O.CHINNAPPA REDDY - (1.) A few months ago, orthodox Hindu sentiment was outraged and general public feeling was roused by the discovery that beef tallow imported from abroad was either being sold as vanaspati or used in its manufacture by certain unscrupulous persons. There was a furore in the country. There was public agitation. Questions were asked in Parliament. Outside the House, Press and Politician made capital of it. There were demands that severe action be taken against those responsible. Assurances were given in Parliament. Bureaucracy went into action. It was discovered that though the import of beef tallow, like other animal tallow, had been canalised through the State Trading Corporation with effect from 5/06/1981, there had been considerable import of beef tallow outside the channel of the State Trading Corporation even subsequent to 5/06/1981, on the ostensible pretext that licences had been issued and firm contracts had already been entered into before that date. It was also discovered that beef tallow had been allowed to be imported even by non-actual user' under letters of authority given by licensees who had obtained import licences against the entitlement based on the value of their exports. As a result of these discoveries it was thought that drastic action was called for. So, a notification was issued under Section 3 (3) of the Imports and Exports Control Act totally banning the import of beef, buffalo and pig tallow into India with effect from 24/08/1983. And, on 7th, 9th and 10th November and l7th and 21st December, five circulars, styled 'abeyance circulars' and marked 'secret' were issued by the Deputy Chief Controller of Imports and Exports, in respect of as many as 1920 concerns (business houses), directing licensing authorities to keep in 'abeyance' for a period of six months from the respective dates of the circulars any application received from any of them for the grant of Import Licence or Customs Clearance Permits and allotment of imported goods through agencies like the State Trading Corporation of India Limited, the Minerals and Metals Trading Corporation of India Ltd. or any other similar agency. It may be useful to extract one of these 'abeyance' circulars, all of which are in substantially similar terms. The abeyance circular dated 9/11/1983 which 'lists' - we will not use the word 'black-lists' - as many as 61 concerns including Liberty Oil Mills (P.) Ltd. is as follows : "SECRET GOVERNMENT OF INDIA MINISTRY, OF COMMERCE OFFICE OF THE CHIEF CONTROLLER OF IMPORTS and EXPORTS UDYOG BHAVAN, NEW DELHI-11. Dated, the 9th Nov. 1983 ABEYANCE CIRCULAR NO. 28/83-84/HQ. Whereas investigation into certain allegation mentioned under Clause 8 of the Imports (Control) Order, 1955 are pending against the under mentioned concerns all the licensing authorities are hereby requested to keep in abeyance for six months from the date of issue of this circular any application received from them for the grant of import licence or Customs Clearance Permit and allotment of imported goods through agencies like the State Trading Corpn. of India Ltd./ Minerals and Metals Trading Corpn. of India Ltd. or any other similar agency : JUDGEMENT_465_3_1984Html1.htm
(2.) THESE instructions may be kept secret and if any of the above mentioned firms make any enquiry about the position of their application(s), they may simply be informed that the matter is under consideration. This does not, however, preclude the licensing authorities from rejecting their applications if they are otherwise inadmissible or suffer from discrepancies in terms of the licensing instructions. Only these applications may be kept in abeyance where the party is entitled to licences or Customs Clearance Permits etc. except for the allegations against them. Full details of all applications kept in abeyance as a result of the above instructions may be reported to the Headquarters.
(3.) THE receipt of this circular may please be acknowledge in the standard pro forma. Sd/- (J. P. SHARMA) DY. CHIEF-CONTROLLER OF IMPORTS and EXPORTS. (Issued from file No. 3/42/HQ/83/ECA-I)" 2. To say the least and to put it mildly, it is a very odd circular, emanating as it does from a high dignitary of the Government of India. Why the secrecy and why the instruction to mislead, as it were ? Are statutory orders to be made and given effect in this furtive manner, almost as if the authorities that be are afraid of wounding the susceptibilities of the persons in respect of whom the orders are made! We presume they are statutory orders made in exercise of the powers conferred by Clause 8-B of the Imports Control Order, though they do not themselves cite any statutory authority. THE actual direction, the use of the word 'abeyance' and the prescription of the six month period are indicative that Clause 8-B is the source of power. In the counter-affidavits filed on behalf of the Government of India and the Chief and Deputy Chief Controller of Imports and Exports it is claimed that the power exercised was that conferred by Clause 8-B. It was so asserted by the Addl. Solicitor General. THE learned counsel who appeared for the parties proceeded on that basis. So, we may also proceed on that basis. Incorporating, as they did, directions under Cl. 8-B, vitally affecting the business of the concerns concerned, one would expect the circulars to be communicated to the affected parties, even if they were to be kept secret from other prying eyes. That was not done for reasons which no one has been able to explain to us. Curiously, enough despite the circular, supplies of imported goods appear to have been continued to be made for about a month to some parties. But soon the circulars ceased to be secret. Everyone came to know of them. True but unauthorised versions were even published in commercial newspapers. THE circulars also came to be acted upon. Licences were not granted, Customs Clearance Permits were not issued. Allotments were not made Several persons against whom 'abeyance' orders had been made filed writ petitions in different High Courts challenging those orders. Liberty Oil Mills (P.) Ltd. was one of those who filed such a writ petition in the Bombay High Court. THE case has been withdrawn to this Court under Art. 139-A of the Constitution and it is this case that has been heard by us. We heard Shri Ashok Desai for the Liberty Oil Mills (P.) Ltd. and Shri Soli Sorabji, Shri V. P. Raman and Shri Ram Jethmalani for the interveners. We heard Shri Milon Banerjea, Addl. Solicitor General ably assisted by Sri Gopala Subrahmanyam for the Union of India and the Chief Controller and Deputy Chief Controller of Imports and Exports and Shri M. C. Bhandare and Shri A. Subba Rao for the State Trading Corporation. 3. Liberty Oil Mills (P.) Ltd. is a 'Trading House' recognised as such in terms of the expression as defined in the 'Import Policies' for several years. THEir exports for the period 1982-83 are stated to have exceeded Rs. 19 crores. THEy claim to deal in Vegetable Oils export of Frozen Marine Products. Frozen foods, Textiles Chemicals, Agricultural Products and imports of diverse commodities such as Oil and Oil seeds, Chemicals, Drugs, etc. THEy claim to have a factory for refining. Vegetable Oil at Kurla and a factory for manufacturing vanaspati at Shahpur. THEy have plants for processing frozen food at Madras, Tuticorin, Calcutta and Vishakhapatnam; they also have solvent extraction and Industrial Oil Plants. THEy claim that they require a continuous and steady flow of various imported goods for their several Industrial activities. THEy allege that if import licences for which they have applied are not granted to them and if the imported goods for which they have applied are not allotted to them, their factories and their plants will have to be dosed down, their business will be seriously affected and many of their employees will be thrown out of employment. THEy state that they have never adulterated the vahaspati manufactured in their factory at Shahpur and that the samples taken from their factory on as many as thirty six occasions had never been found to contain any type of animal tallow. THEy further state that they had not imported any tallow after July, 1982. Such tallow as was imported by them before July, 1982 was sold to them by other licencees to them as actual users. THE tallow to purchased was air-treated by them in their premises at Kuria and sold by them to soap manufactures and other fatty plants. THE import of tallow was on the strength of letters of authority issued by licencees in respect of additional licences and, replenishment licences held by them. All the additional licences had been issued prior, to 5/06/1981 and import of OGL items was permitted against the said licences. Beef tallow became canalised from 5/06/1981 but the canalisaition was not retrospective and could not affect the licences previously issued. All the contracts for the import of beef tallow bad been entered into before 5/06/1981 and in respect of seven of the contracts letters of credit had also been opened before that date. THE beef tallow imported up to July, 1982 was duly cleared by Custom Authorities without any dispute or question. THEreafter the tallow was subjected to air-treatment and sold to soap manufacturers and, fatty acid plants. THEre was never any allegation. Against the petitioners that any portion of the tallow imported by them bad never been diverted far the adulteration of vanaspati. Liberty Oil Mills therefore, claim that there was no justification whatsoever for making an order under Clause 8-B against them. THEy accordingly seek the issue of writ to quash the circular. 4. Shri Ashok Desai for Liberty Oil Mills (P.) Ltd. contended that an order under Clause 8-B of the Import Control Order could only be made if the Central Government or the Chief Controller of Imports and Exports was satisfied that the grant of licences and allotment of imported goods would not be in the public interest In the present case, not only was the requisite satisfaction of the appropriate authority not recorded in the circular said to have been issued under Clause 8-B but there was no material whatsoever upon which such satisfaction could have been arrived at Before 5/06/1981, beef tallow was not canalised and could therefore, be freely imported as an OGL item. It was on 5/06/1981 that the import of beef tallow came to be canalised but such canalisation could not affect licences which bad already been granted. Beef tallow could be imported under the pre-existing licences as an OGL item even after June 5, 1481 and up to the date an which the import of beef tallow was, totally banned. Our attention was repeatedly invited to the two cases of Arvind Exports (P.) Ltd. and, Jayant Oil Mills (P.) Ltd. where dealing with appeals and decisions under Sections 128 and 131 of the Costoms Act, the Central Board, of Excise and Customs and the Government of India took the view : "THE licence issued during a policy period is governed by that policy as amended up to the date of issue of the licence and amendments made after the date of issue do not have any application to the licences." and "A licence is governed by the policy which is made applicable to it. Restrictions placed on the import of goods in the policy for the subsequent years have to be ignored unless of course, any such restriction has been specifically made applicable to licences issued earlier either generally or in the particular cases. In this case the licences were issued during the policy for the period AM-81 and were governed by this policy only particularly para 174 (v) thereof. THEse licences were valid for the goods in question as only Mutton Tallow was in the list of canalised items. In terms of para 222 (3) of the policy for the period AM-82, these licences continued to be valid beef tallow as this item continued in the list of OGL items even after the coming into force of the policy for the period AM-82. When vide Public Notice No. 29/81 dated 5/06/1981 beef tallow was put in the canalised items it is from this date only that it became canalised, In the public notice there is no specific provision invalidating licences previously issued so far as beef tallow is concerned, in case such licences were valid earlier, to import this item. In the absence of any specific prohibition the licences produced by the importer in this case had to be accepted for the clearance of beef tallow." It was further contended that the circular order under Clause 8-B as actually issued was not confined to the banned item of animal tallow or to items which could be mid to have some connection with the banned item, but extended to all items for, which applications for the grant of licences or for allotment had been made by Liberty Oil Mills (P.) Ltd., whether or not such items had the remotest connection with animal tallow, Shri Ashok Desai contended that the very general nature of the order disclosed a total non-application of the mind since there was no nexus between the alleged misuse of licences for importating beef tallow or the misuse of the imported beef tallow and the abeyance of applications for grant of import licences and for allotment of other items. It was also argued that as many as 61 firms were dubbed together and dealt with by a single circular and there was no indication whatsoever that the facts relating to each of the firms had been considered separately. THE circular was an omnibus one and revealed a total non-application of the mind. It was suggested that the abeyance orders far from advancing the public interest would, on the other hand, prejudicially affect the public interest by bringing to a halt several industries and throwing hosts of workers out of employment. It would also affect exports from India and reduce foreign exchange earnings. It was submitted that there was no substance in the allegation that Liberty Oil Mills Pvt. Ltd. were not 'actual users' of beef tallow but they had none the less obtained letters of authorisation for import of beef tallow as if they were actual users and they had thus misused the import licences of other licencees. It was pointed out that the beef tallow imported by them under letters of authority had either been sold by them to actual users on the high seas or had been actually used by them to produce marketable beef tallow for use by soap manufacturers and fatty acid plants, by subjecting the imported beef tallow to 'air-treatment'. It was also argued by Shri Ashok Desai that the circumstance that there was public agitation about the import of beef tallow was a totally irrelevant circumstance for making an order under clause 8-B. Shri V. P. Raman, learned counsel for one Of the interveners suggested that Cl. 8-B did not apply to goods covered by Open General Licence in view of clause 11 (4) of the Import Control Order which provided, "Nothing in this order, except para 3-1 of sub-clause (3) of Clause 5, Cl. 8, Cl. 8-A. Cl. 8-C and Cl. 10-C shall apply to the import of any goods covered by Open General Licence or Special General Licence issued by the Central Government". Shri Soli Sorabjee, who appeared for another intervener, submitted that clause 8-B should be construed as providing for an opportunity to be heard and since the abeyance orders made no provision for hearing, they should be struck down, as opposed to the principles of natural justice, and therefore, arbitrary and violative of Arts. 14 and 19 (i) (g) of the Constitution. It was also urged by the learned counsel that the satisfaction contemplated by clause 8-B was not an omnibus satisfaction but a satisfaction which must disclose an application of the mind to the facts of each individual case and each individual application for licence or allotment. Shri Ram Jethmalani, who appeared for another intervener urged that secret orders affecting rights of parties could not lawfully be made since secrecy would militate against natural justice and against the right of appeal provided by Sec. 4-M of the Imports and Exports (Control) Act. He also submitted that in the absence of an express recital of satisfaction which was the foundation for the exercise of the jurisdiction under clause 8-B, the order must be held not to conform to clause 8-B and therefore, vitiated. He also contrasted clause 8-A and clause 8-B and argued that the public interest contemplated by Cl. 8-B should be such as to exclude a pre-decisional hearing. THEre was no such public interest involved in the case. THEre was not even a recital to that effect. For that reason also the order was vitiated. He further submitted that an order under Cl. 8-8 could only be made after the investigation under clause 8 had commenced, that is after a show cause notice had been issued under clause 8. 5. Shri Milan Bannerjee, learned Additional Solicitor General urged that the only question for the consideration of the Court was whether there was any relevant material before the authority competent to take fiction under clause 8-B to reach the satisfaction contemplated by that clause. Since the satisfaction contemplated by clause 8-B was the subjective satisfaction of the authority concerned, the Court was not to concern itself with the sufficiency of the material in arriving at the requisite satisfaction. He however, invited our attention to various facts and circumstances which, according to him, wholly justified the action taken against Liberty Oil Mills (P.) Ltd. Though Liberty Oil Mills itself held several licences, it nevertheless indulged in the collection of a large number of licences of other importers, imported beef tallow as their authorised agents, sold part of the beef tallow to alleged actual users on high seas or purchased the beef tallow after importation, subjected it to the so-called air-treatment - a treatment which could by no means be called a manufacturing process and which left the character of beef tallow unaltered and sold it to innumerable parties stated to be soap manufacturers and fatty, acid plants. THE claim of Liberty Oil Mills (P.) Limited that Liberty Oil Mills was an 'actual users, who had purchased beef tallow for subjecting it to air-treatment was no more than a pretence. It was stated that fun particulars of the parties to whom the beef tallow was claimed to have been sold were no made available despite requests for the same. THEre was great public concern about the manner in which beef tallow had been imported and used by some importers and the authorities very naturally felt that it was their duty in the public interest to investigate into malpractices connected with the import of beef tallow and the misuse of beef tallow after import. THE learned Additional Solicitor General placed before us the relevant files which according to him indicated that the case of Liberty Oil Mills (P.) Limited as well as the cases of each of the other firms who were included in the abeyance circular had been separately considered and satisfaction duly and property arrived at by the appropriate authority on relevant material. THE learned Additional Solicitor General very fairly did not urge that the decision to keep in 'abeyance' need not be communicated or that the principles of natural justice were not required to be observed. But he argued that a pre-decisional hearing was not contemplated. He submitted that Rule 8-B did not rule out a post-decisional hearing and stated that the appropriate authorities were ready even, now to consider faithfully any representation made by the parties affected. With reference to the views expressed by the Central Board of Excise and Customs and the Government of India, in the cases of Arvind Exports and Jayant Oil Mills, Shri Bannerjee submitted that those cases did not represent the correct position in law. Those decisions were rendered in proceedings under the Customs Act and did not preclude appropriate action under the Import and Export Control Act and the Import Control Rules. Shri Bannerjee also invited our attention to several provisions of the Import Control Order. Before considering the questions at issue, it will be useful to refer to our Import Policy and to take a cursory look at the various statutory and non-statutory instruments embodying the policy. The import policy of any country, particularly a developing country, has necessarily to be tuned to its general economic policy founded upon its constitutional goals, the requireaunts of its internal and international trade, its agricultural and industrial development plans, its monetary and financial strategies and last but not the least the international political, and diplomatic overtones depending on 'friendship, neutrality or hostility with other countries? (Glass Chatons importers and Users' Association v. Union of India, (1962) 1 SCR 862: (AIR 1961 SC 1514)). There must also be a considerable number of other factors which go into the making of an import policy. Expertise in public and political, national and international economy is necessary before one may emerge in the making or in the criticism of an import policy. Obviously, Courts do not possess the expertise and are consequently incompetent to pass judgment on the appropriateness or the adequacy of a particular import policy. But we may venture to assert with some degree of accuracy that our present import policy is export oriented. Incentives by way of import licences are given to promote exports. Paragraph 173 of Chap. 18 of the 'Import Policy' for April 81 to March 82 published by the Government of India, Ministry of Commerce - in the first week of April every year, an annual 'Import and Export Policy' to be in force during the financial year is published - expressly states "the objective of the scheme of registration of Export Houses and the grant of special facilities to them is to strengthen their negotiating capacity in foreign trade and to build up a more enduring relationship between them and their supporting manufacturers". Paragraphs 183 and 184 enumerate the various import facilities available to Export Houses. Paragraph 185 (1) allows Export Houses to import OGL (Open General Licence) items against REP (Replenishment) Licences issued in their own names or transferred to them by others. The facility is stated to be available to them for the import of (a) capital goods listed in Appendix II and placed on Open General Licence for Actual Users and (b) Raw Materials, components, consumables and spares (excluding items covered by Appendix V) which have been placed on Open General Licence for Actual Users. Paragraph 185 (1) further stipulates that Capital Goods so imported shall be transferred by them only to such Actual Users as are authorised to purchase them by the concerned Licensing Authority and that raw materials, components and consumables so imported may be transferred by them to eligible Actual Users. Imported spares, may be sold to any person. Paragraph 185 (2) provides that import replenishment licences issued in their own names or transferred to them by others, against which Export Houses wish to take advantage of the facility provided in Para 185, shall be non-transferable. Therefore, the Export Houses wishing to take advantage of the facility are required to get the licences concerned endorsed by the Licensing Authority as under :- "This licence will also be valid for import of OGL items under para 185 of Import Policy, 1981-82, subject to the conditions laid down and shall be non-transferable". Paragraph 185 (3) further stipulates that import of OGL items under these provisions shall be subject to the condition that the shipment of goods shall take place within the validity of the OGL, that is, 31/03/1982 or within the validity period of the import licence itself, whichever date is earlier. Paragraph, 186 (1) broadly entitles Export Houses to Additional Licences up to the value of 15 Per Cent of the f. o. b. value of select products made in 1981-82 and manufactured by small scale and cottage industries plus 71/2 Per Cent of the f. o. b. value of other exports of select products made in the same year. All such Additional Licences shall be non-transferable. Paragraph 186 (7) provides that the Additional Licences will also be valid for import of Raw Materials, Components, Consumables and Spares (including items covered by Appendix V) which have been placed on Open General Licence for Actual Users (Industrial). While Spares so imported may be sold to any person, Raw Materials, Components and Consumables may only be sold to eligible Actual Users Paragraph 192 requires every Export Houses to maintain proper accounts of all its exports, imports and disposed of imported items and are further required to furnish detailed information in the prescribed forms. ;