Calcutta High Court (Appellete Side)
Sri Bimal Kumar Modi vs Union Of India & Ors on 11 April, 2014
Author: Harish Tandon
Bench: Harish Tandon
In The High Court At Calcutta
Constitutional Writ Jurisdiction
Appellate Side
Present :
The Hon'ble Justice Harish Tandon.
W. P. No. 26409 (w) of 2013
Sri Bimal Kumar Modi, Prop. Of M/s Empire Exports
-vs-
Union of India & Ors.
With
W.P. 29114 (w) of 2013
With
W.P. 22987 (w) of 2013
With
W.P. 27979 (w) of 2013
With
W.P. 26410 (w) of 2013
With
W.P. 26411 (w) of 2013
With
W.P. 26412 (w) of 2013
With
W.P. 26413 (w) of 2013
With
W.P. 16414 (w) of 2013
With
W.P. 26408 (w) of 2013
With
W.P. 26416 (w) of 2013
With
W.P. 26415 (w) of 2013
With
W.P. 27973 (w) of 2013
With
W.P. 27976 (w) of 2013
With
W.P. 24770 (w) of 2013
With
W.P. 24073 (w) of 2013
With
W.P. 21918 (w) of 2012
With
C.A.N. 8374 (w) of 2013
With
W.P. 24772 (w) of 2013
With
W.P. 27642 (w) of 2013
With
C.A.N. 10609 (w) of 2013
With
W.P. 27035 (w) of 2013
With
C.A.N. 10610 (w) of 2013
With
W.P. 25399 (w) of 2013
With
W.P. 29168 (w) of 2013
For the Petitioners : Mr. Kishore Datta,
In W.P. 29114 (w) of 2013 : Mr.Sukhendu Sekhar Ray,
W.P. 22987 (w) of 2013 : Mr. Shakeel Md. Akhtar.
For the Petitioners : Mr. Pranab Kumar Datta,
In W.P. 27642 (w) of 2013 : Mr. Shovendu Banerjee.
W.P. 27035 (w) of 2013
For the Petitioners : Mr. Samir Chakraborty,
In W.P. 29168 (w) of 2013 : Mr. Hasmukh Kundalia,
: Mr. Vipul Kundalia,
: Mr. Arnab Chakraborty,
: Ms. Aritra Chakraborty.
For the Petitioners : Mr. N. K. Chowdhury,
In W.P. 26409 (w) of 2013 : Mr. Arijit Chakrabari.
W.P. 27979 (w) of 2013
W.P. 24772 (w) of 2013
For the Customs Authority : Mr. Rajarshi Bhardwaj,
In W.P. 26409 (w) of 2013 : Ms. Santa Mitra,
W.P. 29168 (w) of 2013 : Mr. T. M. Siddique,
W.P. 26414 (w) of 2013 : Mr. S. B. Saraf,
W.P. 27035 (w) of 2013 : Mr. K.K. Maiti,
W.P. 27642 (w) of 2013 : Mr. Subir Kumar Saha.
W.P. 27979 (w) of 2013
W.P. 26413 (w) of 2013
W.P. 25399 (w) of 2013
For the Union of India : Mr. Somenath Bose,
In W.P. 24073 (w) of 2013 : Mr. Rabindra Nath Pal,
W.P. 24770 (w) of 2013 : Mr. Utpal Maitra,
W.P. 24073 (w) of 2013 : Mr. Kushagra Shah,
W.P. 24772 (w) of 2013 : Ms. Mamta Bhargav,
W.P. 27642 (w) of 2013 : Mr. Dipanjan Datta.
W.P. 25399 (w) of 2013
Judgment on : 11.04.2014
HARISH TANDON, J.:
The above writ petitions assumed importance for the challenges made to the notification dated 13th May, 2013 issued by the Director General of Foreign Trade fixing Cost Insurance & Freight (CIF) Value at Rs. 110/- per kg and above as condition for policy to import the areca nut commonly known as betel nut. Correspondingly the Director to Government of India, Ministry of Finance (Central Board of Excise and Customs) issued notification dated June 25, 2013 fixing the Tariff Value of the areca nuts at US $ 1613 per metric ton which is also a subject matter of challenge in the aforesaid writ petitions. In some of the writ petitions, a show cause notice issued by the Commissioner of Customs (Preventive), West Bengal, Kolkata contemplating to confiscate the aforesaid goods under Section 111(d) of the Customs Act, 1962 for violation of the non-fulfillment of the policy condition enshrined under the said notification dated 13th May, 2013 and imposition of penalty under Section 112 of the said Act is also assailed before this Court.
Admittedly the Foreign Trade Policy does not prohibit the importation of the areca nuts/betel nuts absolutely, which can be deciphered from the impugned notification dated 13th May, 2013 that it is freely importable. However, conditions have been imposed wherein the import is permissible provided the CIF Value is Rs. 110/- per kg and above. The entire thrust of the argument is founded on the legality of the said notification issued by the Director General of Foreign Trade (DGFT), though it reflects that the Central Government have imposed such conditions by amending the Foreign Trade Policy, 2009-2014. It would be relevant to record that the impugned notification dated 13th May, 2013 is issued in exercise of the powers conferred under Section 5 of the Foreign Trade (Development & Regulation) Act, 1992 read with Paragraph 2.1 of the Foreign Trade Policy, 2009-2014.
The petitioners have imported the areca nuts/betel nuts from Bangladesh at much lesser price, to what is indicated in the policy conditions i.e. Rs. 110/- per kg and above and have been detained at the entry point. According to the authorities, the bill of entry submitted by the respective importers do not reflect that the conditions imposed in the impugned notification dated 13th May, 2013 is fulfilled and, therefore, liable to be confiscated treating the same to be a prohibited goods.
For better understanding and clear exposition, the argument advanced by the respective Counsels are compartmentalized in three broad heads viz; notification dated 13th May, 2013 issued by the DGFT, notification dated 25th June, 2013 issued by the Director to the Government of India, Ministry of Finance (Central Board of Excise and Customs) and show cause notice.
Notification dated 13th May, 2013 As indicated above, the impugned notification is issued in exercise of the powers conferred under Section 5 of the FTDR Act read with Paragraph 2.1 of the Foreign Trade Policy, 2009-2014 in the form of an amendment made by the Central Government imposing the policy conditions which is issued by the DGFT. The impugned notification clearly indicates that the areca nuts/betel nuts is freely importable under the Foreign Trade Policy, 2009-2014 subject to the conditions that the CIF Value is Rs. 110/- and above per kg. Prior to the impugned notification, the CIF Value was fixed at Rs. 75/- and even prior thereto, it was Rs. 35/- and above per kg.
Mr. Kishore Datta, the learned Advocate appearing for the petitioner in some of the writ petitions submits that Section 5 of the FTDR Act empowers the Central Government to formulate and announce the export and import policy with further power to amend it and not DGFT who is responsible for carrying out the policy. The DGFT can only advise the Central Government in formulation of the Foreign Trade Policy and, therefore, is not bestowed with any power either to formulate or amend the same. He further submits that though Section 6 (3) of the FTDR Act authorises the DGFT to exercise the power of the Central Government by Order published in the Official Gazette but excludes the power to be exercised by the Central Government under Section 3, 5, 15, 16 & 19 of the said Act. He, thus, submits that power to formulate and amend the export & import policy cannot be delegated to the DGFT by the Central Government in view of the clear embargo created under Section 6(3) of the FTDR Act. He strenuously submits that Article 53 (1) of the Constitution of India vest the executed power of the Union in the President to be exercised directly or through the officers subordinate to him in accordance therewith. Thus, he submits that the notification amending the Foreign Trade Policy is required to be issued in the name of the President or in the name of a person subordinate to him, if duly authorized. By referring Article 77 (1) of the Constitution, Mr. Datta contends that all the executive action of the Government are expressed to be taken in the name of the President and to facilitates the smooth transaction of business of the Government of India, the President can make the Rules under Article 77 (3) of the Constitution. Since the Rules are intended for the smooth and convenient transaction of the business of the Government of India, it cannot override the substantive provisions of the Act or the other statutory Rules framed by the Parliament. In support of the above contentions, he placed reliance upon a judgment of the Supreme Court in case of State of Haryana -vs- P.C. Wadhwa reported in AIR 1987 SC 1201. He, thus, submits that the Allocation of Business Rules, 1961 cannot delegate the power of the Central Government upon the DGFT in view of the clear embargo created under Section 6 (3) of the FTDR Act. In support of the above contentions, he relies upon an unreported Division Bench judgment of the Gujrat High Court in case of Alstom India Ltd; -vs- Union of India & Another (Special Civil Application No. 11031 of 2013). According to Mr. Datta, the impugned notification depicts that an amendment to the Foreign Trade Policy, 2009-2014 is made in exercise of the power under Section 5 of the FTDR Act by the DGFT in contravention to the provisions contained under Section 6 of the said Act. In fact, the first notification issued by the DGFT, by which the conditions to the Foreign Trade Policy was imposed at Rs.35/- and above per kg, was assailed before the Madras High Court in case of S. Mira Commodities Pvt. Ltd; -vs- Union of India & Another reported in 2009 (235) ELT 423(Mad) wherein it is held that such notification offends Section 6 (3) of the FTDR Act. The aforesaid judgment was relied on and applied by the Kerala High Court in case of Global Industries -vs- Union of India reported in 2011 (263) ELT 517. Mr. Datta would contend that the conjoint reading of Paragraph 1.2 and 2.1 of the Foreign Trade Policy, 2009-2014 postulates the import and export to be free except regulated as per ITC (HS) with certain restrictions indicated in Paragraph 2.6 thereof. The restriction imposed under Section 2.6 of the Foreign Trade Policy, 2009-2014 may be adopted and enforced by the DGFT through notification which is distinct and different from the power of the Central Government to formulate and announce the export and import policy under Section 5 of the FTDR Act. He, thus, submits that the Central Government can only announce and amend the Foreign Trade Policy under Section 5 of the FTDR Act and not by the DGFT and placed reliance upon a judgment of the Supreme Court in case of Atul Commodities Pvt. Ltd; & Ors; -vs- Commissioner of Customs, Cochin reported in (2009) 5 SCC 46 and a Division Bench judgment of the Bombay High Court in case of Narendra Udeshi -vs- Union of India & Others reported in (2003) 1 Bom LR
315. By placing reliance upon the provisions contained under Section 3 (2) of the FTDR Act, Mr. Datta submits that such power of prohibition, restriction and otherwise regulating is within the exclusive domain of the Central Government which cannot be delegated to the DGFT in view of the embargo created under Section 6 (3) of the FTDR Act. He further submits that such prohibition and/or restriction can only be regulated by an Order which is required to be placed before each house of the Parliament for approval as required under Section 19 (3) of the FTDR Act. According to him, the conditions imposed for import of the areca nuts, when the policy says, it is freely importable, amounts to a restrictions which can only be made by an Order under Section 3 (2) of the FTDR Act provided the procedure incorporated therein are adhere to. He, thus, submits that if a thing is required to be done in a certain manner, it should be done in such manner and not at all as held in case of Nazir Ahmed -vs- King Emperor reported in AIR 1936 PC 253. According to him, the prohibition can also be relatable to Section 11 of the Customs Act which empowers the Central Government to prohibit either absolutely or subject to conditions for importation of the goods under Sub-Section 2 thereof. Since the impugned notification is not issued under Section 11 of the said Act, the importation of the areca nuts at a lesser price than indicated in the impugned notification does not partake the character of the prohibited goods defined under Section 2 (33) of the Customs Act.
Alternatively, he submits that, even if, the impugned notification is treated to have been issued under Section 11 of the Customs Act, it requires the recording of the satisfaction which is not a casual exercise as held in case of Barium Chemicals Ltd. -vs- Company Law Board reported in AIR 1967 SC 295. By placing the passage from the Administrative Law by H.W.R. Wade, 6th Edition, Pages 445 to 453, Mr. Datta submits that the expression "satisfied" manifests the intention of the person/authority and the existence of the conditions, which makes the power exercisable both subjectively and objectively.
According to him, the impugned notification cannot withstand on the anvil of the provisions of Section 14 of the Customs Act which provides that the price at which the goods are sold at the time of importation is the value of goods for assessment i.e. the transaction value. It is further contended that Rule 3 (I) and 4 (I) of the Customs Valuation (determination of price of imported goods) Rules 1988 further provides the value of the imported goods to be transaction value. He, thus, submits that if the authorities have reason to believe that the value is not correctly stated and there is either over invoicing or under invoicing, it would amount to violation of the conditions for import/export. And It would result in illegal/irregular transaction and placed reliance upon a judgment of the Supreme Court in case of Om Prakash Bhatia -vs- Commissioner of Customs, Delhi reported in (2003) 6 SCC 161. He further placed reliance upon a judgment of the Supreme Court in case of Eicher Tractors Limited Haryana -vs- Commissioner of Customs reported in (2001) 1 SCC 315 to submit that the Customs Authorities are bound to accept the duty on the transaction value i.e. the price actually paid for the said transaction. Thus he submits that the authorities cannot arbitrarily fixed a price which has no nexus to the transaction value in invocation of the powers under Section 5 of the FTDR Act. He succinctly submits that the impugned notification cannot withstand as the price fixation is a legislative function and beyond the competence of the DGFT. In support of the above contentions, he relies upon a judgment of the Apex Court in case of Union of India -vs- Cynamide India Limited & Anr; reported in (1987) 2 SCC 720.
Mr. Pranab Kumar Datta, the learned Advocate appearing in some of the other writ petitions adopts the submissions of Mr. Kishore Datta and additionally submits that the artificial fixation of price for importation of the goods offends the provision of Customs Valuation (determination of value of imported goods) Rules 2007. According to him, the FTDR Act was enacted for development and regulation of the Foreign Trade by facilitating imports and augmenting exports from India. Section 5 of the said Act empowers the Central Government to formulate and announce, by notification, the Foreign Trade Policy with further power to amend it. The powers and functions of the DGFT is provided under Section 6 of the said Act wherein Sub-Section 3 excludes the power of the Central Government exercisable under Section 3,5,15,16 & 19 of the said Acts by the DGFT. He further submits that neither Section 5 nor Section 6 contemplates prohibition, restriction or of like nature, which can only be done taking recourse to Section 3 of the said Act. For prohibiting, restricting and/or regulating, the Central Government is required to publish Order in the Official Gazette. By taking aid of Section 9A of the said Act, he thus submits that the Central Government can impose quantitative restrictions by putting certain conditions if the import would cause or threaten to cause serious injury to domestic industry, which can only be done by publishing the notification in the Official Gazette. He succinctly argued that unless the Order under Section 3 of the said Act is passed by each house of the Parliament, such restrictions cannot come into effect in view of Section 19 (3) of the said Act. He succinctly argues that apart from the aforesaid provisions, Section 19 of the said Act empowers the Central Government to make Rules for the purpose of carrying out the object of the said Act. Such Rules have been framed providing the mechanism for valuation, which cannot be overridden by notifications. The Foreign Trade Order, 1993 is already notified under Section 3 of the said Act which does not include any such conditions as imposed in the impugned notification. He concludes that the impugned notification is contrary to the provision of the FTDR Act and is liable to be quashed and set aside.
Mr. Sourav Bagaria, the learned Advocate appearing in W.P. No. 915 of 2013 submits that the imposition of conditions in the impugned notification for import of the betel nut is arbitrary and discriminatory and have no reasonable nexus to the object of the FTDR Act. He further submits that the respondents have pleaded in the opposition that such conditions were imposed to protect the domestic producers. He thus submits that Section 8B and Section 9A of the Customs Tariff Act, 1975 provides the imposition of safeguard duty and anti dumping duty to protect the domestic producers subject to the compliance of the conditions incorporated therein. According to him, if the parent notification is declared invalid by the Madras High Court in case of S. Mira Commodities Pvt. Ltd;(supra) and Kerala High Court in Global Industries (supra), the impugned notification amending the quashed notification is impermissible and is also liable to be quashed and set aside.
Mr. Arijit Banerjee, the learned Advocate appearing in other writ petitions also adopts the submissions of Mr. Kishore Datta & Mr. Pranab Kumar Datta. He additionally submits that at the time of submissions of the bill of industry, the importer has to make a declaration that the content therein are true and the correct statement of facts. Any other declaration would amount to a false and wrong declaration which may attract the initiation of criminal and penal proceedings. According to him, the Foreign Trade Policy for the year 2009-2014 announced by the Central Government under Section 5 of the FTDR Act, is notified by the DGFT as Ex-Officio Additional Secretary to the Government of India, but the impugned notification is issued by the DGFT alone and, therefore, cannot be a valid and legal.
Mr. Bose, the learned Advocate appearing for the Director General of Foreign Trade, at the very outset, supports the impugned notification on the plea that the DGFT has conveyed the decisions of the Central Government amending the conditions in the policy. He succinctly argues that Section 2 (8) of the General Clauses Act, 1897 defines the Central Government to mean the President. He further submits that the President in exercise of the powers conferred under Clause 3 of Article 77 of the Constitution formulated the Rules for Allocation of Business of the Government of India i.e. the Government of India (Allocation of Business) Rules 1961 (hereinafter called Allocation of Business Rules). Rule 2 of the said Allocation of Business Rules relates to the transaction of the business of the Government of India in the Ministries, Departments, Secretaries and Officers specified in First Schedule. Item VI of the First Schedule relates to the Ministry of Commerce and Industry. The Second Schedule to the Allocation of Business Rules contains the distribution of subject amongst the departments wherein Item VIII under the Ministry of Commerce and Industry includes Director General of Foreign Trade. Thus, he submits that any executive action taken by the DGFT would amount to an action taken by the Central Government under the Allocation of Business Rules and the impugned notification cannot be said to be invalid under Section 5 of the FTDR Act. He further submits that Article 53 (1) vest the President with the executive power of the Union to be exercised by him either directly or to officers subordinate to him in accordance with the constitution but all the executive action of the Government of India is expressed to be taken in the name of the President. He further submits Article 77 (2) of the Constitution provides immunity to the Orders and other instruments in the name of the President, if authenticated in the manner specified in the Rules made by the President. He thus submits that the Allocation of Business Rules framed in exercise of such power by the President includes DGFT in Second Schedule, the impugned notification by the DGFT under Section 5 of the FTDR Act is not susceptible to be challenged. By placing reliance upon a judgment of the Supreme Court in case of Dattatraya Moreshwar -vs- The State of Bombay & Others; reported in AIR 1952 SC 181, he audaciously submits if there is a substantial compliance under Article 77 (2) of the Constitution, it cannot nullify and/or invalidate the executive action as the said provision is mere directory and not mandatory as also held in P. Joseph John -vs- State of Travancore-Cochin reported in AIR 1955 SC 160. By placing reliance upon a judgment of the Supreme Court in case of M/s. Bijoya Lakshmi Cotton Mills Ltd. -vs- State of W.B. & Others; reported in AIR 1967 SC 1145, Mr. Bose would contend that although the executive action of the Union is vested in the President but it is actually performed by the Ministers under the Allocation of Business Rules through the various departments specified in Second Schedule and if there is a substantial compliance thereof, such executive action cannot be assailed in a judicial proceedings. He would further contend that the Rules of Business and Allocation thereof amongst the Ministers are relatable to the provisions contained under Article 53 of the Constitution which is exercisable by the President directly or through the subordinate Officers and placed reliance upon a judgment of the Supreme Court in case of Ishwar Chand Agarwal -vs- State of Punjab reported in AIR 1974 SC 2192 and in case of A. Sanjeevi Naidu -vs- State of Madras reported in AIR 1970 SC 1102. He further submits that the Central Government can not only formulate and/or announce the Foreign Trade Policy but can regulate by amending the same by putting restrictions in terms of Section 5 read with Section 3 (2) of the FTDR Act as held in case of Union of India -vs- Asian Food Industries reported in AIR 2007 SC
750. He thus submits Para 2.1 of the Foreign Trade Policy, 2009-2014 makes exports and imports to be free except where regulated as specified in ITC (HS) notified by DGFT. By taking aid of the EXIM-Code 080290 of the ITC (HS), he submits that the policy conditions are clearly and expressly provided the CIF Value to be Rs. 110/- and above per kg. He, therefore, submits that violation of any conditions relating to a policy for import amounts to prohibition and partakes the character of a prohibited goods defined under Section 2 (33) of the Customs Act and placed reliance upon a judgment of the Supreme Court in case of Commissioner of Central Excise & Customs, A.P. -vs- Suresh Jhunjhunwala reported in (2007) 12 SCC 391. According to Mr. Bose, the matter can be viewed from another angle. It is an exclusive domain of the Parliament to enact the policy in respect of Economy, Finance, Communication, Trade, Tele-Communication and others and the Court should be reluctant to judicially examine the same as held in case of Balco Employees Union -vs- Union of India reported in (2002) 2 SCC
333. On the plea of price fixation, Mr. Bose submits that it is in the nature of the legislative action based on objective criteria which can only be assailed on the ground of unreasonability and/or arbitrary exercise of power and in support of the aforesaid contentions, he placed reliance upon a judgment of the Supreme Court in case of Sitaram Sugar Company LTD: U.P. State Sugar Corporation LTD. -vs- Union of India reported in (1990) 3 SCC 223. To sum up his argument, Mr. Bose concludes that the impugned notification issued by the DGFT is, in fact, the notification of the Central Government in terms of the Allocation of Business Rules as well as under the provisions of Section 5 of the FTDR Act taking aid of Section 3(2) thereof and cannot be said to be invalid and liable to be quashed.
The FTDR Act enacted by the Parliament is to provide Development and Regulation of the Foreign Trade by facilitating in imports and commanding exports from India which is a driving force of the economic activities. Section 5 of the FTDR Act empowers the Central Government to formulate and announce the Foreign Trade Policy and to amend it by notification in the Official Gazette which can be aptly quoted as under:
"5. Foreign Trade Policy.- The Central Government may, from time to time, formulate and announce, by notification in the Official Gazette, the foreign trade policy and may also, in like manner, amend that policy:
Provided that the Central Government may direct that, in respect of the Special Economic Zones, the foreign trade policy shall apply to the goods, services and technology with such exceptions, modifications and adaptations, as may be specified by it by notification in the Official Gazette."
The Central Government announces the Foreign Trade Policy on regular intervals and the policy in vogue today which is a subject matter in this writ petition is Foreign Trade Policy, 2009-2014. Paragraph 2.1 contained in Chapter II relates to general provisions pertaining to import and export wherein the export and import is free except where regulated by the said policy or any other law in force. It further provides that the Item wise export and import policy shall be specified in ITC (HS) notified by DGFT as amended from time to time. The functions of the DGFT can be deciphered from Section 6 of the FTDR Act which is primarily to advise the Central Government in formulation of the Foreign Trade Policy with further responsibility to carry out the same. Sub-section 3 of Section 6 of the FTDR Act put a fetter on the Central Government to delegate any power on the DGFT exercisable under Section 3, 5, 15, 16 & 19 of the FTDR Act. It would be relevant to quote Section 6 which reads thus:
"6. Appointment of Director General and his functions.- (1) The Central Government may appoint any person to be the Director- General of Foreign Trade for the purposes of this Act. (2) The Director-General shall advise the Central Government in the formulation of the foreign trade policy and shall be responsible for carrying out that policy.
(3) The Central Government may, by Order published in the Official Gazette, direct that any power exercisable by it under this Act (other than the powers under Sections 3, 5, 15, 16 & 19) may also be exercised, in such cases and subject to such conditions, by the Director-General or such other officer subordinate to the Director General, as may be specified in the Order."
The harmonious reading of the aforesaid provisions would indicate that the power to formulate and announce the Foreign Trade Policy vests in the Central Government and the functions of the DGFT is to advise the Central Government at the time of formulation of the Foreign Trade Policy and responsibility for carrying out the same. The power of prohibition, restriction and/or regulation is further conferred upon the Central Government by publishing the Order in the Official Gazette. The said power can be traced from Section 3 of the FTDR Act which is aptly quoted hereunder:
"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 exports.
(2) The Central Government may also, by Order published in the Official Gazette, make provision for prohibiting, restricting or otherwise regulating, in all cases or in specified classes of cases and subject to such exceptions, if any, as may be made by or under the Order, the import or export of goods or services or technology:
Provided that the provisions of this sub-section shall be applicable, in case of import or export of services or technology, only when the service or technology provider is availing benefits under the foreign trade policy or is dealing with specified services or specified technologies.
(3) All goods to which any Order under sub-section (2) applies shall be deemed to be goods the import or export of which has been prohibited under section 11 of the Customs Act, 1962 (52 of 1962) and all the provisions of that Act shall have effect accordingly.
(4) Without prejudice to anything contained in any other law, rule, regulation, notification 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."
The expression 'Order' is defined under Section 2 (h) of the FTDR Act to mean any Order made by the Central Government under Section 3 of the said Act. The expression 'prohibition' is of wide amplitude. Any pedantic and restrictive meaning would frustrate the intendment for which such prohibitions are incorporated in the legislation. It admits no quarrel that the imposition of conditions or restrictions is imbibed within the expression 'prohibition'. Apart from section 3 (2) of the said Act, the power to impose restrictions can also be traced from Section 9A of the said Act which restricts its applicability to quantitative restrictions to be exercised by the Central Government. Section 11 of the FTDR Act is a penal provision prohibiting any export and import to be made except in accordance with the provisions of the said Act, the Rules and Orders made thereunder as well as the Foreign Trade Policy in vogue at the relevant period. The FTDR Act supplements the other Acts, which could be culled out from Section 18A of the said Act which provides thus:
"18A. Application of other laws not barred.- The provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force."
The meaningful reading of Section 5 & Section 6 of the FTDR Act suggest that the power to formulate and announce the Foreign Trade Policy vest in the Central Government who can delegate some of its powers to the DGFT by taking recourse to Section 6. Sub-section 3 of Section 6 clearly prohibits the delegation of power by the Central Government exercisable under Section 3, 5, 15, 16 & 19 of the said Act. According to the DGFT, the executive functions of the Union is vested in the President which is required to be exercised by him either directly or to officers subordinate to him. All the executive actions of the Union is expressed to be taken in the name of the President who by Order and other instruments shall authenticate in a manner as may be specified in the Rules for convenient transactions of the business and for allocation amongst the Ministers. The Allocation of Business Rules made in exercise of such power by the President includes Ministry of Commerce and Industry in Item No. VI of the First Schedule. The Second Schedule thereof which relates to the distribution of the subject amongst the departments incorporated DGFT under Item No. VIII which relates to attached and subordinate offices. The Allocation of Business Rules framed by the President facilitates for convenient transaction of the business of the respective Ministers, which is to be exercised subject to the restrictions imposed in any legislation passed by the Parliament. Though the expression 'Central Government' means President in terms of the definition enshrined under Section 2 (8) of the General Clauses Act, but it is subject to the restrictions embargo and prohibition created in any other law in force. The contentions of the respondent, if accepted, would lead to the proposition that the executive action of the DGFT is deemed to be the action of the Central Government despite the specific embargo created under Sub-section 3 of Section 6 of the FTDR Act. Though the Allocation of Business Rules entrusted the DGFT to act for the Central Government but in view of the specific embargo created under Sub-section 3 of Section 6, the Central Government cannot delegate the power enshrined under Section 3, 5, 15, 16 & 19 of the said Act to be exercised by the DGFT.
In case of Dattatraya Moreshwar (supra), one of the point before the Constitutional Bench was whether the order passed under Section 11 of the Preventive Detention Act is invalid as it has not been expressed in the manner laid down in Article 166 of the Constitution. It was sought to be argued that the order passed by the Assistant Secretary to the Home Department who is otherwise authorized under the Rules framed by the Governor of the State to sign orders and instruments for the Government of the State is invalid, the Court held:
"18. The other contention raised by the learned Attorney General involves consideration of the question as to whether the provisions of Art.166 (1) of the Constitution is imperative in the sense that non-compliance with it would nullify or invalidate an executive action. The clause does not undoubtedly lay down how an executive action of the Government of a State is to be performed; it only prescribes the mode in which such act is to be expressed. The manner of expression is ordinarily a manner of form, but whether a rigid compliance with a form is essentially to the validity of an act or not depends upon the intention of the legislative. Various tests have been formulated in various judicial decisions for the purpose of determining whether a mandatory enactment shall be considered directory only or obligatory with an implied nullification for disobedience. It is unnecessary for our present purpose to discuss these matters in detail.
In my opinion, Art.166 of the Constitution which purports to lay down the procedure for regulating business transacted by the Government of a State should be read as a whole, Under Cl. (3), the Governor is to make rules for the more convenient transaction of such business and for allocation of the same among the Ministers in so far as it does not relate to matters in regard to which the Governor is required to act in his discretion. It is in accordance with these rules that business has to be transacted. But whatever executive action is to be taken by way of an order or instrument, it shall be expressed to be taken in the name of the Governor in whom the executive power of the State is vested and it shall further be authenticated in the manner specified in the rules framed by the Governor. Clauses (1) and (2) of Art. 166, in my opinion, are to be read together. Clause (1) cannot be taken separately as an independent mandatory provision detached from the provision of Cl. (2). While Cl.(1) relates to the mode of expression of an executive order or instrument, Cl.(2) lays down the way in which such order is to be authenticated; and when both these forms are complied with, an order or instrument would be immuned from challenge in a Court of law on the ground that it has not been made or executed by the Governor of the State.
This is the purpose which underlines these provisions and I agree with the learned Attorney General that non-compliance with the provisions of either of the clauses would lead to this result that the order in question would lose the protection which it would otherwise enjoy, had the proper mode for expression and authentication been adopted. It could be challenged in any Court of law even on the ground that it was not made by the Governor of the State and in case of such challenge the onus would be upon the State authorities to show affirmatively that the order was in fact made by the Governor in accordance with the rules framed under Art. 166 of the Constitution. This view receives support from a pronouncement of the Federal Court in J.K. Gas Plant Manufacturing Comp. Ltd. -vs- Emperor, 1947 FCR 141, where a somewhat analogous provision contained in S. 49 (1), Schedule IX of the Government of India Act, came up for consideration and the provision was held to be directory and not imperative.
19. Even if Cl. 1 of Art. 166 is taken to be an independent provision unconnected with Cl.(2) and having no relation to the purpose which is indicated therein, I would still be of opinion that it is directory and not imperative in its character. It prescribes a formality for the doing of a public act. As has been said by Maxwell (Maxwell on Interpretation of Statutes):
"Where the prescriptions of a statute relate to the performance of a public duty and where the invalidation of acts done in neglect of them would work serious general inconvenience or injustice to persons who have no control over those entrusted with the duty without promoting the essential aims of the Legislature, such prescriptions seem to be generally understood as mere instructions for the guidance and government of those on whom the duty is imposed, or in other words as directory only."
In the present case the order under S.11 (1) of the Preventive Detention Act purports to be an order of the Government of Bombay and is signed by the officer who was competent to sign according to the rules framed by the Governor under Art. 166 of the Constitution, and in these circumstances, I am unable to hold that the order is a nullity even though it has not been expressed to be made in the name of the Governor. The result is that both the grounds fail and the petition is dismissed."
In case of P. Joseph John (supra), a show cause notice signed by the Chief Secretary of United State of Travancore-Coachin on behalf of the Government was assailed on the ground that it is not in accordance with the provisions of Article 166 of the Constitution. The Court held that when there is a substantial compliance with the directory provision of Article 166 of the Constitution, it couldn't validate the executive action in these words:
"8. Mr. Thomas argued that the show cause notice was not in accordance with the provisions of Article 166 of the Constitution inasmuch as it was not expressed to have been made in the name of the Rajpramukh. As above mentioned, this notice was issued on behalf of the Government and was signed by the Chief Secretary of the united State of Travancore-Cochin who had under the rules of business framed by the Rajpramukh the charge of the portfolio of service and appointments" at the Secretariat level in this State. This was in our opinion substantial compliance with the directory provisions of Article 166 of the Constitution.
It was held by this Court in Dattatreya Moreshwar -vs- State of Bombay, AIR 1952 SC 181 (B), that clauses (1) and (2) of Article 166 are directory only and non-compliance with them does not result in the order being invalid, and that in order to determine whether there is compliance with these provisions all that is necessary to be seen is whether there has been substantial compliance with those requirements. In the present case there can be no manner of doubt that the notice signed by the Chief Secretary of the State and expressed to be on behalf of the Government and giving opportunity to the petitioner to show cause against the action proposed to be taken against him was in substantial compliance with the provisions, of the article. The petitioner accepted this notice and in pursuance of it applied for further time to put in his defence. He was twice granted this time. In these circumstances, the contention of Mr. Thomas that as the notice was not expressed as required under Article 166 it was invalid and therefore the requirements of Article 311 were not satisfied in this case must be held to be devoid of force. We are satisfied that all the requirements of Article 311 have been fully complied with in this case. It may also be mentioned that the High Court held that H. H. the Rajpramukh had intimation of the decision of the Council of Ministers and the action proposed to be taken against the petitioner and that in fact His Highness approved of the proposed action."
The notification under Section 4 of the West Bengal Land Development and Planning Act, 1948 was assailed for its invalidation on the plea that the same was issued by the Assistant Secretary of the department in the name of the State Government in case of Bijoya Lakshmi Cotton Mills Ltd. (supra). The rules of business framed by the Governor under Article 166 of the Constitution and by the standing orders made by the Minister-in-Charge, the Assistant Secretary was authorized to issue such notice. It is held that the said notice having not expressly indicated to have been issued by the Governor is not invalid in these words:
"16. * * * * * * * * * * * * * * * * * * * * * We are also in agreement with the views expressed by the High Court that the Governor s personal satisfaction was not necessary in this case as, this is not an item of business, with respect to which, the Governor is, by or under the Constitution, required to act in his discretion. Although the executive Government of a State is vested in the Governor, actually it is carried on by Ministers; and, in this particular case, under Rr. 4 and 5 of the Rules of Business, referred to above, the business of Government is to be transacted in the various departments specified in the First Schedule thereof. Item 5 therein is the Department of Land and Land Revenue and the Governor has allotted the business of that Department to a Minister. We are further in agreement with the views of the High Court that the said Minister-in-Charge, has got power to make Standing Orders regarding the disposal of cases, in his Department, under the Rules of Business issued by the Governor on August 25, 1951, under Article 166 (3) of the Constitution. In this case, there is no controversy that the Minister-in-Charge of the Department of Land and Land Revenue, has made Standing Orders on November 29, 1951, by virtue of powers given to him under Rr. 19 and 20 of the Rules of Business."
Therefore, the executive action of the Union under the Allocation of Business Rules framed under Clause 3 of Article 77 of the Constitution assumed immunity to be called in question that the said action is not made or executed by the President. The compliance of the rules clearly discernible from the executive action, does not invalidate the same. The rules of business framed under Article 77 of the Constitution for convenient transaction of the business of the Government of India and the allocation among the Ministers in relation to the decision of any Ministers or Officers but such rules cannot override the provisions of the Act or the statutory rules as held in State of Haryana -vs- Shri P.C. Wadhwa, IPS, Inspector General of Police & another reported in 1987 SC 1201 in these words:
"10. * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * The Rules of Business that have been framed under Article 166 cannot override the provisions of the Act or any statutory rules."
Therefore, under the Allocation of Buiseness Rules, DGFT is a subordinate officer to discharge the functions of the Central Government expect where it acts as a delegatee under the FTDR Act.
The notification announcing the Foreign Trade Policy, 2009-2014 was published under the aegis of the DGFT who is also an Ex-Officer Additional Secretary to the Government of India. Therefore, the DGFT not only assumes the power as a delegatee of the Central Government under Section 6 of the FTDR Act but is further competent as an authorized officer under the Allocation of Business Rules on behalf of the Central Government. The DGFT discharges the official functions allotted to him as a limb of the Central Government but also as a delegatee under Section 6 of the FTDR Act. Though the statute itself provided for delegation of power by the Central Government upon the DGFT but the same is supplemental and does not exclude the making of the decision according to the Rules of business. Such discharge of functions cannot be branded as mutually destructive but can co-exist. In this regard, the experts from the decisions of the Supreme Court in case of A Sanjeevi Naidu (supra) can be aptly quoted as under:
"4. On the other hand, it was urged on behalf of the State of Tamil Nadu that originally the functions under the Motor Vehicles Act had been allocated to the Home Department but when Mr Annadurai formed the D.M.K. Government in Tamil Nadu in 1967, the Home Department as such was not allocated to any Minister. The various subjects included in that Department were split up and distributed amongst the various Ministers. Transport was allocated to Mr Karunanidhi. Motor Vehicles Act as such was not allocated to any Minister. The department of Transport included functions under the Motor Vehicles Act as well. Ever since the D.M.K. ministry was formed. The functions under the Motor Vehicles Act were dealt with by the Transport Ministry. At the instance of the Transport Minister, Mr Karunanidhi, Governor framed Rule 23(A) for the more convenient discharge of the business. On behalf of the Government, it was further urged that Article 166(3) has two parts namely: (1) rules for the more convenient transaction of the business of the Government of the State and (2) rules relating to allocation of business of the State among the Ministers. It was said that after allocating the business of the Government among various Ministers, it was open to the Governor on the advice of the ministry to make rules for the convenient discharge of the business allocated. Rule 23 (a) is one such rule made under Article 166(3). Hence its validity is not open to question.
5. The impugned Rule 23(A) was introduced for the first time by GO. Ms No. 2715-Public, dated 22-12-67. Under sub-clause (1) of that rule, it is provided that powers and functions which State transport undertaking may exercise under Section 68(C) of the Act shall be exercised and discharged on behalf of the State Government by the Secretary to the Government of Madras in the Industries, Labour and Housing Department. The rule further provides that cases relating to such powers and functions of the State transport undertaking under Section 68(C) need not be submitted to the Minister in-charge. Under sub-clause (2) of that rule, the powers and functions of the State Government under Section 68(D) of the Act and the rules relating thereto are directed to be exercised and discharged by the Secretary to the Government in the Home Department.
Rule 4 of "the Rules" deals with allocation and disposal of business. It provides that the business of the Government shall be transacted in the department specified in the 1st Schedule and classified and distributed between those departments as laid down therein. Rule 5 says that Governor shall, on the advice of the Chief Minister allot the business of the Government among the Ministers, assigning one or more departments to the charge of a Minister but the proviso to that rule says that nothing in that rule shall prevent the assigning of one department to the charge of more than one Minister. Rule 6 prescribes that each department of the secretariat shall be under a Secretary who shall be the official head of the department. Under Rule 7, the Council of Ministers constituted under Article 163(1) is held collectively responsible for all the executive orders issued in the name of the Governor in accordance with rules, whether such orders are authorised, by an individual Minister on a matter pertaining to his portfolio or as a result of the discussion at the meeting of the Council of Ministers. Rule 9 provides that without prejudice to the provisions of Rule 7, the Minister in-charge of a department shall be primarily responsible for the disposal of the business pertaining to his department. Section 3 of the rules containing Rules 21 to 30 deal with the departmental disposal of business. Rule 21 says that except as otherwise provided by any other rule cases shall ordinarily be disposed of by or under the authority of the Minister in-charge who may by means of standing orders give such directions as he may think fit for the disposal of cases in the department; copies of such standing orders shall be sent to the Governor and the Chief Minister. Rule 22 provides that each Minister shall by means of standing orders arrange with the secretary of the department what matters or class of matters are to be brought to his personal notice; copies of such standing orders has to be sent to the Governor and the Chief Minister. Rule 23 prescribes that except as otherwise provided in the rules, all cases shall be submitted to the Minister in-charge by the secretary of the department to which they belong. Then comes Rule 23(A) to which reference has already been made."
Therefore, it admits no ambiguity that the DGFT not only exercises the power on behalf of the Government as a limb thereof, but can also act as a delegatee to the Central Government under Section 6 of the FTDR Act. The exercises of the executive functions under the Allocation of Business Rules are clearly discernible with reasonable certainty. The Madras High Court in case of S. Mira Commodities Pvt. Ltd; (supra) had no occasion to consider the above aspect whether the notification issued by the DGFT was taken as a limb of the Central Government and not as a delegatee under Section 6 of the FTDR Act. The Court simply proceeded on the basis that Section 6 (3) of the FTDR Act clearly prohibits the delegation of power by the Central Government upon the DGFT and, therefore, the DGFT as a delegatee cannot exercise the power of the Central Government conferred under Section 5 of the FTDR Act. The judgment of the Madras High Court assumed some importance on the factual matrix that at the time of announcing the Foreign Trade Policy, 2004-2009, the conditions were imposed in a notification issued by the DGFT under which the import is permissible provided the CIF Value is Rs.35 per kg and above, when the policy says that it is freely importable. The Court held that imposition of conditions amounts to restrictions and DGFT has no power under Section 5 of the FTDR Act nor the Central Government can do so under the aforesaid provisions. It was ultimately held that the said notification is bad and was subsequently quashed with following observations:
"26. This Court has already found that the second respondent has no power to issue the notification under Section 5 read with Section 6 (3) of the FTDR Act. Further, that the price fixing on an artificial basis cannot be done and that too under the FTDR Act. It has to be done in the light of the enactments such as the Customs Act and the Customs Tariff Act. No material data have been furnished for arriving at the figure of Rs.35/- per kilo (CIF) for the betel nuts imported. When the market for betel nuts requires 90% import and the free import policy has been evolved for such an import, the present notification goes contrary to such policy. It also makes the importers to commit further illegalities of retention of amounts in foreign countries."
The Kerala High Court in case of Global Industry (supra) accepted and applied the proposition of law laid down by the Madras High Court in case of S. Mira Commodities Pvt. Ltd;(supra) in these words:
"6. Reading of these Sections shows that it is only the Central Government which can formulate export and import policy and amend the said policy. It also is evident that the power coferred on the Central Government under Section 5 cannot be delegated to the Director General of Foreign Trade appointed under Section 6 of the Act. If this be the position, and as admittedly the notification has been issued by the Director General of Foreign Trade, it has to be concluded that the notification is issued without jurisdiction.
7. Learned counsel for the petitioners has also made available before me judgment of the Madras High Court in S. Mira Commodities Pvt. Ltd. -v- Union of India [ 2009 (235) ELT 423 (Mad)], wherein the Madras High Court has quashed Ext. P1 notification on the very ground itself.
8. therefore, in view of the statutory provison referred above and in the light of the judgment of the Madras High Court, the Notification dated 4-6-2008 issued by the Director General of Foreign Trade is illegal and is to be set aside and I do so."
The above noted decisions are relevant where the DGFT exercises the power of the Central Government as a delegatee, which is prohibited under Section 6 (3) of the FTDR Act. The Allocation of Business Rules framed by the President in exercise of constitutional power under Article 77 of the Constitution was neither considered nor addressed in the aforesaid judgments. The source of the power of the DGFT as a limb of the Central Government can be traced with reasonable certainty under the Allocation of Business Rules and the notification conveying the decision of the Central Government by the DGFT cannot be invalidated on the ground of non-delegation of power. The DGFT functions as a limb of the Central Government and not as a delegatee and mere non- mentioning of the specific source of power does not invalidate the entire executive action.
It leads to an another point whether the imposition of condition amounts to restriction/prohibition and otherwise regulation, which can be imposed in exercise of the power under Section 5 of the FTDR Act by the Central Government. The said provision contemplates the formulation and/or announcement of the Foreign Trade Policy by the Central Government with further power to amend it. The power of prohibit, restrict or otherwise regulate the Foreign Trade Policy is further conferred upon the Central Government under Section 3 (2) of the FTDR Act. Putting of any conditions which fetters the free import amounts to restriction and can be brought within the wider meaning thereof. The reference can be conveniently made to the definition of a prohibited goods enshrined under the Custom Act, 1962 which provides that any goods of the import or export which is subject to the prohibition under the said Act or any other law for the time being in force but does not include any goods in respect of which the conditions subject to which the goods are permitted to be imported or exported when complied with. It can be deciphered without any ambiguity that the expression 'any other law for the time being in force' certainly imbibed within itself the prohibition under the FTDR Act. The word 'prohibition' cannot be given a restrictive meaning because of the nature of the meaning assigned to a prohibited goods and includes every prohibition as held by the Supreme Court in case of OM Prakash Bhatia (supra) in these words:
8. The aforesaid section empowers the authority to confiscate any goods attempted to be exported contrary to any "prohibition" imposed by or under the Act or any other law for the time being in force.
Hence, for application of the said provision, it is required to be established that attempt to export the goods was contrary to any prohibition imposed under any law for the time being in force.
9. Further, Section 2(33) of the Act defines "prohibited goods" as under:
"2. (33) 'prohibited goods' means any goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with;"
(emphasis supplied)
10. From the aforesaid definition, it can be stated that: (a) if there is any prohibition of import or export of goods under the Act or any other law for the time being in force, it would be considered to be prohibited goods; and (b) this would not include any such goods in respect of which the conditions, subject to which the goods are imported or exported, have been complied with. This would mean that if the conditions prescribed for import or export of goods are not complied with, it would be considered to be prohibited goods. This would also be clear from Section 11 which empowers the Central Government to prohibit either "absolutely" or "subject to such conditions" to be fulfilled before or after clearance, as may be specified in the notification, the import or export of the goods of any specified description. The notification can be issued for the purposes specified in sub-section (2). Hence, prohibition of importation or exportation could be subject to certain prescribed conditions to be fulfilled before or after clearance of goods. If conditions are not fulfilled, it may amount to prohibited goods. This is also made clear by this Court in Sk. Mohd. Omer v. Collector of Customs, wherein it was contended that the expression "prohibition" used in Section 111(d) must be considered as a total prohibition and that the expression does not bring within its fold the restrictions imposed by clause (3) of the Import Control Order, 1955. The Court negatived the said contention and held thus: (SCC p. 732, para 11) "What clause (d) of Section 111 says is that any goods which are imported or attempted to be imported contrary to 'any prohibition imposed by any law for the time being in force in this country' is liable to be confiscated. 'Any prohibition' referred to in that section applies to every type of 'prohibition'. That prohibition may be complete or partial. Any restriction on import or export is to an extent a prohibition. The expression 'any prohibition' in Section 111(d) of the Customs Act, 1962 includes restrictions. Merely because Section 3 of the Imports and Exports (Control) Act, 1947, uses three different expressions 'prohibiting', 'restricting' or 'otherwise controlling', we cannot cut down the amplitude of the word 'any prohibition' in Section 111(d) of the Act. 'Any prohibition' means every prohibition. In other words all types of prohibitions. Restriction is one type of prohibition. From Item (I) of Schedule I Part IV to Import Control Order, 1955, it is clear that import of living animals of all sorts is prohibited. But certain exceptions are provided for. But nonetheless the prohibition continues."
The inclusive definition of the prohibited goods clearly suggests that the conditions put for the import or the export would also come within the prohibition. Section 3(2) of the FTDR Act requires an Order to be published in Official Gazette when the Central Government make provision for prohibiting, restricting or otherwise regulating the import or export of goods. The Order is defined under Section 2 (h) of the FTDR Act to mean Order made by the Central Government under Section 3. The impugned notification clearly depicts that the same is issued by the Central Government in exercise of the power under Section 5 of the said Act and not by way of an Order as provided under Section 3 (2) of the said Act. Even if, it is assumed that the power is bestowed upon the Central Government under the FTDR Act and misquoting or wrong quoting of the exercise of power cannot make the action fatal, the impugned notification cannot be sustained as the prohibition can also be made by way of an Order published in the Official Gazette and not in the manner as has been done in the instant case. The impugned notification clearly suggest that the same is issued on behalf of the Central Government by amending the Foreign Trade Policy by revising the rate from Rs. 75/- to 110/- per kg and above. It is not disputed by either of the parties that initially the CIF Value was fixed at Rs.35/- which was further revised to Rs. 75/- and lastly to Rs.110/- per kg and above. The notification, by which the condition for import was fixed at Rs. 35/- per kg and above, is quashed by the Madras High Court and the Kerala High Court in the above noted judgment on the ground that the same was issued by the DGFT as a delegatee to the Central Government when Section 6 (3) of the FTDR Act debars such delegation of power. Merely by revising the rate in the garb of the amendment to a circular which has been quashed and set aside by the High Court cannot be done by way of an amendment of the policy under Section 5 of the FTDR Act. The respondent tried to support the notification by taking aid of Chapter-II of the Foreign Trade Policy, 2009-2014 relating to the general provision regarding import and export. Paragraph 2.1 of the Foreign Trade Policy, 2009-2014 clearly provides the import and export, to be free except, where regulated by Foreign Trade Policy or any other law in force. It further provides that the Item wise export and import policy shall be notified by the DGFT as amended from time to time. According to the respondent, Paragraph 2.6 of the policy empowers the DGFT to adopt and enforce any measure under the principles of restrictions through a notification. It is relevant to quote the source of power of restriction of the DGFT under Paragraph 2.6 of the Foreign Trade Policy, which reads thus:
"2.6. DGFT may, through a notification, adopt and enforce any measure necessary for:-
(i) Protection of public morals.
(ii) Protection of human, animal or plant life or health.
(iii) Protection of patents, trademarks and copyrights and the prevention of deceptive practices.
(iv) Prevention of use of prison labour.
(v) Protection of national treasures of artistic, historic or archaeological value.
(vi) Conservation of exhaustible natural resources.
(vii) Protection of trade of fissionable material or material from which they are derived; and
(viii) Prevention of traffic in arms, ammunition and implements of war."
The aforesaid parameters set forth therein does not satisfy the imposition of conditions by way of revision of rate from Rs. 75/- to 110/- per kg and above. Therefore, the DGFT even as a delegatee is not empowered to put a condition by revising the rate as a condition to import.
As a last resort, the respondent tried to upheld the impugned notification by taking shelter under Section 11 of the Customs Act, 1962. According to Mr. Bose that the Central Government can prohibit either absolutely or subject to such condition, the import and export of goods of any specified description. Sub-section 2 of Section 11 of the Customs Act extensively refers the purposes, which may justify the absolute or a conditional prohibition. The aforesaid argument is advanced by Mr. Bose on the basis of the stand taken in the affidavit-in-opposition that the conditions were put to prevent the serious injury to the domestic production of the goods and in the interest of the general public. Before addressing the points canvassed by Mr. Bose, it would be profitable to quote Section 11 of the Customs Act which reads thus:
"11. Power to prohibit importation or exportation of goods.- (1) If the Central Government is satisfied that it is necessary so to do for any of the purposes specified in sub-section (2), it may, by notification in the Official Gazette, prohibit either absolutely or subject to such conditions (to be fulfilled before or after clearance) as may be specified in the notification, the import or export of goods of any specified description.
(2) The purposes referred to in sub-section (1) are the following:-
(a) the maintenance of the security of India;
(b) the maintenance of public order and standards of decency or morality;
(c) the prevention of smuggling;
(d) the prevention of shortage of goods of any description;
(e) the conservation of foreign exchange and the safeguarding or balance of payments;
(f) the prevention of injury to the economy of the country by the uncontrolled import or export of gold or silver;
(g) the prevention of surplus of any agricultural product or the product of fisheries;
(h) the maintenance of standards for the classification, grading or marketing of goods in international trade;
(i) the establishment of any industry;
(j) the prevention of serious injury to domestic production of goods of any description;
(k) the protection of human, animal or plant life or health;
(l) the protection of national treasures of artistic, historic or archaeological value;
(m) the conversation of exhaustible natural resources;
(n) the protection of patents, trade marks, copyrights, designs and geographical indications;
(o) the prevention of deceptive practices;
(p) the carrying on of foreign trade in any goods by the State, or by a Corporation owned or controlled by the State to the exclusion, complete or partial, or citizens of India;
(q) the fulfillment of obligations under the Charter of the United Nations for the maintenance of international peace and security;
(r) the implementation of any treaty, agreements or convention with any country;
(s) the compliance of imported goods with any laws which are applicable to similar goods produced or manufactured in India;
(t) the prevention of dissemination of documents containing any matter which is likely to prejudicially affect friendly relations with any foreign State or is derogatory to national prestige;
(u) the prevention of the contravention of any law for the time being in force; and
(v) any other purpose conducive to the interests of the general public."
The FTDR Act does not override any other substantive law but is an addition to and not in derogation with the other law, which can be found from Section 18A of the said Act. Both the Customs Act & Foreign Trade Policy Act supplement each other and does not supplant. Though the Central Government is within its competence to issue notification regarding specific prohibition and restriction of the import or export under Section 11 of the Customs Act but the same is required to be exercised within the parameter provided therein. The notification issued under Section 11 of the Customs Act does not contain any such prohibition either absolutely or by condition for the import of the betel nuts. The stand of the respondent authorities are that the CIF Value is revised by way of an amendment to a Foreign Trade Policy which necessarily ruled out the invocation of powers under Section 11 of the Customs Act. This Court, therefore, does not find that Section 11 of the Customs Act can be brought in aid to the respondents' contention. After the above finding, the another point argued by the petitioner lost significance but since the same is addressed before the Court, this Court feels that a determination thereupon is required. The petitioners have strenuously argued that the fixation of a price is a legislative function and not the executive function. The aforesaid argument was advanced because of the peculiarity of the expression used in the impugned notification that the amendment is brought by revising the CIF Value from Rs. 75/- to 110/- per kg and above. It is contended that the fixation of price is a legislative function and not the executive one. The reference is made to a judgment of the Supreme Court in case of Union of India & another -vs- Cynamide India Ltd. & Another reported in (1987) 2 SCC 720 which was the case under the Essential Commodities Act, 1955 where a complaint was made about the unscrupulous exploitation of the Indian Drug & Pharmaceutical Market by multi national corporation by circulating low quality and deleterious drugs. Section 3 (1) of the Essential Commodities Act enables the Central Government to maintain and increase the supply of essential commodity at fare price. Section 3 (2) (c) empowers the Central Government to make Order for controlling the price at which any essential commodity may be bought or sold. In exercise of the power conferred upon the Central Government under the Essential Commodities Act and the Drug (Prices Control) Order, 1979 was made wherein notifications were issued fixing the maximum price at which various indigenous manufacturing bulk drugs may be sold by the manufacturer. The said notification was assailed before the High Court and ultimately the matter reached before the Supreme Court. In the above perspective, it was held that ordinarily the fixation of price or determination of price is legislative action, which is not a rule of rigidity. The Supreme Court in unequivocal and clear terms indicated that the price fixation is neither the function nor the forte of the Court. The exception to the above rule is also indicated when the price fixation may assume an administrative or quasi-judicial character than the legislative activity, Para 7 of the said report can be conveniently quoted for the above proposition:
"7. The third observation we wish to make is, price fixation is more in the nature of a legislative activity than any other. It is true that, with the proliferation of delegated legislation, there is a tendency for the line between legislation and administration to vanish into an illusion. Administrative, quasi-judicial decisions tend to merge in legislative activity and, conversely, legislative activity tends to fade into and present an appearance of an administrative or quasi-judicial activity. Any attempt to draw a distinct line between legislative and administrative functions, it has been said, is "difficult in theory and impossible in practice". Though difficult, it is necessary that the line must sometimes be drawn as different legal rights and consequences may ensue. The distinction between the two has usually been expressed as "one between the general and the particular". "A legislative act is the creation and promulgation of a general rule of conduct without reference to particular cases; an administrative act is the making and issue of a specific direction or the application of a general rule to a particular case in accordance with the requirements of policy". "Legislation is the process of formulating a general rule of conduct without reference to particular cases and usually operating in future; administration is the process of performing particular acts, of issuing particular orders or of making decisions which apply general rules to particular cases." It has also been said: "Rule-making is normally directed toward the formulation of requirements having a general application to all members of a broadly identifiable class"
while, "an adjudication, on the other hand, applies to specific individuals or situations". But, this is only a broad distinction, not necessarily always true. Administration and administrative adjudication may also be of general application and there may be legislation of particular application only. That is not ruled out. Again, adjudication determines past and present facts and declares rights and liabilities while legislation indicates the future course of action. Adjudication is determinative of the past and the present while legislation is indicative of the future. The object of the rule, the reach of its application, the rights and obligations arising out of it, its intended effect on past, present and future events, its form, the manner of its promulgation are some factors which may help in drawing the line between legislative and non-legislative acts. A price fixation measure does not concern itself with the interests of an individual manufacturer or producer. It is generally in relation to a particular commodity or class of commodities or transactions. It is a direction of a general character, not directed against a particular situation. It is intended to operate in the future. It is conceived in the interests of the general consumer public. The right of the citizen to obtain essential articles at fair prices and the duty of the State to so provide them are transformed into the power of the State to fix prices and the obligation of the producer to charge no more than the price fixed. Viewed from whatever angle, the angle of general application, the prospectiveness of its effect, the public interest served, and the rights and obligations flowing therefrom, there can be no question that price fixation is ordinarily a legislative activity. Price fixation may occasionally assume an administrative or quasi-judicial character when it relates to acquisition or requisition of goods or property from individuals and it becomes necessary to fix the price separately in relation to such individuals. Such situations may arise when the owner of property or goods is compelled to sell his property or goods to the Government or its nominee and the price to be paid is directed by the legislature to be determined according to the statutory guidelines laid down by it. In such situations the determination of price may acquire a quasi-judicial character. Otherwise, price fixation is generally a legislative activity. We also wish to clear a misapprehension which appears to prevail in certain circles that price fixation affects the manufacturer or producer primarily and therefore fairness requires that he be given an opportunity and that fair opportunity to the manufacturer or producer must be read into the procedure for price fixation. We do not agree with the basic premise that price fixation primarily affects manufacturers and producers. Those who are most vitally affected are the consumer public. It is for their protection that price fixation is resorted to and any increase in price affects them as seriously as any decrease does a manufacturer, if not more."
In case of Centre for Public Interest Litigation -vs- Union of India reported in (2000) 8 SCC 606, it is held that the Court should not ordinarily interfere the action of the government relating to price fixation unless on the ground of mala fide or extraneous consideration in these words:
"20. It is clear from the above observations of this Court that it will be very difficult for the courts to visualise the various factors like commercial/technical aspects of the contract, prevailing market conditions, both national and international and immediate needs of the country etc. which will have to be taken note of while accepting the bid offer. In such a case, unless the court is satisfied that the allegations levelled are unassailable and there could be no doubt as to the unreasonableness, mala fide, collateral considerations alleged, it will not be possible for the courts to come to the conclusion that such a contract can be prima facie or otherwise held to be vitiated so as to call for an independent investigation, as prayed for by the appellants. Therefore, the above contention of the appellants also fails."
In case of Pallavi Refractories and others -vs- Singareni Collieries Co. Ltd. and Others; reported in (2005) 2 SCC 227, the Apex Court held that in judicial review, the Court is neither concerned with the economic policy nor with the rates unless it is based on extraneous and irrelevant consideration while determining the price.
The fixation of price though ordinarily a legislative activity but may assume an administrative and quasi-judicial character when it relates to the acquisition and requisition of goods or property from the individuals. Apart from the said proposition of law, the petitioners could not demonstrate in the pleading that the fixation of price at Rs.110/- per kg & above is based on the irrelevant or extraneous consideration. On the other hand, the respondents have justified the fixation of price to be based upon the price prevalent in the indigenous market and the cost of production and/or cultivation. I don't wish to delve deep into the matter in absence of any specific pleadings except to say that generally a price fixation is a legislative activity but may assume administrative and quasi-judicial character occasionally.
To conclude the above point, I thus held that the impugned notification cannot be sustained on whichever angle it is viewed and is, therefore, quashed and set aside.
Notification dated 25th June, 2013 issued by the Director of Government of India, Ministry of Finance (Central Board of Excise & Customs) & Notification dated 21st August, 2013. The aforesaid notifications are issued under Section 14 (2) of the Customs Act, 1962 by fixing the tariff value for importation of the areca nuts upon taking into consideration the trend of the value of such or like goods. Before proceeding to deal the above aspect, the antithesis of the Customs Act is required to be recollated. After having passed by both the houses of Parliament, the customs bill received the assent of the President on 13th December, 1962. The object and scheme of the Act can be gathered from the following passage of the judgment rendered by the Supreme Court in case of Commissioner of Customs (Preventive), Mumbai -vs- M. Ambalal & Company reported in (2011) 2 SCC 74 held:
"12. Dutiable goods are goods whose import is permitted by the Act or any other law in force. Duty is the tax leviable on the goods occasioned by their import into India or their export out of India. The dutiability of the goods is covered by Section 12 of the Act which is the charging section. Under this section, all goods imported into or exported from India are liable to customs duty unless the Customs Act itself or any other law for the time being in force provides otherwise. The rate of duty is fixed by the Customs Tariff Act, 1975.
"Import" and "imported goods" mean that if goods are brought into India, meaning thereby into the territory of India from outside, there is import of goods and the goods become imported goods and become chargeable to duty up to the moment they are cleared for home consumption. The word "importer" has been defined in the Act as importer in relation to any goods at any time between their importation and the time when they are cleared for home consumption includes any owner or any person who holds himself out to be an importer. The word "smuggling", in relation to goods, means any act or omission which will render such goods liable to confiscation under Section 111 or Section 113 of the Act.
13. Section 11 of the Act enables the Central Government to prohibit importation or exportation of goods either absolutely or subject to conditions as specified in the notification, the import or export of the goods of any specified description. Sections 11-A to 11-G speaks of detention of illegally imported goods and prevention of the disposal thereof. Section 12 of the Act is the charging section. Under this section, the duty is leviable on all imported goods. Valuation of the imported goods is done as provided under Section 14 of the Act. Section 25 of the Act empowers the Central Government to issue notifications exempting generally either absolutely or subject to such conditions as specified in the notification, goods of any specified description from the whole or any part of the customs Act (sic duty) leviable thereon.
14. The definition of imported goods has to be read along with Section 111 of the Act which deals with goods brought from place outside India. Section 111 of the Act provides for confiscation of goods and conveyances and imposition of penalties. Section 111(d) of the Act provides that any goods which are imported or attempted to be imported or are brought within Indian customs waters for the purpose of being imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force, shall be liable for confiscation. Section 112 of the Act provides for penalties for improper importation of goods."
The levy and exemption of the customs duties are provided under Chapter V of the said Act. Sub-section 1 of Section 14 of the Customs Act makes the applicability of the Customs Tariff Act, 1975 by reference relating to the valuation of both imported and exported goods to be the transaction value, which is the price actually paid or payable for the goods, when sold for export to India for delivery at the time and place of importation. Sub-section 2 of Section 14 starts with a non-obstante clause where the Board can fix the tariff values for any class of the import goods or export goods in relation to the trend of the value of such or like goods. It would be profitable to quote Section 14 for the present purposes, which reads thus:
"14. Valuation of goods.- (1) For the purposes of the Customs Tariff Act, 1975, or any other law for the time being in force, the value of the imported goods and export gods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules in this behalf:
provided that such transaction value in the case of imported goods shall include, in addition to the price as aforesaid, any amount paid or payable for costs and services, including commissions and brokerage, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the rules made in this behalf: provided further that the rules made in this behalf may provide for,-
(i) the circumstances in which the buyer and the seller shall be deemed to be related;
(ii) the manner of determination of value in respect of goods when there is no sale, or the buyer and the seller are related, or price is not the sole consideration for the sale or in any other case;
(iii) the manner of acceptance or rejection of value declared by the importer or exporter, as the case may be, where the proper officer has reason to doubt the truth or accuracy of such value, and determination of value for the purposes of this section:
Provided also that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under section 46, or a shipping bill of export, as the case may be, is presented under section 50.
(3) Notwithstanding anything contained in sub-section (1), if the Board is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, fix tariff values for any class of imported goods or export goods, having regard to the trend of value of such or like goods, and where any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value. Explanation- For the purposes of this section-
(a) "rate of exchange" means the rate of exchange-
(i) determined by the Board, or
(ii) ascertained in such manner as the Board may direct, for the conversion of Indian currency into foreign currency or foreign currency into Indian currency;
(b) "foreign currency" and "Indian Currency"
have the meanings respectively assigned to them in clause (m) and clause (q) of section 2 of the Foreign Exchange Management Act, 1999"
The tariff value is defined under Section 2 (40) of the Customs Act to mean the tariff value fixed in respect of any goods under Sub-section 2 of Section 14. The value is also defined under Section 2 (41) of the Customs Act to mean the value determined in accordance with the provisions of Sub-section 1 or Sub-section 2 of Section 14. Prior to 1988, Section 14 of the Customs Act provided for chargeability of the duty of customs with reference to value, which shall be deemed to be the price at which such or like goods are ordinarily sold or offered for sale for delivery at the time and place of importation or exportation, as the case may be, in course of all international trade where the seller and buyer have no interest in the business of each other and price is the sole consideration for the sale or offer for sale. It was further provided that in case of unascertainability of the price, the nearest ascertainable equivalent shall be determined in accordance with rules made in that behalf. By way of an amendment brought in 1988, Section 1A was incorporated in Section 14 after deleting Clause (b) of Sub-section 1 of Section 14 providing the determination of price in relation to Sub-section 1 in accordance with the rules made in this behalf. By virtue of Rule making power enshrined under Section 14 read with Section 156 of the Customs Act, 1962, Customs Valuation (determination of value of imported goods) Rules 2007 is framed which came into operation from 30th July, 2007. Rule 2(g) of the Customs Valuation Rules defines transaction value as under:
" Rule 2(g) "transaction value" means the value referred to in sub- section (1) of section 14 of the Customs Act, 1962."
Rule 3 thereof relates to the mechanism by which the determination of the valuation is to be done which are aptly quoted as under:
"Rule 3. Determination of the method of valuation.- (1) subject to rule 12, the value of imported goods shall be the transaction value adjusted in accordance with provisions of rule 10;
(4) value of imported goods under sub-rule (1) shall be accepted:
Provided that-
(a) there are no restrictions as to the disposition or use of the goods by the buyer other than restrictions which-
(i) are imposed or required by law or by the public authorities in India; or
(ii) limit the geographical area in which the goods may be resold; or
(iii) do not substantially affect the value of the goods;
(b) the sale or price is not subject to some condition or consideration for which a value cannot be determined in respect of the goods being valued;
(c) no part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer will accrue directly or indirectly to the seller, unless an appropriate adjustment can be made in accordance with the provisions of rule 10 of these rules; and
(d) the buyer and seller are not related, or where the buyer and seller are related, that transaction value is acceptable for customs purposes under the provisions of sub-rule (3) below.
(5) (a) Where the buyer and seller are related, the transaction value shall be accepted provided that the examination of the circumstances of the sale of the imported goods indicate that the relation ship did not influence the price.
(b) in a sale between related persons, the transaction value shall be accepted, whenever the importer demonstrates that the declared value of the goods being valued, closely approximates to one of the following values ascertained at or about the same time.
(i) the transaction value of identical goods, or of similar goods, in sales to unrelated buyers in India;
(ii) the deductive value for identical goods or similar goods;
(iii) the computed value for identical goods or similar goods:
Provided that in applying the values used for comparison, due account shall be taken of demonstrated difference in commercial levels, quantity levels, adjustments in accordance with the provisions of rule 10 and cost incurred by the seller in sales in which he and the buyer are not related;
(c) substitute values shall not be established under the provisions of clause (b) of this sub-rule.
(4) if the value cannot be determined under the provisions of sub-rule (1), the value shall be determined by proceeding sequentially through rule 4 to 9."
Section 15 of the Customs Act though not of much relevance in the present context relates to the rate of duty and tariff value in relation to the imported goods, which is quoted as under:
"15. Date for determination of rate of duty and tariff valuation of imported goods.-(1) The rate of duty and tariff valuation, if any, applicable to any imported goods, shall be the rate and valuation in force-
(a) in the case of goods entered for home consumption under Section 46, on the date on which a bill of entry in respect of such goods is presented under that section;
(b) in the case of goods cleared from a warehouse under section 68, on the date on which a bill of entry for home consumption in respect of such goods is presented under that section;
(c) in the case of any other goods, on the date of payment of duty:
Provided that if a bill of entry has been presented before the date of entry inwards of the vessel or the arrival of the aircraft by which the goods are imported, the bill of entry shall be deemed to have been presented on the date of such entry inwards or the arrival, as the case may be.
(2) The provisions of this section shall not apply to baggage and goods imported by post."
The point arose before the Supreme Court in case of Union of India -vs- Apar Pvt. Ltd. reported in (1999) 6 SCC 117 as to whether the import is completed when the goods entered the territorial water and the value, at that relevant point of time, is to be taken for consideration. It is held that duties required to be paid in reference to the relevant date mentioned in Section 15 in these words:
4. The Bombay High Court following its earlier decision in M.S. Shawhney v. Sylvania & Laxman Ltd. decided in favour of the respondents and held that as the goods were exempt from payment of tax on the day when they entered the territorial waters no customs duty was payable.
5. In our opinion, this question is no longer res integra. At least two decisions of this Court, namely, Bharat Surfactants (P) Ltd. v. Union of India and Dhiraj Lal H. Vohra v. Union of India were directly concerned with a similar contention that had been raised. Dealing with the same, this Court has in clear terms come to the conclusion that what is relevant is the day on which the bill of entry in respect of the goods is presented under Section 46 and in the case of goods which are warehoused the relevant date would be the date on which the goods are actually removed from the warehouse. It is no doubt true that in Bharat Surfactants this Court did observe that it did not express any opinion with regard to the soundness of the view taken by the Bombay High Court in Sylvania & Laxman case and in the judgment under appeal but, nevertheless, as we read the said judgment, the conclusion of this Court in Bharat Surfactants was contrary to the view expressed by the Bombay High Court. We do not find that the said decision in Bharat Surfactants can in any way be distinguished from the facts of the present case. Similarly in Dhiraj Lal the contention raised that the ship had entered the territorial waters on 20-2-1989 and that was the relevant date for determining the taxability of the imported goods, was rejected. In this connection, it was observed as follows: (SCC p. 456, para 3) "3. It is clear from a bare reading of these relevant provisions that the due date to calculate the rate of duty applicable to any imported goods shall be the rate and valuation in force, in the case of the goods entered for home consumption under Section 46, is the date on which the bill of entry in respect of such goods is presented under that section and in the case of goods cleared from a warehouse under Section 68, the date on which the goods are actually removed from the warehouse. By operation of the proviso if a bill of entry has been presented before the date of entry inwards the bill of entry shall be deemed to have been presented 'on the date of such entry inwards' but would be subject to the operation of Sections 46 and 31(1) of the Act. Section 46(1) provides that the importer of any goods, other than goods intended for transit or transhipment, shall make entry thereof by presenting to the proper officer a bill of entry for home consumption or warehousing in the prescribed form and it may be presented under sub-section (3) thereof at any time after delivery of the import manifest. Section 31(1) provides that the master of the vessel shall not permit the unloading of any imported goods until an order has been given by the proper officer 'granting entry inwards' to such vessel and no order under sub-section (1) shall be given until an import manifest has been delivered or the proper officer is satisfied that there was sufficient cause for not delivering it. Granting entry inwards on delivery of import manifest and the date of arrival of the vessel into port admittedly are on March 2, 1989 and the master of the vessel made a declaration in this behalf that they would discharge the cargo on March 2, 1989 therefore, the relevant date under Section 15(1)(a) is the date on which entry inwards after delivery of import manifest was granted to discharge the cargo for the purpose of the levy of the customs duty and rate of tariff. The contention, therefore, that the ship entered Indian territorial waters on February 20, 1989 and was ready to discharge the cargo is not relevant for the purpose of Section 15(1) read with Sections 46 and 31 of the Act. The prior entries regarding presentation of the bill of entry for clearance of the goods on February 27, 1989 and their receipt in the appraising section on February 28, 1989 also are irrelevant. The relevant date to fix the rate of customs duty, therefore, is March 2, 1989. The rate which prevailed as on that date would be the duty to which the goods imported are liable to the impost and the goods would be cleared on its payment in accordance with the rate of levy of customs prevailing as on March 2, 1989."
In case of Garden Silk Mills Ltd. -vs- Union of India reported in (1999) 8 SCC 744, the point arose whether the landing charges can be added and/or included in ascertaining the value of the imported goods. It is held that the taxable event would arise when the goods reaches at the customs barriers and is allowed to become a part of the mass of goods in these words:
13. All imported goods unloaded in a customs area are required to remain under the Customs Authorities until they are cleared for home consumption or are warehoused or are trans-shipped (Section 45).
The goods can be cleared by the importer only after, as provided by Section 6, the importer files a bill of entry for home consumption or warehousing pursuant to which clearance of goods is granted under Section 47 by the Customs Officer. This clearance is given after the officer is, inter alia, satisfied that the importer has paid the import duty assessed on the imported goods.
14. The aforesaid provisions of the Act, therefore, clearly show that after the imported goods are discharged from the vessel at the wharf the importer cannot immediately take delivery thereof. The imported goods remain in the custody of the Port Trust Authorities till they are, inter alia, cleared for home consumption. This being the position the goods cannot be cleared and delivery taken without their being valued and assessed and, thereafter, duty being paid. Section 14 of the Act provides that the value of the goods shall be deemed to be the price of the goods for the delivery at the time and place of importation in the course of international trade. The value has to be determined with relation to the time when physical delivery to the importer can take place. Physical delivery can take place only after the bill of entry, inter alia, for home consumption is filed and it is the value at that point of time which would be relevant. It is evident that there normally will be some lapse of time between the time when the shipper discharges the goods and the time when the bill of entry is filed. The landing charges, which are imposed at or after the time of the discharge of the goods and prior to the clearance being granted under Section 47 of the Act, necessarily have to be an element which have to be taken into account in determining the value thereof for the purpose of assessing the customs duty which would be chargeable.
16. The question as to whether the import is completed when the goods entered the territorial waters and it is the value at that point of time which is to be taken into consideration is no longer res integra. This contention was raised in Union of India v. Apar (P) Ltd. In that case the day when the goods entered the territorial waters, the rate of duty was nil but when they were removed from the warehouse, the duty had become leviable. The contention which was sought to be raised was that what is material is the day when the goods had entered the territorial waters because by virtue of Section 2(23) read with Section 2(27) the import into India had taken place when the goods entered the territorial waters. Following the decision of this Court in Bharat Surfactants (P) Ltd. v. Union of India and Dhiraj Lal H. Vohra v. Union of India this Court came to the conclusion in Apar (P) Ltd. case that the duty has to be paid with reference to the relevant date as mentioned in Section 15 of the Act.
17. It was further submitted that in the case of Apar (P) Ltd. this Court was concerned with Sections 14 and 15 but here we have to construe the word "imported" occurring in Section 12 and this can only mean that the moment goods have entered the territorial waters the import is complete. We do not agree with the submission. This Court in its opinion in Bill to Amend Section 20 of the Sea Customs Act, 1878 and Section 3 of the Central Excises and Salt Act, 1944, Re SCR at p. 823 observed as follows:
"Truly speaking, the imposition of an import duty, by and large, results in a condition which must be fulfilled before the goods can be brought inside the customs barriers, i.e., before they form part of the mass of goods within the country."
The aforesaid judgments as cited above and relied upon by the Custom Authorities couldn't be conveniently applied in relation to the power to fix the tariff value by the Board except for the limited purpose as to the commencement of the taxing events. On a meaningful reading of Section 14 Sub-section 1 thereof relates to a transaction value and its mode of determination with reference to the Customs Valuation Rules. However, Sub-section 2 starts with a non-obstante clause empowering the Board to fix the tariff values for any class of the imported goods by notification in the Official Gazette notwithstanding anything contained in Sub-section 1 thereof. The determination of the tariff value is relatable to the trend of the values of such or like goods. According to the petitioner, the tariff value fixed by the impugned notification is in contravention to Sub-section 1 which relates to a transaction value defined under Rule 2
(g) of the Customs Valuation Rules and Rule 4 subject to the method of determination provided under Rule 3 thereof. The definition of the transaction value can be ascertained with reasonable certainty under Section 14(1) of the Customs Act. Sub-section 2 of Section 14 of the Customs Act empowers the Board to fix the tariff values and the incorporation of non-obstante clause is an exception to Sub-section 1 of Section 14 thereof. The aforesaid proposition can be fortified by the observation of the Supreme Court in case of Eicher Tractors Ltd., Haryana -vs- Commissioner of Customs, Mumbai reported in (2001) 1 SCC 315 which reads thus:
"6. Under the Act customs duty is chargeable on goods. According to Section 14(1) of the Act, the assessment of duty is to be made on the value of the goods. The value may be fixed by the Central Government under Section 14(2). Where the value is not so fixed, the value has to be determined under Section 14(1). The value, according to Section 14(1), shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation -- in the course of international trade. The word "ordinarily" necessarily implies the exclusion of "extraordinary" or "special" circumstances. This is clarified by the last phrase in Section 14 which describes an "ordinary" sale as one "where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale ...". Subject to these three conditions laid down in Section 14(1) of time, place and absence of special circumstances, the price of imported goods is to be determined under Section 14(1-A) in accordance with the Rules framed in this behalf.
In absence of any fixation of a tariff value by the Board, the recourse to Sub-section 1 of Section 14 can be resorted to and not otherwise. The contention of the petitioners that the Board cannot fix the tariff value is unacceptable and runs contrary to the intendment of the legislation. The other point taken by the petitioner to assail the impugned notification is that Sub-section 2 of Section 14 of the Customs Act requires the satisfaction of the Board in relation to the trend of values of such or like goods. The petitioner says that there is no recording of satisfaction both subjectively and objectively with regard to the trend of values of the similar or like goods and, therefore, the impugned notification is liable to be quashed and set aside. It is further contended that unless there is a valid reason for fixation of a tariff value, the notification can be challenged on the ground of unreasonability and improportionality. In this regard, the reference can be made to a judgment of the Supreme Court in case of Union of India -vs- Century Manufacturing Company Ltd. reported in 1992 (60) ELT 3 (SC) where the vires and interpretation of Section 3 (2) of the Central Excises and Salt Act, 1944 was raised. Under the aforesaid provision, the Central Government issued the notification fixing the tariff value on the basis of which excise duty was to be levied on sulphuric acid and liquid chlorine respectively. Section 3 (2) of the said Act empowers the Central Government to fix the tariff value by Gazette the notification whereas Section 4 further empowers the Assessing Authority to determine the value of the exercisable goods in the individual cases on the basis of wholesale cash price for which the goods are sold at the factory gate. The Apex Court held that there is nothing in the statute which precludes the government for fixing the tariff value which is not immune from any challenge, if such tariff value is fixed capriciously and whimsically in these words:
"9. but, then, says learned counsel, to read Section 3 (2) in the manner indicated above, would make the provision vulnerable to challenge on the basis of violation of Article 14 of the Constitution. Such an interpretation, it is said, would leave it open to the Central Government to fix tariff values at its whim and caprice without any statutory guidelines laying down the parameters of such fixation. We think that the contention proceeds on a misconception. While we undoubtedly say that Section 3 (2) confers a power on the Central Government to fix tariff values for goods at its pleasure, unrestricted to the terms of Section 4, we do not say that this can be done at the whim and caprice of the Government. This discretion has to be exercised by the Government in accordance with the crucial guideline that is inbuilt into the statute and also illustrated by the manner in which the determination is provided for in Section 4. The statute leaves one in no doubt that the rate of duty is to be fixed ad valorem i.e. on the basis of the value of the goods. It cannot be disputed that the normal indication of the value of the goods will be its price and, that the statute intends price to be the relevant factor is clear from the language of Section 4 under which the statute itself fixes the value for the majority of cases. But where one had got bogged down, possibly due to certain earlier observations of this Court in a different context, was in thinking that the value of goods can only comprise of manufacturing cost and profit. Actually it has been made to depend on the wholesale price of the manufacturer concerned under Section 4 (old and new). But this need not be the sole criterion. The value may be derived with reference tot he wholesale price, the retail price or the average price at which the goods are sold by the manufacturer concerned or even by the price at which the goods are sold by any particular person or place or the average price which the goods command in the whole country or any part thereof. It can be fixed at the lowest of such prices, at the highest of such prices or at some average (mean, media mode etc.) of such prices as the Government may consider appropriate in the case of any particular commodity."
The Supreme Court in Paragraph 11 of the said reports ultimately held:
"11. In our opinion, the tariff value has been notified under Section 3(2) for valid reasons and on germane grounds having a nexus to the 'value' of the goods and the High Court erred in accepting the assessee's plea that "the notifications are arbitrary, perverse and display a non-application of mind on the part of the authorities as the tariff values fixed are unrelated to the value or price or the manufacturing cost and manufacturing profit of the products". That the weighted average so fixed exceeds the manufacturing cost and profit of a particular manufacturer, can be no reason for doubting its validity. Equally, there is no acceptable logic in the High Court's suggestion that it should be fixed at the lowers of the prices at which the manufacturer is able to sell his goods in the wholesale market. To apply such a measure will restrict the fixation of the value at figures even less than those that can be arrived at under Section 4. The whole purpose of Section 3(2) is to enable the Revenue to free itself from the shackles of Section 4, inter alia, in cases where, as here, the Government feels that the application of that section would lead to difficulties and harassments. The criticism that the tariff value has been manipulated to enhance the rate of duty has also no force. The Central Government has the undoubted power to enhance the rates and the validity of a notification having such an effect is not open to challenge even if it is done under the "guise" of fixing a tariff value. But, as already pointed out by us, there is no such guise or façade in this case and the tariff value has been fixed on the basis of relevant criteria having a nexus to the value of the goods."
Except that the impugned notification does not stand on the anvil of wednespury principle and the principle of proportionality, it is not averred in the writ petition, the said notification lacks subjectivity. The power to frame the tariff value is entirely depend upon the satisfaction of the Board and the question of sufficiency of the ground which forms such satisfaction cannot be gone into unless it is demonstrated that it is extraneous to the scope and purpose of the statute. The following excerpts from the judgment of the Supreme Court in case of Barium Chemicals Ltd. -vs- Company Law Board reported in AIR 1967 SC 295 is quoted in this regard:
"Though an order passed in exercise of power under a statute cannot be challenged on the ground of propriety or sufficiency, it is liable to be quashed on the ground of mala fides dishonesty or corrupt purpose. Even if it is passed in good faith and with the best of intention to further the purpose of the legislation which confers the power, since the Authority has to act in accordance with and within the limits of that legislation, its order can also be challenged if it is beyond those limits or is passed on grounds extraneous to the legislation or if there are no grounds at all for passing it or if the grounds are such that no one can reasonably arrive at the opinion or satisfaction requisite under the legislation."
No case of such nature has been made out in the present case. It would be deciphered from the impugned notification that the authorities took note of the trend of the value of such or like goods and, therefore, the presumption lies in favour of upholding the notification. This Court, therefore, does not find that the impugned notification, which is issued in exercise of the power under Sub-section 2 of Section 14 can be invalidated on the grounds taken by the petitioner.
Show Cause Notice The power of judicial review should not be exercised when challenge is made to a show cause notice unless the Court is satisfied that the said show cause notice is totally non-est in the eye-of-law for want of jurisdiction or the authority issuing the said show cause notice is otherwise not competent therefor and not vitiated by unfairness and bias or issued with a close mind. The show cause notice is not an ideal formality but should inspire confidence in the minds of those subjected to its jurisdiction. In Oryx Fisheries (P) Ltd. -vs- Union of India & Ors; reported in (2010) 13 SCC 427, the Apex Court held that the language in the show cause notice must reflect the mindset and on bare reading, it must get an impression that what allegations have to be reverted in these words:
"31. It is of course true that the show-cause notice cannot be read hypertechnically and it is well settled that it is to be read reasonably. But one thing is clear that while reading a show-cause notice the person who is subject to it must get an impression that he will get an effective opportunity to rebut the allegations contained in the show- cause notice and prove his innocence. If on a reasonable reading of a show-cause notice a person of ordinary prudence gets the feeling that his reply to the show-cause notice will be an empty ceremony and he will merely knock his head against the impenetrable wall of prejudged opinion, such a show-cause notice does not commence a fair procedure especially when it is issued in a quasi-judicial proceeding under a statutory regulation which promises to give the person proceeded against a reasonable opportunity of defence.
32. Therefore, while issuing a show-cause notice, the authorities must take care to manifestly keep an open mind as they are to act fairly in adjudging the guilt or otherwise of the person proceeded against and specially when he has the power to take a punitive step against the person after giving him a show-cause notice.
33. The principle that justice must not only be done but it must eminently appear to be done as well is equally applicable to quasi- judicial proceeding if such a proceeding has to inspire confidence in the mind of those who are subject to it."
Though the Court should be slow and circumspect in entertaining the writ petition challenging the said show cause notice but it is not inviolable principle that in each and every circumstances, the Court should refuse to interfere with the show cause notice. The petitioners have not only challenged the show cause notice after giving reply but have also challenged the impugned notification dated 13th May, 2013 and 25th June, 2013 which forms the basis of the issuance of the said show cause notice. There is no impediment in maintaining the writ petitions even after filing of the reply. In this regard, the reliance can be conveniently placed upon a decision by this Court in case of Suttons & Sons Pvt. Ltd; -vs- Union of India & Ors; reported in 1994 (2) CHN 131 where it is held:
"41. A contention has been raised by Mr. Daw, learned Advocate for the respondents, that the petitioner should have replied to the show cause notice and submitted to the jurisdiction of the Customs authorities. If the petitioner is aggrieved by the decision of the Adjudicating Authority, the petitioner will be at liberty to move the appropriate forum.
The contention of Mr. Dutt, learned Advocate on behalf of the petitioner is that had the reply to the impugned show cause notice been given, the Court would not have entertained the writ application and accordingly no reply was given.
42. I do not find any substance in the contentions raised by the learned Advocates appearing for the parties. If the show cause notice is without jurisdiction, the Writ Court can interfere irrespective of the fact whether the importer has replied to the show cause notice or not. Mere submission of a reply to the statutory Authority against the show cause notice does not by itself take away the right of a citizen to challenge such show cause notice, if such show cause notice is without jurisdiction. In this case, as I have already indicated that no duty is leviable on the imported seeds subject to the compliance with the Customs exemption Notification No. 265/88 Cus. dated 28th September, 1988. The show cause notice was issued on the ground that one of the conditions regarding the production of valid permit in terms of the said notification was not complied with. The only dispute is, therefore, that whether such condition is still applicable to the import of such seeds. In view of the notification of the Ministry of Agriculture, the Customs authorities could not have insisted on production of a permit in Form 'D' and accordingly, their action in proceeding to levy duty by the impugned show cause notice is on the face of it without jurisdiction"
Therefore, there is no impediment in maintaining the writ petitions challenging the notifications issued by the DGFT and the Custom Authorities even after replying the show cause notice.
With the above observations, the writ petition is disposed of. However, there shall be no order as to costs.
Urgent photostat certified copy of the judgment, if applied for, be given to the parties on priority basis.
(Harish Tandon, J.)