Supreme Court of India
PREM CHAND SOMCHAND SHAH AND ANR. ETC. ETC.versusUNION OF INDIA AND ANR.
- Citation
- 1991 INSC 24
- Decided
- 5 February 1991
- Disposal
- Dismissed
- Bench
- S RANGANATHAN
Holding
The classification of Additional Licences based on the date of issuance is valid; the petitioners are not similarly situated with later licence holders, and para 218(10) of the 1988‑91 Import‑Export Policy does not infringe Article 14.
Summary
The petitioners, diamond exporters, were granted Export House Certificates and Additional Import Licences under the 1978‑79 Import‑Export Policy, which were based on FOB export values. After the 1988‑91 Policy came into force, a provision (para 218(10)) excluded licences issued before 1 April 1988 from the new import‑flexibility benefits, prompting the petitioners to claim discrimination under Article 14. The Supreme Court examined whether the classification of licences by date created an unreasonable distinction and whether the petitioners were similarly situated with later licence holders. It held that the basis for granting licences under the two policies differed materially – the earlier regime used FOB values while the later one used net foreign‑exchange earnings – so the two groups were not similarly situated. Consequently, the differential treatment was a valid classification with a rational nexus to the policy’s objective, and para 218(10) did not violate Article 14. The Court dismissed the writ petitions, extending the validity of the petitioners’ licences by six months but refusing any relief on the equality claim.
Issues considered
- Whether sub‑para (10) of para 218 of the Import‑Export Policy 1988‑91, which denies the flexibilities of para 215(4) to Additional Licences issued before 1 April 1988, violates Article 14 of the Constitution.
- Whether Export Houses granted Additional Licences under the 1978‑79 policy constitute a single class with those granted licences under the 1988‑91 policy for equality purposes.
- Whether the classification based on the date of issuance of Additional Licences is arbitrary or has a rational relation to the policy’s objective.
- Whether the petitioners are entitled to the import‑flexibility benefits provided to later licence holders under para 215(4).
Legislation cited
- Constitution of Indias. Article 14, s. Article 226, s. Article 32
Subjects
Article 14EqualityImport‑Export PolicyAdditional Import LicenceClassificationDiscriminationExport HousesFlexibility provisionsPara 218Para 215
Judgment
PREM CHAND SOMCHAND SHAH AND ANR. ETC. ETC.
A
v.
UNION OF INDIA AND ANR.
FEBRUARY 5, 1"991
B [S. RANGANATHAN, N.M. KASLIWAL AND
S.C. AGRAWAL, JJ.]
Constitution of India, 1950: Article ]~Equality-Reasonable
classification-Export~ Houses-Additional Import Licences-Classiji- "r--
cation of Licences for the purpose of benefit of flexibilities of import
c ite.ms under Para 215(4) of 1988-91 Imports and Exports Policy-Held
Export Houses granted Additional Import Licences prior to 1.4.1988 on
the basis of f.o.b. value of Exports and Exports Houses granted Addi-
tii;mal import Licences after 1.4.88 on the basis of the net foreign
exchange earnings on exports do not constitute a single Class-Held
classification of licences valid since basis and conditions of grant of
--
D licences under 1978-79 Policy and 1988-91 policy were different. Y
·Import and Export Policy, 1978-79: Paras 165, 166, 174 & 176
Import and Export Policy, 1988-9.1: Paras 212, 214, 215 and 218-
Appendices 3 and 5 Part-A-Export Houses-Additional Export
E Licences-Benefit of flexibilities in import items under Para 215(4)
-Benefit extended to grantees of Additional Import Licences issued
after 1.4. I988 i.e. under I988-9I Policy and denied to grantees of
Additional Import Licences issued prior to I.4. I988 i.e. under I978-
79 Policy, Para 2I8(10)-Held Export Houses granted Additional
Import Licences prior to 1.4.88 cannot claim the benefit of relaxation
F of import under Para 215(4)-Para 218(10) of 1988-91 Po/icy held
valid.
The petitioners, carrying on import-export of diamonds, f"ded
. applications for registration as Export Houses and grant of Additional
Import Licences under Para 174 and 176 of the Import and Export
G Policy 1978-79 which were rejected by the authorities on the ground
that they have failed to deversify their exports of "other products"
during the year 1977-78. They challenged the order of the authorities by
filing writ petitions before the Bombay High Court under Article 226 of
the Constitution. One of the petitions was dismissed by a learned single
judge of the High Court and the said petitioners f'Iled an appeal before a
H Division Bench of the High Court. During the pendency of the appeal
232
P.C.S. SHAH v. U.O.I. 233
and the writ petition, the Supreme Court by its order dated April 18, 1985 A.
decided the case of Union of India v. Rajnikant Bros. holding that there
was no requirement of diversification of exports as a condition for the
grant of Export Houses Certificates in the Import Export Policy for the
year 1978-79 but the grantee of Additional Licences were not only pro-
. hibited from importing items which were excluded in the Export Policy
1978-79 but also from importing items excluded under the Import B
Policy prevailing at the time import. The High Court decided the cases
of the petitioners in accordance with the decision of this Court in Union
of India v. Rajnikant Bros. Pursuant to the decision of the Bombay
'
High Court petitioners were granted Export House Certificates and
Additional Import Licences which were valid for 12 months, with the
same condition as provided by this Court in its order dated April
18, 1985 in the case of Rajnikant. However, the petitioners were not C
able to make imports under the said licences till 31st March, 1988. On
1.4.1988, the Government of India issued a revised Export and Import
...., Policy for the period 1988-91. Under Para 215 of the said revised policy
certain flexibilities were granted in the matter of imports to the grantees
of Additional Import Licences. However, under para 218(10) of the said D
revised Policy the holders of Additional Import Licences issued prior to
1.4.1988 were made ineligible for the benefit of flexibilities in import as
contained in para 215(4). Since the petitioners were holding licences
issued prior to 1.4.1988 they could not avail the flexibilities in import as
contained in Para 215 of the 1988-91 Policy. Consequently, they filed
writ petitions in this Court challenging the validity of para 218(10) of E
the 1988-91 Policy contending (i) that all the Export Houses who were
granted Additional Licences constitute a single class and their classifica·
tion on the basis of date or on the basis of period of exports has no
connection with the object sought to be achieved by the 1988-91 policy;
(ii) that Para 218(10) of 1988-91 Policy arbitrarily discriminates bet-
ween Export Houses who were issued Additional Licences prior to p
(
1.4.1988 and Export Houses who were issued Additional Licences on or
'r
after 1.4.1988 since the benefits of Para 214 of 1988-91 Policy were
conferred only on the latter; (iii) that in view of the judgment of this
Court in I'. Naveenchandra and Co. v. Union of India, (1987] 2 S.C.R.
989 the petitioners should be treated at par with the grantees of Addi-
tional Licences under the Export Policy for the subsequent years and G
since there has been relaXation in the matter of policy of canalisation of
imports under Para 215(4) in respect of Additional Licences granted to
Export Houses under the 1988-91 Policy, the petitioners were also
entitled to a similar relaxation.
Dismissing the petitions, this Court, H
234 SUPREME COURT REPORTS [1991] 1 S.C.R.
HELD: 1. The right to equality guaranteed under Article 14
A
ensures equality amongst equals and its aim is to protect persons simi-
larly placed against discriminatory treatment. It means that all persons
similarly circumstanced shall be treated alike both in privileges confer-
red and liabilities imposed. Conversely discrimination may result if
persons dissimilarly situate are treated equally. Even amongst persons
8 similarly situate differential treatment would be permissible between
one class and the other. In that event it is necessary that the differential
treatment should be founded on an intelligible differentia which distin-
guishes persons or things that are grouped together from others left out
of the group and that differentia must have a rational relation to the
object sought to be achieved by the statute in question. [242H, 243A-B]
c 2. A close examination of the Import & Export Policy 1978-79
and the Import & Export Policy 1988-91 shows that there is material
difference between the conditions for grant of Additional licences under
Import Policy 1978-79 and the conditions for grant of such licences
under the Import Policy 1988-91. Wh_ile in the Import & Export Policy
D 1978-79 the emphasis was only on the f.o.b. value of exports without
taking into account the outgo of foreign exchange in importing the goods
required for achieving the exports by an Export House and Additional
licences were granted for a much larger amount at a higher percentage on
the basis of the f.o.b. value of the exports, where as in the Import & Export
Policy 1988-91 there is a more realistic appraisal of actual benefit to the
E country' economy by the exports by taking into account the net foreign
exchange earnings after deducting the value of the imports and addi-
tional licences are issued on the basis of the net foreign exchange earn-
ings for a much lesser value on a smaller percentage. Therefore, the
basis for the grant of Additional Licences which are entitled to relaxa-
tion in import under the 1988-91 Policy is different ftom. the bMis on which Ad-
F ditional Licences were granted under the 1978-79 policy. [243C, 2458-C, 248A]
3. The petitioners were not granted Additional Licences on the
basis of net foreign exchange earnings and they have secured the Addi-
tional Lieences on the basis off.o.b. value of the exports, without taking
into account the value of goods imported by them for achieving the
G exports. It cannot be said that the petitioners who have been granted
Additional Licences under the 1978-79 Policy and the Export Houses
who were granted Additional Licences under the 1988-91 Policy are
persons similarly circumstanced. Therefore the petitioners cannot
claim the same facilities that have been provided to Export Houses who
are granted Additional Licences under the 1988-91 Policy. Hence they
H have failed to make out a case for interference by this Court under
- ~-
P.C.S. SHAH v. U.0.I. [AGRAWAL, J.]
Article 32 and consequently they cannot ~ the validity of Para 218(10)
of the Import & Export Policy 1988-91. [245E, 2430, 245F, 249C, 248B]
235
4. Export Houses, like the petitioners, who were granted Addi-
tional Licences on the basis of order of this Court dated April 18, 1985
are not to be treated at par with Export Houses who are granted Addi-
B
tional Licences under the Import & Export Policy prevalent at the time
of import. Import of canalised items under Additional Licences issued to
the petitioners would be permissible if the import policy prevailing at
the time of import permits them to import such items. Therefore the
rights of the petitioners under the Additional Licences issued to them
would be governed by the terms of the Import Policy prevailing at the
- time of import. [246A-B, 247E, 247H]
D. Naveenchandra & Co. Bombay & Anr. v. Union of India &
c
Ors., [1987] 2 S.C.R. 989, explained.
Raj Prakash Chemicals Ltd. & Anr. v. Union of India & Ors., D
[1986] 1 S.C.R. 448; Union of India v. Godrej Soaps Pvt. Ltd., [1986] 3
S.C.R. 771; Union of India v. Rajinikant Bros., Civil Appeal No. 1423
of 1984 decided on 18.4.1985; Indo Afghan Chamber of Commerce v.
Union of India, [1986] 3 S.C.R. 88, referred to.
,_ B. Vi jay Kumar & Co. etc. etc. v. Collector of Central Excise and
E
Customs, [1991] 1Scale33; held inapplicable.
ORIGINAL JURISDICTION: Writ Petition No. 459 & 460 of
1988.
(Under Article 32 of the Constitution of India).
F
Harish N. Salve, S. V. Kamdar and M.N. Shroff for the Petitioners.
P.K. Goswami, Additional Solicitor General, Kailash Vasdev
and Ms. A Subhashini for the Respondents.
G
The Judgment of the Court was delivered by
S.C. AGRAWAL, J. These petitions under Article 32 of the Con-
stitution raise a common question as to the validity of sub-para (10) of
para 218 of the Import & Export Policy for the period April, 1988 to
March, 1991. H
236 SUPREME COURT REPORTS [1991) 1 S.C.R.
The petitioners in both these writ petitions are partnership firms
A
carrying on business of import of rough diamonds and export of cut
and polished diamonds. The Import & Export Policy for the period
April 1978 to March 1979, in para 174, made provision for grant of
certain import facilities to Export Houses which were registered in
accordance with the provisions of the said Policy. One of the said
B facilities wRs grant of an Additional licence in terms of para 176 of the
said Policy for an amount to be calculated at one third the f.o.b. value
of the exports of select products made by the Export House in the year
1977-78. The petitioners submitted application for registration as
Export Houses and for grant of Export House Certificate which would
have entitled them to the grant of such Additional licence. The said
applications of the petitioners were rejected by the authorities on the
c view that petitioners had failed to diversify their export of "Other
Products" during the year 1977-78. The said order refusing the Export
-
Certificate was challenged by the petitioners by filing writ petitions
under Artide 226 of the Constitution before the Bombay High Court .
. One of those writ petitions (filed by the petitioners in writ petition
D No. 460 of 1988 herein) was dismissed by a learned Single Judge of the'
High Court and the said petitioners filed an appeal before a Division
Bench of the High Court. While the said appeal and the other writ
petition (filed by the petitioners viz. writ petition No. 459 of 1988
herein) were pending in the Bombay High Court, this Court decided
Civil Appeal No. 1423 of 1984, Union of India v. Rajnikant Brothers,
E and other connected matters by order dated April 18, 1985, wherein it
was observed that there was no requirement of diversification of
exports as a condition for the grant of Export House Certificates in the
Import Policy for the year 1978-79, and the authorities were directed
to issue necessary Export Certificates for the year 1978-79. In that
~rder this Court laid down the following condition:
F
"Save and except items which are specifically banned
under the prevalent import policy at the time of import, the
respondents shall be entitled to import all other items
whether canalised or otherwise in accordance with the
relevant rules."
G
The writ petition and the appeal were decided by the Bombay High
Court in accordance with the aforesaid decision of this Court in the
case of Union of India v. Rajnikant-Brothers, (supra) and the High
Court directed the authorities to grant Export House Certificates to
the petitioners under the Import-Policy 1978-79 within three months.
H While giving the said direction the High Court imposed a condition in
P.C.S. SHAH v. U.0.1. [AGRAWAL, J.] 237
the same terms as laid down by this Court in its order dated April
18, 1985, referred to above. A
While construing the aforesaid direction contained in its order
dated April 18, 1985, in Rajnikant Brothers case (supra) this Court has
held that the grantees of the Additional licences were not only
prohibited from importing items which were excluded under the B
Export Policy 1978-79 but also from importing items excluded under
the Import Policy prevailing at the time of import and that the word
"ba.med" was intended to take in terms which were banned altogether
as well as items which were banned for import by the holder of an
Additional licence. (See: Raj Prakash Chemicals Ltd. & Anr. v. Union
of India & Ors., [1986] 1 S.C.R. 448. In Union of India v. Mis. Godrej
-- Soaps Pvt. Ltd. & Anr., [1986] 3 S.C.R. 771 this Court construed the C
words 'whether canalised or otherwise' contained in the order dated
April 18, 1985, passed in Rajnikant Brothers case (supra) and it was
observed that the Court would not know whether in the future certain
canalised items could be imported directly by an Export House holding
an Additional licence and that the possibility of a policy being framed I)
in the future enabling an Export House holding an Additional licence
to directly import items which are 'non-canalised' and also items which
are 'canalised' could not be ruled out and it was in this light that the
Court can be said to have used the words "whether canalised or
otherwise" in the order dated April 18, 1985. The matter was further
clarified by this Court in D. Navinchandra & Co. Bombay & Anr. Etc. E '
v. Union of India & Ors., [1987] 2 S.C.R. 989, wherein this Court has
observed:
"Analysing the said order, it is apparent, ( 1) that the
importation that was permissible was of goods which were
not specifically banned, (2) such banning must be under the F
prevalent import policy at the time of import, and (3)
whether items which were canalised or un-canalised would
be imported in accordance with the relevant rules. These
conditions had to be fulfilled. The Court never did and
could not have said that canalised items could be imported
in any manner not permitted nor it could have given a G
go~bye to canalisation policy." (P. 1000)
-- In accordance with the directions given by the Bombay High
Court the petitioners in writ petition No. 459 of 1988 herein were
granted the Export House Certificate and were also granted an Addi-
tional licence dated November 16, 1987. Similarly, the petitioners in H
238 SUPREME COURT REPORTS [1991] 1 S.C.R.
writ petition No. 460 of 1988 herein were granted the Export House.
A Certificate and an Additional licence dated August 31, 1987. These
licences were valid for a period of 12 months and they contained the
following endorsement:
"This licence in valid for import of items permissible to
B Export Houses under the Additional Licence category as
per para 176 of Import Policy 1978·79 excluding those
items which were banned in the policy for the period 1978-79 .'r- -
and those which have been specifically banned in the pre-
vailing Import Policy, 1985-88, pursuant to and subject to
the decision of the Supreme Court dated S.'.3.1986 in M/s.
c Raj Prakash Chemicals case civil appeal No. 4978 of 1985;
the decision dated 15.5.1986 in the case of M/s. Indo-
Afghan Chamber of Commerce writ petition No. 199 of
1986, the decision dated 12.9 .86 in the case of M/s. Godrej
--
Soap Pvt. Ltd. civil appeal No. 3418/1986; the decision
dated 12.9.1986 in the case of M/s. Star Diamonds Com-
D pany of India in civil misc. petitions No. 20021-22 of 1986 in
.civil appeal No. 2924/1984; and the decision dated
15.4.1987 in the writ petition No. 1483 of 1987 filed by M/s.
D. Naveen Chandra & Company. xxx';
It appears that the petitioners were not able to make imports under the
E said Additional licences till March 31, 1988. With effect from April
1, 1988, the Government of India issued the revised Import & Export
Policy for the period April, 1988 to March 1991. The Import & Export
Policy 1988-1991 also contains in paras 214 and 215 provisions for
grant of Additional licences to Export Houses. In para 215 of the said
Policy certain additional. facilities have been given in the matter of
F imports by Export Houses under Additional licences issued to them.
In sub-para ( 4) of para 215 it has been provided as under:
"( 4) Additional licences issued to Export Houses will also
be valid for the import of the following items upto 10%
(upto 15% in the case of Trading Houses) of the value of
G the licence for:-
(i) Import of technical designs, drawings and other techni- '.Y--
cal documentation for a value not exceeding Rs.10 lakhs in /
the case of Export Houses, and Rs.25 lakhs in the case of
Trading Houses;
H
P.C.S. SHAH v. U.O.I. [AGRAWAL, J.] 239
(ii) import of items appearing in Appendices 3 Part-A, 3
Part-Band 5.Part-A subject to the following conditions: A
(a) that the c.i.f. value of a 'single item' shall not exceed
10% of the flexibility in value terms of .F.s.10 lakhs,
whichever is less;
B
(b) where the value for import of a 'single item' on the
basis of 10% as at (a) above, works out to less than Rupees
one lakh, import would be permitted upto a value of Rs.1
lakh, provided it is within the overall flexibility allowed on
the licence: and
- (iii) import of non-OGL capital goods (other than those
appearing in Appendices 1 Part-A and 8) without indige-
nous clearance, subject to the same conditions as stipulated
c
at . (ii) above,· within the overall flexibility allowed to
Export/Trading Houses.''
D
Paragraphs 217 and 218 of the said Policy provide for transitional
arrangements. In para 217, it is prescribed that Export Trading House
Certificates issued prior to Apnl 1, 1988 would continue to be valid till
the date of the expiry and the Export House Trading House can apply
for fresh certificates, if they fulfil the eligibility conditions laid down in
the policy and in cases where these Certificates are expiring on 31st E
March, 1988, and the applicants a'o not fulfil the eligibility conditions
for recognition laid down under the revised Policy, recognition would
- be granted for one year only if they fulfil conditions for renewal of
these Certificates as laid down in the Import Policy, 1985-88. Para 218
of the said Policy reads as under:
F
"218. ( 1) Where the· applications from Export Houses/
Trading Houses for Additional licences have not been dis-
posed of by 31st March of the preceding licensing year, the
rate of entitlement will be the same as permissible during
the licensing year to which the application pertains, but the
items to be allowed will be as per the Import Policy in force G
on the date of isSoe of the licence.
(2) Additional licences already issued prior to
1.4.1988 shall continue to be 'non-transferable.'
(3) The Additional licences issued prior to 1.4.1988 H
240 SUPREME COURT REPORTS [1991] 1 S.C.R.
shall cease to be valid for import of items of raw materials,
A components and spares which appeared in Parts I and II of
List 8, Appendix 6 of Import-Export Policy, 1985-88, but
are not now covered by Part I of List 8, Appendix 6 of this
Policy. These licences will also cease to be valid for the
import of items of capital goods which appeared in
B Appendix 1 Part-B of Import-Export Policy, 1985-88 but
are now covered by Appendix 1 Part-B of this Policy.
( 4) The Additional licences issued to Trading Houses
prior to 1.4.1988 will cease to be valid for the import of
items which appeared in Appendices 3 and 5 Part-A of the
c
Import-Export Policy, 1985-88 but do not appear in
Appendices 3 and 5 Part-A of this Policy.
(5) Additional licences issued to Export Houses/
-
Trading Houses prior to 1.4. 1988 shall cease to be valid for
import of items of spares appearing in Appendices 2, 3, 5
D Part-A, 8 and 10 of this Policy.
(6) Notwithstanding the provisions contained in sub
paras (3), (4) and (5) above, the restrictions will not apply
to the extent the licence holders have already made firm
commitments by irrevocable Letters of Credit opened and
E established through authorised dealers in foreign exchange
before 1st April, 1988 but any extension of these letters of
credit made after 31st March, 1988 shall be treated as 'fresh
commitments'.
(7) Additional licences issued to Export Houses/
F Trading Houses prior to 1.4.1988 will also be valid within
their overall value, for import of raw materials, compo-
nents, consumables and spares appearing in Appendix 6,
List 8, Part-A of this Policy. Similarly, such licences wili
also be valid for import of items of capital goods now
covered by Appendix 1, Part-B of this Policy within their
G overall value.
(8) REP licences held by Export Houses/Trading
Houses and already endorsed prior to 1.4.1988 shall 'cease
to be valid for import of any items which could be imported
under Open General Licence under the Import-Export
H Policy, 1985-88 but are no longer so in this Policy. . \
P.C.S. SHAH v. y.o.I. [AGRAWAL, J.] 241
(9) Additional licences issued to Export Houses/
Trading Houses after 1.4.1988 on exports made during A
_1986-87 or earlier periods, will be 'non-transferable'. These
licences will be valid for import of the items appearing in
Part-I of List 8, Appendix 6 of this Policy. These licences
when issued to Trading Houses, will also be valid for
import of the items appearing in Appendices 3 and 5 Part- B
A of this Policy, subject to the conditions laid down in this
regard, in the Import-Export Policy, 1985-88.
r (10) Additional licences issued on Export Houses/
Trading Houses prior to 1.4.1988, or issued after 1.4.1988
on exports made during 1986-87 or earlier periods, will not
be eligible for the flexibilities in the import of items of raw C
materials, components and consumables covered by Ap-
pendices 3 and 5 Part-A and items of non-OGL capital
goods (other than those covered by Appendices 1 Part-A
and 8) available under this Policy. However, these licences
will be eligible for the endorsement (if not already D
endorsed) for the import of non-OGL capital goods (other
than those covered by Appendices 1 Part-A and 8) as
allowed against such licences in the Import Policy, 1985-88,
subject to the conditions laid down therein provided the
items sought to be imported against such licences con-
tinued to be non-OGL (other than those covered by E
Appendices 1 Part A and 8) under this Policy."
The grievance of the petitioners is confined to sub-para ( 10) of
para 218 which lays down that Additional licences issued to Export
Houses/Trading Houses prior to April 1, 1988, or issued after April
1, 1988, on exports made during 1986-87 or earlier periods, will not be p
~- eligible for the flexibilities in the import of items of raw materials,
~ ' [ ' components and consumables covered by Appendices 3 and 5 PartcA.
and items of non-OGL capital goods (other than those covered by
Appendices 1 Part-A 8) available under the revised Policy. Appendix 3
Part-A relates to raw materials, components, consumables, tools and
spares (other than Iron and Steel and Ferro-Alloys) and Part-B of the G
said Appendix deals with raw materials (Iron and ~teel and Ferro-
Alloys). Part-A of Appendix 5 contains the list of items import of
which is canalised through public sector agencies. As a result of the
aforesaid provision contained in sub-para ( 10) of the para 218, the
petitioners who were granted Additional licences prior to April
1, 1988, cannot avail the flexibilities in import of items granted under H
242 SUPREME COURT REPORTS [ 1991] 1 S.C.R.
clauses (ii) and (iii) of sub para (4) of para 215 of the Import Policy
A 1988-1991.
On behalf of the petitioners it has been urged by Shri Salve that
sub-para ( 10) of para 218 of the Import & Export Policy 1988-1991
arbitrarily discriminates between Export Houses who were issued
B Additional licences prior to April 1, 1988, and Export Houses who
were issued Additional licences on or after April 1, 1988 in as much as
the Export Houses who were issued Additional licences prior to April
1, 1988, on the basis of exports made during 1986-87 or earlier periods
have been denied the facilities which have been given to Export
Houses who were issued Additional licences on or after April 1, 1988,
on the basis of exports made during the period subsequent to 1986-87.
c It has been submitted that all Export Houses who have been granted
Additional licences constitute a single class and that there is no basis
for classifying such Export Houses into two different categories on the
basis of the date of issuance of the Additional licences or on the basis
of the period of the exports against which such licences have been
o issued and that such a classifcation has no connection whatsoever with
the object sought to be achieved by the Import & Export Policy 1988-
91.
On behalf of the respondents it has been submitted by the
learned Additional Solicitor General that there is no similarity bet-
E ween the petitioners who have been granted Additional licences on the
basis of their exports made during the period 1977-78 in accordance
with the Import Policy 1978-79 and the Export Houses who would be
granted Additional licences on or after April 1, 1988, under the Import
& Export Policy 1988-91 inasmuch as the conditions of eligbility for
grant of such licences and the value of licences under the Import &
F Export Policy 1978-79 were quite different from those contained in the ·~
Import & Export Policy 1988-91. It has been urged that under Import ,
& Export Policy 1978-79 Additional licences were to be given on the --· -
basis of one third of the f.o.b. value of the exports made in 1977-78
whereas under Import & Export Policy 1988-91 Additional licences are
to be given on the basis of not foreign exchange earnings from the
G exports actually made and the value of such Additional licence is only
10 to 12% of the net foreign exchange earnings.
As regards the right to equality guaranteed under Article 14 the
position is well settled that the said right ensures equality amongst
r-
equals and its aim is to protect persons similarly placed against dis-
H criminatory treatment. It means that all persons similarly circumstan-
P.C.S. SHAH v. U.O.I. [AGRAWAL, J.] 243
ced shall be treated alike both in privileges conferred and liabilities
A
imposed. Conversely discrimination may result if persons dissimilarly
situate are treated ·equally. Even amongst persons similarly situate
differential treatment would be permissible between one class and the
other. In that event it is necessary that the differential treatment
should be founded on an intelligible differentia which distinguishes
persons or things that are grouped together from others left out of the
group and that differentia must have a rational relation to the object
sought to be achieved by the statute in question.
The petitioners, in order to successfully invoke the right
guaranteed under Article 14 of the Constitution, will have to establish
- that they and the Export Houses which were issued Additional licences
under the Import Policy 1988-91 are similarly situate. A close exami-
nation of the Import & Export Policy 1978-79 under which the
c
petitioners have been granted the Additional licences and the Import
& Export Policy 1988-91 shows that there is material difference bet-
ween the conditions for grant of Additional licences under Import
Policy 1978-79 and the conditions for grant of such licences under the D
Import Policy 1988-91 and it cannot be said that the petitioners who
have been granted Additional licences under the Import & Export
Policy 1978-79 and the Export Houses who are granted Additional
licences under the Import & Export Policy 1988-91 are persons simi-
larly circumstanced.
E
Under the Import & Export Policy 1978-79, there were two
requirements for grant of Additional licences: one was the condition as
to eligibility for registration as an Export House and grant of Export
House Certificates; and the other was the basis for issuing the Addi-
tional licences to Export Houses which had been granted Export
House Certificates. In para 165 of the said Policy the eligibility for F
grant of Export House Certificates was to be determined on the basis
of the exports actually made in the three year base period 1975-76,
1976-77 and 1977-78 and in para 166 it was laid down that the annual
average f.o.b. value of exports in the prescribed base period of select
products should not be less than Rs. One crore or those of non-select
products Rs. Five crores, but in the case of a small scale unit or a G
consortium of small scale units, the said minimum limit was reduced to
Rs.25 lakhs for select products and Rs.2 crores for non select products.
In para 176 of the said Policy it was laid down that the value of the
Additional licences to be granted for 1978-79 would be calculated at
one third of the f.o.b. value of the exports of select products made in
1977-78 and manufactured by the small scale and cottage industries H
244 SUPREME COURT REPORTS [1991] 1 S.C.R.
A
plus 5% of the f.o.b. value of other exports of select products made in
the same year. In other words, under the Import & Export Policy of
!978-79 the basis for grant of Export House Certificates as well as
grant of Additional licences to Export Houses was the f.o.b. value of
-
the exports.
B Under the Import & Export Policy 1988-91 provision with regard
to eligibility for the grant of Export House/Trading House Certificate
is contained in para 212 which prescribes that the said eligibility shall
"------ -
be determined on the basis of the net foreign exchange (NFE) earnings
from the exports actually made in the preceding three licensing years
termed as 'the Base Period'. The expression 'net foreign exchange
earnings' has been defined as the total f.o.b. value of admissible
c exports minus the c.i.f. value of Advance/Imprest (including Diamond
Imprest/OTC Imprest) Licences/Iimport-Export Pass Bookss (exclud-
ing Special-Imprest Import-Export Pass Books) if any issued, and the
REP licences issued or the eligbility thereto, during the preceding
three licensing years. Among the conditions for eligibility for grant of
D such Certificates are that the annual average NFE earnings in the
prescribed base period should not be less than Rs.2 crores in the case
of Export Houses arid Rs.10 crores in the case of Trading Houses and
that NFE earnings in none of the three years of the base period should
be less than 25% of the minimum average NFE earnings prescribed.
For determining the eligibility of the products manufactured by small
E scale and cottage sector industries are to be reckoned at twice the
actual NFE earnings. In para 215 of the said Policy, it is provided that
the Export House/Trading Houses would be eligible to Additional
licences on the basis of the admissible exports made in the preceding
licensing year and that the value of these licences will be calculated at
10% of the NFE earnings on the total eligible exports made in the
F preceding licensing year and that this percentage shall be 12% in cases
where an Export/Trading House is able to achieve a minimum growth
of 10% in terms of NFE realisation in the previous year, over and
above the year preceding the' same. This indicates. that under the
Import & Export Policy 1988-91 for the purpose of grant of Export
House Certificate as well as Additional licences the emphasis is on the
G net foreign exchange earnings made by the Export House, which
means that the value of the imports made by the Export House for the
purpose of exporting the goods is to be excluded from the f.o.b. value
of exports. That apart even the value of the Additional licences which
can be issued under the Import & Export Policy 1988-91 on the basis of
NFE earnings is much less viz. 10% as against 33.33% of f.o.b. value
H under the Import & Export Policy 1978-79. The said 10% value can be
P.C.S. SHAH v. U.0.1. [AGRAWAL, J.] 245
increased to 12% in cases where the Export House is able to achieve a
minimum growth of 10% in terms of realisation in the previous year,
A
over and above the year preceding the same.
The aforesaid examination of the provisions contained in the
Import & Export Policy 1978-79 and the Import & Export Policy 1988-
91 shows that while in the Import & Export Policy 1978-79 the B
empahsis was only on the f.o.b. value of exports without taking into
- _ _., / account the outgo of foreign exchange in importing the goods required
for achieving the exports by an Export House and Additional licences
were granted for a much larger amount at a higher percentage on the
basis of the f.o.b. value of the exports, in the Import & Export Policy
1988-91 there is a more realistic appraisal of actual benefit to country's
economy by the exports by taking into account the net foreign c
exchange earnings after deducting the value of the imports and addi-
tional licences are issued on the basis of the net foreign exchange
~ earnings for a much lesser value on a smaller percentage. The petitio-
ners who were granted Additional licences to the extent of 33.33% of
the f.o.b. value of the exports made by them during the year 1977-78 D
cannot, therefore, be said to be persons similarly circumstanced as
Export Houses who exported goods "in the year 1987-88 and in subse-
quent years and obtain Additional licences for a much lesser value
under the Import Policy 1988-91 on the basis of the net foreign
--\ exchange earnings. The provisions conferring flexibility in the matter
of imports contained in sub-para (4) of para 215 of the Import & E
Export Policy 1988-91 are intended to give an incentive to Export
Houses to increase the exports in a way as to enhance the net foreign
.... exchange earnings of the country. The petitioners were not granted
Additional licences on the basis of net foreign exchange earnings and
they have secured the Additional licences on the basis of the f.o.b.
~- value of the exports, without taking into account the value of the F
-goods imported by them for achieving the exports. They cannot claim
Y . to be entitled to the same facilities that have been provided to Export
Houses who are granted Additional licences under the Import &
Export Policy 198~-91.
Shri H.N. Salve, has, however, urged that in view of the decision G
of this Court in D. Navinchandra & Co. case (supra) the Export
_ - - Houses who were granted Additional licences under the Import &
' Export Policy 1978-79 have to be treated at par with Export Houses
who have been granted Additional licences under the Import & Export
Policy for the subsequent years and since there has been relaxation in
the matter of policy of canalisation of imports under sub-para (4) of H
246 SUPREME COURT REPORTS [1991] 1 S.C.R.
,
para 215 in respect of Additional licences granted to Export Houses
A under the Import & Export Policy. 1988-91, the petitioners are also
entitled to a similar relaxation. We are unable to agree with this con-
tention. In D. Navinchandr(l & Co. case (supra) this Court has not laid
down that Export Houses, like the petitioners, who are granted Addi-
tional licences on the basis of the order dated April 18, 1985, are to be
treated at par with Export Houses who are granted Additional licences
under Import & Export Policy prevalent at the time of import. In that
case this Court, while explaining the background in which the order
dated April 18, 1985, was passed, has observed:
"It has to be borne in mind that basic background under
which the Rajnikant's decision was rendered, the Export
c Houses had been refused Export House Certificates
because it was insisted that they shati!d have diversified
their ewort and that was a condition for the grant or enti-
tlement of an export house certificate. It was found and it is
common ground now that that was wrong. Therefore, the
D wrong was undone, Those who had been denied Export
House Certificates on that wrong ground were put back to
the position as far as it could be if that wrong had not been
done. To do so, the Custom authorities and Govt. authori-
ties were directed to issue necessary Export House Certifi-
cates for the ye;u 1978-79 though the order was passed in >--
E April, 1985. This was a measure of restitution, but the
court while doing so, ensured that nothing illegal was
done." (P. 1000) ·
F
After referring to the decision in Raj Prakash Chemicals Ltd. (supra)
this Court has stressed:
...
"The items had to pass to two tests, firstly, they should --.......-/\.,
have been importable under the im.port policy 1978-79 and '
secondly they should also have been importable under the
import policy l985-88 in terms of the Order dated 18th
April, 1985, and if one may add, in such terms 'in accor-
G dance with the import rules' whether canalised or not
canalised," (P. 1001)
This Court has gone on to emphasise: >---
"It must be emphasised that in the Order dated 18th April,
H 1985, this Court did not do away with canalisation. That
P.C.S. SHAH v. U.0.1. [AGRAWAL, J.] 247
was not the issue before this Court. The expression A
'whether canalised or not canalised' was to include both.
This Court did not say that canalised items could be
imported directly by the importers ignorning the canalisa-
tion process. We are of the opinion that this Court did not
say that canalisation could be ignored. That was not the
issue. High public policy, it must be emphasised, it B
involved in the scheme of canalisation." (Pages 1001-2)
Shri Salve has placed reliance on the following observations of
this Court in this case:
- "Canalised items are those items which are ordinarily open
to import only through a publi~ sector agency. Although
generally these are importable through public sector
agencies, it is permissible for any import policy to provide
an exception to the rule and to. declare that an importer
might import a canalised item qirectJy. It is in that sense
and that sense only that the Court coukl have intended to D
define the'entitlement of diamond exportes. They would be
entitled to import items which were canalised or not if the
import policy prevailing at the time of import permitted
them to import items falling under sµch category. This was
also viewed in that light in the case of Inda Afghan Cham-
bers of Commerce (supra)." E
- These observations only indicate that import of the canalised
items under Additional licences issued to Export Houses, like the
petitioners, would be permissible if the import policy prevailing at the
time of import permits them to import such items. In other .words it
)r would depend on the terms of the import policy prevailjng at the time F
r of import. The decision in Inda Afghan Chambers of Commerce v.
Union of India, [1986] 3 S.C.R. 88 to which reference has been made,
is also to the same effect. In that case Export Houses. like the petitio-
ners, wanted to import to Dry Fruits under the Additional licences
issued to them. Under the Import Policy 1985-88 prevailing at the time
of such import, the import of Dry Fruits was permissible only by dea- G
, lers engaged in the trade of stocking and selling Dry Fruits. It was held
- --< that the Export Houses could not import Dry Fruits in view of the said
restriction placed in the Import Policy 1985-88. The decision of this
Court in D. Nayinchandra & Co. case (supra) reiterates that the rights
of the petitioners under the Additional licences issued to them would
be governed by the terms of the import policy prevailing at the time of H
import.
248 SUPREME COURT REPORTS [1991] 1 S.C.R.
Here we find that in the Import & Export Policy 1988-91 there
A has been relaxation to a limited extent in respect of import by Export
Houses who are granted Additional licences under the said Policy on
the basis of their exports during that period 1987-88 and subsequent
periods. Since the basis for the grant of Additional licences which are
entitled to this relaxation is different from the basis on which Addi-
B tional licences were granted to the petitioners, the petitioners cannot
claim the benefit of the same relaxation and assail the validity of
sub-para ( 10) of para 218 of the Import & Export Policy 1988-91.
Shri Salve has invited our attention to the Import Licence dated
November 21, 1988 issued in favour of M/s. Suraj Diamonds Industries
Pvt. Ltd. wherein it is stated that this licence is valid for import of
c items as per para 215 of Import & Export Policy 1988-91 subject to
restrictions/conditions laid down therein. It has. been submitted that
this :~icence has also been issued under the Import & Export Policy
1978-79 on the basis of the f.o.b. value of exports. It has been urged
that the petitioners as well as the said licencee, namely, M/s. Suraj
D Diamonds Industries Pvt. Ltd. are persons similarly situate and
whereas M/s. Suraj Diamonds Industries Pvt. Ltd. have been granted
an Additional licence whereunder, it is permissible to import items as
per para 215 of the Import & Export Policy 1988-91, the said facility
has been denied to the petitioners and that the petitioners have been
subjected to arbitrary and hostile discrimination. The learned Addi-
E tional Solicitor General had pointed out that the said licence to M/s.
Suraj Diamonds Industries Pvt. Ltd. was issued under a mistake and
the said mistake has been rectified on 2nd December, 1988, i.e.,
within 10 days of the issue of the said licence. In view of the fact that
the licence issued in favour of M/s. Suraj Diamonds Industries was
issued under a mistake and the said mistake has been rectified, it
-
F cannot be said that the petitioners have been subjected to hostile
.
discrimin;ition
""'
. vis-a-vis other Export Houses similarly situate .
Before we conclude, we may take note of the recent decision of
this Court in B. Vi jay Kumar & Co. etc. v. Collector of Central Excise
and Customs, [ 1991] 1 Scale 33. The appellants therein had been
G granted Additional Import licence in pursuance of this Court's order
dated April 18, 1985 in Rajnikant Brothers, case (supra) and had
imported canalised items under the said licence. The goods were not
cleared by the customs authorities and the Collector of Customs
imposed penalty and passed orders for confiscation of the goods and
permitteu the appellants to take delivery of goods on payment of rede-
H mption fine. The Customs, Excise & Gold (Control) Appellate Tri-
P.C.S. SHAH v. U.0.1. [AGRAWAL, J.J 249
bunal (hereinafter referred to as 'the Appellate Tribunal') on appeal,
while upholding the order of imposition of redemption fine, set aside A
the order of Collector imposing penalty. In view of the special facts
and circumstances of the case and specially having regard to the find-
ings of the Appellate tribunal that the appellants imported canalised
items bona fide, this Court set aside the orders of the Collector and the
Appellate Tribunal with regard to confiscation of goods and imposi- B
tion of redemption fine without dealing with the submissions of
learned counsel for the parties with regard to the interpretation and
the effect of the earlier judgments of this Court in Raj Prakash Chemi-
cals case (supra), Inda-Afghan case (supra), Godrej Soap case (supra)
and D. Navinchandra &"Co. case (supra). This decision is, therefore, a
decision based on the facts of that particular case only.
- As a result of the aforesaid discussion it must be held that the
petitioners have failed to make out a case for interference by this
Court under Article 32of the Constitution.
c
As indicated earlier, the licences issued to the petitioners were D
valid for a period of twelve months and the said period has expired
during the pendency of these writ petitions. By order dated May 3.
1988, this Court," while directing that notice be issued had further
directed that the matter be listed on July 20, 1988, a·nd in these
circumstances this Court did not pass any interim order for stay. The
writ petitions could not, however, be heard as per the aforesaid direc- E
tions. Since the matter has been pending in this Court and the Addi-
tional licences issued to the petitioners-have expired in the meanwhile
we consider it appropriate that the period of validity of the said
licences should be extended so that the-petitioners can avail the same
and are able to import the goods which can be so imported under the
prevailing Import Policy. It is, therefore, directed that the period of F
" validity of the Additional licences that have been granted to the
( petitioners under Import & Export Policy 1978-79 may be extended by
r six months from the date of such extension. Subject to the aforesaid
observations, the writ petitions are dismissed. The parties are left to
bear their own costs.
G
T.N.A. Petitions dismissed.
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