TaxTMI 
TaxTMI 
2024 (8) TMI 32
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....into supply contracts with their foreign buyers on different dates for export of the Non-Basmati India White Rice for the quantities mentioned in the respective contracts / agreements. The foreign buyers have issued irrevocable Letters of Credit in favour of the petitioners, who in turn and to fulfill the contractual obligations placed purchase orders on their local suppliers for procuring the Rice. The petitioners are required to supply the agreed quantities as per the schedule mentioned in the agreements / contracts. 3. On 20.07.2023, the 1st respondent issued Notification No. 20 of 2023 in exercise of powers under Section 3 r/w Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 r/w Para 1.02 and 2.01 of the Foreign Trade Policy-2023 prohibiting export of Non-Basmati White Rice (semi milled or wholly milled rice, whether or not polished or glazed: other) with immediate effect. Subsequently, the 1st respondent issued Trade Notice No.23 of 2023, dated 18.08.2023 clarifying certain conditions in Para No.2 of the Notification dated 20.07.2023. Aggrieved by the same, the petitioners invoked the jurisdiction of this Court under Article 226 of the Constitution of I....
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....es (Page Nos.55, 59 etc.,), the learned Senior Counsel contends that when there is a ban on the earlier occasions, shipments were allowed where irrevocable Letters of Credit were issued on or before the date of the Notifications imposing ban, that in respect of the present Notification, no such benefit was extended and no reasons are forthcoming as to why the export policy in terms of Para 1.05 of the Foreign Trade Policy-2023 was deviated. 7. The learned Senior Counsel further contends that in the light of the policy of the Government in vogue all these years and under a legitimate expectation of the same, petitioners procured polypropylene bags and the requisite quantities of Non-Basmati Indian White Rice by placing purchase orders with their local suppliers before issuance of the impugned Notification dated 20.07.2023. While submitting that most of the petitioners have stored substantial quantities of Non-Basmati Indian White Rice in different warehouses at different locations, he contends that as they were not permitted to export the agreed quantities of rice as per the contracts / agreements and Letters of Credit thereof which are much prior to the impugned Notification dat....
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....e of Film Festivals & Others v. Gaurav Ashwin Jain & Others (2007) 4 SCC 737, 4) Navjyoti Coop. Group Housing Society & Others v. Union of India & Others (1992) 4 SCC 477 and 5) Indian Ex-Servicemen Movement and others v. Union of India & Others (2022) 7 SCC 323, the action of the respondents is not sustainable. 9. Mr. G.L. Nageswara Rao, learned counsel while adopting the arguments advanced by the learned Senior Counsel, contends that the action of the 1st respondent is not tenable in Law and the impugned Notification is liable to be set aside. 10. On the other hand, the learned Additional Solicitor General of India while opposing the submissions made on behalf of the petitioners, advanced arguments by drawing the attention of this Court to the relevant Sections of the Foreign Trade (Development and Regulation) Act, 1992. He submits that Sections 3 and 5 of the said Act-1992 empowers the Central Government to make provisions relating to imports and exports and formulate the Foreign Trade Policy by Notification in the Official Gazette and as per Section 6 of the said Act-1992, the Director General of Foreign Trade shall advise the Central Government in the formulation of the ....
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....bmits that the petitioners in the said case were on a better footing, having paid the Export Duty on 17 shipping bills prior to the issuance of the impugned Notification dated 20.07.2023, out of 28 shipping bills. 12. Referring to one of the purchase orders dated 15.06.2023 (Ex.P3, Page 29), he submits that as per Clause No.18 which deals with Force Majeure, the fulfillment of the contract is subject to the GAFTA force majeure clause. He submits that in view of the said provision, the contractual obligations between the petitioners and their foreign buyers are adequately protected and the apprehensions of the petitioners with regard to damages / compensation / penal consequences etc., are not well founded. He submits that Para 1.02 of the Foreign Trade Policy is incorporated in Public Interest and the scope of Judicial Review in policy matters is very limited. While stating that the supply of Non-Basmati White Rice of specified quantities to the neighbouring friendly Countries is pursuant to a sovereign decision keeping in view the foreign relations with small countries and human needs in under developed countries, he submits that even such a decision is in accordance with the i....
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....that most of the arguments advanced on behalf of the petitioners are not even met and the policy cannot be given retrospective effect and the respondents are silent about the effect of Letters of Credit and other aspects. He submits that nothing is stated as to what made the respondents to detract from the earlier policy and the rights vested on the petitioners pursuant to the existing policy cannot simply be taken away, that too without issuing any notice or assigning any reasons. He submits that the existing procedure cannot be done away without any notice and in fact, either in the impugned Notification or in the Trade Notice, was there any statement as to how the Public Interest would be effected by virtue of the supplies / export of Non-Basmati Indian White Rice? He also submits that no material is placed to substantiate the stand of the respondents or justifying the exclusion of Para 1.05 of the Foreign Trade Policy without any reasons. The learned Senior Counsel submits that it is mere ipse dixit of the respondents. He submits that the counter-affidavit is silent as to why the contracts with the foreign buyers or shipments backed up with Letters of Credit are excluded. He su....
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....ive of Fundamental Rights? 4) Whether the policy decision can be interfered with, if the same is violative of principles of natural justice or Doctrine of Legitimate Expectation? Point No.1: 17. Before dealing with the points under consideration, it may be appropriate to extract the relevant notifications issued by the 1st respondent for ready reference: (To be Published in the Gazette of India Extraordinary Part-II, Section-3, Sub-Section (ii)) Government of India Department of Commerce Directorate General of Foreign Trade Vanijya Bhawan, New Delhi Notification No. 20/2023 New Delhi, Dated 20th July, 2023 Subject:-Amendment in Export Policy of Non-basmati rice under HS Code 1006 30 90. S.O. (E) The Central Government, in exercise of powers conferred by Section 3 read with section 5 of the Foreign Trade (Development & Regulation) Act, 1992 (No. 22 of 1992), as amended, read with Para 1.02 and 2.01 of the Foreign Trade Policy, 2023, hereby amends the Export Policy of Non-basmati rice against ITC (HS) code 1006 30 90 of Chapter 10 of Schedule 2 of the ITC (HS) Export Policy, as under: ITC HS Codes Description Export Polic....
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.... ****** Government of India Ministry of Commerce & Industry Department of Commerce Directorate General of Foreign Trade .............. Trade Notice No. 23/2023 Date: 18th August, 2023 To 1. All Regional Authorities of DGFT 2. All Customs Commissionerate 3. Members of Trade Subject: Amendment of export policy of Non-basmati white rice (HS Code 1006 30 90) Expert 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 has been amended from 'Free' to 'Prohibited vide Notification No. 20/2023 dated 20.07.2023. 2. The provisions as under Para 1.05 of the Foreign Trade Policy, 2023 regarding transitional arrangement was not made applicable however, consignments of Non-basmati rice was allowed to be exported under following conditions: (i) where loading of Non-basmati rice on the ship has commenced before this Notification; (ii) where the shipping bill is filed and vessels have already berthed or arrived and anchored in Indian ports and their rotation number has been allocated before this Notification. The approval....
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.... (iii) of Notification No. 20/2023 (S.O.3249(E)) dated 20th July, 2023 is amended as under: "where Non-basmati rice consignment has been handed over to the Customs before 21:57:01 hours on 20.07.2023 and is registered in Customs system or where Non-basmati rice consignment has entered the Customs Station for exportation before 21:57:01 hours on 20.07.2023 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 21:57:01 hours on 20.07.2023. The period of export shall be upto 30.10.2023. ii. Export duty is paid before 21:57:01 hours on 20.07.2023 2. For removal of doubts, wherever the words/phrase "before this Notification" appears in the Notification No. 20/2023 [S.O. 3249(E)] dated 20th July, 2023, the same shall mean "before 21:57:01 hours on 20.07.2023" 3. Effect of this Notification: In relaxation of Notification No. 20/2023 dated 20th July, 2023 export of non-basmati white rice is allowed when export duty is paid before 21:57:01 hours on 20.07.2023. Para 2 (iii) of Notification No. ....
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....e unless otherwise provided for. 2.01 Policy regarding import/Exports of goods (a) Exports and Imports shall be 'Free' except when regulated by way of 'Prohibition', 'Restriction' or 'Exclusive trading through State Trading Enterprises (STEs)' as laid down in Indian Trade Classification (Harmonized System) [ITC (HS)] of Exports and Imports. The list of 'Prohibited', 'Restricted', and STE items can be viewed under 'Regulatory Updates' at https://dgft. gov.in (b) Further, there are some items which are 'Free' for import/export, but subject to conditions stipulated in other Acts or in law for the time being in force." 19. Sections 3 and 5 of the Foreign Trade (Development and Regulation) Act, 1992 inter alia deals with powers to make provisions relating to exports & imports and Foreign Trade Policy respectively and the same reads as follows: "3. Powers to make provisions relating to imports and exports.-(1) The Central Government may, by Order published in the Official Gazette, make provision for the development and regulation of foreign trade by facilitating imports and increasing e....
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....ange its Foreign Trade Policy from time to time. In the present case, as is evident from the impugned Notification, the existing policy with regard to export of Non-Basmati White Rice is changed in 'public interest' and the export of the same is prohibited by carving out certain exceptions. Therefore, the impugned Notification cannot be held to be contrary to the Foreign Trade Policy. Point No.1 is answered accordingly. POINT No.2: 21. Though the impugned Notification is held to be in conformity with the Foreign Trade Policy, this Court is required to examine whether the said Policy can be given retrospective effect and rights stated to have been accrued to the petitioners can be taken away. In this regard, the contention advanced by the learned Senior Counsel for the petitioners is that acting on the policy, which was in force, the petitioners have entered into contracts / agreements with the foreign buyers, secured Letters of Credit and placed orders / procured the Non-Basmati White Rice from the local dealers. He contended that the vested rights accrued to the petitioners by virtue of the policy that is in existence prior to the issuance of the impugned notification cannot....
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....f the public good. Section 25 underlines the importance of the common good. 'Public interest' dominates the economic scene. If in public interest the Central Government finds that it is necessary to protect its own industry by putting up a tariff wall it will be futile to say that it cannot do so because it is bound by its promise to continue the exemption up to a particular time. The traders may feel incensed at the behaviour of the executive at its imposition, exemption, reimposition and re-exemption of taxes and levies. But when to exempt and when to impose duty is left to the executive by the legislature. It will depend on the economic climate. New times require new measures. In a world of growing interdependence the first thing every country wants is protection for its domestic industry. 44. Governed by the market forces and the laws of supply and demand, if the Government finds that it must withdraw the exemption notification at once it can do so. What actuated the Government to take the step of exemption and reimposition was enlightened self-interest, such self-interest as would subserve the common good. The imposition and exemption of customs duty are the chief veh....
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....nt Regularization) Act, 1992, was dealt with by the Hon'ble Supreme Court of India in Union of India and Others v Asian Food Industries (2006) 13 SCC 542. In the said case, the Hon'ble Supreme Court of India was dealing with a Notification issued by the Central Government banning export of pulses in purported exercise of its powers under Section 5 of the said Act. The Notification was issued in public interest on 27.06.2006. An irrevocable Letter of Credit was opened in favour of the exporter on 24.06.2006 on the basis of which shipping invoices and bills were submitted to the Customs Authorities for export of chickpeas. Thereafter, a notification dated 04.07.2006 was also issued. Challenging the same, a Writ Petition was filed before the High Court of Gujarat and another Writ Petition was filed before the High Court of Delhi. The Hon'ble Supreme Court of India after referring to the provisions of Customs Act as also Foreign Trade (Development and Regulation) Act-1992, at para No.48 held as follows: "48. .... Prohibition promulgated by a statutory order in terms of Section 5 read with the relevant provisions of the policy decision in the light of sub-section (2) of Section....
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....ater latitude than laws touching civil rights such as freedom of speech, religion, etc. that the legislature should be allowed some play in the joints because it has to deal with complex problems which do not admit of solution through any doctrine or straitjacket formula and this is particularly true in case of legislation dealing with economic matters, where having regard to the nature of the problems greater latitude require to be allowed to the legislature. The question, however, is as to whether it can be done retrospectively, thereby taking away some right that had accrued in favour of another person?" 28. Further, the Hon'ble Apex Court after referring to a catena of decisions and thorough analysis of the matter at Para 121 inter alia held that the impugned decision reflected in the Notifications dated 21.04.2004 and 23.04.2004, did not take away any vested right of the exporters and amendments were necessitated by overwhelming public interest / considerations to prevent the misuse of the scheme. 29. In the present case, the petitioners claim that Letters of Credit were issued in their favour by the foreign buyers prior to the issuance of the impugned Notification and t....
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.... are still at the stage of procurement of the Non-Basmati White Rice and they cannot be equated with those of exporters who made all arrangements for shipment. Therefore, the contention that the action of the respondents is arbitrary and hit by Article 14 of the Constitution of India cannot be accepted. The Point No.3 is accordingly answered. Pont No.4: 31. One of the contentions advanced by the learned Senior Counsel for the petitioners is that under legitimate expectation the contracts / agreements with the foreign buyers have been entered into and the impugned Notification pursuant to the policy decision is contrary to the doctrine of legitimate expectation and the Court can interfere in the facts and circumstances of the case. In the counters, the respondents have taken a plea that the petitioners are claiming their rights based on a policy decision taken almost five years ago and the respondents have now changed the same based on the changed facts and circumstances and that the interference by the Court would amount to setting a precedent where a right can be claimed on the basis of policy decision taken almost five years ago which will thereby hinder the authority of th....
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....end the benefits of the original amendment to the appellants herein, till the expiry of such a benefit as per the original amendment. In light of the same, the present batch of civil appeals are allowed." 34. In the present case the petitioners / exporters had acted upon the existing Foreign Trade Policy-2023, entered into agreement / contracts with foreign buyers, pursuant to which the Letters of Credit were issued in their favour and therefore justified in raising the contention based on doctrine of legitimate expectation. However, in the light of the Constitutional Bench decision of the Hon'ble Supreme Court in Sivananda C.T. case (10 supra) the contentions with reference to Doctrine of Legitimate Expectation cannot be upheld. In the said decision, the Hon'ble Apex Court referring to a fleet of earlier precedents held as follows: "37. This Court has consistently held that a legitimate expectation must always yield to the larger public interest. In Sethi Auto Service Station v. DDA, this Court clarified that legitimate expectation will not be applicable where the decision of the public authority is based on a public policy or is in the public interest, unless the acti....