Circular laying down criteria for allocating import of restricted cotton yarn

PJ/Case Laws/2011-12/1377

Circular laying down criteria for allocating import of restricted cotton yarn - validity of

Case: BALLY EXPORTS PVT. LTD. V/s UNION OF INDIA

Citation: 2011 (269) E.L.T. 181 (Cal.)

Issue:- Import policy of restricted item cotton yarn – criteria for allocation prescribed in Circular challenged on ground that change in policy was to be Notification – held, circular merely laying down mode of allocation and clarificatory and not amending policy – upheld.

Brief Facts:- Petitioner No. 1 is a private company of which petitioner No. 2 is a Director. Petitioner No. 1 carries on business inter-alia of trading in cotton.

The Central Government has been given powers to make provision for development and regulation of foreign trade by facilitating imports and increasing exports; to make provisions prohibiting, restricting or otherwise regulating import or export of goods and to formulate and announce, from time to time, the Import Export Policy, by notification in the Official Gazette and in like manner, to amend that policy under the Foreign Trade (Development and Regulation) Act, 1992.

In exercise of their powers, the Joint Director General of Foreign Trade issued Circular No. 17 (RE-2010)/2009-14 dated 10th February, announcing that an administrative decision had been taken to consider allocation of cotton yam for export only to applicants with export performance m 2009-10.

Petitioner have filed this writ petition challenging the Circular No. 17 (RE-2010).

Petitioner’s Contention:- The petitioner submitted that the Foreign Trade Policy can only be amended by a Notification of the Central Government in the Official Gazette.

Pursuant to issuance of Circular No. 15(RE-2010)/2009-14 dated 1st February, 2011 by which applications for allocation of quota for export of cotton yarn were invited, petitioner applied for grant of quota for export of cotton yarn, along with all necessary documents.

Petitioners are aggrieved by the conditions and modalities for grant of quota for export of cotton yarn laid down by Circular No. 17(RE-2010). They have not exported any cotton yarn in 2009-10 and therefore have questioned the decision to allocate quota for export of cotton yarn, only to those applicants with export performance in 2009-10.

The main ground to challenge the circular is that that the circular in effect purports to amend the Foreign Trade Policy without recourse to the procedure prescribed in Section 5 of the Foreign Trade Act for amendment of the Foreign Trade Policy. It was submitted that the Foreign Trade Policy could not be amended by an administrative circular, as has been done in the instant case. The Foreign Trade Policy could only be amended by notification in the Official Gazette. That the Circular dated 10th February, 2011 is discriminatory since it discriminates against exporters who did not have export performance in 2009-10. There is no intelligible differentia for discriminating between persons who had export performance in 2009-10 and those who did not have export performance during that year.

Respondent’s Contention:- The Additional Solicitor General submitted that export of cotton yam was placed in the restricted category, by the Notification 14 (RE-2010)/2009-14 dated 22nd December, 2010 and was made subject to licensing.

He emphatically argued that there was a difference between formulation and announcement of policy and a policy decision. While the Foreign Trade Policy was required to be announced and amended by notification in the Official Gazette, a decision in implementation of the policy did not require notification in the Official Gazette. He submitted that a decision in implementation of the Foreign Trade Policy was circulated by the circular impugned. He also pointed out that the Circular dated 10th February, 2011 was in effect and in substance as equal to the Circular dated 1st February, 2011 pursuant to which the petitioners had applied for grant of quota. The petitioners were thus estopped from questioning the legality of the Circular dated 10th February, 2011. He finally argued that the petitioner No. 1 had neither applied for nor obtained licence as required in terms of the notification dated 22nd December, 2010 and was, therefore, not entitled to allocation of cotton yarn for export. The petitioner could not, therefore, challenge the decision was announced by the Circular dated 10th February, 2011 to allocate quota to applicants with expert performance in 2009-10.

Reasoning of Judgement:- The High Court held that there is a difference between announcement and amendment of the Foreign Trade Policy and circulation of a decision in relation to the implementation of Foreign Trade Policy. It was held that it is a well-established proposition of law that when statute requires a thing to be done in a particular manner, it is to be done in that manner alone or not at all. The proposition of law laid down by the Supreme Court in the judgments cited by Petitoner cannot be questioned.

It was held that the mandatory requirement of publication of a statute in the Official Gazette cannot be dispensed with as held by the Supreme Court in RajendraAgricultural Universityv. Ashok Prasad & Ors. [2010 (261) E.L.T. 49 (S.C.)]. The judgments given in the case of ITCBhavor RiverBoard & Anr. v. Mondal Revenue Officer, AP & Ors. [(1996) 6 SCC 634] and MRF Ltd. v. Manohar Parikkar & Ors [(2010) 11 SCC 374].

It was held that the Foreign Trade Policy cannot be amended except by publication of a notification of the Central Government in the Official Gazette. Cotton yarn has been placed in the restricted category by notification of the Central Government in the Official Gazette. The circular, which is in implementation of the Foreign Trade Policy in terms whereof cotton yarn is now in the restricted category, merely lays down the mode of allocation amongst the applicants. The mode of allocation was not required to be published by notification in the Official Gazette.

There being a restriction on the total volume of cotton yarn that could be exported and there being numerous applicants, all applicants could not be favoured with grant of quota for export. A method of selection had to be evolved. A decision was thus taken to grant quota to existing exporters with export performance in 2009-10. The selection of existing exporters who continued with export till 2009-10 is neither arbitrary nor discriminatory nor violative of Article 14 of the Constitution of India. The authorities have preferred exporters who have continued with exports, to those who discontinued in 2009-10.

Unequal treatment of equals violates Article 14 of the Constitution of India. However, unequal treatment of unequals is permissible. In the view of the High Court there is a rational differentia between exporters with export performance in 2009-10 and exporters who had stopped export and did not have any export performance in 2009-10. In any case, the decision to make allocation to existing exporters was announced by the Circular dated 1st February, 2011 which has not been questioned by the petitioners.

It was held that there is a difference between amendment of policy, a clarification, and/or working out of details in implementation of policy. Under the scheme of the statute, one finds a clear distinction between an amendatory provision and a clarificatory provision. The power to amend the Foreign Trade Policy is conclusively vested in the Central Government and this has to be done by notification of the Central Government whereas the power to clarify is vested in the Director General of Foreign Trade.

Broadly imports fall in two categories, general and restricted and there is also a prohibited category. Change of categorization can only be done by amendment under Section 5 of the Foreign Trade Act. Categorization and re-categorization cannot be done by policy circulars as held by the Supreme Court in Atul Commodities (P) Ltd. v. Commissioner of Customs [2009 (235)E.L.T. 385 (S.C.)]. It is not open to the Director General of Foreign Trade to change categorization of items from the category of ‘free export’ to category of ‘restricted export’.

Under paragraph 2.3 of the Foreign Trade Policy, the Director General of Foreign Trade is empowered to interpret the policy. If any doubt or question arises in respect of any provision in the Foreign Trade Policy or in the matter of classification of any item in the ITC (HS) or in the handbook, the said question or doubt has to be referred to the Director General of Foreign Trade whose decision is to be binding. Similarly, once an item is placed in the restricted category and made subject to licensing, the Director General of Foreign Trade is empowered to work out details for allocation of quota for export of such item.

In Hindustan Granites v. Union of India a question arose as to whether policy circular No. 24 dated 30th August, 2005 limiting issuance of licence to those applicants who had imported crude marble between 1999-2001 under the SIL (Special Import Licence) Scheme, constituted a change in policy, or a matter of detail within the existing policy. Pending decision on the issue, the Supreme Court passed an interim order [2007 (208) E.L.T. 161 (S.C.)]to the effect that the DGFT would be entitled to grant licences to those applicants who were so entitled under policy No. 24 dated 30th August, 2005. By a final judgment and order [2007 (211) E.L.T. 3 (S.C.)], the Supreme Court upheld the validity of the circular.

In this case, as observed above, export of cotton yam has been categorized in the restricted category by notification of the Central Government published in the Official Gazette. The Circulars of 1st February, 2011 and 10th February, 2011 lay down the matters of detail within the existing policy, which do not amount to amendment of the Foreign Trade Policy. Changes in details do not require publication in the Official Gazette. The policy has not been changed. A decision in implementation of policy, laying down details with regard to allocation of quota has been modified. Initially it was decided to allocate quota in a particular manner, that is, on pro rata basis, amongst applicants. However, having regard to the large number of applicants for a limited quantity allowable for export, it was decided to restrict the allocation to applicants with export performance in 2009-10 and/or in other words, existing exporters who continued export up to the previous year.

Decision:- Writ petition, being unsustainable, is dismissed.

Comment:- A very good ratio has been laid down by the High Court is that the policy decision is to be taken by Central Government but the implementing decisions is to be taken by DGFT.

Comments

PJ/Case Laws/2011-12/1377

Post a Comment

Query