2026 (2) TMI 793 - HC - Customs

Administrative Circulars and Reasonable Classification can lawfully channel e auctions via a PSU if temporally limited and non arbitrary.

Addresses validity of a Central Board circular canalising e auctions of unclaimed/uncleared imported goods through a single agency for a limited period. ... Freedom to carry on trade under Article 19(1)(g) - Reasonable restriction under Article 19(2) - Equality before law and reasonable classification under Article 14 - Judicial restraint in review of economic policy - Power of the Board/CBIC to prescribe separate procedure u/s 143 AA of the Customs Act, 1962 - Validity of administrative circulars and admissibility of explanatory reasons in counter affidavits (distinction from orders requiring reasons) - Canalisation of administrative functions through a Public Sector Undertaking (MSTC) as a permissible administrative measure - HELD THAT:- Administrative Circulars such as the Circular dated 3 December 2018 cannot be expected to contain detailed reasons for their issuance, and insistence on every such administrative or executive circular having to contain such reasons may well paralyze administrative functioning. In the case of such circulars, therefore, the only requirement is for the authority issuing the circulars to set out the reasons for their issuance before the Court in the event of a challenge, which would, in ordinary course, be in counter-affidavit. It is, thereafter, for the Court to satisfy itself that the reasons cited are germane, and dispel any possibility of arbitrariness or caprice in the issuance of the circular. We, therefore, reject Dr. Bajpai’s submission that the reasons for issuance of the Circular dated 3 December 2018 cannot be seen by the Court, predicated on the law declared in Mohinder Singh Gill. It is obvious that the CBIC is entitled to assert that the Circular dated 3 December 2018 was issued in exercise of the power conferred by Section 143-AA of the Act. It goes without saying that the mere fact that the Circular may not make specific reference to Section 143-AA does not estop the CBIC from tracing the power for its issuance to the said provision. If the power to issue the Circular is to be found in Section 143-AA, the fact that Section 143-AA does not find especial mention in the Circular cannot invalidate it. It is not, therefore, as if the Circular dated 3 December 2018 permanently throttles the trade or vocation of auctioneers. As it stands, in our view, the Circular more than amply constitutes a reasonable restriction, within the meaning of Article 19(2) of the Constitution of India, engrafted in economic and public interest, and is, therefore, also constitutionally valid. The plea of infraction of Article 19(1)(g) of the Constitution, therefore, also fails. CVC Circular No. 06/07/18, dated 11 July 2018 is, again, equally extraneous to the controversy at hand. The CVC has, by the said Circular, disapproved award of contracts on nomination basis without adequate justification. The Circular dated 3 December 2018 does not award any contract on nomination basis. Besides, we have already held the measures, that the Circular puts in place, including the requirement of e-auction of uncleared goods through the MSTC, to be adequately justified. We also agree with the learned Single Judge that the appellant was effectively aggrieved, not by any detriment to public interest caused by the Circular dated 3 December 2018, but by the fact that private auctioneers lost the opportunity of auctioning uncleared and unclaimed goods within a year of their importation. Clearly, the writ petition was not prompted by any desire to safeguard public interest, but to preserve the right of the petitioner, which, according to the petitioner, the Circular dated 3 December 2018 illegally violated. Of course, there cannot be any embargo on such a right being asserted in a Court of law, as the right to freedom of trade, guaranteed by Article 19(1)(g) of the Constitution, is precious and inviolable. Like all fundamental rights, however, it is not absolute, but is subject to reasonable restrictions under Article 19(2). The Circular dated 3 December 2018, to our mind, eminently satisfies the requirements of Article 19(2). We, therefore, are unable to find any infirmity either in the Circular dated 3 December 2018 issued by the CBIC or the impugned judgment dated 5 September 2022 of the learned Single Judge. The appeal is accordingly dismissed, without costs. Issues: Whether the Circular dated 3 December 2018 issued by the Central Board of Indirect Taxes and Customs, which canalizes e-auctions of unclaimed/uncleared imported goods through a single agency (MSTC) for a limited period, is ultra vires the powers of the Board under Section 143-AA of the Customs Act, 1962 and/or violative of Articles 14 and 19(1)(g) of the Constitution of India.Analysis: The Circular is an executive administrative measure addressing disposal of unclaimed/uncleared cargo and was issued under the power to prescribe separate procedures for categories of goods or persons in Section 143-AA of the Customs Act, 1962. Judicial scrutiny of economic or fiscal policy measures is limited to legality, arbitrariness, procedural fairness and compliance with constitutional limits; courts exercise restraint and do not substitute policy judgment. Reasonable classification and an intelligible differentia connecting the classification to the objective are constitutionally permissible. Administrative circulars need not contain detailed reasons; where challenged the issuing authority may place reasons on record (e.g., in counter-affidavit) and courts may examine whether those reasons demonstrate absence of arbitrariness. The impugned Circular aims at expeditious, transparent disposal of cargo through a centralized e-auction portal run by a PSU with demonstrated capacity, for a limited period (one year after unloading), and contains safeguards such as segregation of disputed consignments and preservation of prior disposal procedure for goods remaining unsold after one year. The measure engages Article 19(1)(g) but is subject to reasonable restriction under Article 19(2); the limited temporal scope and stated public interest objectives constitute a rational nexus to the aim of expeditious clearance and revenue protection. Reliance on earlier task force reports, operational limitations of field formations, and the PSU's auction infrastructure were adequate factual bases for the policy choice; no misuse of the statutory power is established.Conclusion: The Circular dated 3 December 2018 is within the scope of Section 143-AA of the Customs Act, 1962, does not offend Article 14, and constitutes a reasonable restriction on the freedom under Article 19(1)(g); consequently the challenge to the Circular fails and the impugned judgment dismissing the writ petition is upheld.