2025 (6) TMI 1738 - HC - Customs

DGFT lacks power to impose port landing conditions after TRQ license issuance, only Central Government can formulate trade policy under FTDR Sections 5 and 6(3)

Gujarat HC held that DGFT exceeded its powers by imposing 'condition x' requiring import consignments to land at Indian ports after TRQ license issuance ... Power to formulate and amend the FTP - power of DGFT to stipulate any condition which is contrary to the FTP and which has the effect of amending, modifying or altering the FTP - Validity of 'condition x' whereby import consignments landing at Indian Ports after the date of issuance of TRQ license shall only be considered for clearance under TRQ - goods were not cleared holding that goods stood warehoused before issuance of TRQ license and that the same being legal issue and till resolution thereof goods will not cleared against the aforesaid TRQ license - applicability of principle of estoppel, waiver and acquiescence - HELD THAT:- Having perused the provisions of the FTDR Act and the relevant provisions of the Customs Act, 1962, this Court is of the view that the power to formulate and announce the Foreign Trade Policy (FTP) and consequentially to amend the said policy lies exclusively with the Central Government under Section 5 read with Section 6(3) of the FTDR Act and not by the DGFT. Any provision for prohibiting, restricting or regulating in any manner, the import or export of goods can be done only by the Central Government in terms of Section 3(2) of the FTDR Act. The power to frame and amend only the procedure for the purpose of implementation of the Foreign Trade Policy can be issued by the DGFT. The power of the DGFT for the purpose of issuing procedural Circulars/Notices can be traced not to the FTDR Act but to the Foreign Trade Policy itself, particularly, paragraph Nos.1.02, 1.03 and 2.04 of the Foreign Trade Policy. The public notices dated 24.05.2022 and 14.06.2022 issued by the DGFT cannot be said to be issued in exercise of powers under the FTDR Act but, in exercise of the powers vested under the DGFT in paragraph No. 1.03 and 2.04 of the Foreign Trade Policy. Therefore, it has to be held that DGFT cannot be cloaked with the powers of amending altering or modifying the Foreign Trade Policy which would have the essence of taking away something from or being contrary to the Foreign Trade Policy itself which is formulated by the Central Government exercising its powers under Section 5 of the FTDR Act. In that view of the matter, ‘condition No. x’ at Serial No. 3 in the Condition Sheet in the TRQ licence must be held to be outside the powers of DGFT. The contention of the respondents that the DGFT is also the Ex-officio Additional Secretary to the Government of India and therefore, the public notices has been issued in such capacity and therefore, meets the test of Kanak Export (Supra) is rejected, for the reason that it would be apparent from the perusal of the public notice dated 14.06.2022 that “Ex-officio Additional Secretary to the Government of India” only describes the post held by the DGFT and does not reference the power exercised by him. Therefore, it is clear that the public notices have been issued by the DGFT as DGFT and not as the Central Government under Section 5 or 6(3) or 3(2) of the FTDR Act. Further, as per Section 25(1) of the Customs Act, 1962, the Central Government has the power to grant exemption from payment of duty. Section 15 provides the relevant date for the determination of the rate of duty and tariff valuation of the imported goods. Section 15(1)(b) speaks of the rate of duty applicable in case of goods clear from a warehouse under Section 68, to be the duty in force on the date on which the bill of entry for home consumption is filed in respect of such goods. Thus, ‘condition No. x’ is contrary to the Customs Act itself. Conclusion - i) The ‘condition No. x’ mentioned in paragraph No. 2 of the Public Notice No. 15/2015 -20 dated 14.06.2022 is contrary to the Foreign Trade Policy and beyond the powers of the DGFT. Consequently, the ‘condition No. x’ in paragraph No. 2 of the Public Notice No. 15/2015-20 dated 14.06.2022 is quashed and sert aside. ii) Condition No. 3 in Condition Sheet of the Tariff Rate Quota dated 05.07.2022 issued to the petitioner is quashed and consequently, the respondents are directed to permit the clearance of 2597.330 Mts. of the subject goods from the customs bonded warehouse in terms of Section 68 of the Customs Act, 1962 on production of Tariff Rate Quota dated 05.07.2022 by the petitioner, extending the benefit of Notification No. 30 of 2022-Cus. Dated 24.05.2022 on such clearance of the goods. Petition disposed off. Issues Presented and ConsideredThe core legal questions considered by the Court were:1. Whether the Director General of Foreign Trade (DGFT) possessed the jurisdiction and authority under the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act) and the Foreign Trade Policy (FTP) to issue Public Notice No. 15/2015-20 dated 14.06.2022, specifically to impose 'condition x' restricting clearance of warehoused goods imported prior to issuance of Tariff Rate Quota (TRQ) license;2. Whether 'condition x' and the consequential Condition No. 3 in the Condition Sheet of the TRQ license issued to the petitioner were valid and sustainable in law;3. The interplay between powers of the Central Government and DGFT under the FTDR Act, particularly regarding formulation and amendment of the FTP and issuance of procedural guidelines;4. Whether the impugned condition contravened provisions of the Customs Act, 1962, especially Section 15 relating to the determination of applicable customs duty on clearance of warehoused goods;5. Whether the petitioner was entitled to clearance of goods warehoused prior to the issuance of the TRQ license against the said license and refund of excess duty paid on goods cleared without the license;6. The applicability of principles of estoppel or waiver in challenging the impugned condition;7. The correctness of the respondent's contention that the DGFT acted as Ex-officio Additional Secretary to the Government of India in issuing the impugned Public Notice.Issue-wise Detailed AnalysisIssue 1 & 2: Jurisdiction of DGFT to impose 'condition x' and validity of the impugned conditionsThe Court analyzed Sections 3, 5, and 6 of the FTDR Act, which delineate the powers of the Central Government and DGFT. Section 5 empowers the Central Government exclusively to formulate and amend the Foreign Trade Policy by notification in the Official Gazette. Section 6(3) explicitly excludes powers under Sections 3, 5, 15, 16, and 19 from delegation to DGFT or any subordinate officer.DGFT's powers, as per the FTP (paragraphs 1.03 and 2.04), are limited to issuing Public Notices to notify or amend procedural aspects, such as the Handbook of Procedures (HBP), for implementing the FTP. DGFT cannot amend or alter the substantive provisions of the FTP itself.The impugned Public Notice No. 15/2015-20 dated 14.06.2022 introduced 'condition x', which restricted clearance under TRQ only to consignments landing after issuance of the TRQ license, thereby excluding warehoused goods imported earlier. The Court found that this condition effectively amended the substantive policy of the FTP by restricting the benefit of TRQ contrary to paragraph 2.13 of FTP, which permits clearance of warehoused imported goods against subsequently issued authorizations.Reliance was placed on the Supreme Court decision in Director General of Foreign Trade v. Kanak Exports, which held that DGFT does not have power to amend the FTP, and any Public Notice issued by DGFT that alters substantive policy provisions is ultra vires. The Court also referred to the Delhi High Court decision in M.D. Overseas Limited v. Union of India, which similarly held that DGFT's power under paragraph 1.03 of FTP is procedural and cannot be used to amend substantive policy provisions.The Court rejected the respondent's contention that DGFT issued the Public Notice in the capacity of Ex-officio Additional Secretary to the Government of India, noting that the Public Notice clearly showed the DGFT acting in his capacity as DGFT and not as the Central Government. Thus, the impugned 'condition x' and the consequential Condition No. 3 in the TRQ license were held to be beyond the powers of DGFT and therefore void.Issue 3: Powers of Central Government versus DGFT under FTDR Act and FTPThe Court emphasized the statutory scheme under the FTDR Act, wherein the Central Government alone has the power to formulate and amend the FTP (Section 5), and to make provisions regulating import/export (Section 3(2)). DGFT's role is advisory and executive in nature, responsible for carrying out the FTP and issuing procedural guidelines (Section 6(2) and FTP paragraphs 1.03 and 2.04).The Court held that DGFT's Public Notices cannot override or amend the FTP, which is a statutory policy issued by the Central Government. Any attempt by DGFT to impose substantive conditions that alter the FTP is ultra vires.Issue 4: Conflict with Customs Act, 1962, particularly Section 15Section 15(1)(b) of the Customs Act provides that the applicable duty on goods cleared from a warehouse is the duty in force on the date the Bill of Entry for home consumption is filed. The Court observed that 'condition x' conflicted with this statutory provision because it sought to deny the benefit of the TRQ license to goods warehoused before the license issuance date, effectively imposing a restriction not found in the Customs Act or FTP.Paragraph 2.13 of the FTP also permits clearance of warehoused goods against authorizations issued subsequently, reinforcing that the impugned condition was contrary to both the Customs Act and FTP.Issue 5: Entitlement to clearance of warehoused goods and refund of excess dutyThe petitioner had cleared 5210 MTs of the subject goods without tendering the TRQ license, paying excess customs duty of Rs. 3,58,33,223/-. The Court held that the petitioner was entitled to clear the balance 2597.330 MTs of warehoused goods against the TRQ license and directed the respondents to permit such clearance under Section 68 of the Customs Act, 1962, extending the benefit of Notification No. 30/2022-Cus dated 24.05.2022.The Court further directed refund of the excess duty paid on the 5210 MTs along with interest at 12% per annum, relying on the principle that the petitioner paid the duty under protest and was entitled to recovery of excess payment.Issue 6: Applicability of estoppel or waiver principlesThe Court rejected the respondents' contention that the petitioner was estopped from challenging the impugned condition because it had applied for the TRQ license and cleared goods under protest. Citing Supreme Court precedents, the Court held that estoppel and waiver do not apply where a party challenges an act done without jurisdiction. Since 'condition x' was void ab initio, the petitioner's challenge was maintainable.Issue 7: DGFT's capacity as Ex-officio Additional SecretaryThe Court examined the argument that the DGFT issued the Public Notice in his capacity as Ex-officio Additional Secretary to the Government of India, which might confer authority to amend the FTP. The Court found this argument unpersuasive, noting that the Public Notice itself did not indicate that the power exercised was that of the Central Government but rather that of the DGFT. Therefore, the DGFT could not cloak himself with powers reserved for the Central Government.Significant Holdings'The power to formulate and announce the Foreign Trade Policy (FTP) and consequentially to amend the said policy lies exclusively with the Central Government under Section 5 read with Section 6(3) of the FTDR Act and not by the DGFT.''DGFT cannot be cloaked with the powers of amending, altering or modifying the Foreign Trade Policy which would have the essence of taking away something from or being contrary to the Foreign Trade Policy itself which is formulated by the Central Government exercising its powers under Section 5 of the FTDR Act.'''Condition No. x' mentioned in paragraph No. 2 of the Public Notice No. 15/2015 -20 dated 14.06.2022 is contrary to the Foreign Trade Policy and beyond the powers of the DGFT.''The impugned 'condition x' and Condition No. 3 in the Condition Sheet of the Tariff Rate Quota dated 05.07.2022 issued to the petitioner are quashed and set aside.''The respondents are directed to permit clearance of 2597.330 MTs of the subject goods from the customs bonded warehouse in terms of Section 68 of the Customs Act, 1962 on production of the Tariff Rate Quota dated 05.07.2022, extending the benefit of Notification No. 30/2022-Cus dated 24.05.2022.''The respondents are directed to refund the excess duty of Rs. 3,58,33,223/- paid on clearance of 5210 MTs of the subject goods to the petitioner along with interest at the rate of 12% per annum.''Principles of estoppel, waiver or acquiescence do not apply to acts done without jurisdiction and the petitioner is entitled to challenge the impugned condition.'