Oswal Woollen Mills Ltd. vs Union of India

Pendse J.

The petitioners are a public limited company and are engaged in the business of woollen materials. The petitioners, in course of the business, imported synthetic waste under OGL-4 AM 1983-84 (Appendix 16) and sought clearance. The petitioners claimed that the goods imported were destroyed in Customs Warehouse at Ludhiana due to fire. The customers authority declined to clear the goods by asserting that OGL-4 Appendix 16 of Import Policy 1983-84 has no application. The petitioners thereupon preferred the present petition under Article 226 of the Constitution seeking direction to the Collector of Customs to clear the consignment. The learned single Judge while admitting the petition directed the department. The clear the consignment after provisional assessment and by securing requisite bank to complete adjudication proceedings in pursuance of the show cause notice issued on June 23,1985 under Section 124 of the Customs act.

Accordingly, the petitioners cleared the consignment after furnishing bank guarantee and thereafter the Additional Collector of Customs by impugned order dated June 5, 1986 held that the goods cleared by the petitioners could not have been imported in pursuance of OGL-4 Appendix 16 Import Policy 1983-84 and the goods were liable for confiscation. As the goods were already cleared by the petitioners, the Additional Collector imposed penalty of Rs. 2,34,423/- under Section 112 of the Customs Act and directed enforcement of the bank guarantee. The petitioners thereupon amended the petition and challenged the legality of this order.

Apart from the impugned order passed by the Additional Collector, the petitioners also challenged the levy of landing charges and validity of provisions of Section 3(2) and levy of additional countervailing duty.

Shri Mehta, learned counsel appearing on behalf of the petitioners, submitted that the issue of landing charges and levy of additional countervailing duty stands concluded by decision of Division Bench of this Court to which one of us (Pendse J.) was a party, reported in Ashok Traders Vs. Union of India and another, . Shri Mehta very fairly stated that the department is entitled to enforce the bank guarantee to recover the landing charges and the countervailing duty. The only contention which survives for consideration is whether the Additional Collector was in error in holding that the petitioners were not entitled to the benefit of replacement import under Appendix 16 OGL-4 Import Policy 1983-84. The relevant part of Appendix 16 sets out provisions for importation of the goods. The goods must be imported against insurance (marine) policy, insurance claim must be settled by the insurance company and the goods to be imported must be replacement of previously imported goods which were lost or damaged after import. The conditions to take advantage of the replacement import are - i) that the replacement goods should be imported within 24 months from the date of the clearance of the previously imported goods; ii) that no remittance shall be allowed except for payment of insurance and freight charges where the replacement of goods by the foreign suppliers is subject to such payment; and iii) the documents in respect of this shall be produced by the importers before the customs authorities. Now, in the present case, it is not in dispute that the goods previously imported were burnt in the fire broke out in the customs warehouse at Ludhiana. It is also not in dispute that replacement goods were imported within a period of 24 months from the date of clearance of previously imported goods. it is also not in dispute that the petitioners had produced the requisite documents before the customs authorities. The only question on which the Additional Collector held against the petitioners by the impugned order is that the condition that the replacement goods must be covered by marine insurance policy is not fulfilled.

Shri Mehta, learned Counsel appearing on behalf of the petitioners, submitted that view taken by the Additional Collector is entirely erroneous. The learned Counsel urged that the insurance covered was from warehouse to warehouse or which is popularly known as point to point. The learned Counsel urged that the goods were not cleared from the customs warehouse at Ludhiana and were not in custody of the petitioners and consequently the conclusion of the Additional Collector that the insurance covered ceases to exit as soon as the goods reached Ludhiana town is totally erroneous. In our judgment, the submission is correct and deserves acceptance. The Additional Collector has proceeded to hold that as soon as the goods reached Ludhiana town, the insurance covered ceases to have any effect and consequently the petitioners could not have recovered insurance claim in respect of goods previously imported and which were destroyed in fire. It was further held that the replacement goods were not purchased from the insurance claim and therefore the provisions of Appendix 16 OGL-4 Import Policy 1983-84 has no application. we are unable to accept the claim urged on behalf of the department that the insurance covered ceases to have effect as soon as the goods reached Ludhiana town. A perusal of insurance policy makes it clear that the insurance covered is available while the goods are in transit and the policy clearly lays down that it is from warehouse to warehouse, i. e. the warehouse of the importer. The mere fact that the goods have reached Ludhiana town is not enough to conclude that the transit has come to an end. As long as the goods are not cleared by the customs authority and are stored in the customs warehouse, it is futile to suggest that the transit has come to an end and the goods have been received by the importers. Once the erroneous assumption of the Additional Collector on this court is found to be unsustainable, then the submission of Shri Mehta that the replacement import is covered by the relevant policy deserves acceptance.

Shri Mehta also pointed out that in respect of identical matter where the goods imported by M/s. Sanjeev Woollen Mills and M/s Monica Mills were burnt at Ludhiana, the Collector of Customs by order dated June 1, 1985 had discharged the show cause notice accepting the contention of the importers that the replacement import is squarely covered the provisions of Appendix 16 of the relevant import policy. Shri Mehta submits that the additional Collector in the present case could not have taken a different view and that too, on a wrong reading of insurance policy. The submission is correct and deserves acceptance.

Shri Desai, learned Counsel for the department, submitted that the petitioners had another remedy of filing an appeal against the impugned order of Additional Collector and therefore relief should not be granted in writ jurisdiction. We are unable to accede to the submission for more than one reason. In the first instance, the impugned order was passed during the pendency of the petition. Secondly, the petition is pending in this Court for last about ten years and no fruitful purpose will be served by directing the petitioners now to file an appeal. In our judgment, the relief sought by the petitioners cannot to denied.

Accordingly, petition partly succeeds and the impugned order dated June 5,1986 passed by the Additional Collector of Customs and the copy of which is annexed as Exh. ''B'' to the petition, is set aside and it is declared that the replacement import squarely falls within the provisions of Appendix 16 OGL-4 AM 19983-84 policy. The relief sought by the petitioner in respect of landing charges and in respect of payment of additional/ countervailing duty is rejected. The department is at liberty to enforce the bank guarantee furnished by the petitioners to recover the landing charges and additional/ countervailing duty. In the circumstances of the case, there will no order as to costs.