2024 (5) TMI 835 - HC - Customs

Export ban on non-basmati white rice violated natural justice by denying transitional arrangements under FTP 2023

M/s Shriram Food Industry Ltd., M/s Bharti Foods, M/s Pagariya Export Private Limited, Versus Union of India, The Director General of Foreign Trade, New Delhi, The Commissioner of Customs and Central Excise, Nagpur, The Chief Commissioner of Customs and Central Tax, Vishakhapatanam Zone, The Chief Commissioner of Customs, Maharashtra, The Additional Commissioner of Customs Kakinada, The Commissioner of Customs, Gujrat, The Chief Commissioner of Customs, Kolkata.

M/s Shriram Food Industry Ltd., M/s Bharti Foods, M/s Pagariya Export Private Limited, Versus Union of India, The Director General of Foreign Trade, New ... Issues Involved:1. Authority to issue the notification.2. Retrospective effect of the notification.3. Violation of fundamental rights and principles of natural justice.4. Application of transitional arrangements under the Foreign Trade Policy, 2023.Summary:1. Authority to Issue the Notification:The petitioners challenged the authority of the Director General of Foreign Trade (DGFT) to issue the notification dated 20.07.2023. The court observed that the notification was issued by the Central Government exercising powers u/s 3 read with u/s 5 of the Foreign Trade (Development and Regulation) Act, 1992, and para 1.02 and 2.01 of the Foreign Trade Policy, 2023. The DGFT, acting as Ex-Officio Additional Secretary to the Government of India, signed the notification. The court referenced the Supreme Court's decision in 'Union of India and Ors. vs. Agricas LLP and Ors.' and concluded that the notification was indeed issued by the Central Government, thereby rejecting the petitioners' contention.2. Retrospective Effect of the Notification:The petitioners argued that the notification had a retrospective effect, adversely affecting concluded contracts. The court noted that the notification came into immediate effect and did not explicitly state any retrospective application. However, the denial of transitional arrangements for concluded contracts implied a retrospective impact. The court cited the Supreme Court's ruling in 'Director General of Foreign Trade and Anr. vs. Kanak Exports and Anr.' which held that delegated legislation could not be retrospective unless expressly authorized by statute. The court held that the impugned notification's retrospective application was not justified.3. Violation of Fundamental Rights and Principles of Natural Justice:The petitioners contended that the notification violated Articles 14 and 19(1)(g) of the Constitution, was arbitrary, and lacked consultation with stakeholders. The court emphasized that any restriction on the right to trade must be reasonable and backed by cogent material. The court found that the respondents failed to provide sufficient reasons or data justifying the prohibition on non-basmati rice exports. The absence of such material rendered the notification arbitrary and unreasonable, violating the principles of natural justice.4. Application of Transitional Arrangements under the Foreign Trade Policy, 2023:The court noted that the Foreign Trade Policy, 2023, provided for transitional arrangements allowing exporters with irrevocable commercial letters of credit (ICLC) to complete their contracts despite policy changes. The impugned notification explicitly excluded these transitional arrangements for non-basmati rice exports. The court found no justification for this exclusion, especially when similar transitional arrangements were allowed for wheat exports. The court held that the denial of transitional arrangements was arbitrary and violated the doctrine of legitimate expectation.Conclusion:The court declared that the impugned notification dated 20.07.2023, insofar as it denied the benefit of transitional arrangements u/s 1.05 of the Foreign Trade Policy, 2023, was bad in law. The petitioners were entitled to the benefit of these transitional arrangements if they complied with the specified requirements. The petition was allowed, and the rule was made absolute in these terms, with no order as to costs.