TaxTMI 
TaxTMI 
2002 (10) TMI 485
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....000. The Apex Court allowed these appeals only on the ground of 'territorial jurisdiction'. Following is the operative part of the judgment : "For the reasons stated above, these appeals succeed and the same are hereby allowed. The impugned judgment is set aside. We further direct that Special Civil Application Nos. 3282/99 and 3279/99 filed by the respondents are hereby directed to be transferred to the High Court of Madras at Chennai forthwith and on receipt of the papers, we request the Chief Justice of the High Court of Madras to place them before an appropriate Bench for disposal in accordance with law. We are also of the opinion that since the parties have already undergone one round of litigation before the High Court at Ahmedabad and thereafter in these appeals before us, it is appropriate to request the High Court to dispose of these appeals as early as possible. The appeals are, accordingly, allowed." In pursuance of the above direction, the matters were sent to this Court which were re-registered as W.P. Nos. 4320 and 4321 of 2002 and have now been placed before us for disposal by the Hon'ble Chief Justice. 3. Though the controversy involved in these writ p....
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....h, 1997. This policy was obviously for the purposes of giving fillip to the exporters and thereby earn more foreign exchange for the country. Under Chapter VII of the EXIM Policy, a Duty Exemption Scheme was framed. 5.3.1 Paragraph 48 of the said scheme speaks about 'Advance Licence' and describes it to be a licence granted for import of inputs without payment of basic customs duty. It further provides that such licence shall be subject to the fulfilment of a time-bound export obligation and value addition as would be specified. Such advance licences are either value-based or quantity-based. In short, under this advance licence the goods could be imported with the obligation to use those goods or the value thereof for the purpose of exports. These licences were specific and while in case of a value-based advance licence, it specified the names and description of items to be imported and exported, the CIF value of imports, and the FOB value and quantity of exports and in case of quantity-based advance licence, it specified the names and description of items to be imported and exported, the quantity of each item to be imported or, if the quantity cannot be indicated, the valu....
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.... holder, the credits may be utilised to pay the basic and additional customs duties on the imported goods. Payment shall be by a debit entry to be made in the Pass book by the designated authority. The export goods shall not be eligible for drawback on the inputs for which credit in the Pass book is taken. The import and export shall be made through the same port. Any goods which are not included in the Negative List of Imports or in the list of Sensitive Items may be imported under this scheme. The Pass book shall be valid for a period of two years from the date of issue and may be renewed from time to time." (emphasis supplied) 5.3.4 The standard input-output norms (SION) would be necessary to be seen for the present controversy. The norm regarding the fish products and more particularly Entry 7 therein would be relevant for our purpose. The relevant entry regarding export item and import item is re-produced hereunder : Duty Exemption Scheme                  I.O. Norms - Fish Products S. Export Item Import Item Value Remarks No. Quantity Quan....
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....t April, 1992 to 31st March, 1997, incorporating the amendments made up to 30th April, 1995, provide as under : "... ... ... The Pass book holder should specify in the export documents including the shipping bill that the export is under the Pass book Scheme in terms of Paragraph 54 of the Policy. Based on the standard input-output and value addition norms (referred to in Paragraphs 51 and 60 of the Policy), the Designated Authority will determine the basic customs duty deemed to have been paid by such an exporter and the said amount will be credited in the Pass Book. The exporter can utilise the credit so given for import of permissible items. The Pass book will be valid for a period of two years from the date of issue. However, any credit in the Pass book at the end of the period of two years may be utilised within a period of 12 months thereafter and any unutilised credit at the end of the period of three years shall lapse. ... ... ... After determining the applicable customs duties on such imports, clearance of imports will be permitted and the customs duties so arrived at will be debited in the Pass book by the Designated Authority. ... ... ... The exports and ....
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....Entry 7 of SION entries (please refer to Paragraph 5.3.4. for the entry). There is no dispute that these exports were made during the period of two years covered in the Pass book Scheme. They, therefore, sought a credit commensurate to their exports of frozen Head-on/Headless Shrimps. The claim was that they should be given the credit for the item covered in entry (j) in the Import Items, viz. Vitamin Mixes at the rate of 227 kilos per metric ton. In short, petitioners claim that for every metric ton of the export made, they should be given the credit of the customs duty payable on 227 kilos of Vitamin Mixes. They claimed the rate of U.S. $ 36 per kilo. However, the customs authorities proposed that the credit should be granted by the respondents at the rate of U.S. $ 8 per kilo for Vitamin Mixes. It is significant to see here, at this stage there was no dispute regarding the quantity of 227 kilos for every metric ton of export. The dispute was only as regards the rate which, according to the petitioner, was U.S. $ 36 per kilo while according to the respondents, it was only U.S. $ 8 per kilo. An order to that effect was passed by the first respondent and the petitioners filed appea....
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....d for utilising the same on the basis of the earlier exports made during the period of two years when the Pass book Scheme was in vogue. However, the respondents denied that credit to the petitioners, necessitating the filing of the petitions by the petitioners. 9. It seems that the stand taken by the respondents was that from 1-4-1997, new SION came into effect wherein the entry regarding the Vitamin Mixes which hitherto was a consolidated entry permitting the import of Vitamin Mixes/Mineral Mixes to the extent of 0.227 MT/MT was bifurcated and the permissible quantity under the new SION was Vitamin Mixes 0.027 MT and Mineral Mixes 0.200 MT. It seems that vide letter No. 3/36/97-98/P&I, dated 25-5-1998, the customs authorities were advised not to allow the clearance of Vitamin Mixes beyond the quantity of 27 kilos per metric ton of export. A stand was, therefore, taken regarding the claims of the petitioners that in respect of the advance licences issued prior to 1-4-1997 also, the new SION should be made applicable meaning thereby that for the import of Vitamin Mixes, credit should be given only at the rate of 27 kilos for every metric ton of export of frozen Head-on/Head....
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.... (h) Wheat Gluton (i) Lecithin (Soya Bean) (j) Vitamin Mixes consisting of Vitamin C, Vitamin E, Vitamin A/AD3, Vitamin B-1, HCL/B-1, Mono Nitrate, Vitamin B2/B6 0.27 MT (k) Mineral Mixes 0.200 MT Note : The feed ingredients - Vitamin Mixes and Mineral Mixes allowed above are to be permitted only in mixed form and not as individual vitamins/minerals. When compared with entry (j) appearing in Paragraph 5.3.4 of this judgment, the change becomes significant. In the earlier norms, there was nothing limiting the imports only to the Vitamin Mixes or only the Mineral Mixes. The quantity up to 0.227 kilos per metric ton could be imported in any proportion or even individually. The restriction was only the limit of 227 kilos per metric ton. When we see the amended entry (j), it becomes apparent that under the same now if the Vitamin Mixes are to be imported as against the exports that will be restricted only to 27 kilos per metric ton as against the export of 1 metric ....
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....port was completely done away with and the credit had to be calculated only on the notional imports which the exporters could have been entitled to under the SION. The learned Counsel points out that to take the example if 1 MT of frozen Headless/Head-on Shrimps were exported, it was not necessary that the exporter would be liable to import the Vitamin Mixes in the quantity as per SION. The learned Counsel is at pains to point out that the credit had to be given only on the notional import as for example on an export of 1 MT of frozen Head-on/Headless Shrimps, the exporter would be entitled for a credit of the customs duty which he would have otherwise paid had he imported 227 kilos of Vitamin Mixes and Mineral Mixes. The learned Counsel says that there would be no question of prior imports or even the subsequent imports as on the basis of the credit given the exporter could import any other goods, of course, with the exception of the goods included in the Negative List of Imports or in the list of Sensitive Items. The following sentence in the Pass book Scheme is very heavily relied upon by the Learned Senior Counsel, that being : "Any goods which are not included in the Negati....
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....min Mixes was restricted to 27 kilos per metric ton while in respect of the Mineral Mixes, they were restricted to 200 kilos per metric ton. Thus, an exporter could not combine the imports in respect of Vitamin Mixes and the Mineral Mixes. According to the learned Senior Counsel in the original entry, there was no restriction on these two items being imported individually or in any combination. However, that was changed with effect from 1-4-1997. The learned Counsel fairly admitted that if that entry of SION governed even the earlier Pass book period, then the petitioners would have no case. However, according to the learned Counsel that could not be, as firstly there was nothing in the new scheme to suggest that the subsequent SION was restrictive in nature and would thus apply to the earlier period also. The argument is that there is no hiatus between the factum of export and the entitlement of the credit based thereupon and, therefore, as soon as the exports were made during the currency of the Pass book Scheme, the credits on the notional imports as per the SION had become due as a matter of right. 14. As against this the learned Additional Solicitor General, Mr. V.T. G....
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....dbook of Procedures, Vol. 2, for the period April, 1997 - March, 2002, under the SION for Fish Products, an entry (D3) is found for Frozen Head-on/Headless Shrimps of species Black Tiger and White Shrimps. We have already quoted the new entry in the earlier part of our judgment. We, however, find nothing in the language of the norms or the new policy to suggest that the new SION which have been provided in pursuance of the subsequent policy (post-1997 policy) could govern even the earlier exports. The language of the new policy is definitely futuristic and there is nothing to suggest therein that the norms provided or framed thereunder would affect the rights earned under the old policy in accordance with the old norms. 17. In the language of Para 54, which pertains to the Pass book Scheme, there is a clear-cut indication to suggest that the credit should be calculated on the basis of the exports made and the calculation would be in terms of the SION. We will have to necessarily infer that the credits could have been calculated only on the basis of the norms as they were existing on the date of exports. A correct reading of Paragraph 54 and more particularly the third part ....
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....t is so, all the imports which were made during the pendency of the Pass book Scheme period would attract the credit as per the SION and essentially it would have to be the SION which was in prevalence at the time of export. It is very significant to note that at that time, the Pass book Scheme was in prevalence and after 31-3-1997, there was no Pass book Scheme at all. If, therefore, the whole Pass book Scheme is absent conspicuously in the subsequent EXIM Policy, it will be difficult to connect the SION under the subsequent policy with the exports made under the old policy. It is, therefore, difficult to accept the contention raised by the learned Additional Solicitor General that the subsequent SION would decide the fate of the petitioners in this case. 19. In this behalf, it may still be further seen that in the Pass book Scheme once the exports were made and the credits accrue and recorded by the competent authority in the pass book, on the basis of those credits any goods could be imported and even be sold. We have deliberately quoted extensively Para 54 of Chapter 7 of the Policy (see Para 5.3.3. supra) under which, there is a clear reference that any goods not inclu....
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.... 21. There are few decisions in which the Apex Court as well as the other High Courts have considered the question of the applicability of the norms. In S.B. International case, 1996 (82) E.L.T. 164 (S.C.) cited (supra), it was observed by the Supreme Court as under : "It is the date of licence that is relevant and not the date of application therefor. The norm (value addition norm) in vogue on the date of grant of licence shall govern the licence. The mere fact that the authorities have a discretion to take into account the exports made after the date of application for advance licences makes no difference to this position." That was a case where the exporter was claiming the relief on the basis of the norms which were applicable on the date of the filing of applications for Advance Licence whereas, the Department's view was that the norms which were applicable on the date of the licence could alone be relied upon by the exporter. That was also a case where the norms were changed to the detriment of the exporter and perhaps because of that it was claimed that the changed norms were not applicable. The Supreme Court held as quoted above and the observations would go to s....
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....authority and in the present case the Competent Authority after considering the petitioners' application has granted Advance Licence in September, 1993. That licence could not be modified on the basis of the norms fixed on 20th January, 1995. This would be totally arbitrary action. That norms cannot have any retrospective effects so as to adversely affect the rights granted to the petitioners under Licence. The norms prescribed will take effect only from the date of its publication i.e., from 20th January, 1995 and not from the earlier date." The situation is no different in our case either. The pass books were issued to the petitioners on certain conditions as they appeared in the EXIM Policy, which we have quoted earlier. If that is so, then the entitlement of the petitioners to the credit earned on account of the exports made during the pendency of the pass books granted to them could not be set at naught by relying on the subsequent norms which came into effect only from 1-4-1997. The Bombay High Court had also relied upon the aforementioned decision of S.B. International Limited case. We also respectfully agree with the learned Judges of the Bombay High Court and would choo....
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....e individual import of these items subject to the quantity limitation of 227 kilos as against the export of 1 MT of Frozen Head-on/Headless Shrimps. There can be no other way in which the said entry can be read. 25. Learned Additional Solicitor General, however, raised an entirely new argument to the effect that even if we apply the old SION, on account of the language of Paragraph 54 and more particularly because of the subsequent amendments, which came into effect from 25-3-1996, the petitioners could not be entitled to any credit whatsoever. The learned Counsel points out that the original Paragraph 54 was amended during the pendency of the Pass book scheme whereby some changes came to be made by adding the words "deemed imports" at some places. We have highlighted these amendments in Para 5.3.6. (supra). In Paragraph 54 and more particularly the third part thereof, the import was described as "deemed import" at two places. From this, the learned Additional Solicitor General suggests that since the pass books were issued prior to 25-3-1997 when the amendments came into effect, there will be no question of any concept of "deemed" or "notional imports" and in order to be e....
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....of .27 MT of export insofar as it pertained to the Vitamin Mixes. Even if the whole counter is scanned, it will be seen that it is not at all pleaded that on the basis of unamended Paragraph 54, there had to be matching prior import in order to be able to get the credit on the basis of exports and indeed it could not have been the stand for the simple reason that the concept of advance licence is entirely different from the concept of the Pass book scheme though the Pass book facility is in the nature of a further facility but which is independent of and de hors the Advance Licence Scheme. It will be seen that the language of Paragraph 54 of the Policy and more particularly third part thereof is plain and unambiguous to suggest that on the basis of the export of goods by the pass book holder, the designated authority has to calculate the basic customs duty payable on the imports in the light of the SION and has to credit the said amount in the pass book. The subsequent sentence clarifies the position further, which is to the following effect : "Upon imports being made by the Pass book holder, the credits may be utilised to pay the basic and additional customs duties on the impor....
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.... the matching imports even under the unamended scheme. However, it was tried to be argued that we should not interpret the substantive policy on the basis of the language of Paragraph 114 of the Handbook of Procedures, Vol. 1 because a procedural rule could not be used for the purpose of interpreting the provisions of the Act. There can be no dispute about this proposition but the sentence is being displayed only to show as to how the earlier policy, which in itself depended upon only notional imports, was to be worked in reality. Our attempt is to show that the user of the words 'deemed imports' in Paragraph 114 of the Handbook of Procedures, Vol. 1 was a natural fallout of Paragraph 54 of the Policy and not vice versa. 28. The learned Additional Solicitor General then suggested that by amendment, the word 'deemed' came to be added in the Pass book Scheme also, more particularly in the third part of Paragraph 54. We have quoted the same paragraph in Paragraph 5.3.6 of this judgment. From this, the learned Additional Solicitor General contends that at least from the date of the issue of the pass book, i.e. from 25-11-1995, up to 25-3-1996 the deeming provision was not avail....
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....was bifurcated into two parts, namely, (i) Vitamin Mixes = 0.027 MT/MT and (ii) Mineral Mixes = 0.200 MT/MT" Therefore, the bifurcation even if introduced as a corrective measure was with effect from 1-4-1997. On this backdrop though the authorities were in a quandary about the real interpretation, which would be clear from the letter dated 15-12-1998, at Page 64 of the compilation, it is clear to us that the bifurcation of the entry in SION could operate only prospectively. 30. From the overall correspondence and the documents, it seems that even the responsible officers of the Department were not certain about the implication of the Policy and were mixing up the Advance Licence Scheme with the Pass book Scheme. We have already shown that what was made applicable to Advance Licence Scheme (the nexus between the imports and the exports) was not applicable and could not be made applicable to the Pass book Scheme which was entirely different and based on only the notional imports. 31. In view of all that has been stated above, it must be said that the writ petitions deserve to be allowed. In these cases, the pass books were issued on 25-11-1995 and throughout the r....