TaxTMI 
TaxTMI 
2015 (11) TMI 1027
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....ses issued under Foreign Trade (Development and Regulation) Act 1992 (hereinafter referred to as 'the Foreign Trade Act) is ultravires the provisions of the Act. iii). Whether the imposition of condition that persons, who wish to import insecticide for non-insecticidal purposes, must obtain an import permit from the Central Insecticide Board and Registration Committee is unworkable. iv). Whether there is any discrimination practised against the petitioners and similar importers of other insecticides. 2. These questions appear to arise in the following factual matrix. Boric acid is an insecticide which is included in the schedule to the Act. The writ petitioner in W.P.(C) Nos.11388/2005, 1577/2006 and 4168/2007 is a trader who imports boric acid as part of its trade, whereas the other writ petitioner (in W.P.(C) No.28432/2006 and W.P. (C)10934/07) is a manufacturer who uses boric acid as raw material. The writ petitioners originally approached this court by filing W.P.(C) Nos. 11388/2005 and 1577/2006 and 26432/06. In the writ petitions the writ petitioners sought to challenge administrative instructions. By Ext.P1 they were asked to get themselves registere....
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.... . Learned counsel drew support from Section 2 of the Act. He would contend that Section 2 of the Act makes it clear that Act is in addition to any other Law for the time being in force (In this case the Foreign Trade Act). In fact, the expression 'time being in force' takes in future law, he submits. In this regard, he relies on the decision in M/s. Indian C. & P. Works v. State of A.P. (AIR 64 (AP) 430). He would contend that there are incidental powers available with the authorities. He would further contend that the condition imposed under Foreign Trade Act is not unworkable. He would point out that in policy matters interference by the Court must be limited to well established grounds. He would further submit that actually what the notification under the Foreign Trade Act insists is not registration but import permit and this aspect has been lost sight of by the learned Single Judge. The learned counsel relies on the following decisions in support of his arguments; Liberty Oil Mills v. Union of India ( AIR 1984 (3) SCC 465) , Sultana Begum v. Prem Chand Jain(1997 (1) SCC 373), CIT v. Hindustan Bulk Carriers (2003 (3) SCC 57), Manohar Lal Sharma v. Union of India (20....
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.... in the Act, which enable the authorities to check illegal activities indulged in by persons who may have imported boric acid purporting to import it for non- insecticidal purposes but diverting it for being used as insecticides, such provisions are more than sufficient to ensure that there is no abuse by any unscrupulous importer. He would further submit that even assuming that some restriction is required to check the possibility of abuse by any unscrupulous traders or importers, some documents can be obtained from the District Industries Centre which would suffice for the purpose of checking the possible misuse. Learned counsel would point out that there is no restriction on traders to freely import boric acid. He would then pose the question that when free import policy is in place, how permits could be contemplated having regard to the fact that the traders may not be in a position to produce end use certificate as sought to be demanded. He would contend that as the Act in this case governs the field and certain authorities are created under the Act for performing certain functions which are provided in the Act, the Executive could not confer additional functions on them by wa....
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....rned counsel for the appellants would place before us the provisions of Manufacture, Storage and Import of Hazardous Chemicals Rules, 1989. He would submit that other insecticides covered by the Act are also brought under the ambit of said rules. This is an attempt to rebut the complaint of the writ petitioners that there is hostile discrimination. He also drew our attention to the Hazardous Wastes (Management Handling And Trans boundary Movement) Rules 2008. Sri.Santhosh Mathew drew our attention to the judgment Paramjit Kaur v. State of Punjab (1999 (2) SCC 131) for the proposition that authority under the statutory body could be asked to perform duties beyond the purview of its statutory jurisdiction/functions. 11. As already noticed, the learned Single Judge interfered with the matter on the basis of two grounds which we have already indicated. In our view following questions arise for our consideration; i). What is the effect of Section 2 of the Act and Sections 3 and 5 of the Foreign Trade Act. (ii) Whether this is a case whereby insistence of the Authority, under the Foreign Trade Act for production of import permit, is ultra vires its powers. ....
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.... may be, as regards the efficacy of the insecticide and its safety to human beings and animals, register on such conditions as may be specified by it and on payment of such fee as may be prescribed, the insecticide, allot a registration number thereto and issue a certificate of registration in token thereof within a period of twelve months from the date of receipt of the application: Provided that the Committee may, if it is unable within the said period to arrive at a decision on the basis of the materials placed before it, extent the period by a further period not exceeding six moths; Provided further that if the Committee is of opinion that the precautions claimed by the applicant as being sufficient to ensure safety to human beings or animals are not such as can be easily observed or that notwithstanding the observance of such precautions the use of the insecticide involved serious risk to human beings or animals, it may refuse to register the insecticide. (3A). In the case of applications received by it prior to the 31st day of March, 1975, notwithstanding the expiry of the period specified in sub-section (3) for the disposal of such applicatio....
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....hereunder; Provided that any person who has applied for registration of an insecticide(under any of the provisos) to sub-section (1) of section 9 may continue to import or manufacture any such insecticide and such insecticide shall not be deemed to be a misbranded insecticide within the meaning of sub-clause (vi) or sub-clause (vii) or sub-clause (viii) of clause (k) of section 3, until he has been informed by the Registration Committee of its decision to refuse to register the said insecticide. (2). No person shall, himself or by any person on his behalf, manufacture any insecticide except under, and in accordance with the conditions of, a licence issued for such purpose under this Act. " Section 21 of the Act deals with the powers of the Insecticide Inspectors. Section 22 says about the procedure to be followed by insecticide inspectors. Section 27 deals with prohibition of sale, etc. of insecticides for reasons of public safety. Section 38 reads as follows: "38. Exemption:- (1) Nothing in this Act shall apply to - (a). the use of any insecticide by any person for his own household purposes or for kitchen garden or in respect of any la....
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....ime to time, formulate and announce, by notification in the Official Gazette, the foreign trade police 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. " Prior to the enactment of the Foreign Trade Act, Imports and Exports, were regulated under the Imports and Exports (Control) Act 1947. In the decision in Glass C.I. & U Asson. v. Union of India and others (AIR 1961 Supreme Court 1514), the Apex Court had occasion to deal with the challenge to an order issued under the Imports and Exports Act on the grounds inter alia that there is "violation" of Article 19 (1) (g) in empowering the state to deny licence on the ground that canalisation was contemplated. The Apex Court considered the challenge and upheld it by holding that there was no violation of the fundamental right. In Dy.Asst. I & S. Controller v. K.M.Corpn.(AIR 1972 Supreme Court 935), the Apex court was dealing with the case again under....
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.... grant of licence depends upon diverse factors. 15. The learned counsel Sri.Paul Jacob refers to the decision in Union of India v. Asian Food Industries {2006 13 Supreme Court Cases 542). That is a case under the Foreign Trade (Development & Regulation) Act, 1992. The Apex Court took the view that vested or accrued right cannot be taken away. In paragraph 26 of the Judgment, the Court held as follows: "26. A citizen of India has a fundamental right to carry out the business of export, subject, of course to the reasonable restrictions which may be imposed by law. Such a reasonable restriction was imposed in terms of the 1992 Act. " 16. From the above cited decisions, we arrive at the following conclusions: An executive instruction or a policy, which is not a statutory document, cannot form the basis for creation of an enforceable legal right. This obviously is based on the principle of law that executive instructions by themselves are policy, which could be amended at any time, could not form the basis to claim fundamental right under Article 19 (1) (g) of the Act. As far as notification under Section 5 of the Foreign Trade Act is concerned, it is not mere ex....
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.... is imported for insecticidal purposes, there is no restriction under the Foreign Trade Act. That is apparently taking note of the fact that the import of boric acid for insecticidal purpose would certainly require registration under the Act. In that sense, no doubt, it could be said that merely because there is registration obtained under Section 9 of the Act or because Section 17 of the Act provides that import can be done in terms of the Registration, it would still be a matter which is regulated in terms of the law relating to import and export which at the time of the enactment of the Act was contained in the Import and Export Act 1947 and after 1992 the Foreign Trade Act. Insecticides not intended to be used as insecticides and therefore exempted under Section 38 will not come under the Act. Therefore, there cannot be much significance to the effect of Section 2 in respect of insecticides not intended for insecticidal purposes. Of course, even in respect of insecticides which are not intended for insecticidal purposes, they can be regulated like any other goods under the terms of the Foreign Trade Act. The only issue would be whether any such restrictions contained therein is....
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.... Section 38 to do activities mentioned in Section 9 without taking out registration? The other way to look at the issue would be that Parliament did not intend to place restrictions to be found in the Act as such on those insecticides covered by Section 38 of the Act, but, at the same time it could not be said that the intention of the Parliament is that it should be completely unregulated. When Parliament makes the law, several aspects would be taken into consideration. Parliament knows best the needs of its people. Parliament knows which are those commodities and persons which must be regulated and the extent in which they should be regulated. The theory of laise faire states that the ideal state leaves its people free. But, then it becomes the duty of the Parliament to make Laws from time to time to deal with various situations where laws are found necessary. Death of both human beings and animals activated the legislative process culminating in enactment of the Act. Primary concern of the Act appears to be ensuring safety of both human beings and animals from the use of insecticides and protecting them from the use of insecticides as insecticides. There are insecticides which h....
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...."4. The Central Insecticides Board. (1). The Central Government shall, as soon as may be, constitute a board to be called the Central Insecticides Board to advice the Central Government and State Governments on technical matters arising out of the administration of this Act and to carry out the other functions assigned to the Board by or under this Act. " Section 5 (ii) also provides for performance of other functions assigned to it by under the Act. 3) Rule (3(f) of Insecticides Rules, 1971 inter aia provides as follows; "3. Functions of the Board: The Board shall, in addition to the functions assigned to it by the Act, carry out the following function, namely ; xxxxxxx xxx 3 (f). carry out such other functions as are supplemental, incidental or consequential to any of the functions conferred by the act or these rules. " 24. There is a like provision in regard to the Committee. Undoubtedly , it is true that under Section 38 insecticides not intended for insecticidal uses are not covered by the Act. The purport of the Insecticides Act is to prevent danger to human and animal life from the use of insecticides. It is also in....
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....he Court to limit the exercise of powers by the State to achieve various goals which it is bound to achieve. The executive power of the State enables the Government to discharge various duties under the Constitution and Laws. Every Welfare State would necessarily expect the Government to enact policies and implement it in a most effective manner. If it is not an area covered by legislative enactment, then certainly, unless it in any way affects the rights of its people or fundamental rights, executive must be free as long as it exercises it inconformity with the Constitution. In this regard we are of the view that if a person intends to import insecticides for non insecticidal purposes, then there should some checks and balances to ensure that it is not mis used. The issue as to how the executive power should be exercised would essentially be left to the executive. The question which is apposite in this regard would be this. Can, in exercise of the executive powers, the Government provide a system of checks and balances which is identical to the regime of the Registration under Section 9 of the Act. If that is admitted and established, that it is absolutely similar to the system of....
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....d-use issued by the concerned administrative Ministry/Department of the Government of India. By Annexure R2(c) 2 dated 17/12/2004 it is inter alia reiterated that such imports as aforesaid of boric acid is exempted from registration subject to the certification of such non insecticidal end use by the administrative Ministry/Department concerned of the Central Government. The insecticidal and non insecticidal use of boric acid have been given in the Annexure R2(c) order. It is by communication dated 1/8/2005 it is ordered that in super cession of all previous instructions issued, import of boric acid for non insecticidal use may be allowed as per the same procedure and guidelines in regard to the import of other insecticides for non insecticidal use i.e. on the basis of import permit issued by the Registration Committee on the recommendation of the nodal Department/Ministry. Annexure R2 (i)8 is the application for grant of permit for import of insecticides for non insecticidal use. R2(i) 8 is as follows: APPLICATION FOR GRANT AOF PERMISSION FOR IMPORT OF INSECTICIDES FOR NON INSECTICIDAL USE 1. Name of the importer along with complete address. : 2. Address....
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.... for registration latest by 31/8/2004. Annexure R3(g) contains further such information inserted by the Borax Manufacturers Association of India. Annexure.R3(h) is produced purporting to be an application for registration of insecticides under Rule 6. Annexure R3(i) purports to be a letter addressed by the Under Secretaryto the Government of India, the Ministry of Agriculture to the Secretary (CIB & RC), which reads as follows: "(i). A simplified registration proceedure be put in place by the RC within the next 6 months by applying, with necewssary modifications, as may be required, the same data and related requirements for registration of multi use pesticides which are already in use and are being manfuctured/imported without registration, as are being applied to cases of registration for ecport. All manufacturers/importers who intend to use such insecticides for insecticidal end use may be informed of such simplified/relaxed rgistration requirements by the Registration Committee by 31/12/2006 and they be given an opportunity to generate the date and apply for registration so as to complete the registyration process within a period of 2 years thereafter. (ii). S....
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....lines and that it may include certain further information. It is further stated that the committee took up list of applicants for grant of import permit for import of of boric acid and dual use chemicals (other than boric acid). We notice therein that mention is made about Sodium Cyanide/Potassium Cyanide for electroplataing and head treatment of metals in respect of M/s. M.B.Sales Corporation, and they are not seen approved as recommendation of the Nodal Ministry has not been submitted. Likewise in respect of Barium Carbonate, Benzo, etc.among other chemicals decisions are seen taken. Ext.R3(k) purports to be form of application for grant of permit for import of insecticide for non insecticidal purposes. 30. The writ petitioners seek to draw support from the Circular dated 22/6/2011 issued by the Central Board of Excises and Customers therein after referring to Section 38 of the Act , it is stated as follows: " As may be seen, the aforementioned provisions of the said Section 38 of the insecticides Act, 1968 are unambiguous and leave no scope interpretation. Essentially, the exemption from the provisions of the said Act would apply to those insecticides that are used f....
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....r the import policy without restriction and then divert part of of its import for non insecticidal purposes. In this regard , we may notice that if there is diversion for non insecticidal purposes, apparently the object of the Insecticide Act being to prevent the use of insecticide as insecticide it may not cause danger to life and such diversion would not be objectionable. If it is meant to be used as insecticides on the other hand on obtaining registration the Law apparently permits it. 34. Under Section 38 of the Act what is provided is that when insecticides are intended to be used for non insecticial purposes, the provisions in the Act will not apply. It is certainly open to the government to put in place sufficient safeguards to ensure that actually only insecticides which are genuinely intended for non insecticidal purposes are taken out of the purview of the Act and the restrictions and controls are which are provided therein. It is in this context when the importer of boric acid is not able to establish the end use it is not open to the trader to say that he should be allowed to import boric acid ostensibly for non insecticidal purposes. It is fraught with the danger th....
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.... proved by objective criteria supported by documentary evidence and facts and figures should be allowed to import the court should strike it down. 35. We are unimpressed by the argument that the provisions in the Act, which provides for violations being visited with legal consequences, should deprive the Government of the lawful exercise of its powers both executive and legislative. The manner of exercise of both legislative and executive power is only subject to the control envisaged under the Constituion through the doctrine of ultravires. The court will not sit in judgment over the wisdom of the measures. Wide latitude is usually shown in matters of economic policies by the Court. Therefore, in such circumstances we see no merit in the contention of the writ petitioners that the restriction deprives the traders of their right to import. They only had such right as is vouchsafed to them under the extant policy and law. In this case, only those who are able to produce import permit alone can have the limited right to import. If they intend either as traders or anyone else for that matter to import boric acid to be used as an insecticide, then in view of section 9 of the Act cer....
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....n v. P.Veldurai's case (supra), the Apex Court was dealing with the case where the appellant had filed an election petition challenging the election of the respondent on the ground that the respondent was disqualified for submitting nomination papers as he had subsisting contracts with the Government and those contracts had not been terminated in terms of an executive order. The Election Petition was dismissed by the High Court. The appeal was allowed by the Supreme Court. The Court took the view as follows inter alia: "47. Once a law occupies the field, it will not be open to the State Government in exercise of its executive power under Article 162 of the Constitution to prescribe in the same field by an executive order. However, it is well recognized that in matters relating to a particular subject in absence of any parliamentary legislation on the said subject, the State Government has the jurisdiction to act and to make executive orders. The executive power of the State would, in the absence of legislation, extend to making rules or the state would, in the absence of legislation, extend to making rules or orders regulating the action of the executive. But, such ord....
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.... order in regard to that matter in exercise of its executive power nor can the Governor exercise such power in regard to that matter through officers subordinate to that authority cannot apply to the situation at hand. What is involved is not grant of Registration under Section 9 or discharge of any other function assigned to the statutory authorities under the Act through any subordinate authorities. Equally , it is not a case where the Executive power in this case has been exercised in relation to the matter which is the subject matter of Section 9. In other words, the executive orders relate to providing for a procedure for the Government to control the import of multi-use insecticides so that those insecticides are imported only for non insecticidal purposes as intended. The writ petitioners have not been able to establish that members of the Board of the Registration Committee, who have been appointed by the Government, are being asked to discharge any duties which violate terms of their appointment or the duties which could be assigned to them in terms of the orders of appointment. There is nothing in the Act in relation to deprive them off their authority conferred under exe....
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....rd. Therefore, virtually members of the Registration Committee are also drawn from the members of the Board. The statutory function of the Committee appears to be to register the insecticides after scrutinizing their formulae and verifying claims as regards safety to human being and animals. Further clause (2) of Section 5 (1) indicates that they are bound to perform such other functions as are assigned to them by or under the Act. In this connection it is also necessary to note that executive orders were holding the field. providing for import permit and it is apparently taking note of such procedure that the authority under the Foreign Trade Act provides such condition in Ext.P5. It is to be noted in this context, the authorities under the Foreign Trade Act Customs Officers may not be equipped with necessary information and inputs which are needed for regulation of indiscriminate import of insecticides purporting to be made for non insecticidal purposes, but which were not meant to be so used. The competent authority which would have the technical authority would be the expert body viz. the Board and the Registration Committee. The requirement of end use being certified, may have....
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....xecutive orders are called in question. In Ext.P1 dated 28/10/2004, it is provided inter alia that the registration of the importers of boric acid with the Central Committee ( CIB & RC) under the Act should be a pre condition for import if its uses are insecticidal. No exception can be taken. It is further provided that in case boric acid is proposed to be imported for an identified non insecticidal use, then such import would be exempted from the requirements of registration under the Act on the basis of a certificate of end use issued by the concerned Administrative Ministry or the Department of the Government of India. In regard to traders, it is stated that as the end use of the boric acid in respect of import by traders cannot be verified, they would require registration with CIB & RC. In Ext.P3 dated 6/9/2005 issued by the Ministry of Finance, Department of Revenue, after referring to Ext.P1, it is stated that the Ministry of Agriculture has clarified that import of boric acid for non insecticidal use may be allowed as per the same procedure and guidelines with regard to import of other insecticides for non insecticidal use that is only on the basis of import permit issued by....
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....cturers that the learned Single Judge has not taken into consideration the actual condition in Ext.P5 issued under the Foreign Trade Act. It does not speak about the registration. Rather it refers to requirement of import permit. In fact it is pointed out that the learned Judge finally held that the impugned condition in the policy to take out a registration under the Act is arbitrary and unsustainable. It is pointed out that there is no requirement of taking out registration under the Act in Ext.P5. We notice that as far as import notification is concerned as contained in Ext.P5, there is no requirement of taking out registration though the learned counsel Sri.Gopinatha Menon would point out that what is meant is only import permit. We would think that the learned Single Judge has not appreciated the relevant aspects properly. As noted, the learned Single Judge proceeded as if what is required is taking out registration. 44. It would appear, from the document produced, that import permits have been granted not only for boric acid but for other chemicals/insecticides. What would have been unworkable would have been insistence of registration when it is sought in respect of insec....
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....gistration if intended to be used as insecticides. According to us, no further investigation into this matter is necessary for by finding that there is illegality committed by the local manufactures which is being condoned by the authorities may not advance the case of the writ petitioners. The case of the writ petitioner is to quash the of condition in Ext.P5 relating to boric acid. We are of the view that there is no basis for the learned Single Judge to have quashed Ext.P5. Whether there is hostile discrimination and whether Article 14 is violated? 46. The next question which arises for consideration is whether there is discrimination. A plea of discrimination is founded upon Article 14 of the constitution. Article 14 of the Constitution is available to citizens and persons who are not citizens. In substance it provides for three principles. Equals must not be treated as unequals. Unequals must not be treated as equals. Last, but not the least, the action of the State must be free from arbitrariness as arbitrariness is a sworn enemy of equality. In this case, apparently the argument is that by the imposition of the impugned clause there is discrimination in so far as while....
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....and quantities mentioned therein) issued by such satatuotry authoriteis may be accepted as end use certificate for issue of import permits. Therefore, even in respect of Sodium cyanide there is a requirement of import permit and also the end use element govern the import of sodium cyanide which apparently is multiple use pesticide. No doubt the writ petitioner would point out that there are such requirements in an executive order in relation to other insecticides . It is pertinent to note that there is no such requirement in the statutory policy in regard to other insecticides. Discrimination and arbitrary conditions are imposed only in regard to the boric acid in the statute. 49. Under 2004 - 2009 policy column 1 provides for EXIM Code, Column 2 provides for item description, column 3 contains policy. The restrictions contained are of two types viz. Prohibited and Restricted. Items which do not require any licence under the Exim policy have been denoted as "Free" subject to the Licensing Notes contained in the relevant chapter/heading/sub-heading or as may have been indicated under column 4 mentioning conditions relating to the policy and is also subject to any other law for th....
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....nditions mentioned in the Rules, the importer shall, before 30 days but not later than the date of import, furnish the details specified in Rule 18 to the authority specified in Schedule 5 of the said Rules. (2). Import is restricted in terms of Interim PIC Procedure of Rotterdam Convention on Prior Informed Consent Procedure for hazardous chemicals and pesticides. 52. In fact the learned counsel for the appellant would emphasise that the right, which is given to import without licence, is subject to the above conditions. Of course, the learned counsel for the writ petitioners would point out that under the Prior Informed Consent Procedure, the condition which is imposed on the importers of boric acid is not imposed. Under the terms of the Prior Informed Consent Procedure what is required is after the import is carried out, the importer would have to comply with the procedure. 53. We would think that this is a case where the learned Single Judge has not pronounced on the case set up that there is violation of Article 14 based on the alleged discrimination. We find that there is no denial of the same by the appellants. But,at the same time, we noticed materials ....
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....ondition. W.P.(C) No.11388/2005 also filed by the very same authority which filed W.P.(C) No. 1577/2006 & 4168/2007. In W.P.(C) No. 11388/2005, the prayer was to quash Ext.P1 circular to the extent it mandates that import of boric acid by traders can be effected only on their getting a registration under the Act. As far as the said writ petition is concerned, another learned Single Judge following the judgment in the other cases only found that Ext.P1 Circular is liable to be quashed and there was a direction to refund the duty paid by the petitioner within a period of three months. 55. No doubt, if the restriction had not been imposed by law (the amendment on 7/4/2006to the statutory policy), the question would arise as to what is the effect of executive instructions on the right to import boric acid as per the statutory policy till the date of the amendment that is 7/4/2006. An executive order cannot impinge on a legal right. There was a right available under the extant statutory policy before the amendment. It could be said that an executive order could not have imposed a restriction on the right available under the policy. But, after the amendment with effect from 7/4/2006 t....