Holding

White cement is not a canalised item under Appendix 5 Part B Serial No. 8 and therefore may be imported under the Open General Licence, rendering the penalty unlawful.

Summary

M/s Kajaria Exports Ltd. and others imported 5,000 metric tonnes of white cement and sought clearance under the Open General Licence provision of Appendix 6 List 8 Part III Item 33 of the 1984-85 Import and Export Policy. The authorities denied clearance, issuing a show‑cause notice that white cement was a canalised item under Appendix 5 Part B Serial No. 8, which required import only through the State Trading Corporation. The High Court upheld the show‑cause notice, held white cement to be canalised, and imposed a penalty of Rs. 29,57,000. On appeal, the Supreme Court examined the definition of "cement" in the Imported Cement Control Order, 1978, which expressly excludes white cement, and noted that the related press note and policy language did not treat white cement as a canalised commodity. Consequently, the Court held that white cement is not a canalised item, allowed the appeals, set aside the penalty, and directed the appellants to pay the applicable customs duties with interest.

Issues considered

Whether white cement falls within the definition of the canalised item at Serial No. 8 of Appendix 5 Part B of the Import and Export Policy, 1984‑85.
Whether white cement can be imported under the Open General Licence provision of Appendix 6 List 8 Part III Item 33.
Whether the penalty imposed by the customs authority is legally sustainable.

Legislation cited

Cement Control Order, 1967
Customs Act, 1962s. 111(d)
Import Control Order, 1955s. 3
Imported Cement Control Order, 1978s. 2(a), s. 2(c)

Subjects

white cementimport policycanalised itemOpen General Licencecustoms dutypenaltyImported Cement Control OrderState Trading Corporationstatutory interpretation

Judgment

/.

M/S KAJARIA EXPORTS LTD. AND ORS. A
v.
UNION OF INDIA AND ORS.

APRIL 7, 1995
B
[S.C. AGRAWAL AND SUJATA V. MANOHAR, JJ.)

Import and Export Policy 1984-85 :

White CemenHmport of-Held Open General Licence item covered
under appendix 6 List 8 Part III Item 33-Held not a canalised item under r,
Appendix 5 Part B Item at Serial No. 8-'White Cement' 'Ordinary Portland
Cement'-Distinction between.

Imported Cement Control Order 1978: Clause 2(aT-'Cement'-Dejini-
b~ D
· The appellant imported 5000 metric tonnes of white cement and
sought its clearance as an Open General Licence item under Appendix 6
List 8 Part III Item 33 of the Import and Export Policy for 1984-85. The
clearance was denied on the ground that it was a canalised item under
• Appendix 5 Part B item at serial No. 8 of the Import and Export Policy E
and a show cause notice was issued to the appellants. The appellants
challenged the show cause notice before the High Court which by an
interim order allowed clearance of goods on appellants' funishing of a
bank guarantee as well as undertaking to pay interest in the event of
dismissal of their writ petitions. Pursuant to the interim order the respon- F
. _.,
)
dent adjudicated the matter and held that white cement could not be
' imported under Open General Licence and consequently imposed a penal-
ty of Rs. 29,57,000 and also directed enforcement of bank guarantee. The
High Court also dismissed the appellants' petitions by holding that white
cement could not be imported under Open General Licence and was
covered by Appendix 5 Part B Item at Serial No. 8 of the Import and Export G
Policy and was a canalised item. Against tbe Judgment of the High Court
appeals were preferred before this Court.

Allowing the appeals and setting aside the impugned judgment, this
Court H
227
228 SUPREME COURT REPORTS (1995] 3 S.C.R.
A HELD : 1. For the purposes of import, white cement is not a
canalised item under entry at Serial No. 8 of Appendix 5 Part B of the
Import and Export Policy for 1984·85. [232-H)

2. In item No. 8 itself there Is a clear reference to the manner In
which cement which is covered by that Item Is to be Imported. The item
B refers to the policy or the Government In the Ministry or Industry in
connection with import or cement and specifically states tbat Import by the
State Trading Corporation shall be governed by such policy. The policy of
the Government in the Ministry of Industry Is therefore, directly relevant
for the purpose or interpreting this Item and Is reflected In the order called
C the Imported Cement Control Order 1978. The definition or cement under
clause (2) of the Order excludes white cement from the purview or the
Order. In other words, white cement Is not considered to be a canalised
item which can be imported by the State Trading Corporation of India.
Had it been so cousidered, the Imported Cem.ent Control Order of 1978
would have included white cement within the scope or Its definition. Fur·
D ther a Press Note issued by the Government of India, Ministry of Industry
dated 27th February 1982 also refers, inter alia to the Import of ordinary
portland cement by the State Trading Corporation and makes no reference
to the import of white cement. [230-G, H, 231·A, B, F, 232-B)

E Re : M/s. Purbachal International and Anr., (1985) 21 E.L.T. 673
(Cal.), approved.

3. The order Imposing penalty is set aside. However, the appellants
are bound to pay all duties of customs lo relation to this Import with
interest @ 15% per annum from the date of adJudlcation till payment.
F [223-CJ
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 4922.23
of 1994.

From the Judgment and Order dated 23.3.94 of the Bombay High
Court in W.P. No. 2506/84 & 15 of 1985.
G
K.N. Bhat, U mapathy Gupta and Rakesh K. Sharma for the Appel-
lants.

K.N. Bajpai, G. Prakash and V.K. Verma for the Respondents.

H The Judgment of the Court was delivered by
!(AJARIAEXPORTS LTD. v. U.O.l. [SUJATA V. MANOHAR, J.] '21!}

MRS. SUJATA V. MANOHAR, J. The appellants imported 5000 A
metric tonnes of white cement which arrived at the Port of Bombay on or
about 17.11.1984. The appellants filed bills of entry for home consumption
in respect of the goods so imported and sought clearance of the said goods
as an Open General Licence Item under Appendix 6 List 8 Part III Item
33 of the Import and Export Policy for April 1984-March 1985. Oearance, B
however, was not permitted. The respondents issued a show-cause notice
claiming that white cement was not importable under Open General
Licence since it was a canalised item under Appendix 5 Part B Serial No.
8 of the Import and Export Policy for April 1984-March 1985. The show-
cause notice was challenged by the appellants by filing writ petitions in the
High Court. C
Pursuant to an interim order passed in the writ petitions, the appel-
lants were allowed to clear the goods on furnishing a bank guarantee of a
nationalised bank for 35% of the C.I.F. value of the goods imported as also
an I.T.C. bond for the full C.l.F. value. The appellants also gave an D
undertaking that in the event of failing in the petition, they will pay interest
on the amount covered by the l.T.C. bond at 15%. They also gave certain
<' other undertakings as recorded in the interim order. Under the interim
order, the respondents were allowed to proceed with adjudication under
the impugned show-cause notice. Accordingly the 5th respondent adjudi-
cated the matter and passed an order dated 13th January, 1986 holding E
that white cement was covered at Serial No. 8 Appendix 5 Part B of the
Import and Export Policy 1984-85. Hence it could not be imported under
Open General Licence. The import of white cement without an import
licence, therefore, was not permissible and the goods imported were liable
for confiscation under Section 111 (d) of the Customs Act, 1962, read with F
Section 3 of Import (Control) Order, 1955.''Respondent No. 5 passed an
order imposing penalty of Rs. 29,57,000 and directed that the bond/bank
guarantee executed by the appellants shall be enforced forthwith as the
goods were already cleared and were not available for confiscation.
,
The writ petitions challenging the show-cause notice were dismissed G
by the High Court by its judgment and order dated 23rd of March, 1994.
The High Court held that white cement did not fall under Appendix 6 List
8 Part III Item 33 and could not be imported as an Open General Licence
Item. The High Court held that white cement was covered by Appendix 5
Part B Serial No. 8 and was a canalised item. The present appeals are from H
230 SUPREME COURT REPORTS [1995] 3 S.C.R.

A the above judgment and order of the High Court.
Under the Import and Export Policy for April 1984 - March 1985,
chapter 22 lays down Rules for the interpretation of the policy. Paragraph
242 (f) provides, 'Any item in Appendices 2"to 5 or 8 with a specific or a
generic description, will preclude the eligibility to its import under Open
B General Licence, except where the policy 'allows this clearly". Appendix 5
Part B Serial No. 8 covers the following :

'8. Cement including Clinker :•

In the case of cement including clinker, the import will be made
c only by the State Trade Corporation of India (STC), unde~ Open
General Licence on the basis of foreign exchange releas_ed by the
Govemme~t in its favour, imports, distribution, and pricing will be
made by the STC as per the connected policy of Government in
the Ministry of Industry.'
D
We have to consider whether this item would cover white cement. If
white cement is not covered by the above item then it would fall under
Appendix 6 List 8 Part ill Item 33 which is as follows :

"33. All other items permitted under Open General Licence in
E terms of the Import Policy in force, other than these covered by
Paras I and II above.'

Prima facie, one would be inclined to hold that cement would cover
all types of cement including white cement. Hence white cement should be
F considered as a canalised item, importable only by the State Trading
Corporation of India under bpen General Licence as set out in !•em 8 of
Appendix 5 Part B above. In fact this is what has been held by the High
Court. However, our attention ha8 been drawn to certain other provisions
which are relevant for the purposes of interpreting Item No. 8 in Appendix
5 Part B. In Item No. 8 itself there is a clear reference to the manner in
G which cement which is covered by that item is to be imported. The item
provides that (1) import will be made only by the State Trading Corpora-
tion of India on the basis of foreign exchange released by the Government
of India in its favour; and (2) import, distribution and pricing will be made
by the State Trading Corporation as per the connected policy of Govern-
H ment in the Ministry of Industry. The item, therefore, refers to the policy
KAJARIAEXPORTS LTD. v. U.0.1. (SUJATA V. MANOHAR, J.] 231

of the Government in the Ministry of Industry in connection with import A
of cement and specifically states that import by the State Trading Corpora-
tion shall be governed by such policy.

The policy of the Government in the Ministry of Industry is, there-
fore, directly relevant for the purpose of interpreting this item. In this
connection, the central Government has made an order called the Im- B
ported Cement Control Order, 1978. In Clause 2(a) of the Order 'cement'
is defined as follows :

'2(a): 'Cement' means any variety of cement imported into India
but does not include oil-well cement and white cement and C
coloured cement (other than grey portland cement).'

This definition of cement excludes white cement from the purview of the
Order. Under Clause 2(C) 'agent' is defined to mean the State Trading
Corporation of India or any person who acquires cement from the State
Trading Corporation of lndia. This Order, therefore, has a direct link with D
the cement imported by the State Trading Corporation of India as a
canalising agency wider Appendix 5 Part B, Serial No. 8 of the Import and
Export policy for April 1984-March 1985. The Order provides for the sale
and transport of such cement, prices at which the State Trading Corpora-
tion may sell cement, maintenance and production of accounts and so on. E
The State Trading Corporation, therefore, is required to import and sell
cement in accordance with the Imported Cement Control Order of 1978
which excludes white cement from its purview. In· other words, white
cement is not considered to be a canalised item which can be imported by
the State Trading Corporation of India. Had it been so considered, the
.--1\ Imported Cement Control Order of 1978 would have included white ce- F
ment within the scope of its definition. It is not disputed that this Order
was in force during the period covered by the Import and Export Policy
for April 1984-March 1985.

The Cement Control Order of 1967 also excludes from the definition
of cement, white cement. This Order, however, is under the Industries G
(Development and Regulation) Act, 1951 and is made for the purpose of
securing equitable distribution and availability at fair prices of cement. So
this Order will not be of direct relevance while interpreting the entry at
Serial No. 8 of Appendix 5 Part B. The Imported Cement Control Order
of 1978, however, is of direct relevance for the purpose of interpreting this H
--
232 SUPREME COURT REPORTS [1995] 3S.C.R.
A entry, and a combined reading of both these would clearly show that white
cement was not considered as a canalised item under the said entry. The
appellants have also relied upon a Press Note issued by the Government
of India, Ministry of Industry dated 27th February, 1982 which also refers,
inter alia, to the import of ordinary portland cement by the State Trading
B Corporation and makes no reference to the import of white cement.

The appellants havo also drawo our attention to the composition of
white cement which is different from ordinary portland cement. Properties
of white cement are also somewhat different from those of ordinary
portland cement. In commercial parlance, white cement is considered as a
C different commercial commodity. It is submitted before us that if a cus-
tomer asks for cement from a cement dealer, he will get ordinary portland
cement and not white cement. Our attention was drawo to a decision of
the Calcutta High Court inRe: M/s. Purbacha/ International &Anr., (1985)
21 E.L.T. 673 (Cal.). A learned Single Judge in that judgment has discussed
at length the properties of ordinary portland cement as against the proper-
D ties of white cement. He has set out the relevant portions of a booklet
issued by the Indian Standards Institution under the title "Indian Standard
Specification for White Portland Cement". It states :

'White Portland Cement is generally meant for non- structural use.
E White Portland Cement is made from raw material containing very
little iron oxide and manganese Oxide. Liroited quantities of cer-
tain chemicals, which will iroprove whiteness of cement without
affecting the physical properties, may be added during manufac-
ture ......... "

F
There is a separate booklet issued by the Indian Standards Institution
under the title "Indian Standard Specifications for Ordinary and Low Heat
Portland Cement" which also provides the terminology, manufacturing
process, chemical requirements, physical requirements etc. of ordinary
portland cement. The chemical requirements of white Portland cement and
G ordinary and low heat portland cement are quite distinct and separate. The
learned Single Judge has also observed that the pricing of the two com-
modities is quite different. Their chemical composition and uses are also \
quite different, and in the commercial world,the two are treated as dif-
ferent commodities. He has, therefore, held that for the purposes of
H iroport, white cement is not a canalised item at Serial No. 8 of Appendix
KAJARIAEXPORT)i LID. v. U.0.1. [SUJATA V. MANOHAR, J.] 233

5 Part B. We respectfully agree with these findings of the learned Single A
; Judge. What is more important, the entry in question makes a clear
reference to the connected policy of the Government in the Ministry of
Industry in connection with the items canalised at Serial No. 8 of Appendix
5 Part B. This connected policy of the Govermnent is reflected in the
Imported Cement Control Order of 1978, the Cement Control Order, 1967
am! the Press Nute which du not cover within their ambit white cement. B
In the premises, the appeals are allowed. The impugned judgment of
the High Court is set aside. The appellants are, however, bound to pay all
duties of customs in relation to this import. If they have not done so
already, they shall do so within weeks from today. The amount of customs C
duties required to be paid by the appellants shall bear interest@ 15% per
annum from the date of adjudication till payment. The order imposing
penalty, however, is set aside. The respondents shall be entitled to realise
the bank guarantee furnished by the appellants towards any unpaid duty
together with interest. Looking to the circumstances, however, there will
be no order as to costs. D
T.N.A. Appeals allowed.

)