Supreme Court of India
UNION OF INDIAversusM/S. GODREJ SOAPS PVT. LTD. AND ANR.
- Citation
- 1986 INSC 190
- Decided
- 12 September 1986
- Disposal
- Appeal(s) allowed
- Bench
- R S PATHAK
Holding
Export houses with additional licences cannot import canalised items unless the Import Policy expressly permits it; palm kernel fatty acid is a prohibited canalised item, so the High Court order is set aside.
Summary
The Union of India appealed against the Bombay High Court's order permitting the clearance of 544.86 metric tonnes of palm kernel fatty acid imported by M/s Godrej Soaps Ltd. under an additional licence. The respondents argued that, as export houses holding additional licences, they could import the commodity despite it being a "canalised" item under the Import Policy 1985‑88, relying on the Supreme Court's earlier order of 18 April 1985 and subsequent cases. The Supreme Court held that canalised items may be imported only if the Import Policy expressly authorises such import by export houses, which was not the case for palm kernel fatty acid (listed in Appendix V Part B). Consequently, the High Court's permission was set aside. The appeal was allowed and costs awarded to the Union of India.
Issues considered
- Whether an export house holding an additional licence may import canalised items under the Import Policy 1985‑88.
- Interpretation of the phrase "whether canalised or otherwise" in the Supreme Court order of 18 April 1985.
- Whether palm kernel fatty acid falls within the permissible items listed in Part 2 of List 8 of Appendix VI of the Import Policy 1985‑88.
- Whether the respondents qualify as "actual users" entitled to import under the open general licence provision.
Legislation cited
- Import Policy 1978-79s. para 176
- Import Policy 1985-88s. para 176, s. para 75(1)
Subjects
Import PolicyCanalised itemsAdditional licenceExport houseCustoms clearancePalm kernel fatty acidSupreme Court interpretationArticle 226Actual userOpen general licence
Judgment
'
A
UNION OF INDIA
v.
M/S. GODREJ SOAPS PVT. LTD. AND ANR.
B
SEPTEMBER 12, 1986
I [R.S. PATHAK & SABYASACHI MUKHARJI, JJ.]
k
Import Policy 1985-88:
List 8 of Part 2 of Appendix 6-Additional licence holders-
c
import of 'canalised' items-Permissibility of-This Court's order dated
April 18, 1985-'Whether canalised or otherwise'-lnterpretation of.
The respondents purchased certain quantity of palm kernel fatty
acid on high seas basis from a firm which had imported it on the D
strength ·of an additional licence issued to it pursuant to the order of this
Court dated 18th April.1985 in C.A. No. 1423 of 1984-o-Union of India
v. Rajnikant Brothers. The Customs authorities refused to permit clear-
ance of the goods on the ground that they were canalised items and
could not be imported even under such additional licences:
E
The respondents filed a petition under Art; 226 challenging the
action of the Customs authorities. A Single Judge of the High Court
permitted the clearance of the goods, which order was affirmed by the
Division Bench.
In the appeal to this Court on behalf of the appellant-Union of F
~ ' India it was contended that the direction given by the High Court was
~ . contrary to the directions given by this Court in Raj Prakash's and Jndo
( Afghan Chamber's cases.
On behalf of the respondents it was contended: (l) that the
holders of the additional licences would be entitled to import items G
permissible to export houses under the additional lieence category· as
per para 176 of the Import Policy for 1978-79; (2) that in any event
under Item l of Appendix 6 (import of items under Open Genera) Li-
cence) of the Import Policy 198S-88, raw-materials, components' and
consumables (non"iron and steel items) other than those includell in the
Appendices 2, 3 Part A, 5 and s·wm be permissible by the-actual user H
771
772 SUPREME COURT REPORTS [1986] 3 S.CR.
A (industrial); and (3) that the respondents were actual users (industrial)
because these were used by them for their production.
Allowing the appeal of the Union of India,
HELD: I. A diamond exporter can import the items he was en-
B titled to import under the Import Policy 1978-79 provided they are
importable also under the Import Policy ruling at the time of import.
They are items which are open to import by an Export House holding an
Additional Licence for sale to eligible Actual Users (Industrial). These
are items which could be directly imported, for example, the items
enumerated in Part 2 of List 8 of Appendix VI of the Import Polic)
c 1985-88. These are items which are not 'canalised'. [776F -HJ
2. 'Canalised' items are those items which are ordinarily open to
import only through a public sector agency. Now although generally
they are importable through a public.sector agency only, it is permissi-
ble for the Import Policy to provide an exception to that rule, and to
D declare that an impo~r may import a canalised item directly. [776H; 777A]
3. Paragraph 75(1) of the Import Policy 1985-88 entitles a Trad-
ing House holding an Additional Licence to directly import canalised
items in Appendix V Part A to the extent laid down in that Policy. There
is nothing to prevent an Import Policy from providing in the future that
E an Export House holding an Additional Licence can directly import. ")'.'
certain canalised items also. In that event an Export Hou~e holding an
Additional Licence will be entitled to import items open ordinarily to
direct import (non-canalised items) as well as items directly importable
although on the canalised list. It is in that sense that th•• Court could
have intended to define the entitlement of a diamond exporter. He J.
F would be entitled to import items "whether canalised or not", if the · · \
Import Policy prevailing at the time of import permitted him to import
items falling under each category. The Court would not lmow whether )
in the future certain canalised items could be imported directly by an
Export House holding an Additional Licence. The possibility of a policy
being framed in the future enabling an Export House holding an Addi·
G tional Licence to directly import items which are 'non-canalised' and
also items which are 'canalised' cannot be ruled out. It is in this light
that the Court can be said to have used the wotds "whether canalised or
otherwise" in its order dated 18th April, 1985. [777B-E]
Raj Prakash Chemical's case, I 1986[ 2 SCC 297 and Jndo Afghan
H Chamber of Commerce's case, AIR 1986 S.C. 1567, followed.
UoO.J. v. GODREJ SOAPS 773
4. Only such items could be imported by diamond exporters un- A
der the Additional Licences granted to them as could have been im-
ported under the Import Policy 1978-79, the period during which the
diamond exporters had applied for Export House Certificates and· had
been wrongfully refused, and were also importable under the Import
Policy prevailing at the time of import which is the present case was the B
Import Policy 1985-88. These were the items which were not specifically
banned under the prevalent Import Policy. That is the construction.
The items had to pass through two tests. These should have been im-
portable under the Import Policy 1978-79. These should have been
impiirtable under the Import Policy 1985-88 in terms of the order dated
18th April, 1985. [777G-H; 778A-B]
c
5. 1n respect of Palm Kernel Fatty Acid which is a canalised item
listed as item 9 (v) in Appendix V Part B of the Import Policy 1985-88.
there is no provision in that Policy which permits the import of such
~ item by an Export House holding an Additional Licence. [7798-C]
D
6. As importation of canalised items directly by holders of addi-
tional licences are banned, it should not be construed to have been
permitted by virtue of the order of this Court and the items sought to .be
imported do not come within List 8 of Part 2 of Appendix 6 of the
Import Policy of 1985-88 against additional Licences. The goods in
question which were sought for by the respondents fall under item 'i
E
Part B of Appendix 5 which is the canalised item and such cannot be
allowed to be imported against additional licence granted pursuant to
the order of this Court dated 18th April, 1985. [779D-E]
7. The goods were purchased by the respondents only on 27th
June, 1986 after they were aware of the judgment .of this Court in Ra/
F
Prakash's case as well as lndo Afghan Chambers of Commerce's case.
' No question of any restitution of rights arises. [779F]
8. The acid in question comes within specific prohibition of Item
9 in Part-B Appendix 5 being fatty acid and acid oil which were import"
able only by the State Trading Corporation of India under Open Gen-
eral Licence on the basis of foreign exchange released by the Govern- 0
ment in its favour. The actual importation was not by the respondents
but by somebody else. [780A-B]
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3418 of
1986 H
.ll
774 SUPREME COURT REPORTS [19861 3 S.C. R.
A From the Judgment and Order dated 22/23.7.1986 of the
Bombay High Court in Appeal No. 565 of 1986.
A.K. Ganguli and Sushma Relan for the Appellant.
Soli J. Sorabjee, J.B. Dadachanji, R. Narain, Mrs. A.K. Verma,
B
D.N. Mishra, Aditya Narayan and Harish N. Salve for the Res-
pondents.
The Judgment of the Court was delivered by
.I
SABYASACHI MUKHARJI, J. This is an application for special
C leave to appeal against the order of the Division Bench of the Bombay __,.)
High Court dated 22nd/23rd July, 1986 filed on behalf of the Union of
India.
M/s Godrej Soaps (P) Limited, and a shareholder and Director ·,
of the said company, Mr. A.B. Godrej who were petitioners went
D before the Bombay High Court in Writ Petition No. 1665 of 1986. The
said petitioners who are respondents herein (hereinafter described as
respondents) purchased 544.860 Metric Tonnes of Palm Kamel Fatty
Acid on high sea basis imported under an additional licence. They·
challenged the action of the Customs authorities refusing to permit the
clearance of the said Palm Kamel Fatty Acid in view of the decision of
E this Court in Raj Prakash Chemical's case [1986] 2 SCR 297 and Jndo
Afghan Chamber of Commerce's case AIR 1986 S.C. 1567.
It may be mentioned that one Messrs. Dimexon a firm carrying
on business of importing rough diamonds and exporting cut and ~
polished diamonds were issued Export House Certificate under the
F import policy for the period 1978-79 and certain additional licences in ·
or about the month of July. 1986 covered by the licensing period
AM-79. The said licence was claimed to have been issued in comp~
liance with the order of this Court dated 18th April, 1985. As the
purport of that order was the subject matter of two subsequent deci-
sions of this Court and the genesis of the right of the present respon-
(j dents was claimed from the said decision, it may not be inappropriate
to refer to the said decision. The said decision was given in Civil
Appeal No. 1423 of 1984. This C9urt held that there was no require-
ment of diversification of exports as a condition for the grant of Export
House Certificates in the Import Policy for the year 1978-79. In that
appeal, this Court confirmed the High Court's judgment quashing the
H order whereby the Government had refused Export House Certificates
U.0.1. v. GODREJ SOAPS (MUKHARJI, J.] 775
on the ground that .the petitioners in those cases had not diversified its A
export and as such were not entitled to Export House Certificates. The
High Court quashed that order. This Court confirmed that direction of
the High Court and further directed the Union of India and its emp-
loyees to issue the necessary Export House Certificates for the year
1978-79 within a period of three months from the date. This Court
further directed as follows: B
"Save and except items which are not 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 re-
levant rules. Appe~ls are disposed of accordingly with no c
order as to costs." (Emphasis supplied in view of the con-
tentions now sought to be raised in these proceedings).
This direction was given by a Bench of three learned judges consisting
of S. Murtaza F. Ali, A. Varadarajan .and one of us (Sabyasachi
Mukharji, J.) D
According to the petitioners before the Bombay High Court in
pursuance of the order of this Court, Import Trade Control Authority
issued diverse additional licences expressly covered by the licensing
period AM-79 whereunder the description of the goods was as under:
E
"This licence is valid for import of items permissible to
export houses under additional licence category as per par.a
176 of Import Policy for 1978-79 excluding those items
which were banned in the.Policy for the.period 1978-79 and
I
~ which have been banned in the Import Export Policy vol-
ume 1, 1985-88. The additional licence category import F
shall be subject to the provisions of para 176 of the import
policy for 1978-79."
It was the contention of the petitioners before the Bombay
High Court that it was absolutely clear that the holders of the said
licences would be entitled to import items perm1ssible to export houses G
under the additional lieenc\' category as per para 176 of the, Import
Policy for 1978-79 .
.A It may be mentioned that the said direction of this Court came up
for consideration before this Court again in Civil Appeal No. 4978 of
1985-Raj Prakasfi Chemicals Ltd. & Anr. v. Union of India & Ors. 'H
776 SUPREME COURT REPORTS [1986] 3 S.C.R.
A (supra). This Court clarified· the decision in that case which was ren-
dered by a bench of three learned judges consisting of V.D.
Tulzapurkar, J. and both of us (R.S. Pathak and Sabyasachi Mukharji,
JJ).
As this Court has observed in Mis Indo Afghan Ch[lmbers of
B Commerce and another v. Union of India and others (supra) the order
dated 18th April, 1985 has been considered by this Court in Raj Prakash
Chemicals Ltd. and another v. Union of India & others (supra) to mean
that:
"only such items could be imported by diamond exporters :Jllt'-
under the Additional Licences granted to them as could - ~
c
have been imported under the Import Policy 1978-79, the
period during which the diamond exporters had applied for
Export House Certificates and had been wrongfully
refused, and were also importu;i\e under the Import Policy .,
prevailing at the time of import, which in the present case is
D the !mart Policy 1985-88. These were the items which had
not been 'specifically banned' under the prevalent Import
Policy. The items had to pass through two tests. They
should have been importable under the Import Policy 1978-
79. They should also have been importable under the Im-
port Policy 1985-88 in terms of the order dated April 18,
E ~-" y
The Court had no occasion to consider the significance of the words
. "whether canalised or otherwise" mentioned in the order dated April
18, 1985 because that point did not arise in the case before it. The
respondents rely on those wo.rds in this case in order to justify the
F import of the commodity under consideration.
What did the Court intend by those words? We have seen that a ).- '
diamond exporter can import the items he was entitled to import under
the Import Policy 1978-79 provided they are importable also under the
Import Policy ruling at the time of import. They are items which are
G open to import by an Export House holding an Additional Licence for
sale to eligible Actual Users (Inudustrial). These are items which
could be directly imported, for example, the items enumerated in Part
2 of List 8 of Appendix VI of the Import Policy 1985-88. These are
items which are not 'canalised'. 'Canalised' items are those items
which are ordinarily open to import only through a public sector
l-1 agency. Now although generally they are importable through a public
U.0.1. v. GODREJ SOAPS [MUKHARJI, J.I 777
sector agency only, it is permissible for the Import Policy to provide an A
exception ·to that rule, and to declare that an importer may import a
canalised item directly. For instance, paragraph 75(1) of the Import
Policy 1985-88 entitles a Trading House holding an Additional Licence
to directly import canalised items in Appendix V Part A to the extent
laid down in that Policy. There is nothing to prevent an Import Policy
from providing in the future that an Export House holding an Addi- B
tional Licence can directly import certain canalised items also. In that
event, in view of the aforesaid discussion, an Export House holding an
Additional Lieence will be entitled to import items open ordinarily to
1
direct import (non-canalised items) as well as items directly importable
although on the canali~ed list. It is in that sense that the Court could
have intended to define the entitlement of a diamond exporter. He c
would be entitled to import items "whether canalised or not", if the
Import Policy prevailing at the time of import permitted him to import
items falling under each category. The Court would not know whether
in the future certain canalised items could be imported directly by an
Export Hou8e •holding an Additional Licence. The possibility of a
policy being framed in the future enabling an Export House holding an D
Additional Licence to directly import items which are 'non-canalised'
and also items which are 'canalised' cannbt be ruled out. It is in this
light that the Court can be said to have used the words "whether
canalised or otherwise" in its order dated 18th April, 1985.
I
The point from a slightly different angle was considered in writ E
petition No. 199 of 1986 in Indo Afghan Chambers of Commerce with
Civil Appeal No. 664 of 1986 (supra) dated 15th May, 1986 by a bench
consisting of both of us (R.S. Pathak & Sabyasachi_ Mukharji, JJ).
~
There Indo Afghan Chambers of Commerce and its President
. -. aggrieved by the grant of additional licences to the respondents, M/s
Rajnikant Brothers and M/s Everest Gems for the import of dry fruits F
came to this Court. This Court examined some of the contentions. This
Court reiterated that by the order dated 5th. March, 1986, this Court
has construed its order dated 18th April, 1985 referred to hereinbefore
to mean that only such items could be imported by diamond exporters
under the Additional Licences granted to them as could have been
imported under the Import Policy 1978-79, the period during which the G
diamond exp0rters had applied for Export House Certificates and had
been wrongfully refused, and were also importable under the Import
Policy prevailing at the time of import which in the. present case was
the Import Policy 1985-88, i.e., it meant to say that those importable at
· the time when licence was refused and must continue to be importable
at the time when import is sought, i.e., 1985-88. These were the items H
778 SUPREME COURT REPORTS [1986] 3 S.C.R.
A which were not specifically banned under the prevalent Import Policy.
That is the construction. The items had to pass through two tests.
These should have been importable under the Import Policy 1978-79.
These should have been importable under the Import Policy 1985-88 in
tenns of the order dated 18th April, 1985. The Court examined the
facts of that case.
B
Regarding dry fruits, this Court observed as follows:
"In our opinion the respondents diamond exporters are not
entitled to import dry fruits under the Import Policy 1985-
88 under the Additional Licences possessed by them. They
C are also not entitled to the benefit extended by the judg-
ment of this Court dated 5th March, 1986 to those diamond
exporters who had imported items under irrevocable letters
of credit opened and established before 18th October,
1985. It appears from the record before us that the respon-
dents diamond exporters opened and established the
D irrevocable letters of credit after that date."
Bearing in mind the aforesaid ennunciation of law, we have to
examine this case. It is.the case of the respondents, Godrej Soaps Co.
Ltd. and its Director that they have purchased 544;860 Metric Tonnes
of palm kamel fatty acid (now called 'the said acid') on highseas basis
E from M/s Dimexon. M/s Dimexon had imported the said acid on the
strength of an additional licence issued to it pursuant to the order of
this Court dated 18th April, 1985 in Civil Appeal No. 1423 ·of 1984-
Union of India v. Rajnikant Brothers. The Customs authorities, ac-
cording to the said respondents, refused to pennit clearance of the said
acid on the ground that the canalised items could not be imported even
F under such additional licence. The respondents, therefore, filed a writ
petition in this Court requiring the Union of India and the Customs
authorities to permit clearance of the said acid. It may be mentioned,
the s;iid acid was not a canalised item under the Import Policy 1978-79.
It isl! canalised item under the current Import Policy 1985-88.
G As the Government refused to permit clearance of the said goods
because the said goods were canalised, the learned single judge of the
Bombay High Court by its order dated 10th July-, 1986 permitted the
clearance of the goods in question.
Aggrieved by the said order, Union of India preferred an appeal
H before the Division Bench of the Bombay High Court. The Division
U.0.L v. GODREJ SOAPS(MUKHARJI. J.I 779
Bench was pleased to, by its order dated 23rd July 1986, allow clear- A
ance of the goods. It is the submission of the Union of India that this
direction was contrary to the direct.ions given in Raj Prakash's case
(supra) and Inda Afghan Chamber's case (supra).
In respect of Palm Kamel Fatty Acid which is a canalised item
ll
listed as item 9(v) in Appendix V Part B of the Import Policy 1985-88,
there is no provision fa that Policy which permits the import of such
item by an Export House holding an Additional Licen.ce. Therefore,
the claim of the diamond exporters, or, as· in this case a purcha'ser fro in
the diamond exporter, must fail because it is not open to import by the
diamond exporter under any provision of the Import Policy 1985-88.
c
Therefore, we are unable to accept the contentions of the res-
pondents and both on grounds of equity an_d construction, w_e are of
the opinion that this appeal must be allowed and decision of the High
Court of Bombay impugned in this appeal must be set aside. As impor·
talion of canalised items directly by holders of additional licences are
banned, it should not be construed to have been permitted by virtue of D
the order of this Court and the items sought to be imported do not
coni'e within List 8 of Part 2 of Appendix 6 of the Import Policy of
1985-88 against additional licences. The goods in question which were
sought for by the respondents fall under item 9 Part B of Appendix 5
.....,.: . which is the canalised item and such cannot be allowed to be imported
against additional licence granted pursuant to the order of this Court E
dated 18th April, 1985. As we have mentioned hereinbefore the res-
pondents were fully aware of the position in law and they purchased
... goods on 27th June, 1986, there is no equity in their favour.
i;... - In this case no injustice would be done by this order. The goods
were purchased by the present petitioners only on 27th June; 1986 F
after they were aware of the judgment of this Court in Raj Prakash's
case (supra) as well as Inda Afghan Chambers of Commerce's case
(supra). No queshon of any restitution of rights arises. ·
It was further submitted that in any event under item 1 of Ap-
pendix 6 (import of items under Open General Licence) of the Import G
Policy, 1985-88, raw materials, components and consumables (non-
iron and steel items) other than those included in the Appendices 2, 3
Part A, 5 and 8 will be permissible by the actual user (industrial). It
was submitted that the respondents herein were actual users (indust-
... rial) because these were used by them for their production. This con-
tention cannot be accepted firstly because it comes within specific H
780 SUPREME COURT REPORTS [1986] 3 S.C.R.
A prohibition of Item 9 in Part-B of Appendix 5 being fatty acid and acid
oil which were importable only by the State Trading Corporation of
India. under Open General Licence on the basis of foreign exchange
released by the Government in its favour. Secondly the actual impor-
tation was not by the petitioners but by somebody else is mentioned
hereinbefore, being M/s Dimexon Co. In the premises, the view of the
B Bombay High Court cannot be sustained.
In that view of the matter special leave is granted. The appeal is
allowed. The order of the High Court under challenge is set aside. The
appellant is entitled to the costs. · ,
C A.P.J. Appeal allowed.
-
.........
'
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "Import Policy"Sign in to search