By TIOL News Service

CHENNAI, AUG 12, 2013: THE petitioner is a proprietorship concern. They import various items used in pharmaceutical, beverage, food and other industries. In the course of business, they have entered into an agreement with one Kawarlal & Co., Chennai for purchase of 400 Kgs. of Lactose. The said Kawarlal & Co. imported a consignment of Lactose and the said consignment was kept in the Customs Warehouse under Warehouse Bill of Entry No.6689020, dated 30.4.2012 with In-bond Reference No.2000281547, dated 11.5.2012. The said Kawarlal & Co. sold the consignment under In-bond Sales Invoice No.Bond/2012-13/000052, dated 4.8.2012. On purchase of the Lactose through In-bond sales, the petitioner filed Ex-bond Bill of Entry No.7590365, dated 6.8.2012 before the Customs Department, Chennai for clearance of the goods under DFIA License No.0710070929 stating that it has been duly endorsed for transferability by the competent authority in terms of the Foreign Trade (Development & Regulation) Act, 1992. It is under this transferred DFIA License that the goods are sought to be cleared.

Insofar as the license in issue is concerned, the said DFIA License No.0710070929, dated 15.4.2010 was originally issued to Britannia Industries, Bangalore, as actual manufacturer. On completion of the export obligation, Britannia Industries obtained an endorsement with regard to transferability on 6.12.2010. Thereafter, on 17.12.2010, Britannia Industries transferred the said license to Rishab Enterprises, Chennai for valuable consideration. The said license was thereafter transferred from Rishab Enterprises to Golcha Enterprises on 4.1.2012. Later on Golcha Enterprises transferred the said license in favour of the petitioner on 3.2.2012.

The goods in question, namely Lactose, were consigned in favour of Kawarlal & Co., Chennai, as stated earlier, under Bill of Lading dated 14.4.2012 and the said company filed In-bond Bill of Entry on 30.4.2012. On 4.8.2012, the In-bond Sales Agreement was entered into between Kawarlal & Co. and the petitioner for sale of 400 Kgs. of Lactose and on the same day, the In-Bond Sales Invoice was raised. On 6.8.2012, an Ex-bond Bill of Entry No.7590365 was filed and the Customs Department raised the following query on 6.8.2012:

" Please refer to the Circular No.13, dated 31.1.2011 (DGFT). The import of Lactose as alternative input is not allowed under DFIA ."

Challenging the said stand of the department refusing to allow clearance, the writ petition is filed in the High Court.

The High Court observed,

"In the present case, it is not in dispute that the original licence was issued on 15.4.2010 and its validity is for a period of two years ending 14.4.2012. The transferability endorsement was made on 6.12.2010. Therefore, the license is valid till 30.4.2012 for shipments or imports made under the said license, in terms of paragraph 9.11A read with paragraphs 2.12.1 and 2.12.2 of the Handbook of Procedures, 2009-2014 . Hence, the contention of the respondent/department that the imports are not covered by a valid license cannot be countenanced. It is also not in dispute that the Bill of Lading in this case was issued on 14.4.2012 and In-bond Bill of Entry was filed on 30.4.2012. Therefore, the license covers the import and there cannot be any dispute on its validity in relation to the import.

Insofar as the issue relating to the applicability of the Public Notice dated 23.7.2010, the Clarification dated 23.9.2010 and the Policy Circular dated 31.1.2011 is concerned, the same may not apply to a valid license, the transferability of which is endorsed. It is to be noticed that the clarification issued by the Ministry of Commerce dated 31.7.2008 and the DGFT Policy Circular dated 24.3.2009, which were in force prior to issuance of license in question dated 15.4.2010, will be made applicable to the license, as it extends the benefits of flexibility to import the alternative input/product mentioned in the SION and that appears to be the main tenor of the petitioner's plea seeking release of the Lactose stating that the clarification and the circular which were in force at the time of issuance of license will be applicable to the goods imported and not the subsequent clarifications.

The Supreme Court in S.B. International Ltd. case, has held in categoric terms that the norms that are applicable on the date on which the license is issued will be valid in respect of goods imported under the said license.

The above said view of the Supreme Court has been followed by the Division Bench of the Bombay High Court in the case of Sonia Fisheries , wherein it was emphatically held that the policy prevailing on the date of grant of advance license will apply. A similar view was taken by the Supreme Court in Jain Exports (P) Ltd. case.

Since the license in this case was issued on 15.4.2010 and on the date on which the license was issued the clarification dated 31.7.2008 and the DGFT Policy Circular dated 24.3.2009 were in force, the license would get the benefit of the said clarification and the DGFT Policy Circular. Subsequent change in policy by way of Public Notice No.84/2009-14, dated 23.7.2010, clarification dated 23.9.2010 and the Policy Circular No.13, dated 31.1.2011 will have no consequence in respect of the license that has already been issued. Accordingly, the said issue is decided in favour of the petitioner."

Insofar as the validity of the import is concerned, which is questioned by the respondents on the ground that the In-bond Sales invoice is dated 4.8.2012 and therefore the import is not valid, the High Court was unable to accept such a plea in view of the specific provision contained in paragraph 9.11A read with paragraphs 2.12.1 and 2.12.2 of the Handbook of Procedures, 2009-2014. Therefore, the Bill of Lading issued on 14.4.2012 coupled with the In-Bond Bill of Entry 4.8.2012 will cover the import in question in terms of the above paragraphs of the Handbook of Procedures, 2009-2014 and the endorsement made by the Assessing Authority refusing to grant clearance of the goods is bad.

For the foregoing reasons, the writ petition is allowed as prayed for.

(See 2013-TIOL-612-HC-MAD-CUS)