AI Drafter 
TaxTMI 
TaxTMI 
2015 (8) TMI 997
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....at they were ultra vires the provisions of Section 3 of the Act and, in any case, unconstitutional as offending Article 14 of the Constitution of India. The writ petitions filed by them were dismissed by learned single Judge. Matter was carried in appeal before the Division Bench of Kerala High Court, but unsuccessfully, as these appeals have also been dismissed. It is clear from the above that the issue involved in all these appeals are identical. This was the reason for clubbing these appeals so that they could be heard analogously and decided as one batch. However, for the sake of convenience, we will be referring to the facts from Civil Appeal No.4027/2009 as well as the impugned judgment dated 21.10.2008 which is impugned in the said appeal. 2. The appellants are engaged in refining and manufacture of edible oils, vanaspathi, bakery shortening, margarine etc. Their registered offices and the factories are in the State of Kerala. The main raw material used in the manufacture of RBD palm oil is crude palm oil. The appellants have been importing this raw material from other countries, primarily from Indonesia and Malaysia. Before the issuance of the aforesaid Notifications, th....
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....the provisions of Section 3 of the Act. Before us, the appellants have raised the same arguments and in the process also, submitted that the High Court has not considered the aforesaid twin submissions of the appellants in proper perspective, and, on the contrary, rejected the same in perfunctory manner without dealing with these contentions in the manner they were placed before the High Court. Before we record the arguments of Mr. Naphade, learned Senior Counsel who appeared for the appellants (counsel appearing in other appeals adopted his arguments) in detail, it may be advisable to state the reasons which were given by the respondents in their counter affidavits in support of these Notifications. We would, however, like to record that in the impugned judgment the discussion on this aspect is contained in detail as well. 6. State of Kerala is the largest producer of Coconut which is the raw material for the production of coconut oil. Coconut oil and palm oil are competing products. For production of palm oil, crude palm oil is the raw material which is largely imported. Since the import price of crude palm oil is much less than the price of coconut oil, the price of coconut o....
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....ted 03.02.2006 to Joint Director of General Foreign Trade (JDGFT) enclosing a copy of the letter from All Kerala Coconut Farmers Union, Thrissur to increase minimum support price of coconut oil and to cut import of coconut and coconut oil into the country and in that letter a request is made to JDGFT to offer their comments, if any. The Chairperson of the Board by her letter dated 06.12.2006 addressed to Director General of Foreign Trade (DGFT) seeks restrictions/prohibition on the import of coconut oil and coconut oil cake and the reason being slump in the prices of coconut and coconut oil in the country and in particular, States like Kerala. This correspondence was forwarded by DGFT Office to Ministry of Agriculture. The Chief Minister of Kerala by his letter dated 19.04.2007 to the Hon'ble Prime Minister has brought to his notice the plight of coconut farmers in the State, in view of steep decrease in the price of coconut, copra and coconut oil and, therefore, a request was made to reverse the decision to cut import duties of palm oil. This was followed by another letter by Hon'ble Commerce Minister to Commerce Secretary requesting the action on the letter of the Board d....
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....l prices as a whole, their department had supported a recent proposal of Ministry of Finance for reduction of duties on crude palm oil and reiterated the suggestion not to allow import of palm oil through Southern Ports as suggested by Chairperson of the Board". They sum it by suggesting that the import of palm oil to Southern Ports particularly through Cochin, Tuticorin, Mangalore and Chennai should be disallowed with immediate effect and also the import duty of crude palm oil should not be reduced further, since it may have adverse impact on the livelihood of oil seed growers, particularly the coconut farmers of Kerala as pointed out by the Chief Minister of Kerala. This was followed by the letter dated 03.09.2007 by the Director of Statistics to the Director General of DGCI and seeking import data of palm oil for last three years in the case of Cochin, Tuticorin, Mangalore and Chennai. This was followed by the fax message requesting the Chairperson to clarify on certain issues narrated in her letter dated 05.06.2007. 9. It is on the basis of the aforesaid material produced before the Central Government which ultimately led to issuance of impugned Notifications. Existence of t....
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....lopment Board, they are only referring to the plight of the coconut farmers in the State, in view of large scale importation of palm oil which is being used as a substitute to the coconut oil by the poor and middle class families in the State as an alternate for their day to day need of edible oil and this was precise reason for the Central Government to issue the impugned notification in the public interest and in particular to protect the interest of the coconut farmers in the State." (h) Letter of the Ministry of Agriculture to Prime Minister's Office. 10. Mr. Naphade, however, argued that this material does not provide any rationale for curbing the import through the ports in Kerala. His submission was that by imposing ban on importation of palm oil through the ports of Kerala alone, no such purpose, as manifested, was going to be achieved. He further submitted that such a ban on importation of palm oil through the ports of Kerala would bring no succour to the coconut oil prices. In support of this submission, he referred to the pleadings in para 6 of the writ petition tabulating the prices of coconut oil and palm oil respectively from time to time with endeavour to p....
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....ntly small and marginal with the average size of holding being only half an acre. As already pointed out above, the significant and marked difference between the price of coconut oil and palm oil was manifest the fact that percentage difference between the two stood at 109% in the year 2004, reduced to 50% in December, 2006, to 12% in September 2007 and 0.6% in October 2007. The Board also observed that the import of palm oil in one particular year had a cascading downward impact on coconut oil prices in the subsequent years. For example, the huge import of 1,53,513 tonnes of palm oil in 2004-05 had led to a price decline in coconut in 2005-06 and 2006-07. While the average price of coconut oil is Rs. 6,155/- per quintal in 2004-05, in 2005-06, it declined sharply to Rs. 4,978/- per quintal with further fall in 2006-07 when the price was Rs. 4,459/- per quintal. It is more than abundantly clear that the restriction is imposed keeping in view the welfare of 35 lakhs farmers in the State of Kerala. Matter was examined at the highest level. The Government had two alternatives before it, either to increase the custom duty i.e. duty on the import of crude oil or to issue impugned Notifi....
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....will be violative of the mandate of Article 14 of the Constitution." 13. The power of the Court under writ jurisdiction has been discussed in Asif Hameed and Others. v. State of Jammu and Kashmir and Others 1989 Supp (2) SCC 364 in paras 17 and 19, which read as under: "17. Before adverting to the controversy directly involved in these appeals we may have a fresh look on the inter se functioning of the three organs of democracy under our Constitution. Although the doctrine of separation of powers has not been recognised under the Constitution in its absolute rigidity but the Constitution makers have meticulously defined the functions of various organs of the State. Legislature, executive and judiciary have to function within their own spheres demarcated under the Constitution. No organ can usurp the functions assigned to another. The Constitution trusts to the judgment of these organs to function and exercise their discretion by strictly following the procedure prescribed therein. The functioning of democracy depends upon the strength and independence of each of its organs. Legislature and executive, the two facets of people's will has no power over sword or the purse non....
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....ens or is opposed to the provisions of the Constitution. Thus, the position is that even if the decision taken by the Government does not appear to be agreeable to the Court, it cannot interfere. 6. The correctness of the reasons which prompted the Government in decision-making taking one course of action instead of another is not a matter of concern in judicial review and the Court is not the appropriate forum for such investigation. 7. The policy decision must be left to the Government as it alone can adopt which policy should be adopted after considering all the points from different angles. In the matter of policy decisions or exercise of discretion by the Government so long as the infringement of fundamental right is not shown the courts will have no occasion to interfere and the Court will not and should not substitute its own judgment for the judgment of the executive in such matters. In assessing the propriety of a decision of the Government the Court cannot interfere even if a second view is possible from that of the Government." 15. As far as classification based on geographical area is concerned i.e. held to be permissible by this Court in Gopal Narain v. State ....
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....tters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. The court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. Nowhere has this admonition been more felicitously expressed than in Morey v. Doud, 354 US 457: 1 L Ed 2d 1485 (1957) where Frankfurter, J., said in his inimitable style: In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events - self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability. The Court must always remember that "legislation is directed to practical problems, that ....
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....nd the efforts of the tax department are not likely to disclose their unaccounted money without some inducement by way of immunities and exemptions and it must necessarily be left to the legislature to decide what immunities and exemptions would be sufficient for the purpose. It would be outside the province of the Court to consider if any particular immunity or exemption is necessary or not for the purpose of inducing disclosure of black money. That would depend upon diverse fiscal and economic considerations based on practical necessity and administrative expediency and would also involve a certain amount of experimentation on which the Court would be least fitted to pronounce. The Court would not have the necessary competence and expertise to adjudicate upon such an economic issue. The Court cannot possibly assess or evaluate what would be the impact of a particular immunity or exemption and whether it would serve the purpose in view or not. There are so many imponderables that would enter into the determination that it would be wise for the Court not to hazard an opinion where even economists may differ. The Court must while examining the constitutional validity of a legislatio....
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....hether better public policy can be evolved. Nor are our courts inclined to strike down a policy at the behest of a petitioner merely because it has been urged that a different policy would have been fairer or wiser or more scientific or more logical. 47. Process of disinvestment is a policy decision involving complex economic factors. The courts have consistently refrained from interfering with economic decisions as it has been recognised that economic expediencies lack adjudicative disposition and unless the economic decision, based on economic expediencies, is demonstrated to be so violative of constitutional or legal limits on power or so abhorrent to reason, that the courts would decline to interfere. In matters relating to economic issues, the Government has, while taking a decision, right to "trial and error" as long as both trial and error are bona fide and within limits of authority. There is no case made out by the petitioner that the decision to disinvest in BALCO is in any way capricious, arbitrary, illegal or uninformed. Even though the workers may have interest in the manner in which the Company is conducting its business, inasmuch as its policy decision may have an....
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....s sought to be achieved. We, thus, reject the arguments based on Article 14 of the Constitution. 21. The argument of Mr. Naphade to the effect that interests of consumers is equally important which is not taken into consideration needs an outright rejection for more than one reason. In the first place no such case was made out by the appellants either in the High Court or even in the special leave petition filed in this Court. This argument was raised for the first time during oral hearing. There is, thus, no material produced on record to show how the impugned Notification would affect the interests of the consumers. An argument of this nature cannot be raised in the air without having solid foundation with relevant material. In any case, as we have found that the Notifications were issued in the interests of farmer class in the State of Kerala and, therefore, they are in public interest, this argument is of no avail. 22. With this, we advert to the other arguments, namely, whether the Notifications are ultra vires of Section 3 of the Act. Our discussion has to, necessarily, start by noticing the provision of Section 3, which reads as under: "3. Powers to make provision r....
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....s to import under licences certain fixed quantities of the goods. The quantity of goods to be imported will have to be determined on consideration of the necessity for having those goods in the country and that again, would depend on the use to be made of those goods. It follows therefore that the persons licensed to import goods up to a certain quantity should be amenable to the orders of the licensing authority with respect to the way in which those goods are to be utilised. If the licensing authority has no such power, its control over the import cannot be effective. It may have considered it necessary to have goods imported for a particular purpose. If it cannot control their utilisation for that purpose, the imported goods, after import, can be diverted to different uses, defeating thereby the very purpose for which the import was allowed and power had been conferred on the Central Government to control imports. It is therefore not possible to restrict the scope of the provision about the control of import to the stage of importing of the goods at the frontiers of the country. Their content is much wider and extends to every stage at which the Government feels it necessary to ....
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....r: "5. Export and import policy. - The Central Government may, from time to time formulate and announce, by notification in the Official Gazette, the export and import policy and may also, in the like manner, amend that policy." This Section is substituted by amended Section 5 w.e.f. 27.08.2010 and the amended Section reads as under: "5. Foreign Trade Policy. - The Central Government may, from time to time, formulate and announce, by notification in the Official Gazette, the foreign trade policy and may also, in like manner, amend that policy: Provided that the Central Government may direct that, in respect of the Special Economic Zones, the foreign trade policy shall apply to the goods, services and technology with such exceptions, modifications and adaptations, as may be specified by it by notification in the Official Gazette." 25. Mr. Naphade submitted that proviso which is added in the new Section 5 for the first time relates to the place and since it was conspicuously absent in the old provision, it could clearly be inferred that Section 5 as it stood at the relevant time had no bearing as far as place of import and export policy is concerned. On that basis, he ....
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.... 29. Indisputably, the power under Section 3 of the 1992 Act is required to be exercised in the manner provided for under Section 5 of the 1992 Act. The Central Government in exercise of the said power announced its Foreign Trade Policy for the years 2004-2009. It also exercised its power of amendment by issuing the Notification dated 27.06.2006. Export of all commodities which were not earlier prohibited, therefore, was permissible till the said date. xx xx xx 43. We are, however, not oblivious of the fact that in certain circumstances regulation may amount to prohibition. But, ordinarily the word "regulate" would mean to control or to adjust by rule or to subject to governing principles (See U.P. Cooperative Cane Unions Federations v. West U.P. Sugar Mills Association and Others, (2004) 5 SCC 430, whereas the word "prohibit" would mean to forbid by authority or command. The expressions "regulate" and "prohibit" inhere in them elements of restriction but it varies in degree. The element of restriction is inherent both in regulative measures as well as in prohibitive or preventive measures. xx xx xx 46. The terms, however, indisputably would be construed having regard....