Company Vs. Union of India & Ors.  INSC 1416 (25 August 2008)
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 5222 0F 2008 (Arising
out of S.L.P.(C) No.16917 of 2006) GENERAL INSTRUMENTS COMPANY -- APPELLANT
D.K. JAIN, J.:
appeal, by special leave, arises out of the judgment and order dated 7th April,
2006 passed by the High Court of Judicature at Bombay in Writ Petition No. 1174
facts leading to these proceedings are as follows:
In the year 1982, M/s
Rashtriya Chemicals & Fertilizers Limited (hereinafter referred to as
`RCF'), a Government of India Undertaking, floated a global tender for supply
of various types of capital goods required for its Thal project.
Responding to the
said tender notice, the appellant, a partnership firm, through its managing
partner, Mr. Manohar M. Kulkarni, an ex-army man, submitted its quotation for
supply of thermocouple compensating cables and extension cables. The tender was
accepted by RCF and by a purchase order dated 13th October, 1982, they agreed
to purchase cables worth Rs. 17,49,000/- from the appellant.
order to avail of customs duty exemption on the import of certain raw materials
required in the manufacture of capital goods to be supplied to RCF, on 22nd
November, 1982, the appellant applied to the Joint Chief Controller of Imports
& Exports (for short `JCCI'), Bombay, for issuance of an import licence
with duty exemption entitlement certificate etc. for import of raw materials
free of duty or at a concessional rate of duty in terms of Import Policy Book
for 2 AM 83. According to the appellant, as they were not clear about the form
on which they had to make the application, on the covering letter filed with
the applications, with copies to the Advance Licensing Committee as well as to
the Special Imprest Licensing Committee at New Delhi, a request was made to
forward the said applications to the concerned cell so that an appropriate
licence is issued for the aforesaid purpose.
processing of the application, the office of JCCI, Bombay, vide their letter
dated 30th November, 1982, called upon the appellant to furnish the
essentiality certificate from RCF. Accordingly, the appellant obtained the
essentiality certificate from the project authority i.e. RCF, to the effect
that they have agreed to purchase goods valued at Rs. 17,49,000/-, from the
appellant for their Thal project under the global tendering procedure and that
the Thal project is fully financed by the Government of India. In the
certificate issued by RCF, it was also stated that the appellant was eligible
for availing concessional rate of import duty on the raw materials imported by
them for manufacture of cables in terms of para 14 of Import Policy 1981-82.
The appellant forwarded the said certificate to JCCI, Bombay. In spite of clear
knowledge that the Thal project of RCF was fully financed by the Government of
India, the Controller of Imports & Exports, Bombay issued a Special Imprest
Licence (SIL), to the appellant on 30th May, 1983, under AM 84 policy,
permitting the appellant to import listed raw materials, for approximate value
of Rs.5,78,300/-; without payment of customs duty. However, the licence was
subject to the following conditions:
appellant shall supply to RCF export items as per list attached thereto for an
f.o.b value of Rs.17,49,000/- within 6 months from the date of clearance of the
first consignment against the said licence.
fulfilment of the export obligation under the said licence, the appellant shall
execute a bond with 100% bank guarantee as per the proforma given in
Appendix-38 of the Handbook of Import Export Procedure 1981-82 for a sum of
(c) Goods imported
against the said advance licence shall be utilised in accordance with the
provisions of Customs Notification No.11/F- No.602/14/8/DBK dated 09.06.78, as
amended from time to time.
assistance, if any, will be as per the instructions issued by the Ministry of
Commerce from time to time.
(e) In the event of
failure to fulfil the export obligation within the time stipulated, the bond
will be enforced and the licence holder shall pay customs duty on the
proportionate quantity of the material corresponding to the products not
requisite Bond in terms of the aforementioned condition (b) was accordingly, executed
on 17th June, 1983.
imported raw materials from time to time, aggregating to C.I.F. value of
Rs.3,01,439/-, and cleared the same without payment of duty in terms of the
Bond. It is not in dispute that the appellant has utilised entire quantity of
the imported raw materials in the manufacture of resultant products, valued at
Rs.17,59,382/-; supplied to RCF in order to fulfil export obligation, as
stipulated in the licence, against the export obligation of Rs.17,49,000/-.
thus, fulfilled the export obligation, the appellant approached the project
authority, viz. RCF, for requisite endorsement on Duty Exemption Entitlement
Certificate (for short `DEEC'). Initially RCF declined to make the 5
endorsement, on the ground that the Thal Project was financed by the Government
of India and not by organisations like the World Bank, OECF, ADB, etc. as
contemplated under the Exemption Notification No.210/82 dated 10th September,
1982. However, later on, RCF made the requisite endorsement on the DEEC book on
2nd February, 1988 to the effect that the appellant had supplied goods valued
at Rs.17,59,382/- during the period from 27th July, 1983 to 10th May, 1984.
appears that in the meanwhile, a show-cause notice dated 5/6th September, 1985,
had been issued by the JCCI, Bombay, calling upon the appellant to show cause
as to why Bond, in the sum of Rs.12,14,623/-, furnished by them, should not be
enforced as the appellant had violated clause 1 of the Licence and Clause 5 of
the Bond. The appellant was required to appear before Mr. G.R. Nair, Deputy
Chief Controller of Imports & Exports on 20th September, 1985, at 3:15 p.m.
for a personal hearing, which, in fact, was granted on 29th September, 1985.
Not being satisfied with the cause shown, a cyclostyled order 6 dated 4th
December, 1985, was passed by Smt. R. Johny, Controller of Imports and Exports,
holding that the appellant had failed to fulfil the export obligation in time
and had failed to furnish prescribed documents within the prescribed period,
and thus, violating condition No.5 of the Bond. Accordingly, the appellant was
directed to remit the Bond amount of Rs.12,14,623/-; to surrender the valid
R.E.P. licence remaining unutilised and to pay forthwith the customs duty with
interest @ 18% on proportionate quantity of the exempt materials. In other
words, the supplies made by the appellant to RCF were not treated as discharge
of export obligation in terms of condition (a) of the Licence. The appellant
was declared to be a defaulter thereby debarring it from getting any licence
under the duty exemption scheme or under any other provisions of the Import
Export Policy announced from time to time.
upon the forfeiture order dated 4th December, 1985, the Controller of Imports
& Exports, vide letter dated 20th December, 1985, denied cash assistance to
the appellant. The appeal preferred by the appellant against 7 the forfeiture
order dated 4th December, 1985 was rejected vide order dated 21st May, 1986
issued by Smt. R. Johny, Controller of Imports & Exports on the grounds
that: (i) part `F' of DEEC book duly certified by the project authority had not
been submitted and (ii) certificate of exports in original nor the original
export documents were furnished by the appellant. Incidentally, the forfeiture
order as well as the appellate order was passed by the same officer, namely,
Smt. R. Johny, though the appellate order is purported to have been issued with
the approval of JCCI.
thereby, the appellant preferred second appeal before a Committee of Joint
Director General of Foreign Trade, New Delhi.
the pendency of the second appeal, the customs authorities sought to recover
customs duty amounting to Rs.3,71,614.82 from the appellant in respect of the
raw materials imported and cleared without payment of duty under the Special
Imprest Licence (SIL) dated 30th May, 1983. The proposed action was challenged
by the appellant by preferring Writ Petition No.2038 of 1988.
8 However, when the
petition was taken up for final hearing on 21st October, 2002, counsel for the
appellant volunteered to deposit the customs duty as demanded. Thereupon,
counsel for the revenue made a statement that within two weeks of the deposit
of the said amount, a proper show- cause notice shall be issued and the same
would be adjudicated in accordance with law. The Writ Petition was, thus,
disposed of on the same day. However, while disposing of the Writ Petition, it
was ordered that appeal filed by the appellant against the order dated 21st
May, 1986 shall be disposed of within a period of six months.
Appellate Committee, comprising of two Joint Director Generals of Foreign
Trade, New Delhi, while observing that the second appeal filed by the appellant
was not maintainable as in the current Hand Book of Procedure of Export-Import
Policy, there was no provision for second appeal against the forfeiture order,
in deference to the directions given by the High Court, heard the appeal on
merits. Vide order dated 21st February, 2003, the Committee held that although
the forfeiture order and the 9 order passed in the first appeal were in
accordance with the policy yet in view of the fact that the forfeiture order
had not been actually implemented at the Bank's level and practically no amount
had been transferred out of the appellant's account to the Government's
account, the forfeiture order, did not have any financial effect on the
appellant and hence no relief was required to be given in the second appeal.
Accordingly, the second appeal was also dismissed.
this juncture, it may also be noted that in the light of the forfeiture order
dated 4th December, 1985, the licensing authority had initiated departmental
proceedings against the appellant and vide an order dated 4th May, 1987, the
Deputy Chief Controller of Imports & Exports, Bombay debarred the appellant
and its partners from receiving any import licences, customs clearance permits,
allotment of imported goods from any canalising agency, and from importing any
goods from AM 88 to AM 90. The first appeal preferred by the appellant against
the departmental order was dismissed by the Joint Chief Controller of Imports
& Exports on 28th July, 1987. However, the second appeal filed by the
appellant was partly allowed by the Additional Chief Controller of Imports
& Exports on 18th June, 1992 by reducing the period of debarment upto 31st
March, 1989. While allowing the appeal partly, the appellate authority, inter
alia, observed that there was no mis-utilisation of imported goods, and at no
point of time the appellant had concealed any information. But they had not
been able to identify and choose a correct scheme of import licence to execute
the order. The appellate authority finally concluded thus:
may have mis-comprehended the policy in force. But, they did not object when
the special imprest licence under reference was granted to them under the
deemed export category with specific export obligation with reference to 100%
duty free imports. Since they accepted the conditions of the licence and also
executed a bond to abide by the conditions of the licence which carried an
export obligation, it was incumbent on them to complete formalities in support
of their contention of having discharged export obligation notwithstanding that
the imported goods were utilised for the execution of the project. The project
they executed or supplied they made towards the execution of the RCF, Thal
Project was not a project falling under the category of deemed exports. This
project was not aided by IDA/IBRD. Their request for conversion of their
supplies to RCF, Thal Project in the deemed category of exports was duly 11
considered by the competent authority in the Import Trade Control Organization.
Under letter dated 30.10.1985, their request was not considered as the supplies
made by them to RCF, Thal Project were not covered under the category of deemed
exports. They were advised to convert the special import licence into project
import licence by paying the customs duty with penal interest thereon with the
consent of Ministry of Finance. But they did not do so considering the fact
that the appellants mis-understood the provisions of the policy in force and
that there was no malafides on their part, I am inclined to take a lenient
dissatisfied with order dated 22nd February, 2003, the appellant preferred a
fresh Writ Petition in the Bombay High Court. During the pendency of the Writ
Petition, the appellant sought leave of the Court to make a fresh
representation to the concerned Ministry, seeking conversion of Special Imprest
Licence (SIL) dated 30th May, 1983 into a Project Import Licence. However, the
said representation was rejected on 22nd August, 2003 on the ground that there
was nothing like "Project Import Licence"
and as the imports
were made in the year 1983 when the Project Import Regulations of 1965 were in
force, it was not possible to verify the conditions after twenty years.
the judgment under appeal, after elaborate discussion and particularly having
regard to the afore-extracted observations of second appellate authority in its
order dated 18th June, 1992, the High Court came to the conclusion that : (i)
forfeiture order against the appellant was uncalled for; (ii) even though the
second appellate authority has held that there is no financial implication on
account of the forfeiture order, yet on account of the said order, the
appellant was made liable to pay entire customs duty with interest and penalty;
(iii) the lapse on the part of licensing authorities in issuing a licence with
Bond conditions which were impossible to perform had serious financial
implications on the appellant; (iv) once it is accepted that it was a mistake
to issue Special Imprest licence to the appellant and the conditions attached
to the Bond and the licence were wholly impossible to perform, the licensing
authorities ought to have taken remedial steps immediately, particularly when
Rule 8 of the Foreign Trade (Regulation) Rules, 1963, empowered JCCI to rectify
the error by amending the licence. Finally, the High Court disposed of the Writ
Petition with the directions that : (a) in the light of 13 order dated 21st
February, 2003, the Bond/bank guarantee executed by the appellant on 17th June,
1983 shall not be enforced; and (b) within six weeks from the date of its
order, JCCI, Bombay shall amend the Special Imprest Licence (SIL) into a
licence which may entitle the appellant to seek regularisation of the imports
already made under the said licence at concessional rate of duty, if permissible
under the Customs Act. However, the High Court declined to grant appellant's
prayer for Cash Compensatory Support, hereinafter referred to as CCS,
permissible under the Special Imprest Licence (SIL). It is this part of the
order which is impugned in the present appeal.
M.M. Kulkarni, a partner of the appellant-firm, sought permission to argue the
case on behalf of the appellant on the ground that on account of several rounds
of litigation, spanning over two decades, because of erroneous licence issued
by the licensing authorities, the firm had closed down and, therefore, did not
have the financial capacity to engage the services of a lawyer. We granted the
permission and heard him at some length.
this juncture, it will be relevant to note that during the course of hearing on
23rd January, 2008, learned senior counsel appearing on behalf of the Director
General of Foreign Trade fairly stated that in view of the aforenoted
observations of the High Court, he would discuss the case with the officers of
the concerned department and possibly the appellant might get some relief,
particularly in the matters relating to 13 independent orders/import licences,
confiscated/forfeited by the licensing authority by virtue of order of
forfeiture dated 4th December, 1985. Further hearing in the matter was, thus,
to and in furtherance of the said offer, the office of the Zonal Joint Director
General of Foreign Trade examined the representation made by the appellant on
14th March, 2008. A personal hearing was also granted to the representative of
the firm. Vide order dated 8th April, 2008, the Foreign Trade Development
Officer informed the appellant that out of CCS claim of Rs.5,52,032.92, they
have been found to be eligible for claim of Rs.4,19,916/-, and the department
was ready to pay the said amount.
However, as regards
the balance CCS claim etc., and interest thereon, the letter reads thus:
claim of Rs.1,31,953/- was not supported by the required documents, vide this
office letter dated 26.3.2008 you were advised to furnish documentary evidence
showing that the project was funded by bilateral or multilateral external
assistance. Against this letter, you had replied vide your letter dated
31.3.2008 stating that the project was funded by OECF Fund. In support of your
contention you have quoted certain information from web site of OECF and
claimed that project was funded by OECF, but no documentary evidence from the
project authority i.e. RCF Ltd.
& Fertilisers Ltd.) was furnished by you in support of your claim. In fact,
you have furnished a project authority certificate dated 18.3.1983 issued by
the RCF Ltd. in support of W.P. No.1174/03 filed before the Hon'ble Bombay High
Court, which was annexed as Exhibit - D to the petition at page No.31 showing
project was funded by Govt. of India Fund.
You had also appeared
for personal hearing on 7.4.2008 and contended that Part `F' of DEEC Part II
was certified by the project authority i.e. RCF Ltd., therefore, it is
construed that supplies were funded by the OECF Fund and requested to give
benefit for this amount also. Your this contention cannot be hold good since
Part `F' of DEEC Part II merely bears the information of invoice no. &
date, description of supplied items, quantity and FOR value thereof. But it has
nothing to do with the source of finance of the project. In fact, the supplies
were financed by Govt. of India Fund;
There fore, this
supply does not fall under para 131 of Hand Book of Procedure, as such, not
eligible for CCS benefit to the extent of Rs. 1,31,953/-.
additional claim of Rs.14,478/- raised by you vide your letter dated 31.3.08,
it is to inform you that this claim was not originally included in the writ
petition No.1174/03 field before the Hon'ble High Court of Bombay, which is a
subject matter of SLP No.16917/2003 filed before the Hon'ble Supreme Court of
India. Even this claim is not supported by the required documents, therefore,
your additional claim of CCS cannot be considered.
Regarding payment of
interest, it is hereby informed that the debarring order was in force and
maintained by the Appellate Authority vide their Order dated 18.6.1992. It was
in force upto 27.2.2008 i.e. till the date of Order of the Hon'ble Supreme Court
of India in respect of SLP No. 16917/2003. There was no delay at the part of
the deptt. As such, no interest can be paid against the above claim."
is clear from the afore-extracted communication that a substantial claim for
CCS stands allowed and the balance claim of Rs.1,31,953/- has been disallowed
for want of documentary evidence to show that the project was funded by
bilateral or multilateral external assistance. It is pertinent to note that in
the said letter there is no indication as to why in the first instance CCS
claim for Rs.4,19,916/- had been denied to the appellant.
was submitted by Mr. Kulkarni that having come to the conclusion that on the
facts of the case, order of forfeiture dated 4th December, 1985 was not
warranted, the High Court erred in not granting the consequential relief viz.
the claim for CCS, as the same had been denied only on account of the
forfeiture order, declaring the appellant to be a defaulter. It was also
contended that, in any case, there was no justification in respondents'
withholding the CCS in respect of other independent export orders, when all the
conditions specified therein had been fulfilled. We may also note that in the
written submissions filed after the conclusion of the hearing, it is stated that
RCF has now issued a certificate, dated 27th May, 2008, showing that two
orders, namely, KC 263 and KT 995 were financed by Overseas Economic
Corporation Fund (for short `OECF') and thus, CCS against both these orders are
payable. It was, thus, pleaded that the respondents should be directed to
forthwith release the CCS claim along with interest for the delayed payment. 21.Mr.
Gaurav Agrawal, learned counsel appearing on behalf of the Director General of
Foreign Trade, filed written submissions, opposing the grant of CCS and the
interest thereon. It is pointed out that having got the licence converted from
Special Imprest Licence to Project Import Licence, as per the directions of the
High Court, the appellant cannot, now, contend that RCF-Thal project being a
foreign funded project, they are entitled to the claim for CCS. In support of
the submission that CCS is permissible only in a case of Special Imprest
Licence, our attention was drawn to condition No.4 in the Special Imprest
Licence dated 30th May, 1983. Insofar as the claim for interest is concerned,
it is urged that apart from the fact that such a claim was made for the first
time in April, 2003, when W.P. No.1174/2003 was filed, the order of forfeiture
cannot be said to be malafide inasmuch as, way back on 30th October, 1985, i.e.
prior to the forfeiture order, the appellant was advised to get their import
regularised by approaching the Ministry of Finance by paying customs duty with
penal interest but the appellant did not heed to the advice of the respondents.
22.It is trite that
no man should suffer a wrong by technical procedure of irregularities. The
Rules or procedures are the handmaids of justice and not the mistress of the
justice. Ex debito justitiae, we must do justice to him. (Vide A.R.
although we feel that
the appellant has suffered on account of confusion in the nature of the licence
to be issued to it but appellant's main prayer for conversion of Special
Imprest Licence into a Project Import Licence having been granted by the High Court,
the wrong caused stands remedied to a large extent.
the matter in the light of the afore-noted subsequent intervening events, in
particular the conversion of Special Imprest Licence into Project Import
Licence, in terms of direction (b) by the High Court, we are of the opinion
that insofar as CCS claim is concerned, no further relief can be granted to the
appellant. In that view of the matter, the certificate, stated to have been now
issued by RCF to the appellant, and annexed with the written submissions dated
3rd June, 2008, is of no avail to the 1 (1988) 2 SCC 602 20 appellant.
Nevertheless, in our judgment, in view of the fact that the second Appellate
Authority had reduced the period of debarment, pursuant to order dated 4th May,
1987 passed on account of the order of forfeiture dated 4th December, 1985,
only upto 31st March, 1989 and the fact that the High Court vide its order
dated 7th April, 2006 has held that order of forfeiture against the appellant
was uncalled for, there was no justifiable reason for the Director General of
Foreign Trade for not releasing CCS amount at least on the passing of the order
by the High Court. It was only during the course of hearing of this appeal that
learned counsel for the said respondents offered to get the claim re- examined
and as such now by order dated 8th April, 2008, the appellant's claim to the
extent of Rs.4,19,916/- has been found to be in order. In the premises, it is
manifest that the respondents retained the amount due to the appellant as CCS
without the authority of law and are liable to pay the same forthwith.
24.In view of the
afore-going discussion, the appeal is partly allowed; the respondents are
directed to release the CCS 21 claim which has been determined to be due to
the appellant within four weeks from today along with interest at the rate of
9% per annum from 7th April, 2006 till the date of actual payment.
25.We may clarify
that we have not expressed any opinion on the merits of appellant's claim for
CCS of Rs. 14,478/- against export order KT-995 as also the rate of customs
duty payable by the appellant on the imports of raw materials as appeals on
both the issues are stated to be pending before the concerned appellate forums.
As and when the appeals come up for hearing, these will be decided strictly on
their own merits without being influenced by any observation hereinabove.
26.The appellant will
be entitled to the costs of this appeal.