JUDGMENT

D.K. JAIN, J.

Leave granted.

2. This appeal, by special leave, arises out of the judgment and order dated 7th 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 order dated 13th 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 goods to be supplied to RCF, on 22nd 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 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, Bombay, vide their letter dated 30th 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 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 Special Imprest Licence (SIL), to the appellant on 30th 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.

(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 pr