2023 (12) TMI 1081 - HC - Customs

Delhi HC rejects request to purchase domestic copper for export obligations under advance authorization license

Delhi HC rejected petitioner's request for permission to purchase additional copper from domestic market to fulfill export obligations under advance ... Seeking permission to complete the obligation of manufacturing and exporting copper wire by purchasing additional copper of the same grade from the open market and also seeking advance authorization license - HELD THAT:- The request of the Petitioner is to fill up the shortage of raw material by purchasing the same from the domestic market, the same has been rejected by the Department placing reliance on Para 4.03 of the Foreign Trade Policy 2015-20. Since the Foreign Trade Policy specifically insists that in case advance authorization is issued to allow duty free import which is physically incorporated in the export product, the request to allow the Petitioner to purchase the raw material from open market for these exports could not be permitted. The Court while adjudicating administrative orders exercising its jurisdiction under Article 226 of the Constitution of India only looks into the decision making process and also the fact that whether the order is violative of any law. The reasons given in the order passed by the Respondent does not require any interference under Article 226 of the Constitution of India. A perusal of the Order challenged in the present Writ Petition indicates that the DGFT has given a proper opportunity of hearing to the other sides and, therefore, this Court is of the opinion that the decision-making process is fair. Further, even on merits, the learned Counsel for the Petitioner has not been able to establish as to why the Order is contrary to the law or that any provisions of the Foreign Trade Policy or the handbook of procedures has been violated. Resultantly, this Court finds no reason to interfere with the present Writ Petition. The writ petition is rejected. ISSUES PRESENTED AND CONSIDERED 1. Whether export obligation period (EOP) under an Advance Authorisation can be extended by the authority in view of disruption caused by the COVID-19 pandemic and whether an additional ad hoc extension is warranted beyond the provisions of the Foreign Trade Policy (FTP) and Handbook of Procedures (HBP). 2. Whether inputs required for fulfilment of export obligations under an Advance Authorisation may be procured from the domestic/open market (i.e., replacing duty-free imported inputs) so as to complete the export obligation when import or availability difficulties arise. 3. The scope of judicial review under Article 226 of the Constitution when an administrative authority disposes of representations under the FTP/HBP - specifically, whether the decision-making process or substance of the DGFT order warrants interference by the Court. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Extension of Export Obligation Period (EOP) in view of COVID-19 disruption Legal framework: The HBP (Handbook of Procedures) 2015-20 and FTP govern the EOP for Advance Authorisations. Relevant provisions include para 4.42 (a)-(f) detailing initial EOP (18 months), two possible extensions of six months each (subject to conditions and composition fees), limitations that Regional Authority (RA) grants extensions (not DGFT HQ), and conditions for further extensions. Para 4.42(h) provides for automatic extension where export bans/restrictions are imposed. Precedent treatment: The Court applied principles of administrative law concerning review of administrative decisions; it relied on established precedent outlining the limited scope of judicial review in administrative matters (i.e., review of decision-making process rather than re-appreciation of merits). Interpretation and reasoning: The authority's order was considered against the express scheme of the FTP/HBP which already contemplates EOP, prescribed modes and limits of extension, fee structures, and the competent authority (Regional Authority) to entertain extension requests. The DGFT's conclusion that sufficient period was available or that prescribed procedures and forums exist (online application to RA with composition fee) was held to be consistent with the FTP/HBP scheme. The Court examined whether DGFT's reasoning was arbitrary or violative of law and found the authority's reliance on para 4.42 and procedural allocation to RA to be legally tenable. Ratio vs. Obiter: Ratio - The proper course where the FTP/HBP prescribes specific extension mechanisms and competent authority is to follow those mechanisms; courts will not direct ad hoc extensions contrary to the statutory/regulatory scheme absent illegality or procedural infirmity. Obiter - Observations on sufficiency of time to make exports in individual authorisations were incidental to the Tribunal's conclusion. Conclusion: No interference with the authority's denial of ad hoc EOP extension beyond the statutory/regulatory mechanism; petitioners must follow the FTP/HBP process (apply to RA with requisite fee) or seek remedies available under law. Issue 2 - Permissibility of procuring inputs from domestic market in lieu of duty-free imported inputs Legal framework: FTP para 4.03(a) defines Advance Authorisation as permitting duty-free import of inputs physically incorporated in export products. Para 4.16(i) imposes an Actual User condition: material imported under Advance Authorisation is not transferable even after completion of EO; disposal is limited to manufactured product after EO completion. The HBP/FTP collectively regulate input sources and conditions of use for advance authorisations. Precedent treatment: The Court treated the FTP/HBP provisions as determinative and applied them directly rather than invoking external precedent to alter policy interpretation; administrative discretion is constrained by express policy text. Interpretation and reasoning: The authority rejected permission to purchase the same grade of copper from the domestic market to fulfil export obligations on the ground that Advance Authorisation authorises duty-free import of inputs physically incorporated in export products and contains Actual User restrictions. Allowing domestic procurement as a substitute would, in effect, circumvent the conditions and intent of Advance Authorisation regime. The Court examined whether the denial was contrary to law or procedurally unfair and found the authority's interpretation to be consistent with the FTP/HBP wording. Ratio vs. Obiter: Ratio - Advance Authorisation regime under FTP/HBP does not permit substitution of duty-free imported inputs with domestically procured inputs in order to complete export obligations when the policy expressly defines the nature and conditions of authorised inputs. Obiter - Comments regarding private contractual disputes arising from loans or dealings with moneylenders are incidental and extraneous to FTP/HBP interpretation. Conclusion: The authority's refusal to permit replacement of imported inputs with domestic procurement was lawful and not susceptible to interference; petitioners must either regularise authorisations by paying applicable customs duties or pursue permissible administrative/contractual remedies. Issue 3 - Scope of judicial review under Article 226 of the Constitution of India over administrative orders under FTP/HBP Legal framework: Article 226 grants High Courts power to examine administrative decisions for jurisdictional error, violation of statutory rules, breach of natural justice, or conclusions based on no evidence. Judicial review is not an appellate re-hearing of merits but a probe into the legality and fairness of the decision-making process. Precedent treatment: The Court relied on established doctrine that judicial review scrutinises the manner of decision-making, compliance with natural justice and statutory procedure, and whether conclusions are supported by evidence or are such that no reasonable authority could have reached them. The Court followed this settled standard in evaluating the DGFT order. Interpretation and reasoning: The Court examined whether the DGFT afforded a fair hearing, applied the correct legal provisions (FTP/HBP), and reached a conclusion unsupported by evidence or otherwise arbitrary. It found that the DGFT provided opportunity for representation, applied the express provisions of FTP/HBP, and articulated reasons tied to those provisions. There was no demonstrable breach of natural justice, no misapplication of law and no finding that was perverse or without evidentiary support. Ratio vs. Obiter: Ratio - Where administrative action conforms to prescribed policy, affords fair hearing, and reasons are legally tenable, the Court will not substitute its view for that of the authority; intervention under Article 226 is limited to cases of jurisdictional error, procedural unfairness, or decision-making unsupported by evidence. Obiter - Observations regarding litigants' alternative remedies against private parties are ancillary. Conclusion: The order under challenge did not attract interference under Article 226; judicial review declined to re-appraise merits and upheld the administrative determination as falling within the regulatory scheme and lawful exercise of discretion. Cross-references and Practical Consequences Requests for relief inconsistent with the FTP/HBP scheme (e.g., ad hoc EOP extensions by HQ or substitution of inputs) must be channelled through the mechanisms prescribed in the policy (application to Regional Authority, payment of composition fees, regularisation with customs duty where applicable). Where aggrieved by regional orders, aggrieved persons retain statutory or other legal remedies available under law.