2021 (3) TMI 910 - HC - Customs

Court upholds validity of Notification No. 53(RE-2013)/2009-2014 under Foreign Trade Act.

M/s. PAM AGRO INDUSTRIES A PARTNERSHIP FIRM & 1 OTHERS Versus UNION OF INDIA & 1 OTHERS

The court upheld the validity of Notification No. 53(RE-2013)/2009-2014 dated 2.12.2013, finding it compliant with the Foreign Trade Act, Customs Act, and ... Constitutional validity of notification issued / authenticated by the DGFT - Prescribing Minimum Import Price (for short the 'MIP') for Cashew Kernels Broken and Cashew Kernel whole - whether the notification no. 53 dated 2.12.2013 can be held ultra vires to the provisions of the Customs Act and the Foreign Trade Act as well as to the Article 14 of the Constitution of India or not? HELD THAT:- On perusal of the above notification, it is clear that the same is issued under section 5 of the Foreign Trade Act read with paragraph no. 2.1 of the Foreign Trade Policy, 2009-2014, as amended from time to time by prescribing the minimum CIF value of cashew kernels under Chapter 8 of ITC (HS) 2012, Schedule 1 (Import Policy) per kilogram being ₹ 288/- for cashew kernel (broken) for HS Code 0801 32 10 and ₹ 400/- for cashew kernel (whole) for HS Code 0801 32 20. Since 2013, the MIP for two different categories of cashew kernels broken and whole are in existence. Madras High Court in case of S. MIRA COMMODITIES PVT. LTD. VERSUS UNION OF INDIA [2008 (9) TMI 213 - MADRAS HIGH COURT], considering the similar notification dated 4.6.2008 issued by the DGFT with regard to restricting the import of betel nuts valued at ₹ 35/- or more per kg., held that the DGFT has no power to issue the notification under section 5 read with section 6(3) of the Foreign Trade Act on artificial basis. Thus, it is clear that DGFT has not exercised powers under section 3 of the Foreign Trade Act but has merely authenticated an order which relates to the DGFT in accordance with the authentication rules. Therefore, the contention raised by the petitioners that DGFT has no authority to issue such notification is not sustainable in view of above dictum of law. In view of the provisions of the Customs Act and Foreign Trade Act, notification issued by the DGFT is to be considered as notification issued by the Central Government which is binding upon the petitioners as the same is issued in exercise of powers vested in the Central Government under section 3(2) of the Foreign Trade Act - the contentions raised by the petitioners with regard to the validity of the notification fails. The impugned notification cannot be held to be ultra vires to the provisions of the Customs Act or the provisions of the Foreign Trade Act, or Article 14 of the Constitution of India as the same is issued by the Central Government under the powers conferred by the provisions of section 3(2) and section 5 of the Foreign Trade Act. Petition dismissed. Issues Involved:1. Validity of Notification No. 53(RE-2013)/2009-2014 dated 2.12.2013.2. Compatibility of the notification with Section 5 of the Foreign Trade Act, Section 14 of the Customs Act, and Articles 14 and 19(1)(g) of the Constitution of India.3. Justification for the demand notice and customs duty paid by the petitioners.4. Authority of the DGFT to issue the notification.5. Alternative remedy and maintainability of the petition.Detailed Analysis:Issue 1: Validity of Notification No. 53(RE-2013)/2009-2014 dated 2.12.2013The petitioners challenged the notification on the grounds that it was ultra vires to Section 5 of the Foreign Trade Act and Section 14 of the Customs Act. They argued that the notification prescribed a Minimum Import Price (MIP) of Rs. 288 per kg for cashew kernels (broken), which was arbitrary and not based on actual transaction values. The court, however, upheld the notification, stating that it was issued under Section 5 of the Foreign Trade Act read with paragraph 2.1 of the Foreign Trade Policy, and thus was valid.Issue 2: Compatibility with Section 5 of the Foreign Trade Act, Section 14 of the Customs Act, and Articles 14 and 19(1)(g) of the Constitution of IndiaThe petitioners argued that Section 14 of the Customs Act is a complete code for the valuation of imported goods and that the DGFT's notification was without jurisdiction. They also contended that the notification violated Article 14 of the Constitution by fixing an arbitrary MIP. The court found that the notification was within the powers conferred by Section 5 of the Foreign Trade Act and did not violate the provisions of the Customs Act or the Constitution.Issue 3: Justification for the Demand Notice and Customs DutyThe petitioners received a demand notice for differential customs duty based on the MIP prescribed by the notification. They argued that they had declared the actual transaction value, which was lower than the MIP. The court noted that the petitioners had agreed to pay customs duties based on the MIP for two consignments and could not now challenge the notification. The demand notice was therefore justified.Issue 4: Authority of the DGFT to Issue the NotificationThe petitioners contended that the DGFT did not have the authority to issue the notification under Section 5 of the Foreign Trade Act. The court referred to previous judgments, including those from the Calcutta and Madras High Courts, which had held that the DGFT has the authority to authenticate notifications issued by the Central Government. The court concluded that the DGFT had not exercised powers under Section 3 of the Foreign Trade Act but had merely authenticated an order from the Central Government.Issue 5: Alternative Remedy and Maintainability of the PetitionThe respondents argued that the petition was not maintainable as the petitioners had an alternative remedy under Section 130 of the Customs Act. The court, however, held that the petition was maintainable under Article 226 of the Constitution of India, as it involved a challenge to the constitutional validity of the notification.Conclusion:The court dismissed the petition, upholding the validity of Notification No. 53(RE-2013)/2009-2014 dated 2.12.2013. The notification was found to be within the powers conferred by the Foreign Trade Act and compatible with the Customs Act and the Constitution of India. The demand notice for differential customs duty was justified, and the DGFT was deemed to have the authority to authenticate the notification. The petition was maintainable under Article 226, but ultimately, the court found no merit in the petitioners' arguments.