Motani Industries vs Union of India

Pendse, J.—The petitioner firm imported Polyester Metallised film against import licence issued to Messrs Mehra Leonardt Pens Pvt. Ltd., with a letter of authority in favour of the petitioners. The licence was issued for items covered by Appendix VIII of April-March 1983 import policy end-product i.e. end- product mentioned in the said licence viz., stationery and general engineering. On import of the consignment, the petitioners filed Bill of Entry on October 7, 1982. The Customs Authorities served show cause notice dated December 15, 1982 on the petitioners to explain why the consignment should not be confiscated u/s 111(d) of the Customs Act. The Department claimed that the goods imported did not appear to be required for the end-product mentioned in the licence. The petitioners filed reply to the show cause notice and the Additional Collector of Customs, Bombay, by order dated May 12, 1983 confiscated the consignment u/s 111(d) of the Customs Act read with Section 3 of Exports and Imports (Control) Act, 1962. The Additional Collector gave an option to the petitioners to pay fine of Rs. 1,80,000/-for redemption of goods. The Additional Collector held that according to the trade usage the imported goods are used mainly for manufacturing textile threads and consequently import was not permissible. The Additional Collector further held that neither the licence nor the certificate issued by DGTD indicated whether the importers can use the imported consignment for anything except stationery.

The order passed by the Additional Collector was challenged by the petitioners by filing an appeal before Customs, Excise and Gold (Control) Appellate Tribunal, Bombay. The appeal ended in dismissal by order dated July 13, 1984. The Tribunal held that the first ground given by the Additional Collector that the trade usage indicates that the imported goods are mainly used for manufacturing of textile threads and therefore import was not permissible, cannot be sustained. The Tribunal held that the automatic licence was granted under paragraph 5 of the Import Policy and grant of such licence depends upon the actual consumption of the imported goods during the previous years. The Tribunal felt that as the petitioners have not chosen to produce any certificates and the only certificate issued by the DGTD provides that the goods could be imported only for certain end- products, the import for actual user of different end- products cannot be permitted. The Tribunal realised that it is not open for the Customs Authorities at the time of clearance to make a detailed enquiry as to whether the imported goods will be utilised in the manufacture of end-product but observed that the Customs are entitled to enquire whether the importer is an actual user and whether the imported goods are required for the manufacture of end- products. The order of confiscation passed by the two Authorities below are under challenge.

Mr. Kantawala, the learned counsel appearing on behalf of the petitioners, has submitted that the order of confiscation passed by two authorities below in exercise of powers u/s 111(d) of the Customs Act are unsustainable. The learned counsel submitted that automatic licence was granted under para 25 of Chapter VI of the Import Policy and para 25 inter alia provides that an automatic licence is intended to provide the actual user (industrial) with his actual requirements of raw-materials, components and consumables covered by Appendix 5 and 7. The learned counsel urged that it is not in dispute that the petitioners are actual user (industrial) and the imported goods are required for the manufacture of end-products covered by Appendix 7. Mr. Kantawala submits and in our judgment with considerable merit that once it is established that the importer is actual user and the imported goods are required for manufacture of end-product, then it is not for the Customs Authorities to examine whether the manufacture of end-produce is one covered by the certificate issued by DGTD. Mr. Bulchandani, learned counsel for the Department referred to the contents of licence to urge that it is open for the Customs Authorities to prima facie satisfy that the imported consignment will be used for manufacture of end-products specified in the certificate issued by DGTD. It is not possible to accept this submission urged on behalf of the Department. The plain reading of the import licence makes it clear that the licensee was permitted to import iron steel items required for manufacture of end- products. The licence further recites that the import of those items set out in Appendix 5 of the policy, shall be permitted. It is not in dispute that the petitioners desired to manufacture end-products which are set out in Appendix 5 or 8 as mentioned in the licence.

The short question which requires determination is whether it is open for the Customs Authorities to insist that even though the end- products are those which are set out in Appendix 5 or 8 of the policy, still the goods will be confiscated on the ground that the importer who is an actual user will not manufacture the end-products which are set out in DGTD certificate. In our judgment, it is not open for the Customs Authorities to read something more in the licence on the assumption that the items set out in DGTD certificate are a condition of the import licence. The import licence clearly recites that the actual user can import items set out in Appendix 5 and 8 for manufacture of end-products. It is not in dispute that the petitioners desired to use imported items for manufacture of end- products set out in the appendix. In these circumstances, in our judgment, it is not permissible for the Customs Authorities to proceed to confiscate the goods by claiming that the licence was not valid because the actual user is likely to use the imported items for manufacture of end- products which are not set out in DGTD certificate. In our judgment, the orders passed by the two authorities below are entirely unsustainable and are required to be set aside.

Accordingly, petition succeeds and rule is made absolute in terms of prayer (a). As the goods were permitted to be cleared by interim order on furnishing bank guarantee, the only relief required to be granted is to discharge the bank guarantee and to issue the detention certificate.