2025 (10) TMI 508 - HC - Customs

Petition held maintainable; SC ruling applied to grant exemption and refund where duties paid under protest

The HC held the petition maintainable, extended the benefit of an SC ruling to the petitioner, and granted the requested exemption from the challenged ... Seeking issuance of an appropriate writ directing the Respondents to consider the goods imported by the Petitioner - grant of refund of the collected Customs Duty with interest - notification dated 10th May, 2023 being N/N. 37/2023-Customs has been challenged on the ground of arbitrariness - HELD THAT:- In the present case, the Court notices that the petition has been pending for more than two years. The challenge initially was to the notifications itself and for extension of the TRQ benefits to the bill of lading of the Petitioner. In fact, insofar as the clearance of the goods and payment of Customs Duty is concerned, the matter already was resolved because the goods were cleared with the Customs Duty being paid under protest by the Petitioner. Thus, the main prayer was in respect of the validity of the notifications which did not take into consideration the entire period from March, 2023 till June 2023 and thus, there was a gap in the said period. This Court is of the view that relegating the Petitioner to a different High Court would, in fact, result in the entire matter being started afresh. Moreover, the legal issue stands adjudicated by the Co-ordinate Bench of this Court after filing of the present petition - Initially, when the present petition was filed, the constitutional validity of the notifications had been challenged and no objection was taken by the Customs Department on the issue of maintainability of the present petition. In fact, no objection as to jurisdiction has been taken even in the counter affidavit filed by the Customs Department. This Court is of the view that the benefit of the judgment in Ajanta Soya Ltd. [2024 (12) TMI 1637 - SC ORDER] deserves to be extended to the Petitioner. Accordingly, the exemption is granted to the Petitioner. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether the High Court has territorial jurisdiction to entertain a writ petition challenging central notifications and seeking TRQ benefit and refund where the importer and port of import lie outside the Court's territorial jurisdiction. 2. Whether consignments with Bills of Lading dated on or before 31.03.2023 but landed after that date (before 30.06.2023) fall within the Tariff Rate Quota (TRQ) exemption despite a temporal gap in consequential exemption Notifications, and whether consequent Customs duty paid under protest is refundable. 3. Whether Notification No. 37/2023 (and related ministerial instruments that created a gap in exemption applicability) are arbitrary or violative of Article 14 or other constitutional guarantees, such that equitable or declaratory relief is warranted. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Territorial jurisdiction of the High Court to entertain challenge to central notifications and reliefs seeking TRQ benefit/refund Legal framework: Under Article 226, a High Court may issue writs where part of the cause of action arises within its territorial jurisdiction. Constitutional challenge to a central statute/notification does not automatically confer jurisdiction on any particular High Court; some proximate cause of action must arise within the forum. Precedent treatment: The principle that mere challenge to constitutional validity of a central provision does not confer jurisdiction unless part of the cause of action arises within territorial limits (as reiterated by higher authorities) was recognized and applied by the Court. A coordinate bench decision dismissing a petition for lack of territorial connection (relating to letters issued in a different State) was relied upon by Respondents and considered relevant. Interpretation and reasoning: The Court acknowledged the settled rule that territorial nexus is required. However, the Court examined factual peculiarities: (a) the petition had been pending for over two years; (b) the principal relief sought had shifted effectively to challenge the validity/interpretation of notifications which affected a period where there was a lacuna in exemption; and (c) the goods had already been cleared on payment under protest, leaving the primary operative relief as a declaration of entitlement and refund. The Court also noted that no objection to maintainability had been taken at the initial stage or in the counter-affidavit. Ratio vs. Obiter: The observation that territorial jurisdiction ordinarily requires a local cause of action is ratio, as it applies established constitutional jurisdictional principles. The Court's decision to exercise jurisdiction in the unique facts (despite general rule) is fact-specific and therefore largely obiter as to broader application, explicitly limited by the Court. Conclusion: While the general rule of territorial nexus remains valid, the Court exercised jurisdiction in this petition due to unique facts: pendency duration, absence of earlier objection, prior adjudication on the identical legal issue by a coordinate bench, and the practical consequences of relegating petitioner to another forum. The order is expressly limited and not to be treated as precedent beyond these facts. Issue 2 - Applicability of TRQ exemption to consignments with Bills of Lading dated on or before 31.03.2023 but landing after that date (until 30.06.2023) and refund of duty paid under protest Legal framework: DGFT Public Notices allocate TRQ and may specify temporal eligibility (e.g., Bills of Lading dated on or before a cut-off). Consequential notifications by the Revenue/Customs grant exemption from Customs Duty and related cess for goods covered under TRQ. The operative question is whether the exemption extends to shipments satisfying the Bill of Lading date criterion even if landing occurred later, within a period specified by DGFT, and whether a gap in the customs notification defeats the DGFT temporal extension. Precedent treatment: A coordinate bench of the same High Court earlier adjudicated the identical legal issue, holding that where the DGFT Public Notice allowed Bills of Lading dated on or before 31.03.2023 to be permitted till 30.06.2023, the Customs Notification which failed to extend the exemption to the landing period created a discrepancy; subsequently issued departmental Notification remedied the gap and thereby the TRQ benefit applied to consignments landing before 30.06.2023 if the Bill of Lading date criterion was met. That coordinate-bench decision was affirmed against SLP, which was dismissed. Interpretation and reasoning: The Court accepted the coordinate bench's analysis that the DGFT Public Notice and the customs exemption must be read together in substance: where DGFT extended entitlement based on Bill of Lading dates up to a later landing date, a consequential customs notification that fails to give effect to that extension creates an inconsistency. Correcting this inconsistency by construing subsequent notifications (or issuing remedial notifications) to give effect to DGFT intent upholds policy coherence and prevents arbitrariness. The Court also noted that a later Notification issued by the Revenue extending exemption to the later period (though with a nominal start date creating a gap) underscored the presence of a lacuna that should not defeat entitlement of importers who met the DGFT criterion and landed goods within the extended period. Ratio vs. Obiter: The adoption of the coordinate bench's holding that TRQ exemption covers consignments with Bills of Lading dated on or before 31.03.2023 landing before 30.06.2023 is treated as ratio in the present case and forms the legal basis for granting relief. The Court's statement that refunds should be processed in accordance with law is procedural direction grounded in ratio as applied to facts. Conclusion: The TRQ exemption applies to consignments whose Bills of Lading are dated on or before 31.03.2023 provided the goods landed before 30.06.2023, and Customs duty paid under protest in respect of such consignments is refundable in accordance with law. The petitioner, meeting those criteria, is entitled to exemption/refund, with authorities directed to process refund within three months. Issue 3 - Allegation of arbitrariness/Article 14 violation and claim for retrospective application/extension of Notification No. 37/2023 Legal framework: Administrative action, including issuance of notifications affecting fiscal exemptions, must not be arbitrary and must conform to constitutional guarantees; however, interpretation of ministerial notifications requires examination of policy intent, temporal alignment between DGFT and Revenue instruments, and remedial measures to prevent unfairness to parties who relied on policy. Precedent treatment: The Court considered prior decisions addressing ministerial overreach/arbitrariness in fiscal notifications and administrative lacunae, but principally relied upon the coordinate bench's factual and legal determination that remedial extension (or proper construction) of the customs notification is appropriate to give effect to DGFT's Public Notice, thereby curing practical arbitrariness arising from the gap. Interpretation and reasoning: The Court did not embark on a broad constitutional invalidation of the impugned notification as arbitrary under Article 14. Instead, it treated the alleged arbitrariness as arising from temporal inconsistency between DGFT and customs notifications which produced an inequitable result for importers with qualifying Bills of Lading. Given that the department later issued a notification extending exemption to the later date (albeit with an effective commencement creating a gap), and a coordinate bench had held entitlement, the Court found it appropriate to extend relief by applying that reasoning rather than strike down the notification on constitutional grounds. The Court emphasized factual uniqueness and limited scope of relief rather than a generalized pronouncement on arbitrary administrative action. Ratio vs. Obiter: The refusal to pronounce broad unconstitutionality and the narrower acceptance of remedial construction/extension to prevent arbitrariness is ratio as applied to facts; statements limiting the order's precedential effect are obiter guidance about scope. Conclusion: The Court granted relief by extending the TRQ benefit and directing refund rather than quashing the notification on constitutional grounds; the order is explicitly limited to the unique factual matrix and does not serve as a general precedent that the impugned notification is unconstitutional. Remedial directions and limitation on precedential effect Interpretation and reasoning: Having accepted entitlement on the applied legal principles, the Court directed authorities to process refunds in accordance with law within three months. The Court, recognizing the exceptional factual posture (including pendency, prior coordinate-bench decision and dismissal of SLP), expressly limited the order's precedential value. Ratio vs. Obiter: The direction to process refunds within a specified time-frame is operative ratio; the explicit non-precedential clause is a judicial limitation (obiter as to wider application) underscoring the fact-specific nature of the relief. Conclusion: Administrative authorities must process refunds consistent with statutory procedures and within the timeframe directed; the judgment applies to the specific facts and is not to be treated as precedent beyond those circumstances.