Supreme Court invalidates Circular, expands REP Licences to transferees

The Supreme Court held that the Circular dated 31.8.1981 was invalid as it introduced a condition not present in Paragraph 138 of the Import Policy, 1981-82. The Court clarified that REP Licences were not limited to manufacturer-exporters against their own exports. Transferees of REP Licences were entitled to seek endorsements for importing materials, and the 'Actual User' condition did not apply to REP Licences transferred to Trading Houses. The Court allowed the appeal, directing the endorsement for the first petitioner's REP Licence, enabling the import of necessary materials.

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Issues Involved:
1. Validity of the Circular dated 31.8.1981 issued by the Joint Chief Controller of Imports and Exports.
2. Interpretation of Paragraph 138(1) of the Import Policy, 1981-82.
3. The right of the transferee of an Import Replenishment (REP) Licence to seek endorsement for importing materials.
4. The applicability of the 'Actual User' condition to REP Licences transferred to Trading Houses.

Detailed Analysis:

1. Validity of the Circular dated 31.8.1981:
The appellants challenged the Circular dated 31.8.1981, issued by the Joint Chief Controller of Imports and Exports, as ultra vires and null and void. The Circular directed that endorsements under Paragraph 138 of the Import Policy, 1981-82, should only be made if the REP Licence was issued against the export of the applicant's own products. The Supreme Court found that the Circular was without the authority of law and could not amend or modify Paragraph 138 of the Import Policy, 1981-82. The Court held that the Circular was invalid as it introduced a condition not present in the original text of Paragraph 138(1).

2. Interpretation of Paragraph 138(1) of the Import Policy, 1981-82:
The Court examined whether Paragraph 138(1) of the Import Policy, 1981-82, included the condition that endorsements could only be made for manufacturer-exporters against their own exports. The Court concluded that Paragraph 138(1) did not contain such a condition. The language of Paragraph 138(1) allowed REP Licences issued to manufacturer-exporters to be valid for importing raw materials, components, consumables, and packing materials required for use in their factories without specifying that these licences must be against the export of their own products. The Court found that the interpretation suggested by the respondents amounted to reading additional words into the policy, which was not permissible.

3. The Right of the Transferee of an REP Licence:
The appellants argued that as transferees of the REP Licence, they were entitled to seek endorsements for importing materials under Paragraph 138(1). The Court agreed with this contention, noting that Paragraph 140 of the Import Policy, 1981-82, allowed the transfer of REP Licences and did not subject them to the 'Actual User' condition except in specified cases. The Court held that the transferee of an REP Licence should be treated the same as the original licence holder in terms of the right to import under the licence.

4. Applicability of the 'Actual User' Condition to REP Licences Transferred to Trading Houses:
The Court addressed whether the 'Actual User' condition applied to REP Licences transferred to Trading Houses like the first petitioner. The Court noted that Paragraph 195(4)(ii) of the Import Policy, 1981-82, granted Trading Houses the facility to use REP Licences transferred to them by others. The Court found that the refusal to endorse the REP Licence for the first petitioner based on the Circular dated 31.8.1981 was unwarranted. The Court emphasized that the Import Policy, 1981-82, did not impose the 'Actual User' condition on REP Licences transferred to Trading Houses.

Conclusion:
The Supreme Court allowed the appeal with costs and the Writ Petition without costs. The Court held that the Circular dated 31.8.1981 was invalid and that the refusal to endorse the REP Licence for the first petitioner was unwarranted. The Court directed that the endorsement requested by the first petitioner should have been complied with, allowing the import of raw materials, components, consumables, and packing materials required for use in its factories.

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