2015 (1) TMI 493 - HC - Customs

Export of Bulletproof Vests: Court Invalidates NOC Requirement, Directs DGFT to Revise List

The court held that the circular issued by the DGFT mandating a No Objection Certificate (NOC) from the Department of Defence Production (DoDP) for the ... Free exportability subject to FTP and other law - No Objection Certificate requirement for 'military stores' as specified by DGFT - Limitations on DGFT's power to modify or add restrictions to the Foreign Trade Policy - DGFT's role to specify items within notified categories, not to create omnibus prohibitions - SCOMET classification and its applicationFree exportability subject to FTP and other law - No Objection Certificate requirement for 'military stores' as specified by DGFT - Validity of the impugned circular proscribing export of goods 'apparently in the nature of military stores' without a NOC from DoDP - HELD THAT: - Paragraphs 8-11 and 13-15 analyse the FTP and Schedule 2 (ITC(HS), 2012). The FTP establishes a default rule of free exportability unless an item is expressly regulated under the FTP or any other law. Entry 4 of Table A contemplates that items specified by the DGFT as 'military stores' may require a NOC, but no such list has been specified by DGFT. The impugned circular purports to impose an omnibus prohibition on export of all goods 'apparently in the nature of military stores' without a NOC, which is inconsistent with the FTP's scheme that only items expressly specified attract the stated condition. Consequently the circular goes beyond the regulatory role conferred by the notified Export Policy and imposes a restriction not authorised by the FTP or any other law. [Paras 8, 10, 13, 14]The impugned circular is not in conformity with the FTP and is set aside.Limitations on DGFT's power to modify or add restrictions to the Foreign Trade Policy - DGFT's role to specify items within notified categories, not to create omnibus prohibitions - Interpretation of FTP by DGFT - Extent of DGFT's authority to issue the impugned circular or otherwise impose export restrictions outside the FTP - HELD THAT: - Section 6 and paragraphs 2.3-2.4 of the FTP confer on DGFT the role of advising, interpreting the FTP and specifying procedures, but do not empower DGFT to amend or supplement the FTP or to exercise powers reserved to the Central Government under Section 5. The DGFT's proper role in relation to entry 4 is to specify those items which fall within the notified category; it cannot, by circular, widen the restriction to all items 'apparently' military in nature. Circulars or public notices may clarify procedure or resolve classification doubts, but they cannot effect substantive modification of the Export Policy as notified by the Central Government. [Paras 16, 17, 18, 19]DGFT lacked authority to issue omnibus directions contrary to the FTP; its power is limited to specifying items and procedures within the framework of the notified policy.SCOMET classification and its application - No Objection Certificate requirement for 'military stores' as specified by DGFT - Whether bullet proof vests are covered by SCOMET or otherwise restricted under the FTP so as to require a NOC - HELD THAT: - Entry 5 and Appendix 3 (SCOMET) do not include bullet proof vests; category 6 (munitions list) remains to be finalised but has not been notified to cover the product in question. Given that bullet proof vests are not specified in the SCOMET list and not otherwise listed under the notified entries that attract restriction, there is no basis in the FTP to treat them as requiring a NOC. Further, the fact that such items are freely importable reinforces that FTP does not disclose an export restriction for the product at present. [Paras 23, 24, 25, 26, 27]Bullet proof vests are not shown to be part of SCOMET or otherwise restricted under the FTP; export restriction by DGFT circular is unwarranted.DGFT's role to specify items within notified categories, not to create omnibus prohibitions - Direction to DGFT and DoDP to remedy the regulatory gap identified by the Court - HELD THAT: - Recognising that entry 4 contemplates a list to be specified by DGFT, the Court obliged DGFT to perform that function within a fixed time frame and directed DGFT to ensure DoDP specifies an appropriate timeline for disposal of NOC requests. The direction is procedural and administrative: it does not validate the impugned circular but requires the authorised authority to carry out the specification exercise authorised by the FTP. Meanwhile, the petitioner is permitted to export non lethal items not expressly covered by entries 4 or 5 or other law. [Paras 28, 29, 30]DGFT directed to specify the list of military stores requiring a NOC within eight weeks and to ensure DoDP prescribes a timeframe for NOC decisions; petitioner permitted interim export of non lethal, non specified items.Final Conclusion: Writ petition allowed: the DGFT circular imposing an omnibus NOC requirement for goods 'apparently in the nature of military stores' is set aside as ultra vires the FTP/FTDR Act; DGFT is directed to specify the items that require a NOC within eight weeks and to get DoDP to prescribe timelines for NOC disposal; in the interim the petitioner may export non lethal items not expressly specified as restricted under the FTP or any other law. Issues Involved:1. Validity of the impugned circular dated 04.12.2008 issued by the DGFT.2. Whether the impugned circular is ultra vires the FTDR Act and the FTP.3. The requirement of a No Objection Certificate (NOC) from the Department of Defence Production (DoDP) for the export of bulletproof vests.4. The role and powers of the DGFT under the FTDR Act and FTP.5. Whether bulletproof vests fall under the category of military stores or SCOMET goods.Detailed Analysis:1. Validity of the Impugned Circular:The petitioner challenges the circular dated 04.12.2008 issued by the Director General of Foreign Trade (DGFT), which mandates an NOC from the Department of Defence Production (DoDP) for the export of goods classified as military stores. The petitioner argues that this circular is not in line with the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act) and the Foreign Trade Policy (FTP).2. Ultra Vires the FTDR Act and FTP:The petitioner contends that the circular is ultra vires the FTDR Act and FTP, asserting that bulletproof vests are freely exportable under the FTP and not restricted by any law. The court notes that paragraph 2.1 of the FTP states that exports are free unless regulated by the FTP or any other law in force. Since no law expressly prohibits the export of bulletproof vests, the court examines whether any restriction can be inferred from the FTP.3. Requirement of NOC from DoDP:The court examines entry 4 of Table-A of Schedule 2 of ITC (HS), 2012, which pertains to military stores and indicates that such items are freely exportable but require an NOC from DoDP unless listed under Note 1. The court highlights that the DGFT has not specified any items of military stores, rendering the entry ineffective. Therefore, the circular's blanket restriction on exporting items 'apparently in the nature of military stores' is not in conformity with the FTP.4. Role and Powers of the DGFT:The court discusses the DGFT's role under Section 6 of the FTDR Act, which includes advising the Central Government on foreign trade policy and implementing it. The DGFT can issue clarifications and specify procedures but cannot modify the FTP. The court emphasizes that the DGFT's powers do not extend to issuing circulars that impose restrictions not specified in the FTP.5. Classification of Bulletproof Vests:The court rejects the respondent's argument that bulletproof vests fall under the SCOMET list, noting that Appendix 3 of the SCOMET list does not include bulletproof vests. The court also dismisses the contention that the circular aligns with India's commitments to non-proliferation, as bulletproof vests do not constitute weapons of mass destruction.Conclusion:The court concludes that the impugned circular is not in conformity with the FTP and the FTDR Act. The DGFT's circular is set aside, and the DGFT is directed to specify the list of military stores requiring an NOC from DoDP within eight weeks. In the interim, the petitioner is permitted to export non-lethal items not expressly restricted under the FTP or any other law. The court's decision underscores the importance of adhering to the legal framework established by the FTDR Act and the FTP, ensuring that any restrictions on exports are clearly specified and justified.