2020 (10) TMI 1140 - HC - Customs

Imported Gold Ruling: Proper Notification Required for Trade Policy Changes

The Commissioner Of Customs Bangalore Versus M/s. Sri. Exports

The High Court upheld the tribunal's decision that the imported gold medallions and granules were freely importable at the time and not subject to ... Import of Gold from Korea - Valid import or not - case of Revenue is that respondent is neither a nominated bank nor a nominated agency as specified by Directorate General of Foreign Trade (DGFT) or in possession of status of star and premium trading houses and therefore, is not permitted to import the gold - contravention of the import policy envisaged by DGFT based on regulations promulgated by Reserve Bank of India - Confiscation - Penalty. HELD THAT:- The Foreign Trade (Development and Regulation) Act, 1992 is an Act to provide for development and regulation of foreign trade by facilitating imports into, and augmenting exports from, India and for matters connected therewith or incidental thereto. Section 3 of the Act deals with Powers of the Central Government to make provisions relating to imports and exports. Section 3(2) empowers the Central Government to make a provision for prohibiting, restricting or otherwise regulating, in all cases or in a specific class of clauses and subject to such exceptions, if any, as may be made by or under the order the import or export of goods or services of technology, by an order published in the official gazette - from perusal of the provisions of Foreign Trade (Development and Regulation) Act, 1992 and the Foreign Trade Policy, it is evident that amendments to the Foreign Trade Policy can be made by the Central Government under Section 5 of the Act or by DGFT by issuing a Notification under para 2.07 of the Foreign Trade Policy. The change in categorization from free to restricted can be made in respect of import of goods, only by an amendment and the same cannot be done by DGFT by issuing a Circular. In the instant case, admittedly, the gold medallions and gold granules were imported on 03.07.2017. Thereafter the DGFT by Notification dated 25.08.2017 has restricted the import of gold from South Korea - thus on the date, the gold medallions were imported i.e., 03.07.2017 there was no restriction and the restriction was imposed by the Central Government vide Notification dated 25.08.2017. In other words, there was no restriction with regard to import of gold medallion on the date the same was imported by the respondent - Similarly, the gold granules were imported on 21.09.2017 and thereafter DGFT issued a Notification dated 18.12.2019 by which import policy was amended and gold in any form was allowed only to be imported through nominated agencies as notified by the Reserve Bank of India in case of Banks and for other agencies by the DGFT. Thus, it is evident that on the date when the gold granules were imported i.e., on 21.09.2017, there was no restriction on its import and the restriction was imposed subsequently on 18.12.2019 by the DGFT by way of Notification. Thus, when gold medallions and gold granules were imported, they were freely importable and the same was brought under the restricted category subsequently. Thus, the Reserve Bank of India itself has clarified that regulation of import / export of any item including importing of gold granules is in the domain of Ministry of Commerce / DGFT and is governed by Export-Import Policy / Foreign Trade Policy as prevalent at the relevant point of time. Appeal dismissed. Issues Involved:1. Legality of the import of gold medallions and gold granules by the respondent.2. Applicability of Foreign Trade Policy and Reserve Bank of India regulations on the import.3. Validity of the orders passed by the Additional Commissioner of Customs and the Commissioner (Appeals).4. Interpretation of relevant notifications and circulars issued by DGFT and RBI.5. Relevance of prior judicial decisions on similar issues.Issue-wise Detailed Analysis:1. Legality of the import of gold medallions and gold granules by the respondent:The respondent imported gold medallions and gold granules from Korea. The Additional Commissioner issued show cause notices stating that the respondent was neither a nominated bank nor a nominated agency, nor a holder of star or premium trading house, thus not permitted to import gold as per DGFT regulations. The goods were considered imported in contravention of the import policy, leading to their confiscation under Section 111 of the Customs Act, 1962, and penalties under Section 112.2. Applicability of Foreign Trade Policy and Reserve Bank of India regulations on the import:The tribunal held that the goods were freely importable at the time of import and not subject to RBI regulations, which apply only to nominated banks and agencies. The tribunal quashed the orders of the Commissioner (Appeals), directing the customs authorities to clear the goods free of duty. The appellant argued that import regulations under Para 2.01 of the Foreign Trade Policy 2015-2020 and RBI's role in regulating gold imports were not appropriately considered by the tribunal.3. Validity of the orders passed by the Additional Commissioner of Customs and the Commissioner (Appeals):The Additional Commissioner and the Commissioner (Appeals) upheld that the respondent was not permitted to import gold, as it was not a nominated entity under the Foreign Trade Policy. The tribunal, however, found that the goods were freely importable at the time of their import and the restrictions were imposed subsequently by notifications dated 25.08.2017 and 18.12.2019.4. Interpretation of relevant notifications and circulars issued by DGFT and RBI:The tribunal noted that amendments to the Foreign Trade Policy can only be made by the Central Government under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992, or by DGFT through a notification under para 2.07 of the Foreign Trade Policy. The tribunal found that the restrictions on the import of gold medallions and gold granules were imposed after the import dates, making the goods freely importable at the time of import.5. Relevance of prior judicial decisions on similar issues:The appellant cited the Bombay High Court decision in 'Riddhisiddhi Bullions Limited and Ors. vs. Union of India and Ors.' to support their case. However, the tribunal distinguished the present case, noting that the petitioner in the cited case was a recognized premier trading house challenging RBI circulars, which did not apply to the current factual matrix.Conclusion:The High Court dismissed the appeals, upholding the tribunal's decision that the gold medallions and gold granules were freely importable at the time of their import and that subsequent restrictions imposed by DGFT notifications did not apply retroactively. The court emphasized that amendments to the Foreign Trade Policy must be made through proper notifications and not by circulars, and the RBI's role is limited to regulating the mode of payment rather than imposing import restrictions.