectionery, in the manufacture of which material is required to be used. Under the circumstances, it is not possible to accede to the request of the party."

3. Challenging this action of the respondents, present writ petition was filed.

4. It may be mentioned at this stage that vide order dated 17.11.1978, the respondents were directed to release the goods to the petitioners on payment of duty in cash and full bank guarantee for invoice value of the goods. As the petitioners complied with these conditions, goods in question were released to them.

5. From the aforesaid actual matrix, it is clear that the question which needs to be determined in the instant case is as to whether skimmed milk powder and milk powder are two different products or they are the same products.

6. Mr. Rawal, learned counsel appearing for the petitioners endeavored to argue that two were different products. For this purpose he referred to Import Control Policy for the year 1977-78. Para-33 thereof deals with import of canalised items against REP licenses and he submitted that as per this para, REP licenses were to be valid for direct import of canalised items like other items as indicated therein. He further referred to para-106(1) of this policy dealing with import items permissible to export houses. As per which REP licenses issued to export houses including initial /supplementary initial licenses and transferred licenses would be valid for import of any items of raw material, components, packing material and consumable stores subject to restrictions contained in sub-paras (a) to (e) thereof. Restrictions mentioned in para-(c) and (e) being relevant are noted below:

(c ) "Items appearing in the export-linked-import list in Annexure II to Part 1B' of this book may be allowed to be imported only against exports of specified products as indicated in the said list and to the extent permitted therein.

(e ) Direct import of canalised items will not be allowed against transferred licenses. Export houses can apply for Release Orders for such items according to their entitlement."

7. As per sub para (e) direct import of canalised items were not allowed against transferred licenses. He submitted that Section-III of Vol.1 of the Import Control Policy of the year 1977-78 contained the list of items whose import was canalised. Serial No. 6 thereof read as under:

   S. No.   Canalising Agency                 Description of item
6  Indian Diary Corporation         Skimmed Milk Powder
 

  He also referred to Section-1 of the said Policy where there is mention of Milk Powder in Annexure-II to part B of Vol.II of the Policy and the relevant entry reads as under: 
 S. No.  Description of items Export Product against which import will
                      will be allowed.

47 Milk Powder (i) Biscuits & Confectionery (S.  Nos.  G5
                                                                   and G10.)

   (ii) Instant foods (S. No. G 13 ii)

   (iii) Milk Products (S. No. G.13 & G.21)

    (iv) Malted Milk food containing. Cocoa
          (S. No. (G.24). 
 

8. From the aforesaid two entries, Mr. Rawal tried to demonstrate that whereas item of skimmed milk powder found place in canalised items, milk powder was in general list from which it could clearly be inferred that two items were treated separately. He further submitted that since this Import Control Policy of the year 1977-78 was valid up to 2.4.1978 inasmuch as Import Policy of 1978-79 was promulgated only on 3.4.1978, case of the petitioners was governed by Import Policy of 1977-78 as petitioners had opened Letters of Credit on 1.4.1978. Learned counsel also drew sustenance from Import Policy for the year 1978-79, Annexure-III whereof contains list of banned items. Item-333 of this list gives the following description:

"Milk Powder, (all types)"

9. He submitted that the words "all types" in the aforesaid items would clearly demonstrate that milk powders were of various kinds and thus milk powder and skimmed milk powder were two different products. He also referred to Exemption Notification No. 126-Cus dated 2.8.1976 as per which exemption from duty was accorded to "dried milk powder" which according to him clearly implied that milk powders were of various types. He also placed reliance upon the following judgments:

1. State of Uttar Pradesh and another Vs. M/s. Kores (India) Ltd. .

2. M/s. Ganesh Trading Co. Karnal etc. Vs. State of Haryana and another etc.

3. UNA Subbarao Vs. State of Orissa and another 1987 (30) ELT 105 (Orissa).

4. Deputy Commissioner of Sales Tax etc. Vs. A.B. Ismail etc. .

5. Collector of Customs Vs. Priyanka Overseas (P) Ltd. 1989 (41) ELT 195 (Calcutta).

10. His last submission was that even if two views were possible, view favoring the petitioners i.e in favor of assessed in such a case should be preferred as per well known principle of interpretation of fiscal laws and for this proposition, he relied upon judgment in the case of Priyanka Overseas Pvt. Ltd. Vs. Union of India .

11. Mr. Jayant Bhushan, learned senior counsel argued on behalf of the respondents. He did not dispute that instant case was covered by Import Policy of the year 1977-78. However, his submission was that in view of sub-para (c ) of para 106(1) (already extracted above) items appearing in Annexure-II to Part-B could be imported only by the license holder and not by any other person or the "actual user". In the instant case, the petitioners were admittedly not the license holders but were permitted by the license holder on the basis of Letter of Authority to import the items. Since milk powder was an item appearing in Annexure-II to Part-B, the petitioners could not have imported this item. In order to avoid rigor of this provision, the petitioners were trying to allege that milk powder is different from skimmed milk powder where as it was not so, since milk powder was genus and skimmed milk powder was only specie thereof. His submission was that a particular item can be in the list of actual user and sub-item thereof could be a canalised item and precisely that was done by putting skimmed milk powder in the list of canalised item and milk powder in the other list. He also referred to judgment of Supreme Court in the case of The Mineral Development Ltd. Vs. The Union of India and another .

12. In the case of State of Uttar Pradesh and another Vs. M/s. Kores (India) Ltd. (supra) the Court had to determine whether "carban paper" was same as "paper". The Court held that a word which is not defined in an enactment has to be understood in its popular and commercial sense with reference to the context in which it occurs and in support of this proposition it relied upon judgments in the cases of Attorney-General Vs. Winstanley (1831) 2 Dow and Clark 302: (1901) 6 and Grenfell Vs. Commissioners of Inland Revenue (1876) 1 Ex D 242, 248. The Court thereafter noted that the word "paper" was not defined either in the U.P. Sales Tax Act,1948 or the rules made there under. Accordingly it fell back on English Dictionary for the meaning of the word "paper" and after noticing there from, observed as under:

"10. From the above definitions, it is clear that in popular parlance, the word `paper' is understood as meaning a substance which is used for bearing writing, or printing, or for packing, or for drawing on, or for decorating, or covering the walls. Now carbon paper which is manufactured by coating the tissue paper with a thermosetting ink (made to a liquid consistency) based mainly on wax, non-drying oils, pigments and dyes by means of a suitable coating roller and equalising rod and then passing it through chilled rolls cannot be used for the aforesaid purposes but is used according to the he Random House Dictionary of the English Language between two sheets of plain paper in order to reproduce on the lower sheet that which is written or typed on the upper sheet i.e. making replicas or carbon copies cannot properly be described as paper."

*************

"16. Bearing in mind the ratio of the above mentioned decisions, it is quite clear that the mere fact that the word `paper' forms part of the denomination of a specialised article is not decisive of the question whether the article is paper as generally understood. The word `paper' in the common parlance or in the commercial sense means paper which is used for printing, writing or packing purposes. We are, therefore clear of opinion that carbon paper is not paper as envisaged by entry 2 of the aforesaid notification."

13. In Priyanka overseas Pvt. Ltd. Vs. Union of India (supra) the Supreme Court was concerned with the question as to whether Palm Kernel was different from Palm Seeds and answered the same in affirmative applying the aforesaid principle and holding that the two commodities were different as understood in commerce or trade. To the same effect is the judgment of Calcutta High Court in the case of Collector of Customs Vs. Priyanka Overseas (P) Ltd. (supra).

14. Similarly in the case of M/s. Ganesh Trading Co. Karnal etc. Vs. State of Haryana and another etc. (supra) the Supreme Court held that paddy and rice cannot be considered as identical goods for the imposition of sales tax as two products were known differently and in the trade. In para-5 of this judgment the Court made the following remarks:

"It was contended on behalf of the appellants that the essential question that we have to decide is whether the goods sold differed in identity from the goods purchased. It was urged that merely because paddy was dehusked and rice produced, there was no change in the identity of the goods. Identity of goods is one of the essential elements to be borne in mind in deciding the nature of the transaction. It was so decided in M/s. Tungabhadra Industries Ltd. Vs. Commercial Tax Officer, Kurnool . In that case the question arising for decision was whether hydrogenated oil continued to be ground-nut oil. This Court held that the hydrogenated groundnut oil continued to be groundnut oil. In arriving at that conclusion this Court took into consideration that the essential nature of the goods had not changed after the groundnut oil had been subjected to Chemical process. Similar view was taken by this Court in State of Gujarat Vs. Sakarwala Brothers (1967) 19 STC 24 (SC). Therein the question whether `patasa, harda and alchidana' could be considered as `sugar'. This Court held that when sugar was processed into patasa, harda and alchidana, it did not change its essential characteristic. Its identity continued to be the same. Now, the question for our decision is whether it could be said that when paddy was dehusked and rice produced, its identity remained. It was true that rice was produced out of paddy but it is not true to say that paddy continued to be paddy even after dehusking. It had changed its identity. Rice is not known as paddy. It is a misnomer to call rice as paddy. They are two different things in ordinary parlance. Hence quite clearly when paddy is dehusked and rice produced, there has been a change in the identity of the goods. In this view it is not necessary for us to refer to the decisions of some of the High Courts read to us at the time of hearing."

15. Similarly in the case of UNA Subbarao Vs. State of Orissa and another (supra) the Orissa High Court has held that sugar candy is not same as sugar and is a different item. Likewise in the case of Deputy Commissioner of Sales Tax etc. Vs. A.B. Ismail etc. (supra) the Supreme Court held that lifeless mutton was "other goods" different from "goat and sheep" within the meaning of Section 5-A of the Kerala General Sales Tax Act as meat got after slaughtering goat and sheep would not be same as goat and sheep.

16. Keeping in view the law laid down in the aforesaid pronouncements, we have to decide the issue at hand. It may be that milk powder is a genus of which skimmed milk powder is a specie as contended by learned counsel for the respondents. However, determination in such cases cannot be on this basis alone. It is well known that milk powders may be of different kinds and skimmed milk powder would be a distinct product. Therefore, it could be given different treatment by the framers of Import Control Policy. That is precisely done here also. As noted above, in Section-1 of the Import Control Policy for the relevant year 1977-78, item No. 47, Annexure-II to part-B of Vol.II of the Policy, describes the item "Milk Powder". On the other hand Section-3 of Vol-I of the Import Control Policy which contains the list of canalised items it is "skimmed milk powder" which is a canalised item. Thus framers of the Policy have made distinction between milk powder and skimmed milk powder. Further, as submitted by Mr. Rawal, Item No. 333 of Annexure-III of Import Policy for the year 1978-79, containing banned items, stipulates "milk powder (all types). This also visualies that there would be so many types of milk powders. When the policy makers have thought of various kinds of milk powders and skimmed milk powder is treated as one such kind which is given different treatment in the Import Policy, effect thereto has to be given. Even if we feel that other view as propounded by Mr. Jayant Bhushan, is also a possible view, benefit has to go to the assessed when view propounded by the petitioner is also plausible, going by the ratio of the judgment laid down in Priyanka Overseas Pvt. Ltd. Vs. Union of India (Supra).

17. This writ petition accordingly deserves to be allowed. Rule is accordingly made absolute.

18. By interim order dated17.11.1978 passed in this writ petition, the respondents were directed to release the goods, namely, skimmed milk powder imported by the petitioners on the condition that the petitioners would pay duty in cash and full bank guarantee for the invoice value of the goods. The said bank guarantee therefore shall stand discharged.

19. No costs.