TaxTMI 
TaxTMI 
2025 (4) TMI 78
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....leen Kaur Waraich and Mr. Vivek Sharma, Advocates for UOI. JUDGMENT 1. These petitions have been filed by the petitioner, seeking that notification no. 44/2024-25 dated 26.12.2024 issued by the respondent/s, whereby quantitative restrictions have been imposed on import of Low Ash Metallurgical Coke (hereinafter referred to as LAM Coke) should not affect import of such quantities of LAM Coke for which Irrevocable Commercial Letters of Credit (ICLC) have been opened by the petitioners prior to the issuance of the aforesaid notification dated 26.12.2024. 2. The genesis of the controversy involved in the preset case is that on 30.06.2023, the Directorate General of Trade Remedies (DGTR) issued a notification initiating a safeguard investigation concerning the imports of LAM Coke into India. This investigation, which focused on imposing quantitative restrictions, was initiated under Rule 5 of the Safeguard Measures (Quantitative Restrictions) Rules, 2012. Subsequently, on 29.04.2024, the DGTR, through its final finding, recommended the imposition of quantitative restrictions on the import of LAM Coke into India. Subsequently, on 26.12.2024, based on the DGTR's recommendations, ....
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....able letter of credit ("Sunflag ICLC") amounting to USD 5,570,000.00 (approximately INR 48,22,59,850.66) for the import of 22,000 MT of LAM Coke from Indonesia. At the time of execution, LAM Coke was classified as "free" under the prevailing import policy. It is emphasized that Sunflag had already received multiple shipments under previous ICLCs executed pursuant to the same contract. viii. Following the issuance of Notification No. 44/2024-25 on 26.12.2024 by the Central Government, which reclassified LAM Coke under the "Restricted" category, Sunflag submitted a representation to the DGFT on 04.01.2025. In its representation, Sunflag informed the DGFT of the ICLCs opened prior to the Notification, including the ICLC dated 07.12.2024, and requested the issuance of any necessary authorizations at the earliest. ix. Since, the DGFT failed to respond to Sunflag's representation, Sunflag filed the present Writ Petition. x. On 03.02.2025, this Court directed the DGFT to decide on Sunflag's representation within one week. On 10.02.2025, the DGFT issued an email advising Sunflag to submit an application through the DGFT Import Management System portal for ICL....
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....ommitment through an ICLC opened before the restriction's imposition. Furthermore, paragraph 1.05 (b) of the FTP requires such importers to register their ICLCs with the relevant regional authority within 15 days of the restriction being imposed. iii. It is pointed out that JSW and ARCL submitted their ICLCs for registration on 04.01.2025. Furthermore, Trafigura also submitted its ICLC for registration on 02.01.2025. It is submitted that, Sunflag submitted the details of its ICLCs via its representation dated 04.01.2025. Vide order dated 03.02.2025, this Court directed the DGFT to decide on the said representation. Thereafter, the DGFT advised Sunflag to apply through its online portal, and Sunflag has complied with that requirement as well. It is submitted that substantial compliance with Paragraph 1.05 of the FTP has been duly made by Sunflag. It is submitted that the requirement of registration within 15 days is a directory rule rather than a mandatory one. The said clause does not prescribe any penalty for failure to comply with the prescribed timeline. Therefore, this procedural requirement must be construed as a directory provision rather than a mandatory one. Relian....
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....tigation carried out by Directorate General of Trade Remedies (DGTR) and recommendation made thereunder by the authorized officer in terms of Section 9A read with Safeguard Measures (Quantitative Restrictions) Rules, 2012. 8. It is contended that Sections 3 and 9A of the FTDR operate in parallel. Section 3 has been part of the Act since its inception in 1992, whereas Section 9A was introduced through an amendment on 25.08.2010 to empower the government to address incidents of serious injury to the domestic industry, as per the rules notified in this respect. The authority of the respondent under Section 3 (2) to impose restrictions on the import or export of particular goods or services remains unaffected and unhindered by the procedures contained in Section 9A of Chapter IIIA, which pertains to quantitative restrictions. 9. It is further submitted that Section 9A is a self-contained and standalone provision that addresses a distinct situation in which quantitative restrictions are imposed on goods when they are imported into the country in such increased quantities and under such conditions that they threaten the domestic industry. It is contended that the objective and purp....
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.... the purview of the WTO Commitments and apply exclusively to unexpected imports causing injury to the domestic industry. Hence, measures under Section 9A are emergent in nature and are enforced only after providing opportunity to interested parties and exporting members. The intention behind transitional arrangement under Para 1.05 is to extend the benefit outside the safeguard measures to protect domestic industry. The objective of Para 1.05 (b) is to achieve normalcy within normal course of international trade against genuine hardships in cases of an unforeseen contingencies. 14. It is submitted that the intent behind Para 1.05 (b) of the FTP,2023 was to extend the benefit of "Transitional Arrangements" in case of genuine hardship, in as much as, where importers or exporters in customary course of proceedings would not have been aware of the restrictions to be imposed by the Govt. of India under Section 3 of the FTDR against unforeseen contingency. It is submitted that the words used in paragraph 1.05 of Foreign Trade Policy, 'restricted/prohibited/state trading' or 'otherwise regulated' are identical to the words used in Section 3 (2) i.e. for prohibiting, restricting or othe....
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.... in the preceding years is as follows:- Financia Year Imports from Country of Origin Total Import Production of Met Coke from the coke Oven Batteries (Qty in MT) Coke Procured directly and Coke procure under conversion arrangement form Domestic sources Total Met Coke Requirement/ Availability Indonesia China Aus Poland 2021-22 38500 33507 - 45676 117683 6887231 647522 7652436 2022-23 103242 278888 72433 - 454563 7596003 206937 8257503 2023-24 84380 33000 22000 - 139380 8081131 192345 8412856 2024-25 (April 24 to 31^st Dec 2024) 270121 - - - 270121 6244330 88820 6603271 Total 496243 345395 94433 45676 981747 28808695 1135624 30926066 20. It is further submitted that the petitioners' contracts include a Force Majeure clause on account of which the Buyer can rescind the contract citing a force majeure event (being quantitative restriction by the government in the present case). The Letter/s of Credit (LC) explicitly states that it is subject to US, EU, UN, and Indian sanctions, meaning the quantitative restrictions impo....
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.... 1.05 (b) of the FTP would not apply where a quantitative restriction has been notified pursuant to proceedings/measures under Section 9A of the FTDR Act and the rules framed thereunder. 26. It is pointed out that the notification dated 26.12.2024, in substance seeks to amend Chapter 27 of ITC (HS), 2022, Schedule I (Import Policy), by inserting a new policy condition at Sl. No. 8 in the said Chapter. In other words, the notification clearly seeks to amend the FTP and particularly provision in ITC (HS) 2022. 27. It is submitted that a bare reading of paragraph 1.05 (b) of the FTP shows that the provision concerns the item wise Import/Export policy as delineated in the ITC (HS) Schedule I and Schedule II respectively. The said paragraph also provides for 'change of policy from free to restricted...'. Hence, on the face of it the substantive subject matter of the DGFT Notification is fully covered under said paragraph 1.05 (b) of the FTP. 28. It is contended that on a fair reading of the provisions of Par 1.05 (b) of the FTP renders the DGFT's present submission untenable, inasmuch as:- a. Para 1.05 (b) of the FTP does not use any restrictive phrase, much less one i....
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....ion 3 (2) of the FTDR Act. 32. It is further submitted that since Para 1.05 (b) of the FTP applies to restrictions imposed under Section 3 of the FTDR Act, there is no legal basis for the DGFT to contend that a particular portion of the FTP is inapplicable to cases under Section 9A, particularly when neither the statute nor the FTP draws such a distinction. 33. It is also emphasized that in Agricas LLP (supra), the Supreme Court was solely concerned with whether the Central Government can impose restrictions by exercising its powers under Section 3 (2) of the FTDR Act without invoking Section 9A. It is submitted that this issue is distinct from the one under consideration in the present case. Therefore, the judgment in Agricas LLP (supra) is inapplicable to the DGFT's case. 34. It was further submitted that mere knowledge of the final findings dated 29.04.2024 of the DGTR, recommending the imposition of quantitative restrictions on the import of LAM Coke, cannot be construed as prohibiting the petitioners from entering into contracts based on the prevailing legal position before the publication of the notification dated 26.12.2024. 35. The petitioners refer to the relev....
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....dents that the aforesaid transitional provision would not at all be applicable/attracted in the event of a measure/safeguard action taken under Section 9A of the FTDR Act read with the Safeguard Rules, 2012. The reasons are enumerated hereunder. 41. The FTP is notified by the Central Government in exercise of the powers conferred under Section 5 of the FTDR Act, 1992. It incorporates the provisions/policy relating to the export and import of goods. Clause 1.02 of the FTP clearly provides that the "Central Government in exercise of the powers conferred by Section 3 and Section 5 of the FTDR Act, 1992, reserves the right to make any amendment to the FTP by means of notification, in public interest". 42. Clause 2.07 of the FTP provides as under:- "2.07 Principles of Restrictions DGFT may, through a Notification, impose 'Prohibition' or 'Restriction': (a) on export of foodstuffs or other essential products for preventing or relieving critical shortages; (b) on imports and exports necessary for the application of standards or regulations for the classification, grading or marketing of commodities in international trade; (c) on imports o....
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....diate trade restrictions to be imposed by way of a notification under Section 3 (2) of FTDR Act, 1992. 44. However, Section 9A^2 of the FTDR Act, 1992 stands on a completely different and independent footing. The same contemplates issuance of a notification imposing quantitative restrictions on the import of such goods where Central Government, "after conducting such inquiry as it deems fit" has arrived at the satisfaction that any goods are import into India of such increased quantities and under such conditions as to cause or threaten to cause injury to domestic industry. Thus, unlike in the case of a notification under Section 3, a notification under Section 9A (1) must be predicated on a satisfaction, arrived at pursuant to the conduct of an inquiry, that the goods are imported into India in such increased quantities and under such conditions so as to cause or threaten to cause, injury to domestic industry. 45. The issuance of a notification under Section 9A is also hedged by the limitation imposed under proviso to Section 9A (1) to the effect that no such quantitative restrictions shall be imposed on any goods originating from a developing country, "so long as the share ....
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.... 3. Responsibility of authorised officer for making enquiry in respect to safeguard quantitative restrictions.-(1) The Central Government shall, by notification in the Official Gazette, designate an officer not below the rank of Additional Director General of Foreign Trade as an authorised officer for making investigation for the purpose of these Rules. (2) The authorised officer shall be responsible for conducting investigation, under sub-section (1) of Section 9-A, for the purpose of imposition of safeguard quantitative restrictions and making necessary recommendation therein to the Central Government. (3) The Directorate General of Foreign Trade shall provide secretarial support and the services of such other persons and such other facilities as it deems fit. 4. Duties of authorised officer.-It shall be the duty of the authorised officer- (a) to investigate the existence of serious injury or threat of serious injury to domestic industry as a consequence of increased import of a goods into India; (b) to identify the goods liable for quantitative restrictions as a safeguard measure; (c) to submit its findings, to the Central Go....
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....s injury. (4) Notwithstanding anything contained in sub-rule (1), the authorised officer may initiate an investigation suo moto, if, it is satisfied with the information received from any source that sufficient evidence exists as referred to in clause (a), clause (b) or clause (c) of sub-rule (3). 6. Principles governing investigations.-(1) The authorised officer shall, after it has decided to initiate investigation to determine serious injury or threat of serious injury to domestic industry, consequent upon the increased import of a goods into India, issue a public notice notifying its decision which, inter alia, contain information on the following, namely- (a) the name of the exporting countries, the goods involved and the volume of import; (b) the date of initiation of the investigation; (c) a summary statement of the facts on which the allegation of serious injury or threat of serious injury is based; (d) reasons for initiation of the investigation; (e) the address to which representations by interested parties should be directed; and (f) the time-limits allowed to interested parties for making their views....
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....party refuses access to or otherwise does not provide necessary information within a reasonable period or significantly impedes the investigation, the authorised officer may record its findings on the basis of the facts available and make such recommendations to the Central Government as it deems fit under such circumstances. *** 8. Determination of serious injury or threat of serious injury.-The authorised officer shall determine serious injury or threat of serious injury to the domestic industry taking into account, inter alia, the following principles, namely- (a) in the investigation to determine whether increased imports have caused or are threatening to cause serious injury to a domestic industry, the authorised officer shall evaluate all relevant factors of an objective and quantifiable nature having a bearing on the situation of that industry, in particular, the rate and amount of the increase in imports of the goods concerned in absolute and relative terms, the share of the domestic market taken by increased imports, changes in the level of sales, production, productivity, capacity utilisation, profits and losses, and employment; and (b)....
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....f the public notice regarding his final findings to the Central Government in the Ministry of Commerce and Industry and a copy thereof to the interested parties. 10. Imposition of safeguard quantitative restrictions.-The Central Government may based on the recommendation of the authorised officer, by a notification in the Official Gazette, under sub-section (I) of Section 9-A of the Act, impose upon importation into India of the goods covered under the final determination, a safeguard quantitative restrictions not exceeding the amount or quantity which has been found adequate to prevent or remedy serious injury and to facilitate adjustment. 11. Imposition of safeguard quantitative restrictions on non-discriminatory basis.-Any safeguard quantitative restrictions imposed on goods under these Rules shall be applied on a non-discriminatory basis to all imports of the goods irrespective of its source. 12. Date of commencement of safeguard quantitative restrictions.-The safeguard quantitative restrictions levied under these Rules shall take effect from the date of publication of the notification in the Official Gazette, imposing such quantitative restrictions. ....
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....sing upon importation into India of the goods covered under the final determination, "safeguard quantitative restrictions", not exceeding the amount or quantity which has been found adequate to prevent or remedy serious injury and to facilitate adjustment. 50. As such, the notification under Section 9A (1) is a product of an elaborate quasi-judicial exercise. This is in sharp contrast to a measure taken/notification issued under Section 3 of the FTDR Act read with Clause 2.07 of the FTP. 51. Two aspects are crucial as regards conduct of investigation under the Safeguard Rules, 2012. Firstly, for the purpose of conduct of investigation, it is clearly provided that the concerned "authorised officer" shall duly notify the non-exporters; the concerned trade association; the Government of the exporting country. Further, Rule 6(5) clearly provides that the authorised officer shall provide opportunity to the industrial use of goods under investigation and to representative consumer organisations in case where the goods are commonly sold at retail level, to furnish information which is relevant to the investigation. Thus, there is adequate notice to all concerned as regards the initi....
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....that the impugned notification/s in that case could not have been issued by taking recourse to Section 3 of the FTDR Act without first conducting an inquiry as contemplated under Section 9A of the FTDR Act. While rejecting this argument, the Supreme Court held that:- (i) Section 9A of the FTDR Act, 1992 is a product of an "act of transformation" inserted under Indian law with a view to give effect to treaty obligation under Article (XIX) of the GATT, 1994^3. It was specifically observed by the Supreme Court as under:- 68. Reference to this position is necessary and required when we interpret Section 9A of the FTDR Act which we would accept incorporates into the domestic law Article XIX of GATT-1994, but neither Article XI and nor all the exceptions by implications. XXX XXX XXX XXX 70. Section 9-A substantially incorporates, with some modifications, provisions of Article XIX of GATT-1994." (ii) It was noticed that Section 5 of the FTDR Act, 1992 empowers and authorises Central Government to frame policy, rules and regulation for import and export of goods. Unlike in the case of Section 9A, the applicability of Section 3 and Section 5 of t....
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.... the commencement of the restrictions sought to be imposed: "12. Date of commencement of safeguard quantitative restrictions.-The safeguard quantitative restrictions levied under these rules shall take effect from the date of publication of the notification in the Official Gazette, imposing such quantitative restrictions." 57. In the present case, the country-wise quantitative restrictions have been imposed based on an elaborate safeguards investigation carried out by DGFT under the Safeguard Rules, 2012, and pursuant to final findings notified vide notification number 22/4/2023-DGTR dated 29.04.2024 r/w notification dated 28.05.2024. It has been specifically held by the Supreme Court in Agricas (Supra)^5 that the Safeguard Rules, 2012 are also in conformity with the provisions of WTO agreement on safeguards made in terms of Article XIX of GATT-1994. There is no rationale for subjecting safeguard measures to any 'transitional provision' which is not incorporated in the said Rules. 58. Further, it has been pointed out that the major exporting countries, the concerned importers/exporters; other stakeholders including Indonesia exporters and petitioners were privy to th....
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....cise was moot, in view of the position that the impugned notification is premised on Section 9A of the FTDR Act, and the inquiry conducted as per the Safeguard Rules, 2012 which stands on an independent footing and is not subject to any transitional provision/s as set out in Clause 1.05 of the FTP. 63. Accepting the plea of the petitioners that a safeguards action must also be subject to a 'transition provision', would defeat the very purpose of the same. As held in Agricas (supra) Section 9A of the FTDRA Act substantially incorporates the provisions of Article XIX of the GATT, 1994. The same clearly recognises the right and power of contracting states to take emergency action to protect its domestic industry in a situation where any goods are being imported in the territory of contracting party in such increased quantities and under such conditions so as to cause serious injury to the domestic producers. 64. It has been pointed out by Ms. Nidhi Raman, learned standing counsel for the Union of India that the imports which are subject matter of the ICLCs relied upon by the petitioners, are to the tune of 6,10,121 MT from Indonesia, as against the quota of 66,364 MT allocated t....
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.... 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. 2. [9-A. Power of Central Government to impose quantitative restrictions.-(1) If the Central Government, after conducting such enquiry as it deems fit, is satisfied that any goods are imported into India in such increased quantities and under such conditions as to cause or threaten to cause serious injury to domestic industry, it may, by notification in the Official Gazette, impose such quantitative restrictions on the import of such goods as it may deem fit: Provided that no such quantitative restrictions shall be imposed on any goods originating from a developing country so long as the share of imports of such goods from that country does not exceed three per cent or where such goods originate from more than one developing country, then, so long as the aggregate of the imports from all such countries taken....
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....arty shall be free, in respect of such product, and to the extent and for such time as may be necessary to prevent or remedy such injury, to suspend the obligation in whole or in part or to withdraw or modify the concession. (b) If any product, which is the subject of a concession with respect to a preference, is being imported into the territory of a contracting party in the circumstances set forth in sub-paragraph (a) of this paragraph, so as to cause or threaten serious injury to domestic producers of like or directly competitive products in the territory of a contracting party which receives or received such preference, the importing contracting party shall be free, if that other contracting party so requests, to suspend the relevant obligation in whole or in part or to withdraw or modify the concession in respect of the product, to the extent and for such time as may be necessary to prevent or remedy such injury. 2. Before any contracting party shall take action pursuant to the provisions of Para 1 of this Article, it shall give notice in writing to the CONTRACTING PARTIES as far in advance as may be practicable and shall afford the CONTRACTING PARTIES and those contract....
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....on or sale for export of any product destined for the territory of any other contracting party. 2. The provisions of Para 1 of this Article shall not extend to the following: (a) Export prohibitions or restrictions temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party; (b) Import and export prohibitions or restrictions necessary to the application of standards or regulations for the classification, grading or marketing of commodities in international trade; (c) Import restrictions on any agricultural or fisheries product, imported in any form, necessary to the enforcement of governmental measures which operate: (i) to restrict the quantities of the like domestic product permitted to be marketed or produced, or, if there is no substantial domestic production of the like product, of a domestic product for which the imported product can be directly substituted; or (ii) to remove a temporary surplus of the like domestic product, or, if there is no substantial domestic production of the like product, of a domestic product for which the imported product can ....