2022 (8) TMI 663 - HC - Customs

Court rules excessive penalty for fumigation fees unconstitutional

M/s ND TIMBERS Versus UNION OF INDIA

The court held that imposing a penalty five times the regular fees for fumigation under Regulation 14(2) of the Plant Quarantine Order, 2003, was ... Demand of additional fine/ charge/ penalty 5 times of regular fees by the respondents from the petitioners purportedly under Clause 14 (2) of Chapter VI of the Plant Quarantine Order (Regulation of Import into India), 2003 - Relaxation conditions of Import Permit and Phytosanitary Certificate - deterring petitioners from importing timber from such countries which do not meet with the parameters of fumigation as per Indian standards - restriction on use of Methyl Bromide in India which is a threat to environment of the country - It is the case of the petitioners, that imposition of penalty will amount to restricting their trade and is in violation of Article 19(1)(g) of the Constitution of India, hence the provision, which enables the authority to levy penalty may be quashed. Whether the levy of five time fees in the form of penalty upon the petitioners on import of timber after granting them relaxation for such import will violate the provisions of Article 19(1)(g) of the Constitution of India, and can such levy satisfy the test of reasonableness of restriction on free trade as prescribed in clause(6) of Article? HELD THAT:- Article 19(1)(g) of the Constitution of India guarantees right to practice any profession, occupation or trade or business. However, the freedom is not unrestricted or uncontrolled in view of clause (6) of the article which authorizes the legislation to (a) impose reasonable restrictions on this right in the interest of general public, (b) prescribes technical or professional qualifications necessary for carrying on any profession, trade or business; and (c) enables the state to carry on any trade or business to the exclusion of the private citizens, wholly or partially - While imposing reasonable restrictions, the nature of the business or trade is the necessary element in deciding the reasonable restrictions. The petitioners are dealing in a trade which uses a chemical harmful to the ozone. Methyl Bromide is listed as Ozone Depleting Substance (ODS) under the Montreal Protocol of United Nations. The Union of India is a signatory member since 19.06.1992. As per the said protocol the developing countries will have to phase out use of Methyl Bromide from the fumigation treatment. It is also an undisputed fact that as on today there is no other alternative treatment of fumigation declared by the Indian Government, and it appears that efforts are being made to find an alternate to Mehtyl Bromide and the same is in nascent stage. The impugned OMs and the provision of Regulation 14(2) of PQ Order cannot be set aside on the ground of unreasonable classification. The sole discretion lies with the authorities to classify such goods who are expert in the field, and this Court cannot set in the shoes of such experts and impose its wisdom on the subject unless it is shown that the procedure so followed is absolutely illegal and against the rules and regulations. However, at the same time the petitioners cannot be subjected to penal fees for the inaction of the exporting countries. Restriction on use of Methyl Bromide - HELD THAT:- It is not denied by the respondents that the Ministry of Agricultural and Farmers Welfare Government of India has framed guidelines for usage of Methyl Bromide for fumigation on various products as per Montreal Protocol. Such fumigated products by Methyl Bromide are being exported by India after framing of necessary guidelines being Quarantine Treatment and Application Procedures of Methyl Bromide Fumigation. Thus, the concern of the Indian Government with regard to the affecting of bio-security appears to be well founded, however in wake of no other alternative as on today, the imposition of penalty on the petitioners appear to be harsh. The respondents cannot approbate and reprobate on usage of same chemical by taking shelter under bio-security of country. It is also an undisputed fact that as on today no rules or guidelines or regulations are framed by the Government of India mandating the use of any other chemical except Methyl Bromide for fumigation process. Article 19(1)(g) of the Constitution of India guarantees that all citizens have the right to practise any profession or to carry on any occupation or trade or business and Clause (6) of the article authorises legislation which imposes reasonable restrictions on this right in the interests of the general public. It is not disputed that in order to determine the reasonableness of the restriction regard must be had to the nature of the business and the conditions prevailing in that trade - This Court fails to understand that by imposing penalty, what type of evil is sought to be remedied, whether the respondents want to restrict the use of Methyl Bromide (which is being already used for exports) and imports or after granting approval and relaxation to the petitioners for import, the respondents want to restrict such import after their consignment is fumigated both off-shore and on-shore. The action of the respondents in levying fine or penalty will amount to reasonable restrictions having direct impact on their right guaranteed under Article 19(1)(g) of the Constitution of India, since the petitioners cannot carry on with their trade unless they pay such fine or penalty. The respondents before imposing fine or penalty should have deliberated on the issue and the adversity faced by the petitioners, since the issuance of phytosanitory certificate is beyond their sphere or ambit. They cannot insist the exporting country to issue phytosanitory certificate as per the requirement of Indian parameters. Without resolving the issue at the ends of NPPOs of each country, the petitioners are being penalised. Thus, such an action of the respondents is arbitrary and invades their right to trade, hence the same calls for interference. Whether this Court, while exercising its powers conferred under Article 226 of the Constitution, set aside the impugned Regulation and subsequent OMs which are in form of delegated legislation? - HELD THAT:- Unquestionably, in the present case, the impugned Regulation and the subsequent OMs do not satisfy the principles of rationality and they infract the fundamental rights of the petitioners guaranteed under Article 19(g) of the Constitution of India, hence this Court, in exercise of powers conferred under Article 226, has the explicit authority to set aside the same. The impugned Regulation 14(2) of the Plant Quarantine (Regulation to Import into India) Order, 2003 of Chapter-VI is declared as arbitrary and unreasonable and in violation of fundamental rights guaranteed under Article 19(g) of the Constitution of India to the extent it stipulates charging of fees of five times of normal rates. The same is quashed and set aside to the said extent only - Petition allowed. Issues Involved:1. Legality and constitutionality of imposing additional fine/charge/penalty five times the regular fees under Clause 14(2) of Chapter VI of the Plant Quarantine Order, 2003.2. Validity and impact of Office Memorandums dated 28.06.2017 and 27.12.2018.3. Compliance with international obligations under the International Plant Protection Convention, 1997 and the Montreal Protocol.4. Violation of Article 19(1)(g) of the Constitution of India.Issue-Wise Detailed Analysis:1. Legality and Constitutionality of Imposing Additional Fine/Charge/Penalty:The petitioners challenged the imposition of a penalty five times the regular fees for fumigation under Regulation 14(2) of the Plant Quarantine (Regulation of Import into India) Order, 2003. They argued that this imposition is illegal and unconstitutional, especially when Regulation 9 permits fumigation with equivalent chemicals. The court found that the petitioners were being penalized for the actions of exporting countries which issued phytosanitary certificates not meeting Indian standards. The court held this imposition as arbitrary and violating the fundamental rights under Article 19(1)(g) of the Constitution, as it restricted their trade without a valid legislative basis.2. Validity and Impact of Office Memorandums:The petitioners also contested the conditions imposed by the Office Memorandums dated 28.06.2017 and 27.12.2018, which demanded the aforementioned penalty. The court observed that these memorandums allowed imports from countries discontinuing Methyl Bromide but imposed penal fees. The court found this action contradictory and arbitrary, as it granted relaxation on one hand but imposed penalties on the other, thus infringing on the petitioners' right to trade.3. Compliance with International Obligations:The petitioners argued that the respondents' actions violated international obligations under the International Plant Protection Convention, 1997, and the Montreal Protocol. The court noted that the Montreal Protocol allows the use of Methyl Bromide for Quarantine and Pre-Shipment purposes, and some countries have unilaterally phased it out. The court emphasized that the respondents did not follow the prescribed international procedures for resolving discrepancies in phytosanitary certificates, which should involve bilateral consultations and prompt cooperation between countries.4. Violation of Article 19(1)(g) of the Constitution of India:The court analyzed whether the imposition of five times the regular fees as a penalty constituted a reasonable restriction under Article 19(1)(g) of the Constitution, which guarantees the right to practice any profession or trade. The court concluded that the penalty was excessive and arbitrary, failing to strike a balance between the freedom to trade and the necessity of public interest. The court emphasized that the respondents' action did not meet the test of reasonableness required for restricting fundamental rights.Conclusion:The court declared Regulation 14(2) of the Plant Quarantine Order, 2003, to the extent it stipulates charging fees five times the normal rates, as arbitrary, unreasonable, and in violation of Article 19(1)(g) of the Constitution. Consequently, the subsequent Office Memorandums reiterating such imposition of penal fees were also quashed and set aside. The writ petitions were allowed, and the rule was made absolute accordingly.