Deemed exports through tourist sales can discharge advance licence obligations when foreign exchange is realised and policy is substantially fulfilled.

Sales of goods to foreign tourists against foreign exchange were treated as deemed exports, and the Court read the advance licence scheme, registered exporter provisions and handbook harmoniously to give effect to the shared objective of earning foreign exchange. The distinction drawn between rep licence and advance licence was found too restrictive, and procedural objections such as the absence of DEEC entries were not decisive where the policy clarification showed they were not required for deemed exports to foreign tourists. On the facts, the failed foreign order was bona fide, foreign exchange was realised through authorised channels, and the export obligation was substantially met, so the demand and related order could not stand.

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Issues: Whether sales of goods to foreign tourists against foreign exchange could be treated as deemed exports for discharging export obligation under an advance licence, and whether the impugned demand and related order could be sustained despite the export order having been cancelled and the foreign exchange having been realised through such sales.

Analysis: The relevant policy provisions recognised sales to foreign tourists of specified goods as deemed exports. The policy scheme for registered exporters, the advance licence provisions and the handbook were read together and the distinction drawn by the authorities between rep licence and advance licence was rejected as overly restrictive. The Court held that the common object of the schemes was to promote exports and earn foreign exchange, and that a harmonious construction required deemed exports to be treated as exports for advance licence purposes as well. The petitioner had produced material showing that the foreign order had failed for bona fide reasons, that the goods were sold through an authorised foreign exchange dealer, and that foreign exchange in excess of the stipulated obligation was realised. The objection based on absence of DEEC entries was not decisive in view of the respondents' own clarification that such entries were not required for deemed exports to foreign tourists. The challenge was also not defeated by the availability of an alternative remedy because the matter had been pending for years and the impugned action suffered from arbitrariness and failure to recognise the substantive fulfilment of the policy objective.

Conclusion: Deemed exports by sale to foreign tourists were held to satisfy the export obligation under the advance licence in the facts of the case, and the demand order was unsustainable.

Ratio Decidendi: Where the policy's substantive object is the earning of foreign exchange, a beneficial export scheme must be construed harmoniously so that recognised deemed exports can discharge export obligation, and procedural omissions cannot defeat the relief when the obligation has been substantially fulfilled.

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