MADHU WOOL SPINNING MILLS Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioners are a firm carrying on business of manufacturing shoddy woollen yarn. The petitioners own a shoddy woollen Mill wherein they utilise the imported woollen rags for the purpose of manufacturing woollen yarn and blankets. The Government of India has permitted the import of mutilated woollen rags to be utilised by the consumer shoddy mills. There are two types of woollen rags, garment rags i.e. rags from woven woollen fabrics and hosiery rags i.e. rags from knitted woollen material. The Government of India in exercise of the powers conferred by Section 25 read with sub-section (3) of Section 160 of the Customs Act, 1962, published a Notification dated April 20, 1966 exempting woollen waste and woollen rags, when imported into India, from the whole of the portion of the duty of customs leviable thereon which is specified in the First Schedule to the Indian Tariff Act, 1934. The importers of woollen rags have to claim the said exemption under Item 49(4) of the Indian Customs, Tariff read with the Notification before the clearance of the consignment of woollen rags from the Customs.

(2.) Since the year 1966, the State Trading Corporation of India has been given exclusive monopoly in licences for importing woollen rags from outside India. The import licences are not granted to the shoddy woollen mills individually. The importers apply to the Textile Commissioner for allocation of quota of woollen rags and on the recommendation of the Commissioner, the S.T.C. gives allocation of the import woollen rags to various consumers. The procedure adopted by the S.T.C. in regard to the import of raw materials was to invite local tenders from foreign suppliers for the import of old and used garments, mutilated or unmutilated. The S.T.C. publishes a list of foreign suppliers and the importers are required to choose the suppliers. The importers are thereafter required to establish a local letter of credit in favour of the S.T.C. as per the value of allocation made. After such letter of credit is established, the S.T.C. establishes a letter of credit and other relevant aspects of the importation, as woollen rags are handled by the S.T.C. exclusively. After the woollen rags are imported and the goods arrived in the Port of Bombay, the S.T.C. issues letter of authority to the consuming importers for clearance. The importers lodges chipping document and the goods are cleared from the Docks after the Customs authorities verify that the goods are according to the import licence.

(3.) The petitioners were allotted quota of 37 bales of woollen hosiery rags and the goods imported from the foreign suppliers by the S.T.C. reached Bombay Port on December 12, 1974. The Customs authorities carried out the first visual inspection on January 6, 1975 and for this inspection samples were taken out from the two bales bearing Nos. 12 and 34. The inspection led to the conclusion that the wool content in samples from Bale No. 12 was 64 per cent, while in bale No. 34, 60 per cent. The Customs authorities decided to have a chemical test on January 18, 1975 and five pieces of samples from each of the bale Nos. 12 and 34 were selected. From the chemical examination it was found that the wool content in bale No. 12 was 66.88 per cent while in bale No. 34 it was 40 per cent. In spite of these two tests the Customs authorities decided on May 23, 1975, to resort to the core-drilling test. In regard to this test bale No. 19 was selected and the result of the test was that the wool content of that bale was only 26 per cent.