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PETITIONER: OSWAL WOOLLEN MILLS LTD. & ANR.

       Vs.

RESPONDENT: UNION OF INDIA & ORS.

DATE OF JUDGMENT11/07/1983

BENCH: VARADARAJAN, A. (J) BENCH: VARADARAJAN, A. (J) FAZALALI, SYED MURTAZA

CITATION:  1983 AIR  969            1983 SCR  (3) 362  1983 SCC  (4) 345        1983 SCALE  (1)680

ACT:      Import Policy,  1981-82-Paragraph 138 (1)-Replenishment Licence acquired  by transfer  by  a  Trading  House-Whether endorsement can  be refused on the ground that Replenishment Licence had  not been  issued  against  export  of  its  own products ?

HEADNOTE:      The appellant which was a manufacturer-exporter as well as a  recognised  Trading  House  acquired  a  Replenishment Licence by  transfer from another manufacturer-exporter and, desiring to import raw materials, components, etc., required for use  in its factories under that Licence, sent it to the third respondent requesting that the transfer of the Licence in its name be recognised and an endorsement made thereon to make it  valid for import of items permitted under paragraph 138 (1)  of the Import Policy, 1981-82. The third respondent rejected the  request on  the basis  of an  office  Circular dated  31-8-1981  issued  by  the  second  respondent  which directed the  licensing authority  not to  grant endorsement under paragraph 138 (1) unless the Replenishment Licence had been issued  to the  applicant against  export  of  its  own products.      The appellant’s  writ petition challenging the validity of the circular dated 31-8-1981 as well as the order made on its application  for endorsement of the licence was rejected by the High Court.      Allowing the appeal, ^      HELD: Paragraph  140  of  the  import  Policy,  1981-82 clearly states  that Replenishment Licence will be issued in the name  of the  Registered Exporter  only and  will not be subject to ’Actual User’ condition and that except for cases covered by  paragraphs 136  (2), 185  (2) and  186  (1)  the licence holder  may transfer  the licence in full or in part in favour of any other person and that the licence holder or such transferee  may import  the goods permitted therein but the facility  of paragraphs  136,137 and  146 shall  not  be available to any transferee unless the transferee is himself a Registered Exporter and can satisfy the Custom Authorities at the time of clearance of the goods of his bona fides. The goods sought to be imported by the appellant of the basis of

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the Replenishment  Licence in  question do  not  fall  under paragraphs 136  (2),137,146,185 (2) and 186 (1) mentioned in paragraph 140. Reco- 363 gnised Trading  Houses like  the appellant  are entitled  to certain facilities  under paragraph  195 (4) and one of them mentioned in  paragraph 195 (4) (ii) is import replenishment licences transferred  to them by others. Thus, the appellant is entitled  under paragraphs  140 and  195 (4)  (ii) to the facility of  the Import  Policy  as  a  transferred  of  the Replenishment Licence  issued in  the  name  of  the  actual manufacturer-exporter   against   exports   made   by   that manufacturer-exporter. [370 B-E]      The contention  of the respondents that under paragraph 138 (1)  the facility  to import  raw materials, etc., under the Replenishment  Licence is  available only  to the actual manufacturer-exporter    against     whose    exports    the Replenishment Licence  was issued  amounts to  reading  into paragraph 138 (1) the words "against the exports of products manufactured  by   them"  after   the  words  "manufacturer- exporters" and  before the  words "will be valid...".That is what is sought to be done by the impugned Circular dated 31- 8-1981. The High court was right in saying that the Circular appears to  change the  Import Policy but it erred in saying that the  condition mentioned in the impugned order is found in paragraph  138 (1).  No such  condition is to be found in paragraph 138  (1). It is significant that paragraph 138 (1) was not  mentioned in  paragraph 140. It is also significant that in  the Import  Policy for  the subsequent year 1982-83 the words "against their exports of products manufactured by them" have been actually inserted in paragraph 138 (1) after the words  "Replenishment Licences  issued to  manufacturer- exporter" and before the words "will be valid." [370 E-H, 371 A-B]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeal No. 591 of 1982      Appeal by  Special leave  from the  Judgment and  Order dated the  18th November,  1981 of  the Delhi  High Court in Civil Writ Petition No. 2581 of 1981.                             WITH      Writ Petition No. 802 of 1982:      (Under article 32 of the Constitution of India).      Soli J. Sorabjee and Rajiv Dutta for the Appellant.      M.M. Abdul Khader, Girish Chandra & Miss A. Subhashini, for the Respondent.      V.M. Tarkunde and Rajiv Dutta for the Petitioner in WP.      The Judgment of the Court was delivered by      VARADARAJAN,  J.   This  appeal  by  special  leave  is directed against  the judgment  of a Division Bench of Delhi High Court  dismissing the  Civil Writ  Petition No. 2581 of 1981 in limine, with the obser- 364 vation that  the Circular  dated  31.8.1981  issued  by  the second respondent, the Joint Chief Controller of Imports and Exports, New Delhi appears to change the Import Policy, that the contention  that the  condition mentioned  in the  order impugned in  the Writ Petition is not found in paragraph 138 of the  Import Policy  for 1981-82 is not acceptable, that a reading of paragraph 138 (1) of the Import Policy shows that the Import  Replenishment (REP) Licence, if transferable and an endorsement is sought thereon, must be with regard to the

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materials mentioned  in the  (REP) Licence and not any other material and  that the  contention of  the first respondent, the Union  of India  that  the  endorsement  could  only  be against the export by the applicant himself is correct.      The appellants  have filed the Writ Petition No. 802 of 1982 under  Article 32  of the Constitution against the same three respondents and for the same reliefs prayed for in the Civil Appeal, viz. (1) quashing the Circular dated 31.8.1981 issued by the Joint Chief Controller of Imports and Exports, New Delhi  as being  ultra vires  and  null  and  void,  (2) directing withdrawal  of the  order dated  7.12.1981 of  the third respondent, the Deputy Chief Controller of Imports and Exports, Amritsar,  refusing to  make the endorsement on the (REP) Licence,  (3) issuing a direction to respondents 2 and 3 to  make the  endorsement contemplated in paragraph 138 of the Import  Policy 1981-82  on the  (REP)  Licence  and  (4) restraining  respondents  2  and  3  from  implementing  the Circular dated 31.8.1981 and the order dated 7.12.1981.      The parties  will be referred to in the Civil Appeal as arrayed in  the Writ  Petition before the High Court for the sake of convenience.      No copy  of the  Writ Petition  filed before  the  High Court has  been produced  in this  Appeal. The  case of  the petitioners as  set out  in the  special leave  petition  is this: The  first petitioner  M/s Oswal  Woollen Mills  Ltd., Ludhiana was originally a registered Export House within the meaning of  paragraph 5  (7) of  the Import Policy, 1981-82, and has  been a  manufacturer-exporter since 1971 and is now also a  recognised Trading  House as  the first petitioner’s Export House  Certificate has  been converted into a Trading House Certificate  in terms  of paragraph  195  (1)  of  the Import  Policy,   1981-82.  Recognised  trading  houses  are entitled to  certain facilities  under paragraph  195 (4) of the Import Policy, 1981-82, and one of them 365 mentioned in  paragraph 195  (4)(ii) is import replenishment (REP) Licences  transferred to  them  by  others.  Paragraph 195(4) (ii) reads as under:           "Trading Houses  will  be  granted  the  following      facilities   under    the   Import    Policy:-   Import      replenishment (REP)  Licences transferred  to  them  by      others."      For obtaining  the said  facility the  first petitioner acquired by  transfer the  Replenishment (REP) Licence, viz. "Import  Licence  No.  PW/2941/669/C/XX/78/Z/80  dated  27th February, 1981  for total  value of  Rs.2,02,781"  from  the licence holder who was himself a manufacturer-exporter under a transfer  letter dated  8.7.1981 and  sent it to the third respondent for the purpose of obtaining endorsement thereon. Paragraph 140  of the  Import Policy,  1981-82  provide  for transfer of (REP) Licences and reads as under:           "The REP  Licence will  be issued in the name of a      Registered Exporter  only and  will not  be subject  to      ’Actual User’  condition. Except  for cases  covered by      paragraphs 136(2),  185(2) and 186(1), a licence holder      may transfer  the licence  in full or in part in favour      of  any  other  person.  The  licence  holder  or  such      transferee may  import the  goods permitted therein but      the facility  of paragraphs  136(2), 137  and 146 shall      not  be   available  to   any  transferee   unless  the      transferee is  himself a  Registered exporter  and  can      satisfy the Custom Authorities at the time of clearance      of the goods, of his bonafides".      Thus the (REP) Licence holder and the transferee of the same are in the same position as regards the right to import

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on the  basis of  the licence,  but the  transferee  of  the licence has  to satisfy  certain other conditions, viz. that he should  himself  be  a  Registered  Exporter  and  should satisfy the Custom Authorities of his bona fides at the time of clearance  of the  goods  in  regard  to  the  facilities provided in  paragraphs 136  (2), 137  and 146 of the Import Policy, 1981-82.  The first  petitioner is  a  manufacturer- exporter   holding    a   valid   Registration   Certificate No.FIED/TD-E3(153)/78-132 dated  21.7.1978 and  was keen  to Import under  the (REP)  Licence  acquired  by  transfer  on 8.7.1981 raw  materials, components, consumables and packing materials required  for use  in its  factories in  terms  of Paragraph 138(1)  of the  Import Policy, 1981-82 which reads as under: 366           "REP Licence issued to manufacturer-exporters will      be valid for import of any other items of raw materials      components, consumables  and packing materials required      by them  for use in their factories. However, import of      banned items  will be allowed only upto 20% of the face      value of  the REP Licence subject to the condition that      the value  of ’single’  item should  not exceed  Rs.  1      lakh. REP  Licences issued  to  manufacturer-exporters,      who want  to avail of this facility will be issued with      an ’Actual  User’ condition  and such licences will not      be transferable.  It is  also open to the manufacturer-      exporter to  make use  of this facility only for a part      of his  REP entitlement  and to  get for  the remaining      part a freely transferable REP Licence".      The first  petitioner requested the third respondent by his  letter  dated  23.9.1981  that  the  (REP)  Licence  in question may  be transferred to him and suitable endorsement may be made thereon to make it valid for import of the items permitted under  paragraph 138  with ’Actual  User’ and non- transferable conditions.  But the  third respondent  refused that request  by his letter No. O-33/Q/OO80/EPT/ASR/85 dated 15.10.1981 on  the basis  that the  endorsement in paragraph 138  is   admissible  only  for  the  manufacturer-exporters against their  own exports. This refusal is based on a total misconstruction of paragraph 138 of the Import Policy, 1981- 82. That  decision is  based on  an  office  Circular  dated 31.8.1981  issued   by  the  second  respondent,  which,  in substance, directs  the Licensing  Authority not  to  grants endorsement under  paragraph 138 of the Import Policy, 1981- 82 unless the (REP) Licence had been issued to the applicant against the  export of  his own products. The Circular dated 31.8.1981 reads as under:           "Attention is  invited to  para  2  (iii)  of  REP      Circular No. 10/80 dated the 4th August, 1980 regarding      endorsement to  be made by the Licensing Authorities on      REP Licence sought to be utilised under para 138 of the      Import Policy,  1981-82. The said para 138 is meant for      REP Licence  issued to  manufacturers on the exports of      the products  manufactured by  them. Therefore,  before      making endorsement  of the  REP Licence  under the said      para 138  the Licensing Authority concerned should make      sure that  the REP  Licence, in  question was issued to      the applicant against export of his own products; i.e. 367      for  which   the   licencee   was   registered   as   a      manufacturer-exporter,    as     per    the    relevant      registration-cum-membership certificate  held  by  him.      Similarly, the facility under para 138 (7) is meant for      those manufacturers  only whose  product  was  actually      exported and  not for  other manufacturers  of the same

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    product."      The Circular is without the authority of law and cannot amend or modify paragraph 138 of the Import Policy, 1981-82. The petitioners  filed the  Writ Petition  in the High Court after the  third respondent  failed to send a reply to their notice dated  2.11.1981 by  which  he  was  called  upon  to withdraw  the   decision  contained   in  his  letter  dated 15.10.1981 and  to  make  the  necessary  endorsement  under paragraph 138  of the  Import Policy,  1981-82 on  the (REP) Licence mentioned  above. The Writ Petition was dismissed by the High Court in limine.      The respondents  have  filed  a  counter-affidavit  for meeting the  averments made  in the  special leave petition. They have  admitted that  (REP) Licences  issued on  exports made on  or after  1.4.1978 are not subject to ’Actual User’ condition and  are freely transferable to any person without any  necessity   for  endorsement  or  permission  from  the Licensing authority  except for certain cases as provided in paragraph 140  of the  Import Policy,  1981-82. The facility was extended to manufacturer-exporters and manufacturers who exported their  goods through  others by  permitting them to utilise the  import replenishment  (REP) licence accruing to them on  the export of the products manufactured by them for importing not  only  the  items  utilised  by  them  in  the products exported  but also  other items  of raw  materials, components, consumables  and packing  materials required  by them for  use in  their factories.  But it  is evident  from paragraph  138  of  the  Import  Policy,  1981-82  that  the facilities provided in that paragraph can be availed against (REP) Licences  issued  to  manufacturer-exporters  only  on their own  exports  or  against  (REP)  Licences  issued  to manufacturers whose  products are  exported through  another exporter. This  facility is,  therefore,  not  available  to manufacturer-exporters against  (REP) Licences  acquired  by them by transfer from other Registered Exporters even if the latter is a manufacturer-exporter.      The Circular  dated 31.8.1981  was issued only in order to ensure  that the  manufacturer-exporter  avails  of  this facility only 368 against (REP)  Licence issued on exports of his own products in terms  of the  policy stated  in  paragraph  138  and  to clarify  that  the  facility  is  available  only  to  those manufacturers whose  products were actually exported through another exporter  and that the facility was not available to other  manufacturers  of  the  same  products.  The  special facility  was  given  and  is  intended  to  strengthen  the production of  the units  whose products  were  exported  by allowing them  to import  by the  (REP) Licence not only the items utilised in the products exported but also other items of  raw   materials,  components,  consumables  and  packing materials required  by the  same unit.  For obvious reasons, this facility  has not been extended to (REP) Licences which were transferred  by exporters  to  a  unit  which  did  not contribute to the product exported against which the licence was issued.      Paragraph 138  (1) of  the Import  Policy,  1981-82  is clear enough  and admits of no other interpretation than the one contained  in the impugned Circular dated 31.8.1981. The Circular has neither amended nor modified the Import Policy, 1981-82 contained  in paragraph  138. The  special  benefits referred to  in paragraph  138  are  not  transferable  and, therefore, the  transferees of  the (REP)  Licences like the petitioners cannot  validity  import  the  said  items.  The decision of  the Licensing  Authority refusing  to make  the

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endorsement asked  for by  the letter dated 23.1.1981 on the (REP) Licences acquired by the petitioners was in accordance with the  policy mentioned  in paragraph  138.  The  grounds urged by the petitioners are without substance and amount to distortions of  the contents  of paragraphs 136, 138 and 140 of the Import Policy, 1981-82. The Writ Petition was rightly dismissed by the High Court in limine.      As the  same reliefs  which are  sought  in  the  Civil Appeal are  sought even  in the Writ Petition also it is not necessary to refer to the petitioners’ contentions raised in the Writ Petition and those raised by the respondents in the counter-affidavit  filed  by  them  in  this  judgment.  Our findings in  the Civil Appeal will suffice to dispose of the Writ Petition one way or the other.      The first petitioner was originally a Registered Export House within  the meaning  of paragraph  5 (7) of the Import Policy, 1981-82  and has  been a manufacturer-exporter since 1971. It has become a recognised Trading House as its Export House Certificate  has been  converted into  a Trading House Certificate in  terms of  paragraph 195  (1) of  the  Import Policy, 1981-82.  Recognised Trading  Houses are entitled to certain facilities under paragraph 195 (4), and one of 369 them  mentioned   in  paragraph   195  (4)  (ii)  is  import replenishment (REP)  Licences transferred to them by others. The import  replenishment (REP)  licence mentioned above was issued to a manufacturer exporter against his actual export. The first petitioner got that licence transferred to it by a letter dated  8.7.1981 as  provided for  in paragraph 140 of the Import  Policy, 1981-82 for obtaining the facility under paragraph 195  (4) (ii).  Thereafter  an  application  dated 23.9.1981 was  made by  the first petitioner for recognition of that  transfer and  for an  endorsement being made on the said  licence  forwarded  with  that  letter  to  the  third respondent to  enable the  first petitioner  to  import  raw materials, components,  consumables  and  packing  materials required by it for use in its own factories as per the first part of  paragraph 138 (1) of the Import Policy, 1981-82. In that letter  it is stated that the first petitioner proposes to utilise  the licence  for the  import of  raw  materials, components, consumables and packing materials required by it for use  in its  own factories in terms of paragraph 138 (1) of the  Import Policy,  1981-82 and  that the  licence  may, therefore,  be   transferred  in   the  name  of  the  first petitioner and  an endorsement  may be made on it to make it valid for  import of the items permitted under paragraph 138 with the ’Actual User’ and non-transferable conditions. This request was  rejected by  the third respondent by his letter dated 15.10.1981  on the  ground that  the (REP)  Licence in question was  issued to  the licencee  against the export of his own products, i.e. for which the licencee was registered as a manufacturer-exporter as per the relevant registration- cum-membership certificate  held by him. There is no dispute about these facts.      The  petitioners’   contention  is   that   the   first petitioner  is   entitled  to   import  the  raw  materials, components, consumables and packing materials required by it for use  in its  own factories in terms of paragraph 138 (1) of the Import Policy, 1981-82 as the transferee of the (REP) Licence permitted  by paragraph  140 of  the Import  Policy, 1981-82 notwithstanding  the fact  that the first petitioner is not  the manufacturer-exporter  against whose exports the (REP) Licence in question was issued but a Trading House who got  the  said  licence  transferred  by  the  letter  dated 8.7.1981 as per paragraph 195 (4) (ii) of the Import Policy,

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1981-82. The  respondents’ contention  is that  as the first petitioner is  not the  manufacturer-exporter  to  whom  the (REP) Licence  was issued  against  his  export  it  is  not entitled to  import the  raw materials etc. mentioned in the first petitioner’s 370 letter dated 23.9.1981 under paragraph 138 (1) of the Import Policy, 1981-82.  The question is which of these contentions is correct.      Paragraph 140 clearly states that (REP) Licence will be issued in  the name of the Registered Exporter only and will not be  subject to  ’Actual User’  condition and that except for cases  covered by  paragraphs 136(2), 185(2) and 186 (1) the licence  holder may  transfer the  licence in full or in part in  favour of  any other  person and  that the  licence holder or  such transferee  may import  the goods  permitted therein but the facility of paragraphs 136,137 and 146 shall not be  available to any transferee unless the transferee is himself a  Registered Exporter  and can  satisfy the  Custom Authorities at  the time  of clearance  of the  goods of his bonafides. The  goods sought  to be  imported by  the  first petitioner on  the basis of the (REP) Licence in question do not fall under paragraphs 136 (2), 137, 146, 185 (2) and 186 (1) mentioned  in paragraph  140 of the Import Policy, 1981- 82. Paragraph  195(4)(ii) grants  to Trading Houses like the first petitioner  the facilities  under Import Policy, viz., the import  replenishment (REP) Licences transferred to them by others.  Thus the  first  petitioner  is  entitled  under paragraphs 140  and 195  (4) (ii)  to the  facility  of  the Import Policy as a transferee of the (REP) Licence issued in the name of the actual manufacturer-exporter against exports made by  that manufacturer-exporter.  The contention  of the respondents that  under paragraph  138(1)  the  facility  to import raw  materials etc.  under (REP) Licence is available only  to  the  actual  manufacturer-exporter  against  whose exports the  (REP) Licence  was issued amounts to reading in to paragraph  138 (1)  the words  "against  the  exports  of products   manufactured    by   them"    after   the   words "manufacturer-exporters"  and  before  the  words  "will  be valid...". That is what is sought to be done by the impugned Circular dated  31.8.1981. The  present  contention  of  the respondents  is  that  the  Circular  dated  31.8.1981  only clarifies paragraph  138 (1)  of the  Import Policy, 1981-82 and does not amend or modify that paragraph. That is not how the learned  Judges of  the High  Court have under stood the Circular in  their judgment under appeal. The learned Judges have stated  in  their  judgment  that  the  Circular  dated 31.8.1981 appears  to change  the Import Policy and that the contention of the petitioners before them that the condition mentioned in  the impugned  order dated  15.10.1981  is  not found in  paragraph 138 of the Import Policy, 1981-82 is not acceptable to  them. The learned Judges were right in saying that the  Circular appears  to change  the Import Policy but they have  erred in  saying that  the condition mentioned in the impugned  order dated  15.10.1981 is  found in paragraph 138 (1) of the Import Policy, 1981-82. We are unable to find any such 371 condition in  paragraph 138  (1) of the Import Policy, 1981- 82. It is significant to note that paragraph 138 (1) was not mentioned in paragraph 140 of the Import Policy, 1981-82. It is also  significant to  note that  in the Import Policy for the subsequent  year 1982-83  the said  words "against their exports of products manufactured by them" have been actually inserted in  paragraph 138 (1) after the words "REP Licences

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issued to  manufacturer-exporter" and before the words "will be valid within the overall value for import of any items of raw materials,  components, consumables,  spares and packing materials required  by  them  for  use  in  their  factories subject  to   ’Actual  User’  condition".  In  view  of  the respondents’ contention that the Circular dated 31.8.1981 is only clarifactory of paragraph 138 (1) of the Import Policy, 1981-82 and  does not  amend or  modify that paragraph it is unnecessary for  us to  go into  the  question  whether  the Circular issued by the Joint Chief Controller of Imports and Exports can  validly amend  the Import Policy, 1981-82. On a perusal of  the relevant  paragraphs of  the Import  Policy, 1981-82 mentioned  above we agree with Mr. Soli J. Sorabjee, Senior  Advocate  for  the  appellants  that  the  condition mentioned in  the third  respondent’s impugned  letter dated 15.10.1981 is  not there  in paragraph 138 (1) of the Import Policy,  1981-82,  that  the  Circular  dated  31.8.1981  is invalid and  that the  rejection of the petitioners’ request made in  the letter  dated 23.9.1981 by the third respondent in the  letter dated  15.10.1981  is  unwarranted,  and  the request should  have been  complied with.  We are  unable to agree with  Mr. M.M.  Abdul Khadar,  Senior Advocate for the respondents that the condition mentioned in the letter dated 15.10.1981 is to be found in paragraph 138 (1) of the Import Policy, 1981-82. Accordingly, we allow the appeal with costs and the Writ Petition without costs. H.L.C.                            Appeal & Petition allowed. 372