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2013 (11) TMI 1623
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.... analogously heard for judicial resolution of the surging debate. 2. We have heard Mr. M.S. Singhvi, learned Senior Counsel assisted by Mr. Vineet Dave & Mr. Dinesh Mehta for the petitioners and Mr. V.K. Mathur with Mr. Ankur Mathur, learned counsel for the respondents. 3. The competing pleaded versions would outline the essential facts. To limit the factual narration to the bare minimum, pleadings of D.B. Civil Writ Petition No. 5459/2012, being all encompassing, would be adverted to. 4. The petitioner has introduced itself to be a private limited company incorporated and registered under the Indian Companies Act, 1956 established for the purpose of setting up an industrial unit for manufacture of marble slabs, tiles and dressed marble blocks at Udaipur in the State of Rajasthan. It has averred that the Government of India, with a view to boost exports to capture greater share of global trade, had been formulating import and export policies from time to time. In furtherance of this objective, amongst others, a concept of Export Processing Zone (also referred to as 'EPZ') was developed in the year 1965 and such zones were established at various places in the....
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....ions, applied for grant of license for bonded warehouse under Section 58 of the Customs Act, 1962 and also the permission for manufacturing in Bond under Section 65 thereof, whereupon necessary permissions were granted to it by the concerned authorities. 7. According to the petitioner, it thereafter, having successfully functioned as an EOU for over a year and being inspired by the concessions extended to the EOU as well as the liberal policy of the Government of India, decided to expand its operations by making further investments. It thus, sought for necessary amendments in the LOP granted to it, so as to enable it to increase its manufacturing capacity of marble blocks/tiles. The permission so applied for, was granted by the competent authority on 22-1-2003, and based thereon, the petitioner enhanced its capacity by making huge investments in its business. On its application for inclusion of additional items for exports from time to time, the same came to be granted by the authorities concerned, last thereof being on 26-11-2008 permitting it to manufacture and export all types of dressed blocks of artificial stones, slabs and tiles made therefrom. The validity of such pe....
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....ctional Export Commissioner restricting the clearances of deemed exports with respect to the item "marble" only. Being beset with this prejudicial administrative intervention, the petitioner, in D.B. Civil Writ Petition No. 10877/2009, assailed the validity of this circular seeking redress. By order dated 9-12-2009, this Court as an interim relief stayed the operation of the policy circular dated 26-3-2009 and permitted the petitioner to supply marble against foreign exchange remittances in the DTA on payment of leviable duty, subject however, to the condition that if ultimately, it was held liable to any other consequences, it would give an undertaking to suffer the same. The petitioner has claimed that in view of the supplies so permitted to be made and effected, it earned foreign exchange to the tune of Rs. 4498.39 lacs in USD, and thus, made contribution to the foreign exchange reserves and in addition also made payment of full duty to the extent of Rs. 562.23 lacs and Rs. 250.76 lacs as VAT/CST. The notification dated 7-5-2012 impugned in D.B. Civil Writ Petition No. 5459/2012 prohibiting thereby, supplies of marble in DTA under Paragraph 6.9(b) of FTP 2009-2014 came to be iss....
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.... referring to the Central Government's power to amend the foreign trade policy in public interest, has asserted that in terms of Paragraph 6.1 of FTP 2009-2014, the EOUs are under an obligation to export their entire production of goods and services, except the permissible sales in DTA. According to the answering respondents, Paragraphs 6.3(a) & 6.8(h) of the FTP 2009-2014 deal with sale of goods at concessional rate of duty and at full payment of duty respectively, but do not permit DTA sale of marble. Reiterating that the prohibition of DTA sale of marble has since been upheld by the Hon'ble Apex Court in M/s. Hindustan Granites (supra), they have pleaded that the interim orders passed by this Court permitting the petitioner to undertake DTA sales against foreign exchange remittances, are apparently conditional and do not vest it with any right in law to engage in such transactions in supersession of the relevant provisions of the FTP as well as the authority and right of the Central Government conferred by the Act to restrict and/or prohibit such sales in public interest. Vis-a-vis the circular dated 26-3-2009, as assailed in D.B. Civil Writ Petition No. 10877/2009, the responde....
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....the Policy being within the competence of the Central Government under the Act and actuated by relevant determinants, the challenge is misplaced. 14. In its rejoinder, the petitioner while reiterating and reaffirming its averments, as outlined hereinabove, has denied the allegation of illegal sale of imported marble into DTA. While asserting that it is not at all involved in such illegal sale of imported marble, it has emphasized that on one hand, the Central Government had been increasing the quota of import of marble on regular basis to benefit a selected class of firms and on the other, had been imposing restrictions upon supplies of marble into DTA. According to it, classifying marble to be a restricted item is without any conceivable basis, and that, the restriction on the supply thereof into DTA, is also prompted by oblique considerations. It pleaded that it is involved in supplies of marble in domestic market at the instance of its foreign buyer, and that, no element of sale by it into DTA, in any manner, is involved. As such supplies are being effected for its foreign buyer who, as a matter of fact, is selling marble to its customers in India. Such transactions do n....
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....ional and unwarranted change in the Government policy imposing arbitrary restriction on the trade of marble by EOUs is destructive of foreign trade prospects, and thus, being against national interest, is liable to be declared illegal and null and void, he argued. The learned senior counsel has insisted that the impugned action is partisan and discriminatory as well, inasmuch as, while on one hand, the Central Government had been enhancing the quota of import of rough marble blocks from time to time, on the other, it is throttling supplies of finished goods in DTA against foreign exchange remittances received from overseas. Dismissing the respondents' plea of illegal sale of sub-standard finished marble products in DTA by the EOUs as wholly baseless, Mr. Singhvi has insisted that there being no valid justification for issuance of the impugned circular(s) and/or notification(s), the same ought to be held void ab initio. According to the learned senior counsel, the respondents' purported justification of protecting the domestic industry is also frivolous, in the teeth of continual increase of the quota of import of rough marble blocks. As such marked enhancement of import quota not o....
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....ulted with. Reiterating that Paragraph 6.9 is only by way of a clarification of Paragraph 6.8, and that, these two provisions, in essence, complement to each other, Mr. Mathur has asserted that the restriction on the sale and supplies, amongst others, of marble by an EOU into DTA being an essentiality in the interest of domestic industry the impugned circulars/notifications are unassailable. 18. Mr. Mathur maintained that the restriction on the sale and supplies, amongst others, of marble by EOUs into DTA was warranted, having regard to the clandestine activities resulting in export of sub-standard finished products made of indigenous rough marble blocks against import of rough counterparts on one hand, and release of rich quality goods made out of imported rough marble blocks in the DTA on the other. Moreover, marble being a restricted item, the Central Government was well within its authority, having regard to the various factors e.g. development of domestic industry, economic growth and generation of employment in the country, in particular, to justifiably resort to the decision impugned, he urged. As the impugned action is in furtherance of a policy decision in public i....
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....te judicial analysis of the contrasting pleas. 24. The Act, as its Preamble reveals, is a legislation to provide for the development and regulation of foreign trade by facilitating imports into, and augmenting exports from, India and for matters connected therewith or incidental thereto. The Statement of Objects and Reasons, while underlining that foreign trade is the driving force of economic activity and co-apts technology, investment and production in promoting the same, acknowledged goals of the new trade policy to increase productivity and competitiveness and to achieve a strong export performance. The existing Imports and Exports (Control) Act, 1947 was recommended to be replaced by the intended legislation with the notion that the basic law governing foreign trade must serve as an instrument to create an environment that would provide a strong impetus to exports, facilitate imports and render export activity more profitable. That the Exports and Import Policy is a vital part of trade policy, was highlighted as well. 25. For the purpose in hand, enough it would be to refer to Sections 3 & 5 of the Act. Whereas Section 3 empowers the Central Government to make ....
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.... see that the Goods and Services Tax rebates all indirect taxes und levies on exports. ... ... ... We need to encourage value addition in our manufactured exports and towards this end, have stipulated a minimum 15% value addition on imported inputs under advance authorization scheme." 27. Few provisions thereof, being indispensable, are also referred to hereinbelow : - "1.3 Central Government reserves right in public interest to make any amendments by notification to this Policy in exercise of powers conferred by Section 5 of FT(D&R) Act. 2.1 Exports and Imports shall be free, except where regulated by FTP or any other law in force. The item wise export and import policy shall be, as specified in ITC(HS) notified by DGFT, as amended from time to time. ... ... ... 2.3 If any question or doubt arises in respect of interpretation of any provision contained in FTP, or classification of any item in ITC (HS) or HBP-v1 or HBP-v2, or Schedule of DEPB Rates (including content, scope or issue of an authorization there under) said question or doubt shall be referred to DGFT whose decision thereon shall be final and b....
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....p;Following supplies effected from EOU/EHTP/STP/BTP units to DTA will be counted for fulfillment of positive NFE : (a)  ... ... ... (b) Supplies effected in DTA against foreign exchange remittance received from overseas. 8.2 "Deemed Exports" refer to those transactions in which goods supplied do not leave country, and payment for such supplies is received either in Indian rupees or in free foreign exchange. 8.2 Following categories of supply of goods by main/sub contractors shall be regarded as "Deemed Exports" under FTP, provided goods are manufactured in India : (a) Supply of goods against Advance Authorization/Advance Authorization for annual requirement/DFIA; 9.9.1 "Authorization" means a permission as included in Section 2(g) of FT(D&R) Act to import or export as per provisions of FTP." 28. A plain perusal of the above quoted provisions of the FTP 2009-2014 (also referred to as 'the Policy') would attest that as ordained by the Act, the Central Government in public interest, may effect any amendment to the Policy. Further, the exports and imports, which otherwise are to be free, can be ....
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....in Paragraph 6.8(a), DTA sale at concessional duty, inter alia of marble, was made impermissible. The validity of this notification, to reiterate, has since been upheld by the Hon'ble Apex Court in M/s. Hindustan Granites (supra). 31. As per Paragraph 6.8(h), an EOU may sell finished products, except pepper and pepper products and marble, which are freely importable under FTP in DTA, under intimation to the jurisdictional Development Commissioner, against payment of full duties, provided it has achieved positive NFE. Paragraph 6.9 provides that the supplies, as catalogued in clauses (a) to (h) thereunder, effected amongst others by EOU units to DTA would be counted for fulfilment of positive NFE. Clause (b) thereof comprehends supplies effected in DTA against foreign exchange remittances received from overseas. "Deemed Exports" has been denied in Paragraph 8.1 to refer to those transactions, in which goods supplied do not leave country, and payment for such supplies is received either in Indian rupees or in free foreign exchange. 32. On a cumulative consideration of these provisions, it is thus, apparent that in terms of the EOU Scheme, the entire production of an E....
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....re made, was highlighted. It was asserted that the impugned circular/notification was with a view to protect the SIL Units at the cost of 100% EOUs. 35. Their Lordships, on a survey of the Policy involved and on a scrutiny of the materials on record, negated these contentions for the reasons as hereunder : - (a) 100% EOUs had undertaken to export their entire production except permissible sale in DTA, and thus, DTA sales constituted an exception or an incidental facility, and thus, were not an integral part of the EOU Scheme. (b) 100% EOUs have been importing rough marble blocks from which they had been producing marble tiles/slabs, but the director General of Foreign Trade had found that in course of last seven years, the entire export of marble tiles/slabs is made out of poor quality indigenous rough marble blocks thus, warranting disallowance of DTA sales by 100% EOUs vide the impugned circular/notification. (c) Marble 'is a restricted item, and it had been detected by the Director General of Foreign Trade that 4% to 5%, 100% EOUs have been importing rough marble ostensibly....
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....port of marble tiles/slabs was being made out of poor quality indigenous rough marble blocks and the entire sale of marble tiles/slabs in the DTA is from rich good quality imported rough marble blocks. That marble is a restricted item, is not in dispute. As the above quoted reasons in the decision in M/s. Hindustan Granites (supra) would reveal, their Lordships sustained the validity of the impugned circular/notification by laying due emphasis on the rationale behind allowing imports of rough marble blocks by 100% EOUs to be used for export production, and not for diversion to the DTA, resulting in the Indian market being flooded by imported goods eventuating unemployment in the mining industry. That by the impugned circular/notification, procurement of domestic rough marble blocks for achieving NFE earnings by DTA sales has been sought to be regulated, had been specifically noted. The demur qua consistent enhancement in the import quota to benefit the SIL Units, has been rejected as well. 37. In its bid to demonstrate the inapplicability of the raison d'etre of M/s. Hindustan Granites (supra) qua the present assailment, the distinguishing features between the DTA sales and....
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....ot to be taken cognizance of, we are not inclined to lend our concurrence to this assertion, more particularly, in view of the graphic and conclusive contextual text in this regard, as contained in M/s. Hindustan Granites (supra). The factors and/or considerations cited by the respondents in addition to foreign exchange earnings, as contributing criteria, to formulate a foreign trade policy also, in our comprehension, cannot be readily discarded as impertinent or vacuous. There is no determinative material on record that the factors, such as, development of domestic industry, economic growth and generation of employment in the country, as highlighted by the respondents, have not either been taken note of or applied to prohibit supplies of DTA under Paragraph 6.9 of 'marble'. Though literally, Paragraphs 6.8 & 6.9 refer to sales and supplies respectively, notwithstanding possible variations in the incidental attributes of the transactions involved, these, to our understanding, have in common an element of sale, as fundamentally conceptualized. It is unlikely, and that too, in absence of any overwhelming material to the contrary that though supplies under Paragraph 6.9 are construed ....
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....rovisions thereof or any other law in force, and the Central Government is authorized, in public interest, to make any amendment to the Policy in the exercise of its power under Section 5 of the Act. Thus, if the supplies in DTA, as conceived of in Paragraph 6.9 with all its attendant concomitants, including NFE earning potential thus, can indubitably be regulated/restricted by the Central Government on relevant considerations and in public interest, and in such an eventuality, the plea of violation of the fundamental right to carry on any trade, occupation or business under Article 19 of the Constitution of India, would not be tenable. Having regard to the avowed objectives sought to be achieved by the impugned decision, reliance on the decision in Secretary to Govt., Tamil Nadu & Anr. (supra) is also of no avail. 42. The considerations prompting the impugned decision, in our view, outweighs the aspects highlighted on behalf of the petitioner to repudiate the same and cannot be dubbed to be antagonistic to the Act and the Policy framed thereunder. 43. Referring to the decision in Barium Chemicals & Anr. v. Company Law Board & Anr., (1966) Supp. SCR 311, their Lords....