Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5222 0F 2008
(Arising out of S.L.P.(C) No.16917 of 2006)
GENERAL INSTRUMENTS COMPANY — APPELLANT
VERSUS
UNION OF INDIA & ORS. — RESPONDENTS
J U D G M E N T
D.K. JAIN, J.:
Leave granted.
2. This appeal, by special leave, arises out of the judgment
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and order dated 7 April, 2006 passed by the High Court of
Judicature at Bombay in Writ Petition No. 1174 of 2003.
3. Material facts leading to these proceedings are as follows:
In the year 1982, M/s Rashtriya Chemicals & Fertilizers
Limited (hereinafter referred to as ‘RCF’), a Government of
India Undertaking, floated a global tender for supply of various
types of capital goods required for its Thal project.
Responding to the said tender notice, the appellant, a
partnership firm, through its managing partner, Mr. Manohar
M. Kulkarni, an ex-army man, submitted its quotation for
supply of thermocouple compensating cables and extension
cables. The tender was accepted by RCF and by a purchase
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order dated 13 October, 1982, they agreed to purchase
cables worth Rs. 17,49,000/- from the appellant.
4. In order to avail of customs duty exemption on the import of
certain raw materials required in the manufacture of capital
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goods to be supplied to RCF, on 22 November, 1982, the
appellant applied to the Joint Chief Controller of Imports &
Exports (for short ‘JCCI’), Bombay, for issuance of an
import licence with duty exemption entitlement certificate
etc. for import of raw materials free of duty or at a
concessional rate of duty in terms of Import Policy Book for
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AM 83. According to the appellant, as they were not clear
about the form on which they had to make the application,
on the covering letter filed with the applications, with copies
to the Advance Licensing Committee as well as to the
Special Imprest Licensing Committee at New Delhi, a
request was made to forward the said applications to the
concerned cell so that an appropriate licence is issued for
the aforesaid purpose.
5. On processing of the application, the office of JCCI,
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Bombay, vide their letter dated 30 November, 1982, called
upon the appellant to furnish the essentiality certificate
from RCF. Accordingly, the appellant obtained the
essentiality certificate from the project authority i.e. RCF, to
the effect that they have agreed to purchase goods valued at
Rs. 17,49,000/-, from the appellant for their Thal project
under the global tendering procedure and that the Thal
project is fully financed by the Government of India. In the
certificate issued by RCF, it was also stated that the
appellant was eligible for availing concessional rate of
import duty on the raw materials imported by them for
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manufacture of cables in terms of para 14 of Import Policy
1981-82. The appellant forwarded the said certificate to
JCCI, Bombay. In spite of clear knowledge that the Thal
project of RCF was fully financed by the Government of
India, the Controller of Imports & Exports, Bombay issued a
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Special Imprest Licence (SIL), to the appellant on 30 May,
1983, under AM 84 policy, permitting the appellant to
import listed raw materials, for approximate value of
Rs.5,78,300/-; without payment of customs duty. However,
the licence was subject to the following conditions:
“(a) The appellant shall supply to RCF export
items as per list attached thereto for an f.o.b
value of Rs.17,49,000/- within 6 months from
the date of clearance of the first consignment
against the said licence.
(b)To ensure fulfilment of the export obligation
under the said licence, the appellant shall
execute a bond with 100% bank guarantee as per
the proforma given in Appendix-38 of the
Handbook of Import Export Procedure 1981-82
for a sum of Rs.12,14,623.
(c) Goods imported against the said advance licence
shall be utilised in accordance with the
provisions of Customs Notification No.11/F-
No.602/14/8/DBK dated 09.06.78, as amended
from time to time.
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(d)Cash assistance, if any, will be as per the
instructions issued by the Ministry of Commerce
from time to time.
(e) In the event of failure to fulfil the export
obligation within the time stipulated, the bond
will be enforced and the licence holder shall pay
customs duty on the proportionate quantity of
the material corresponding to the products not
exported.”
6. The requisite Bond in terms of the aforementioned
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condition (b) was accordingly, executed on 17 June, 1983.
The appellant imported raw materials from time to time,
aggregating to C.I.F. value of Rs.3,01,439/-, and cleared the
same without payment of duty in terms of the Bond. It is
not in dispute that the appellant has utilised entire quantity
of the imported raw materials in the manufacture of
resultant products, valued at Rs.17,59,382/-; supplied to
RCF in order to fulfil export obligation, as stipulated in the
licence, against the export obligation of Rs.17,49,000/-.
7. Having thus, fulfilled the export obligation, the appellant
approached the project authority, viz. RCF, for requisite
endorsement on Duty Exemption Entitlement Certificate (for
short ‘DEEC’). Initially RCF declined to make the
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endorsement, on the ground that the Thal Project was
financed by the Government of India and not by
organisations like the World Bank, OECF, ADB, etc. as
contemplated under the Exemption Notification No.210/82
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dated 10 September, 1982. However, later on, RCF made
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the requisite endorsement on the DEEC book on 2
February, 1988 to the effect that the appellant had supplied
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goods valued at Rs.17,59,382/- during the period from 27
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July, 1983 to 10 May, 1984.
8. It appears that in the meanwhile, a show-cause notice
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dated 5/6 September, 1985, had been issued by the JCCI,
Bombay, calling upon the appellant to show cause as to
why Bond, in the sum of Rs.12,14,623/-, furnished by
them, should not be enforced as the appellant had violated
clause 1 of the Licence and Clause 5 of the Bond. The
appellant was required to appear before Mr. G.R. Nair,
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Deputy Chief Controller of Imports & Exports on 20
September, 1985, at 3:15 p.m. for a personal hearing,
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which, in fact, was granted on 29 September, 1985. Not
being satisfied with the cause shown, a cyclostyled order
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dated 4 December, 1985, was passed by Smt. R. Johny,
Controller of Imports and Exports, holding that the
appellant had failed to fulfil the export obligation in time
and had failed to furnish prescribed documents within the
prescribed period, and thus, violating condition No.5 of the
Bond. Accordingly, the appellant was directed to remit the
Bond amount of Rs.12,14,623/-; to surrender the valid
R.E.P. licence remaining unutilised and to pay forthwith the
customs duty with interest @ 18% on proportionate
quantity of the exempt materials. In other words, the
supplies made by the appellant to RCF were not treated as
discharge of export obligation in terms of condition (a) of the
Licence. The appellant was declared to be a defaulter
thereby debarring it from getting any licence under the duty
exemption scheme or under any other provisions of the
Import Export Policy announced from time to time.
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9. Consequent upon the forfeiture order dated 4 December,
1985, the Controller of Imports & Exports, vide letter dated
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20 December, 1985, denied cash assistance to the
appellant. The appeal preferred by the appellant against
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the forfeiture order dated 4 December, 1985 was rejected
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vide order dated 21 May, 1986 issued by Smt. R. Johny,
Controller of Imports & Exports on the grounds that: (i) part
‘F’ of DEEC book duly certified by the project authority had
not been submitted and (ii) certificate of exports in original
nor the original export documents were furnished by the
appellant. Incidentally, the forfeiture order as well as the
appellate order was passed by the same officer, namely,
Smt. R. Johny, though the appellate order is purported to
have been issued with the approval of JCCI.
10. Aggrieved thereby, the appellant preferred second appeal
before a Committee of Joint Director General of Foreign
Trade, New Delhi.
11. During the pendency of the second appeal, the customs
authorities sought to recover customs duty amounting to
Rs.3,71,614.82 from the appellant in respect of the raw
materials imported and cleared without payment of duty
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under the Special Imprest Licence (SIL) dated 30 May,
1983. The proposed action was challenged by the
appellant by preferring Writ Petition No.2038 of 1988.
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However, when the petition was taken up for final hearing
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on 21 October, 2002, counsel for the appellant volunteered
to deposit the customs duty as demanded. Thereupon,
counsel for the revenue made a statement that within two
weeks of the deposit of the said amount, a proper show-
cause notice shall be issued and the same would be
adjudicated in accordance with law. The Writ Petition was,
thus, disposed of on the same day. However, while
disposing of the Writ Petition, it was ordered that appeal
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filed by the appellant against the order dated 21 May,
1986 shall be disposed of within a period of six months.
12. The Appellate Committee, comprising of two Joint Director
Generals of Foreign Trade, New Delhi, while observing that
the second appeal filed by the appellant was not
maintainable as in the current Hand Book of Procedure of
Export-Import Policy, there was no provision for second
appeal against the forfeiture order, in deference to the
directions given by the High Court, heard the appeal on
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merits. Vide order dated 21 February, 2003, the
Committee held that although the forfeiture order and the
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order passed in the first appeal were in accordance with the
policy yet in view of the fact that the forfeiture order had not
been actually implemented at the Bank’s level and
practically no amount had been transferred out of the
appellant’s account to the Government’s account, the
forfeiture order, did not have any financial effect on the
appellant and hence no relief was required to be given in
the second appeal. Accordingly, the second appeal was also
dismissed.
13. At this juncture, it may also be noted that in the light of
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the forfeiture order dated 4 December, 1985, the licensing
authority had initiated departmental proceedings against
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the appellant and vide an order dated 4 May, 1987, the
Deputy Chief Controller of Imports & Exports, Bombay
debarred the appellant and its partners from receiving any
import licences, customs clearance permits, allotment of
imported goods from any canalising agency, and from
importing any goods from AM 88 to AM 90. The first
appeal preferred by the appellant against the departmental
order was dismissed by the Joint Chief Controller of
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Imports & Exports on 28 July, 1987. However, the second
appeal filed by the appellant was partly allowed by the
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Additional Chief Controller of Imports & Exports on 18
st
June, 1992 by reducing the period of debarment upto 31
March, 1989. While allowing the appeal partly, the
appellate authority, inter alia , observed that there was no
mis-utilisation of imported goods, and at no point of time
the appellant had concealed any information. But they had
not been able to identify and choose a correct scheme of
import licence to execute the order. The appellate authority
finally concluded thus:
“The appellants may have mis-comprehended the
policy in force. But, they did not object when the
special imprest licence under reference was granted
to them under the deemed export category with
specific export obligation with reference to 100%
duty free imports. Since they accepted the
conditions of the licence and also executed a bond
to abide by the conditions of the licence which
carried an export obligation, it was incumbent on
them to complete formalities in support of their
contention of having discharged export obligation
notwithstanding that the imported goods were
utilised for the execution of the project. The project
they executed or supplied they made towards the
execution of the RCF, Thal Project was not a project
falling under the category of deemed exports. This
project was not aided by IDA/IBRD. Their request
for conversion of their supplies to RCF, Thal Project
in the deemed category of exports was duly
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considered by the competent authority in the
Import Trade Control Organization. Under letter
dated 30.10.1985, their request was not considered
as the supplies made by them to RCF, Thal Project
were not covered under the category of deemed
exports. They were advised to convert the special
import licence into project import licence by paying
the customs duty with penal interest thereon with
the consent of Ministry of Finance. But they did
not do so considering the fact that the appellants
mis-understood the provisions of the policy in force
and that there was no malafides on their part, I am
inclined to take a lenient view.”
nd
14. Being dissatisfied with order dated 22 February, 2003,
the appellant preferred a fresh Writ Petition in the Bombay
High Court. During the pendency of the Writ Petition, the
appellant sought leave of the Court to make a fresh
representation to the concerned Ministry, seeking
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conversion of Special Imprest Licence (SIL) dated 30 May,
1983 into a Project Import Licence. However, the said
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representation was rejected on 22 August, 2003 on the
ground that there was nothing like “Project Import Licence”
and as the imports were made in the year 1983 when the
Project Import Regulations of 1965 were in force, it was not
possible to verify the conditions after twenty years.
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15. In the judgment under appeal, after elaborate discussion
and particularly having regard to the afore-extracted
observations of second appellate authority in its order dated
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18 June, 1992, the High Court came to the conclusion
that : (i) forfeiture order against the appellant was uncalled
for; (ii) even though the second appellate authority has held
that there is no financial implication on account of the
forfeiture order, yet on account of the said order, the
appellant was made liable to pay entire customs duty with
interest and penalty; (iii) the lapse on the part of licensing
authorities in issuing a licence with Bond conditions which
were impossible to perform had serious financial
implications on the appellant; (iv) once it is accepted that it
was a mistake to issue Special Imprest licence to the
appellant and the conditions attached to the Bond and the
licence were wholly impossible to perform, the licensing
authorities ought to have taken remedial steps immediately,
particularly when Rule 8 of the Foreign Trade (Regulation)
Rules, 1963, empowered JCCI to rectify the error by
amending the licence. Finally, the High Court disposed of
the Writ Petition with the directions that : (a) in the light of
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st
order dated 21 February, 2003, the Bond/bank guarantee
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executed by the appellant on 17 June, 1983 shall not be
enforced; and (b) within six weeks from the date of its order,
JCCI, Bombay shall amend the Special Imprest Licence
(SIL) into a licence which may entitle the appellant to seek
regularisation of the imports already made under the said
licence at concessional rate of duty, if permissible under the
Customs Act. However, the High Court declined to grant
appellant’s prayer for Cash Compensatory Support,
hereinafter referred to as CCS, permissible under the
Special Imprest Licence (SIL). It is this part of the order
which is impugned in the present appeal.
16. Mr. M.M. Kulkarni, a partner of the appellant-firm, sought
permission to argue the case on behalf of the appellant on
the ground that on account of several rounds of litigation,
spanning over two decades, because of erroneous licence
issued by the licensing authorities, the firm had closed
down and, therefore, did not have the financial capacity to
engage the services of a lawyer. We granted the permission
and heard him at some length.
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17. At this juncture, it will be relevant to note that during the
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course of hearing on 23 January, 2008, learned senior
counsel appearing on behalf of the Director General of
Foreign Trade fairly stated that in view of the aforenoted
observations of the High Court, he would discuss the case
with the officers of the concerned department and possibly
the appellant might get some relief, particularly in the
matters relating to 13 independent orders/import licences,
confiscated/forfeited by the licensing authority by virtue of
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order of forfeiture dated 4 December, 1985. Further
hearing in the matter was, thus, deferred.
18. Pursuant to and in furtherance of the said offer, the office
of the Zonal Joint Director General of Foreign Trade
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examined the representation made by the appellant on 14
March, 2008. A personal hearing was also granted to the
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representative of the firm. Vide order dated 8 April, 2008,
the Foreign Trade Development Officer informed the
appellant that out of CCS claim of Rs.5,52,032.92, they
have been found to be eligible for claim of Rs.4,19,916/-,
and the department was ready to pay the said amount.
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However, as regards the balance CCS claim etc., and
interest thereon, the letter reads thus:
“Since balance claim of Rs.1,31,953/- was not
supported by the required documents, vide this
office letter dated 26.3.2008 you were advised to
furnish documentary evidence showing that the
project was funded by bilateral or multilateral
external assistance. Against this letter, you had
replied vide your letter dated 31.3.2008 stating that
the project was funded by OECF Fund. In support
of your contention you have quoted certain
information from web site of OECF and claimed that
project was funded by OECF, but no documentary
evidence from the project authority i.e. RCF Ltd.
(Rashtriya Chemicals & Fertilisers Ltd.) was
furnished by you in support of your claim. In fact,
you have furnished a project authority certificate
dated 18.3.1983 issued by the RCF Ltd. in support
of W.P. No.1174/03 filed before the Hon’ble Bombay
High Court, which was annexed as Exhibit – D to
the petition at page No.31 showing project was
funded by Govt. of India Fund.
You had also appeared for personal hearing on
7.4.2008 and contended that Part ‘F’ of DEEC Part
II was certified by the project authority i.e. RCF
Ltd., therefore, it is construed that supplies were
funded by the OECF Fund and requested to give
benefit for this amount also. Your this contention
cannot be hold good since Part ‘F’ of DEEC Part II
merely bears the information of invoice no. & date,
description of supplied items, quantity and FOR
value thereof. But it has nothing to do with the
source of finance of the project. In fact, the
supplies were financed by Govt. of India Fund;
therefore, this supply does not fall under para 131
of Hand Book of Procedure, as such, not eligible for
CCS benefit to the extent of Rs. 1,31,953/-.
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Regarding additional claim of Rs.14,478/- raised by
you vide your letter dated 31.3.08, it is to inform
you that this claim was not originally included in
the writ petition No.1174/03 field before the
Hon’ble High Court of Bombay, which is a subject
matter of SLP No.16917/2003 filed before the
Hon’ble Supreme Court of India. Even this claim is
not supported by the required documents,
therefore, your additional claim of CCS cannot be
considered.
Regarding payment of interest, it is hereby informed
that the debarring order was in force and
maintained by the Appellate Authority vide their
Order dated 18.6.1992. It was in force upto
27.2.2008 i.e. till the date of Order of the Hon’ble
Supreme Court of India in respect of SLP No.
16917/2003. There was no delay at the part of the
deptt. As such, no interest can be paid against the
above claim.”
19. It is clear from the afore-extracted communication that a
substantial claim for CCS stands allowed and the balance
claim of Rs.1,31,953/- has been disallowed for want of
documentary evidence to show that the project was funded
by bilateral or multilateral external assistance. It is
pertinent to note that in the said letter there is no
indication as to why in the first instance CCS claim for
Rs.4,19,916/- had been denied to the appellant.
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20. It was submitted by Mr. Kulkarni that having come to the
conclusion that on the facts of the case, order of forfeiture
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dated 4 December, 1985 was not warranted, the High
Court erred in not granting the consequential relief viz. the
claim for CCS, as the same had been denied only on
account of the forfeiture order, declaring the appellant to be
a defaulter. It was also contended that, in any case, there
was no justification in respondents’ withholding the CCS in
respect of other independent export orders, when all the
conditions specified therein had been fulfilled. We may also
note that in the written submissions filed after the
conclusion of the hearing, it is stated that RCF has now
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issued a certificate, dated 27 May, 2008, showing that two
orders, namely, KC 263 and KT 995 were financed by
Overseas Economic Corporation Fund (for short ‘OECF’)
and thus, CCS against both these orders are payable. It
was, thus, pleaded that the respondents should be directed
to forthwith release the CCS claim along with interest for
the delayed payment.
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21. Mr. Gaurav Agrawal, learned counsel appearing on behalf
of the Director General of Foreign Trade, filed written
submissions, opposing the grant of CCS and the interest
thereon. It is pointed out that having got the licence
converted from Special Imprest Licence to Project Import
Licence, as per the directions of the High Court, the
appellant cannot, now, contend that RCF-Thal project being
a foreign funded project, they are entitled to the claim for
CCS. In support of the submission that CCS is permissible
only in a case of Special Imprest Licence, our attention was
drawn to condition No.4 in the Special Imprest Licence
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dated 30 May, 1983. Insofar as the claim for interest is
concerned, it is urged that apart from the fact that such a
claim was made for the first time in April, 2003, when W.P.
No.1174/2003 was filed, the order of forfeiture cannot be
th
said to be malafide inasmuch as, way back on 30 October,
1985, i.e. prior to the forfeiture order, the appellant was
advised to get their import regularised by approaching the
Ministry of Finance by paying customs duty with penal
interest but the appellant did not heed to the advice of the
respondents.
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22. It is trite that no man should suffer a wrong by technical
procedure of irregularities. The Rules or procedures are the
handmaids of justice and not the mistress of the justice. Ex
debito justitiae, we must do justice to him. (Vide A.R.
1
Antulay Vs. R.S. Nayak ) . However, in the present case,
although we feel that the appellant has suffered on account
of confusion in the nature of the licence to be issued to it
but appellant’s main prayer for conversion of Special
Imprest Licence into a Project Import Licence having been
granted by the High Court, the wrong caused stands
remedied to a large extent.
23. Having considered the matter in the light of the afore-noted
subsequent intervening events, in particular the conversion
of Special Imprest Licence into Project Import Licence, in
terms of direction (b) by the High Court, we are of the
opinion that insofar as CCS claim is concerned, no further
relief can be granted to the appellant. In that view of the
matter, the certificate, stated to have been now issued by
RCF to the appellant, and annexed with the written
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submissions dated 3 June, 2008, is of no avail to the
1
(1988) 2 SCC 602
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appellant. Nevertheless, in our judgment, in view of the fact
that the second Appellate Authority had reduced the period
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of debarment, pursuant to order dated 4 May, 1987
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passed on account of the order of forfeiture dated 4
st
December, 1985, only upto 31 March, 1989 and the fact
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that the High Court vide its order dated 7 April, 2006 has
held that order of forfeiture against the appellant was
uncalled for, there was no justifiable reason for the Director
General of Foreign Trade for not releasing CCS amount at
least on the passing of the order by the High Court. It was
only during the course of hearing of this appeal that learned
counsel for the said respondents offered to get the claim re-
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examined and as such now by order dated 8 April, 2008,
the appellant’s claim to the extent of Rs.4,19,916/- has
been found to be in order. In the premises, it is manifest
that the respondents retained the amount due to the
appellant as CCS without the authority of law and are liable
to pay the same forthwith.
24. In view of the afore-going discussion, the appeal is partly
allowed; the respondents are directed to release the CCS
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claim which has been determined to be due to the appellant
within four weeks from today alongwith interest at the rate
th
of 9% per annum from 7 April, 2006 till the date of actual
payment.
25. We may clarify that we have not expressed any opinion on
the merits of appellant’s claim for CCS of Rs. 14,478/-
against export order KT-995 as also the rate of customs
duty payable by the appellant on the imports of raw
materials as appeals on both the issues are stated to be
pending before the concerned appellate forums. As and
when the appeals come up for hearing, these will be decided
strictly on their own merits without being influenced by any
observation hereinabove.
26. The appellant will be entitled to the costs of this appeal.
…………………………………J.
(C.K. THAKKER)
…………………………………J.
(D.K. JAIN)
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NEW DELHI;
AUGUST 25, 2008.
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