DTA Supply Restrictions on Marble Upheld as a Valid Foreign Trade Policy Measure

The Foreign Trade Policy 2009-2014 was analysed as permitting the Central Government to regulate exports and imports in public interest under the Foreign Trade (Development and Regulation) Act, 1992. Paragraphs 6.8 and 6.9 were treated as exceptions to the export-oriented scheme for EOUs, and DTA supplies under Paragraph 6.9(b), including supplies against foreign exchange remittance, were regarded as transactions involving an element of sale and capable of regulation. The prohibition on DTA supplies of marble was upheld as a valid policy measure, supported by concerns over domestic industry, employment, and diversion of imported raw material into the DTA.

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Issues: Whether the Central Government could validly prohibit DTA supplies of marble by export oriented units under Paragraph 6.9(b) of the Foreign Trade Policy 2009-2014, and whether such supplies were materially different from the prohibited DTA sales of marble under Paragraph 6.8 of the same Policy.

Analysis: The Foreign Trade (Development and Regulation) Act, 1992 empowers the Central Government to regulate foreign trade and to frame and amend the foreign trade policy in public interest. The Policy itself reserves that power and provides that exports and imports may be regulated by the Policy or other law in force. Paragraphs 6.8 and 6.9 place DTA transactions by EOUs in the nature of exceptions to the scheme of complete export orientation. The Court treated Paragraph 6.9 supplies, including supplies against foreign exchange remittance, as transactions having an element of sale and therefore capable of being regulated along with DTA sales. The earlier decision upholding the prohibition on DTA sale of marble by EOUs was treated as relevant support, because marble was a restricted item and the impugned restriction was founded on concerns of domestic industry, employment, and prevention of diversion of imported raw material into the DTA.

Conclusion: The prohibition on DTA supplies of marble under Paragraph 6.9(b) was upheld as a valid policy measure, and the challenge failed.

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