1. The petitioner carry on the business, inter alia, of wine wholesalers, distributors and exporters. They have obtained what is called a valid REP licence which permits them to import, among other things, ethyl alcohol which is mentioned at item 158 in Appendix 3 of the ITC Policy for 1983-84. After the petitioners submitted their bill of entry the Deputy Collector of Customs, Bombay, examined the question as to whether the item which is actually imported under the REP licence is ethyl alcohol as mentioned at item 158 of Appendix 3 as mentioned above. He found a fact which is not disputed that what is imported by the petitioners under the said licence is 6 year-old Vatted Malt Scotch Spirit. The Deputy Collector noticed that ethyl alcohol which is used in the manufacture, among other things, of dyes intermediates is totally different from the ethyl alcohol which forms a major component of old vatted malt scotch whisky which is imported by the petitioners. He, therefore, found that the petitioners were not entitled to import old vatted malt scotch whisky under the REP licence which they have undoubtedly obtained legitimately by means of transfer. In exercise of the powers conferred upon him under Section 122 of the Customs Act the Deputy Collector ordered that the product imported by the petitioners shall be confiscated with the further permission, however, that the petitioners were at liberty to pay fine of Rs. 96,000 and clear the goods. This order dated 3rd September 1986 has been challenged in this petition under Article 226 of the Constitution of India.

2. Mr. Seervai, the learned Advocate appearing for the petitioners, has taken me through the relevant provisions of the Import Policy for the year 1983-84, hereinafter referred to for brevity's sake as "the Policy", and has also invited my attention to the several documents which are relevant in this petition. He has also taken me through the order of the Deputy Collector and has criticised the same by contending that the Deputy Collector has displayed an indiscipline in not following the orders passed by his superiors in respect of the same commodity and in fact in disregarding the same. If the Deputy Collector had followed, as he was bound to follow, the orders passed by the authorities who were higher than him, then be would not have passed the impugned order.

3. In order to appreciate the point involved it is necessary to state some facts. As already mentioned above the petitioners have obtained the REP licence by way of transfer from someone who was entitled to the same under the Policy. The original holder of the REP licence was the manufacturer of dyes and chemicals. Appendix 17 states that an exporter of synthetic organic dyes including organic pigments and dye intermediates would be entitled to import materials such as "dye intermediates and chemicals in Appendix 3 and used in the manufacture of the product exported". The original holder of the REP licence was given the licence on the basis of the export performance and this licence permitted the import of, among other things, ethyl alcohol. This licence has been subsequently transferred to the petitioners who contend that they are entitled to utilise the same in accordance with paragraph 140 of the Policy.

4. Mr. Seervai points out that ethyl alcohol is undoubtedly a generic term and since the licence itself does not restrict the import to ethyl alcohol other than vatted malt scotch whisky the Deputy Collector could not bold that the item is a prohibited item and therefore order that the same be confiscated He relied upon paragraph 140 of the Policy which specifically states that though the REP licence is issued in the name of the registered exporter only and will not be subject to 'Actual User' condition, the licence holder may transfer the licence in full or in part in favour of another person. The said paragraph also permits a transferee to import the goods permitted therein, namely in the licence. Paragraph 141 of the Policy, which has also been pressed into service by Mr. Seervai, states that the transfer of the licence will not require any endorsement or permission from the licensing authority and accordingly clearance of the goods covered by a REP licence issued under the Policy will be allowed by the customs authorities on production by the transferee of only, the document of transfer of the licence concerned in his name If, therefore, the licence in question has permitted the import of ethyl alcohol, obviously, says Mr. Seervai, of whatever kind, then it is not open to the Deputy Collector to find out whether the product imported by the petitioners is going to be put to a particular use or whether it is going to be utilised as a raw material in the manufacture of particular items.

5. Mr. Seervai has also pointed out that till recently the customs authorities have themselves taken such a view, namely that ethyl alcohol including vatted malt scotch whisky/spirit is a part of ethyl alcohol and in fact have imposed customs duty on that basis. The Deputy Collector himself has recognised that this was so, but be permitted himself to examine the correctness of the view prevalent in the department and made himself bold to say that

"the adjudicating authority is not merely to follow erroneous orders of other adjudicating authorities for it would tantamount to following orders without application of mind"

. Mr. Seervai has taken strong objection to this exercise made by the Deputy Collector and has characterised it as an act of indiscipline. It is not necessary for me to make any comments upon this aspect of the order because even it the Deputy Collector has taken a view which is contrary to' the view taken by his superior officers, if the matter comes before the High Court it will not set aside the order of the Deputy Collector merely because he has not obeyed or followed the orders of his superiors if oh a proper consideration of all the questions involved this Court comes to the conclusion that the view of the Deputy Collector is correct. I am, therefore, proceeding to examine the correctness of the view taken by the Deputy Collector apart from the question whether he has followed the previous orders of his superiors.

6. I have already summarised the arguments of Mr. Seervai. I must now advert to the arguments of Mr. Sethna appearing for the respondents who has in a very emphatic manner put forth the view of the department. Mr. Sethna has supported the order of the Deputy Collector in so far as the Deputy Collector held that ethyl alcohol which is covered by the REP licence in the instant case must be the alcohol which has been originally used in the manufacture of dye intermediates because it was on the basis of the export performance of that product that the REP licence was given to the registered exporter from whom the petitioners, are only the transferees. Mr. Sethna pointed out that Appendix 17 deals with the import Policy for registered exporters, The statement of import replenishment in the said appendix permits the import of materials mentioned in column 4 to the extent mentioned in column 3 and subject to the conditions mentioned in column 5. If we see items B. 16.1 and B. 16.2 in paragraph III of this statement, it is noticed that if the export product is synthetic organic dyes including organic pigment or dye intermediates, import of 15% dye intermediates and chemicals in Appendix 3 and used in the manufacture of the product exported is allowed. Column 5 in this statement also states that in this case paragraph 8 of the General Conditions forming part of this appendix will be relevant. Paragraph 8 states that against certain export products, column 4 permits the import of items appealing in Appendix 3 without mentioning the specific items. In such cases, the export product in column 2 covers more than one product and therefore it is difficult to mention in column 4 itself the specific items of raw materials and components which go into the production of each of the export products covered by the particular serial number or sub-serial number. It is therefore necessary in such cases for each exporter, while applying for REP licence, to submit with the import application the list of such items as are actually used as raw materials/components in the manufacture of the product exported in the instant case dye intermediates embrace large number of products and therefore it was necessary for the exporter, while applying for the REP licence, to enumerate the various items which are utilised in the manufacture of the exported product. This has been done in the present case. Mr. Sethna contends, and in my opinion with sufficient justification, that the items which are permitted to be exported under the REP licences necessarily bear a connection with the raw materials Which are to be utilised in the manufacture of the items exported. Otherwise, says Mr. Sethna, the word 'replenishment' will have no meaning. Since in column 4 of the statement in Appendix 17 what is permitted in the instant case is dye intermediates and chemicals in Appendix 3 and used in the manufacture of the product exported, it is necessary to see whether ethyl alcohol which is mentioned in Appendix 3 is one which was used in the manufacture of the product exported. In support of the department's contention that ethyl alcohol which is now included in the REP licence is not the one which was used or could ever be used in the manufacture of dye intermediates, reliance has been placed by Mr. Sethna on an affidavit of one D. Premchand, Chemical Examiner in the Customs Department, which forms part of the affidavit filed by the department in Writ Petition No. 2031 of 1986 and which has been adopted in reply to this petition also, D. Premchand has clearly stated that ethyl alcohol of potable type is a product different from ethyl alcohol which is of denatured variety. According to him, ethyl alcohol used as raw material for the manufacture of dyes and chemicals is always denatured ethyl alcohol and the undenatured ethyl alcohol, which is more commonly and in trade parlance known as vatted malt scotch spirit/over proof strength whisky, is used for the manufacture of a potable commodity, namely whisky for human consumption. It could never be used as a raw material for the manufacture of dyes and dye intermediates. This is actually what the Deputy Collector has said and in tact this position has not been disputed by Mr. Seervai. It is not necessary, therefore, to go into that question. It is sufficient to say that what has been imported by the petitioners, namely vatted malt scotch whisky/spirit is not ethyl alcohol which was used or can ever be used in the manufacture of dyes and dye intermediates. In my opinion, therefore, there is considerable substance in the contention of Mr. Sethna that ethyl alcohol which could have been permitted to be imported under the REP licence against the export performance of the original holder of the REP licence could only be the ethyl alcohol which was used in the manufacture of dyes and dye intermediates because that is what is permitted in column 3 of the statement in Appendix 17.

7. The REP licence, however, does not specify the kind of ethyl alcohol which can be imported. It is on the basis of the absence of the exclusionary words that Mr. Seervai says that the petitioners are entitled to import vatted malt scotch whisky/spirit. Laft to myself I would have upheld the contention of Mr. Sethna but, however, I cannot overlook the fact that in a number of petitions interim reliefs have been given on the basis that the department itself has treated vatted malt scotch whisky/spirit as a species of the genus of ethyl alcohol and have passed appropriate interim orders. At the stage of interim relief at least on the facts of this case and in view of the fact that different Judges of this Court also have taken a view that the department itself has acted in a particular manner. I am also constrained to pass an interim order on the same lines on which orders were passed in the previous petitions.

8. Accordingly I issue rule on this petition. I also direct that this petition shall be heard along with Writ Petition No. 2031 of 1986 which itself has been directed to be heard by Mr. Justice Pratap along with Writ Petitions Nos. 1883 of 1986 and 685 of 1986.

9. Interim relief in terms of prayer (d)(i) (except the bracketted portion) and (d)(ii) of the petition. Order of interim relief, however, is stayed till 27th October 1986. If by that time the respondents do not obtain any further order in appeal or otherwise, then the order of interim relief shall be forthwith implemented.

10. Mr. Sethna waives service. Mr. Sethna also will give 24 hours' notice to the petitioners in case an appeal is filed against this order of granting interim relief.