TaxTMI 
TaxTMI 
2024 (5) TMI 835
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....f 2023. JUDGMENT (PER : SMT. M. S. JAWALKAR) 1. Heard. 2. Rule. Heard finally with the consent of the learned counsel appearing for the parties. 3. The petitioners are the companies incorporated under the Companies Act, 1956, and are dealing in the business of rice and rice related products. The petitioners company claim to be one of the companies of the group by name "Greta Group", which has various kinds of business activities, namely rice milling, power generation and trading of metal scraps in India and overseas market. The petitioners companies have its corporate office in Nagpur and also in other parts of the world. 4. The respondent No. 1 is the Union of India. The respondent No. 2, the Director General of Foreign Trade is a statutory Authority regulating and controlling foreign trade in India. Respondent No. 3 is the Head of Central Excise and Customs Department. The respondent Nos. 4 to 10 are the Heads of respective Divisions of the Custom Department working under the directives of the respondent No. 3 and implement the policies framed by the respondent Nos. 1 and 2. As the facts in all these petitions are identical, the facts in Writ Petition No. 5601 o....
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....ce 25 PCT Broken 1,50,000 13.07.2023 SE23Y-00067 Glometz International DMCC IR64 White Rice 5% Broken 2,500 13.07.2023 SE23Y-00066 Roop International General Trading Indian White Rice 11,750 Total (in M.T.) 79,250 7. In order to fulfill its obligation for exporting the products in pursuance to the aforesaid sale contracts, the petitioners are claimed to have entered into various purchase contracts for the purchase of sale of Non-Basmati Rice and accordingly, advance has been paid and received under the said contracts. It is submitted that respondent Authorities are well aware of practice of advance sale and purchase contracts prevailing in the trade. It is also contended that the provision is arbitrary, hasty and illogical decision was taken without having regard to this fact. Huge stakes are involved which has not been looked into, while the said Notification was brought into force. In view of the Foreign Trade Policy issued by the Central Government under Section 5 of the Act of 1992, the amendments carried out therein shall only have a prospective effect and not retrospective effect. The Foreign Trade Policy....
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....suppressed martial and relevant particulars. The respondent Nos. 1 and 2 were required to state the details of : i) "Sudden spike in global price of rice", such as what was the price of rice in global market for some period. Similarly, for the reason ii) "Food Security was at risk in India", the respondent Nos. 1 and 2 were required to state the quantity of rice available as well as quantity of rice required for the entire country and the quantity of rice to be exported. For the reason "Price stabilization of food items", relevant data ought to have been placed on record. There is no data placed on record in respect of production and export of Non-basmati rice. All these details have not been supplied. Therefore, the impugned Notification suffers from malice in law. As such, there is no justification for impugned amendment to the export policy. 8.8. It is further argued that paragraph No. 1.05 of the Foreign Trade Policy, 2023 provides for "Transitional arrangement" Clause (b). Therefore notwithstanding change in the policy, the exporter who has commitment through Irrevocable Commercial Letter of Credit (ICLC) before date of imposition of such restriction and w....
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....at the notification issued requires to be presumed, who has been issued by the DGFT as there is nothing on record to show that it is issued in the name of the President, authenticated in the manner specified in the Rules made by the President. If that notification was as per the provisions and under the Authority of the President that would not have been challenged but it is already brought on record by the petitioners that in spite of repeated request, no information is supplied by the respondent that by which order the powers are delegated to the DGFT. 8.11. In support of his contentions, Mr. Bhangde, learned Senior Counsel for the petitioners relied on the judgments of various High Courts and the Hon'ble Apex Court as under : i) Parag Milk and Milk Products Ltd. vs. Union of India, 2007 SCC OnLine Bom 716, ii) Cellular Operators Association of India and Ors. vs. Telecom Regulatory Authority of India,2016) 7 SCC 703, iii) K. S. Paripoornan vs. State of Kerala and Ors.,(1994) 5 SCC 593, iv) Director General of Foreign Trade and Anr. vs. Kanak Exports and Anr.,(2016) 2 SCC 226. v) Food Corporation of India Vs. M/s Kamdhenu Cattle Feed....
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....tamping of these commodities having entered the Customs Station prior to 20.07.2023. The period of export shall be upto 31.08.2023. iv) Export will be allowed on the basis of permission granted by the Government of India to other countries to meet their food security needs and based on the request of their Government." 9.1. It is submitted that prior intimation was not given as very purpose of the amendment will be defeated as it has to be implemented with immediate effect. As such, the notification is issued in a fair and reasonable manner. The notification was not issued with retrospective effect. It is issued in public interest which prevail over the private interest of exporters. It is submitted that the execution of contract is bound by law and regulation and sovereign power of Government cannot be circumscribed by entering into a contract. Thus, the contracts entered into by petitioners cannot be a bar in a sovereign decisions of Government of India. 9.2. The learned Dy. S. G. I., relied on the following citations: 1) Union of India Vs. International Trading Co. and another, (2003) 5 SCC 437 2) Union of India and Ors. vs. Agricas LLP and Ors.,....
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....ore the High Courts were: 11.1. The impugned notifications issued by the DGFT had the effect of modifying or amending the EXIM policy as the specified items were withdrawn from the free category and moved to restricted category. But, DGFT, a statutory authority under the provisions of FTDR Act, was not authorised to authenticate/issue an order amending or modifying the EXIM policy as this power vests with the Central Government in terms of sub-section (2) to Section 3, read-with sub-section (3) to Section 6 of the FTDR Act, which states that powers exercisable under Sections 3, 5, 15, 16 and 19 of the FTDR Act cannot be delegated to the DGFT or any other officer subordinate to the Director General. 11.2. Section 19(3) of the FTDR Act provides that every rule or every order passed by the Central Government shall be laid, as soon as may be after it is made, before each House of the Parliament while it is in session or thereafter. The impugned notifications had not been laid before the Houses of the Parliament 11.3. The Notifications and trade notices suffer from the vires and defects mentioned by this Court in DG of Foreign Trade v. Kanak Exports, (2016) 2 ....
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...., authenticated in the manner specified in the Rules made by the President, shall not be called in question on the ground that it is not an order or an instrument made or executed by the President. Therefore, the contention of issuance of the impugned notification sans authority, cannot be sustained." 10.3. It would thus be apparent that a similar challenge as the present one, raised in Union of India and Ors. vs. Agricas LLP and Ors., (Supra) has been turned down by the Hon'ble Apex Court by observing that the Director General of Foreign Trade is an Ex-officio Additional Secretary in the Government of India and thus is an agent to the Central Government. The argument of Mr. Bhangde, learned Senior Counsel for the petitioners based upon Article 77 of the Constitution, has also been addressed and turned down. 10.4. The contention that the notification dated 20/7/2023 (pg.47) was without authority, therefore in view of Union of India and Ors. vs. Agricas LLP and Ors., (Supra), is not acceptable and is turned down. 11. It is not disputed, that prior to the notification No. 20/2023 dated 20.07.2023 (page 40) export of Non-Basmati Rice, was free thereby indicating that there we....
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....ignment has entered the Customs Station for exportation before this Notification and is registered in the electronic systems of the concerned Custodian of the Customs Station with verifiable evidence of date and time stamping of these commodities having entered the Customs Station prior to 20.07.2023. the period of export shall be upto 31.08.2023. iv. Export will be allowed on the basis of permission granted by the Government of India to other countries to meet their food security needs and based on the request of their Government. 3. Export of Organic Non-basmati rice will be governed in accordance with Notification No. 03/2015-2020 dated 19th April, 2017 read with Notification No. 45/2015-2020 dated 29th November, 2022. 4. Effect of this Notification: Export Policy of Non-basmati white rice (Semi-milled or wholly milled rice, whether or not polished or glazed: Other) under HS Code 1006 30 90 is amended from "Free" to "Prohibited". Signed (Santosh Kumar Sarangi) Director General of Foreign Trade Ex-Officio Additional Secretary, Government of India E-mail: [email protected]" A perusal of this notification would therefore indicate, that export ....
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....eciding the date of import and export respectively. In case of change of policy from 'free' to 'restricted/prohibited/state trading' or 'otherwise regulated', the import/export already made before the date of such regulation/restriction will not be affected. However, the import through High Sea sales will not be covered under this facility. Further, the import/export on or after the date of such regulation/restriction will be allowed for importer/exporter who has a commitment through Irrevocable Commercial Letter of Credit (ICLC) before the date of imposition of such restriction/ regulation and shall be limited to the balance quantity, value and period available in the ICLC. For operational listing of such ICLC, the applicant shall have to register the ICLC with jurisdictional RA against computerized receipt within 15 days of imposition of any such restriction/regulation. Whenever, Government brings out a policy change of a particular item, the change will be applicable prospectively (from the date of Notification) unless otherwise provided for." 13. The provisions regarding transitional arrangement in the Foreign Trade Policy 2023 (FTP 2023 for the sake of ready reference), whi....
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....rt policy in respect of wheat to be prohibited with effect from 13.05.2022, the same has vide clause 2 A permitted as a transitional arrangement of export of wheat in case of shipments where ICLC has been issued on or before the date of the notification, subject to submission of documentary evidence as prescribed. In this context, it is also necessary to note that averments made in petition regarding concluded contracts and ICLC as detailed in para 12 and 13 of the petition, which have been supported by the copies of the purchase contracts at Annexure-K of the petition have not been denied by the respondent Nos. 3 and 5 in their submissions dated 23.09.2023. It is also material to note, that the reply by the respondent Nos. 3 and 5 does not whisper a single word as to why the transitional arrangement 1.05 in the FTP 2023, has not been made applicable to the impugned notification, as is the case of the reply of the respondent No. 3. The respondent No. 2 in his submission also does not speak anything about the applicability of the aforesaid transitional arrangements 1.05 in the FTP 2023, except for saying, that on account of request made by traders seeking clarification on the transi....
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....has held that when viewed from the angle of manifest arbitrariness or reasonable restriction, sounding in Article 14 and Article 19 (1) (g) respectively, the Regulation must, in order to pass constitutional muster, be as a result of intelligent care and deliberation, that is, the choice of a course which reason dictates and any arbitrary invasion of a fundamental right cannot be said to contain this quality. It also held that a proper balance between the freedoms guaranteed and the control permitted under Article 19(6) must be struck in all cases before the impugned law can be said to be a reasonable restriction in the public interest. 21. In Food Corporation India vs. M/s Kamdhenu Cattle Feed Industries, (supra) it has been held as under: 7. In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of which non-arbitrariness is a significant facet. There is no unfettered discretion in public law: A public authority possesses powers only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is 'fairplay in action'. Due observance of this obligation as a part of goo....
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....cision in question has passed the test of the judicial review. 24. It would therefore be apparent, that for the purpose of sustaining a policy, what is necessary to be demonstrated is that there was due application of mind in arriving at the decision which is backed by cogent material; the decision is not arbitrary or irrational and; it is taken in public interest. If these necessary ingredients are not demonstrable, then the policy makes it open, to be branded as arbitrary and unreasonable, on the touchstone of Article 14 of the Constitution and therefore, open to judicial review. 25. The reason for converting the policy for export of Basmati Rice from free to prohibited as per contention of Mr. Deshpande, learned DSGI is the domestic food security situation in India, which as claimed to be at risk and the need for price stabilization of food items, as is indicated, from para-3 of the reply of the respondent No. 2 (Pg.138). For this it is contended, that there was due consultation with the nodal Departments such as Departments of Agriculture and Farmers Welfare, Department of Food and Public Distribution and Department of Consumer Affairs and it is stated that the consultati....
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....etitioners open to litigation on account of breach of contract and consequently damages. Thus, the expectation of fulfilling an existing concluded contract, on the basis of the existing policy could be said to be legitimately available to the petitioners. In this context, it is necessary to note what has been held by the Hon'ble Apex Court in Food Corporation of India Vs. M/s Kamdhenu Cattle Feed Industries (Supra), while dealing with the relationship between Article 14 and the doctrine of legitimate expectation, which is as under : "46. As regards the relationship between Article 14 and the doctrine of legitimate expectation, a three Judge Bench of Food Corporation of India vs Kamdhenu Cattle Feed Feed Industries, (1993) 1 SCC 71, speaking through Justice J. S. Verma, held thus: "7. In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non-arbitrariness is a significant facet. There is no unfettered discretion in public law: A public authority possesses powers only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is 'fai....
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....t of non-arbitrariness and withstand judicial scrutiny. The doctrine of legitimate expectation gets assimilated in the rule of law and operates in our legal system in this manner and to this extent. That the petitioners, had legitimate expectation of exporting basmati rice without any restrictions, is further indicated by the mandate of section 3 (4) of the FT Act, 1992, which mandates that without prejudice to anything contained in any other law, rule, notification, regulation or order, no permit or licence shall be necessary for import or export of any goods, nor any goods shall be prohibited for import or export except, as may be required under this Act, or Rules or Orders made thereunder. Since at the time of making a concluded contract, the policy of free export, was in existence, the petitioners can be said to have had a reasonable and legitimate expectation to complete their obligations under the concluded contracts which were in existence, when the impugned notification was brought into force. 28. The right of a trader, to fulfill his obligation under the concluded contract, on the basis of the policy as was existing on the date when the contract was concluded, fell for ....
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....e garb of such notification. The decision of the authority does not appear to be in conformity with the settled canons of law." 29. Kanishka Trading (supra) relied upon by Mr. Deshande, learned DSGI, was a case in which it was found that the withdrawal of the exemption, was not on account of any fraud practiced by the Government nor any huge loss was caused to the importer as burden of customs duty was passed on to the consumer. In International Trading Company (supra), it was held, that renewal of the permit, could be refused for outweighing reasons of public interest, which were found to exist. 30. Testing the impugned notification on the anvil of the principle of legitimate expectation, vis-à-vis Article 14 of the Constitution, we find that no reasons are forthcoming from the respondents, for denial of the benefit of the transitional arrangements, in the FTP, 2023, to the petitioners, and, though the same has been granted, in the case of wheat, as indicated above, in a similar circumstance, denial of the same, in the impugned notification, is not justified. 31. There is yet another contention, of retrospectivity by Mr. Bhangde, learned Sr. Advocate for the petiti....