Hagabati Prasad Banerjee, J. - (1.) The facts of the case, in short, are that the petitioner company carried on the business of, inter alia, of manufacturing transformers meant for distribution of electricity. The petitioner company sells such transformers to. the various State Electricity Boards in the country against orders received from them. The State Electricity Boards use the said transformers in, inter alia, projects aided by the International Bank for Reconstruction and Development (hereinafter referred to as IBRD) and/or International Development Association (hereinafter referred to as IDA). Supplies to such IBRD/IDA aided projects are treated as 'deemed exports' and enjoy all benefits available in respect of actual exports. The petitioners state that in respect of such 'deemed exports' duty-free imports of raw materials are allowed under the "Duty Exemption Scheme". The said Scheme, as it appears, was framed by the Central Government which provides for, inter alia, duty-free import of raw materials and components required for the manufacture of goods to be supplied to IBRD/IDA aided projects. The said Scheme is contained in Appendix 19 of the Import and Export Policy for the period of April, 1985 to March, 1988 (hereinafter referred to as the said policy). The relevant paragraphs of Appendix 19 are set out below : "Execution of bond : 24(1) Before clearance of the first consignment of import the licence holder shall execute a bond with bank guarantee with the concerned licensing authority in the prescribed from given in Appendix XVI-C of the Hand Book. Certain categories of licence holders may be given the facility of bond with bank guarantee for a lesser value or legal agreement in lieu of the bond as per paras 339 and 340 of the Hand Book." "24(4) Where the export obligation prescribed on a licence under this Scheme has been fulfilled in part before import of the exempt materials involved, the bond/legal agreement will be correspondingly reduced in value so that it represents only the unfulfilled part of the export obligation/Customs duty exemption. If the export obligation prescribed has been met in full before any import takes place, execution of a bond/legal agreement will not be necessary. For these purpose, however, the Advance-licence holder will have to produce to the licensing authority concerned prescribed export documents to prove such partial or full fulfilment of export obligation along with the DEECs showing Customs audited entries. "(5) Customs audited entries in DEEC referred to above Will, however, not be necessary in case of supplies effected under Advance Licences for Intermediate products to another Advance-Licence holder for Intermediate product or under Special Imprest Licence to the project authorities concerned. In these cases, the entries effected on the DEECs concerned by the seller/buyer Advance-Licence holder under the Intermediate Scheme or the project authorities concerned, as the case may be will suffice. However, in respect of Advance-licences issued for supply of Intermediate products, where such applies are effected to a unit in FTZ/100% EOU, such entries relating to supplies in the DEECs involved will have to be made by the Develop-merit Commissioner or the Customs/Central Excise Officer, as the case may be. "(6) Where an Advance-licence holder has not executed the bond/ legal agreement as he had already fulfilled the export obligation in full and a waiver for execution of the bond/legal agreement has been given, the Advance licence holder concerned shall, after effecting imports, submit the DEEC with Customs audited entries relating to imports and exports and Part 'H' duty filled in by him to the licensing authority concerned." "Exports : 26. Exports/supplies made from the date of receipt of application under this Scheme by the licensing authority concernerd will be accepted towards discharge of export obligation. However, the applicant exporter will be taking advantage of this provision only at his own risk and subsequently, if his application for a licence is rejected under this Scheme he will not be entitled to import the items concerned or to the duty exemption benefits." "27(4) Supplies effected by the Special Imprest licence holder within the export obligation period will be endorsed by the Project Authorities concerned on the DEECs, Part II, for having received the goods indicated therein. (5) If a shipment is sought to be effected in discharge of export obligation either before the issue of the licence and the DEEC or after the expiry of the stipulated period of export obligation, Customs authority will allow such exports on provisional shipping bills. Subsequently, if a licence and the DEEC are issued or the period of fulfilling export obligation is extended to cover these exports, the Customs authorities will regularies these exports. If, however, a licence and DEEC are not issued or period 'for fulfilling export obligation is not extended, the provisional exports will not be eligible for regularisation and these endorsement made will be cancelled. The licensing authority concerned will suitably endorse a copy of the communication addressed to the exporter to the Customs authorities concerned regarding such issue of licence or extension, as the case may be." "Utilisation of exempt materials : 30. Exempt materials imported against a licence under this Scheme shall be utilised for the manufacture of the resultant products specified in the DEEC.'Such materials shall not be loaned, sold or transferred or disposed of otherwise under any circumstances. However, in cases where the export obligation has been partially or fully met before the receipt of the licence (but made after the date of receipt of the application for the licence), the Advance Licensing Committee in the office of the CCI&E, New Delhi, may consider transfer at landed cost of the exempt materials imported subsequently on this licence as replenishment to the supporting manufacturer concerned whose name appears in the DEEC for further production and subject to Actual User conditions"
(2.) In this case the admitted position is that the petitioners are entitled to import duty-free materials for the purpose of manufacture of the items in the projects aided by IBRD and IDA but in the instant case what has happened is that before the actual import of the transformer took place, the petitioners from their stock supplied to the manufacturers raw materials and components. Subsequently when the goods arrived, the petitioner wanted the said goods to be released on the basis of the said duty-free exemption which was not acceded to by the Customs Authorities. The contention of the Customs Authorities was that the raw materials and goods which had been imported should be actually used as materials and components, in other words, the goods must not lost its identity and the self same goods which are imported should be used as raw materials and there could not be any question of any re-imbursement or replacement of the raw materials and components after the same was used from the old stock as has been done in this case. The petitioners claim that the purpose for which they were imported had been fulfilled and it is immaterial whether the petitioner had supplied the goods in advance from his old stock or not. According to the petitioners, the respondents are bound to release the same without payment of any Duty as the goods had already been used as raw materials and components for manufacture. The relevant notification in this connection did not in so many words clearly permit the petitioners to import goods which had already been used for the very purpose for which such importation had been made. Here is a case where the petitioners could get the exemption from Customs Duty if the goods were imported and used as raw materials and components by the said manufactures. But in the instant case the petitioners already supplied the goods for being used as components and raw materials in advance and there after sought to replace the same by the. goods so imported.
(3.) It was contended by Mr. Bajoria, that the Court should take liberal view should be taken with regard to the construction of the notification-in-question, so that event the petitioner might get the benefit or the scheme and is entitled to get exemption from payment of the customs duties, in the facts and circumstances of the case. No matter whether the particular goods were used for the purpose, because some other goods from the stock of the petitioner of the same original were already used as components and raw materials for manufacture. The original notification dated September 10, 1982, bearing No. 210/82-Customs, is as follows :- "Copy of Ministry of Finance, Department of Revenue, Notification No. 210/82-Customs, dated 10-9-1982. G.S.R. 560(E). - In exercise of the powers conferred by Sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts raw materials and components required for the manufacture of goods to be supplied to International Development Association or International Bank for Reconstruction and Development or Bilateral or Multilateral aided projects or Oil and Natural Gas Commission or Oil India Ltd. or Gas Authority of India Ltd. when imported into India, from the whole of the duty of customs leviable thereon which is specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the whole of the additional duty leviable thereon under Section 3 of the second mentioned Act subject to the following conditions, namely :- (1) that the importer has been granted necessary import licence or release order on the concerned canalising agency by the licensing authority as specified in the Import (Control) Order, 1955, for the import or release of raw materials and components for the aforesaid purpose; (2) that the import licence contains the following endorsement, inter alia :- (a) the description, quantity and value of raw materials and components allowed to be imported under the said licence; (b) the description and quantity of raw materials and components allowed to be imported duty-free; and (c) the description and quantity of goods to be manufactured out of, or with, the imported materials. (3) that the imported executes a bond in such form and for such sum as may be specified by the said licensing authority binding himself to fulfill the obligations and conditions stipulated in this notification and to pay on demand, an amount equal to the duty leviable on the said raw materials and components as are not proved to the satisfaction of i the said licensing authority to have been used for the afore- said purpose; and (4) that the importer produces evidence to the satisfaction of the said licensing authority for the purpose of discharging the liability in respect of customs duty as well as for discharging the obligations against the said licence. 2. This notification shall be in force upto and inclusive of the 10th day of September, 1987." Thereafter, by notification dated June 5, 1987, bearing No. 235/87-Customs, the notification dated 10-9-1982 have been amended and after paragraph 1. of the said notification dated 10-9-1982 the paragraphs 1A and 1B were inserted, which reads as follows :- "1A. Notwithstanding anything contained in conditions (1) to (5) of paragraph 1 of this notification. (a) in case where the goods in respect of which the said raw materials or components have been imported are already supplied as required under this notification, the importer may use such raw materials and components for the manufacture of any other goods; and (b) in a case where the importer cannot use the said raw materials or components for the manufacture of any other goods also as required under Clause (a) of this paragraph, then, with the previous approval of the authority competent to grant to import licence referred to in this, notification, being the authority not below the rank of the Chief Controller of Imports and Exports, the importer may transfer such raw materials and components to any actual user, subject to such terms and conditions as the said authority may specify. 1B. The exemption under this notification shall also be available to the said raw materials and components imported under and Open General Licence issued under Section 3 of the Imports and Exports (Control) Act, 1947 (19 of 1947), if at the time of clearance of such raw materials and components for home consumption, the import licence required under this notification is produced by the importer.";