Bombay High Court
Eurotex Industries & Exports Limited vs Union Of India on 9 March, 2011
Author: J.P. Devadhar
Bench: J.P. Devadhar, Mridula Bhatkar
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agk IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L) NO.2790 OF 2010
1. Eurotex Industries & Exports Limited,
a Company incorporated under the
Companies Act, 1956 having its
registered office at 809, Raheja
Chambers 8 th Floor, 213, Nariman
Point, Mumbai - 400 021
2. Shri H.P. Siotia,
Adult, Indian Inhabittant,
residing at 80, Neelam, Marine Drive,
Mumbai - 400 002 ...Petitioners
Versus
1. Union of India, through Ministry of
Textile, having its office at
Udyog Bhavan, New Delhi - 110 011
2. Textile Commissioner,
having his office at 48, Vithaldas
Thakarsee Marg, New Marine Lines,
Post Bag No.11500, Nishtha Bhavan,
New C.G.O. Building, Mumbai - 400 020
3. Director General of Foreign Trade,
having his Office at New CGO Building,
New Marine Lines, Churchgate,
Mumbai - 400 020 ..Respondents.
WRIT PETITION (L) NO.2789 OF 2010
M/s.Technocraft Industries (India) Limited,
a Company formed under the Companies
Act, 1956 and having its registered office
at A-25, MIDC Marol Industrial Area
Road No.3, Andheri (East), Mumbai 400 093 ..Petitioner
Versus
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1. Union of India
(i) Through the Secretary,
Ministry of Textiles, Udyog Bhavan,
New Delhi - 110 011.
(ii) Through the Secretary,
Ministry of Commerce,
Department of Commerce,
Udyog Bhavan, New Delhi 110 107
(iii) Through Jr. Secretary,
Ministry of Law & Justice,
Aayakar Bhavan, Churchgate,
Mumbai - 400 020
2.
The Textile Commissioner,
having his office at Nishta Bhavan,
New C.G.O. Building, Mumbai - 400 020
3. Director General of Foreign Trade,
having his Office at Udyog Bhawan,
New Delhi.
4. The Commissioner of Customs (Exports),
having his office at :
(a) New Customs House,
Ballard Estate, Mumbai - 400 005.
(b) Jawahar Customs House,
JNPT, Nhava Sheva, Dist. Raigad ..Respondents
WRIT PETITION (L) NO.3010 OF 2010
1. Indo Count Industries Limited,
a company incorporated under the
Companies Act, 1956, having its
registered office at 301, "Arcadia",
3rd Floor, Nariman Point, Mumbai - 400 021
2. J.R. Ranka, Aged 53 years,
residing at B/52/1383, MIG Adarsh Nagar,
Worli, Mumbai - 400 025 ..Petitioners
Versus
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1. Union of India, through Ministry of Textile,
having its office at Udyog Bhavan,
New Delhi - 110 011.
2. Textile Commissioner, having his office at
48, Vithaldas Thakarsee Marg, New Marine
Lines, Post Bag No.11500, Nishtha Bhavan,
New C.G.O. Building, Mumbai - 400 020.
3. Director General of Foreign Trade,
having his office at New CGO Building,
New Marine Lines, Churchgate,
Mumbai - 400 020.
4. The Commissioner of Customs (Exports)
New Customs House, Ballard Estate,
Mumbai - 400 038 ..Respondents.
AND
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.10085 OF 2010
1. Nagreeka Exports Limited,
a Company formed under the Companies
Act, 1956 and having its registered office
at 18. R.N. Mukherjee Road, 6th Floor,
Kolkata, West Bengal.
2. Mr.Vinod Garg, Age 49,
residing at B-1, 304, Tapovan View,
Pathanwadi Road, Malad (East),
Mumbai - 400 097, Shareholder and
Assistant General Manager, Finance and
Shareholder of Petitioner No.1 ..Petitioners
Versus
1. Union of India,
(i) Through the Secretary,
Ministry of Textiles, Udyog Bhawan,
New Delhi - 110 011.
(ii) Through the Secretary,
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Ministry of Commerce,
Department of Commerce,
Udyog Bhawan, New Delhi 110 107
(iii) Through Jr. Secretary,
Ministry of Law & Justice, Aayakar
Bhavan, Churchgate, Mumbai 400 020
2. The Textile Commissioner,
having his office at Nishtha Bhavan,
New CGO Building, New Marine Lines,
Mumbai - 400 020.
3. Director General of Foreign Trade,
having his office at H-Wing, Gate No.2,
Udyog Bhavan, Maulana Azad Road,
New Delhi - 110 011.
4. The Commissioner of Customs (Exports),
having its office at New Customs House,
Ballard Estate, Mumbai - 400 005 ..Respondents.
Mr.Haresh Jagtiani, Senior Counsel with Mr.Anil D'Souza and Mr.Suprabh
Jain for the petitioners in WP (L) No.2790 of 2010 and WP (L) No.3010 of
2010.
Mr.Vikram Nankani with Mr.Sushant Murthy and Mr.Nitya Begaria i/by
Mr.M.R. Baya for the petitioner in WP (L) No.2789 of 2010.
Mr.Abhay Nevagi for the petitioner in WP No.10085 of 2010.
Mr.A.J. Rana, Senior Counsel with Mr.B.M. Chatterjee and Ms.S.V. Bharucha
for respondent Nos.1 to 3 in WP (L) No.2789 and 2790 of 2010.
Mr.B.M. Chatterjee with Ms.S.V. Bharucha for respondent Nos.1 to 3 in WP
No.10085 of 2010.
Mr.A.J. Rana, Senior Counsel with Mr.Riyaz Chagla i/by Mr.H.V. Mehta for
respondent Nos.1 to 3 in WP (L) No.3010 of 2010.
Mr.Pradeep S. Jetly for respondent No.4 in WP Nos.10085, WP (L) Nos.2789
& 3010 of 2010.
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CORAM : J.P. Devadhar & Mrs.Mridula Bhatkar, JJ.
Judgment Reserved on :
1 st
March, 2011
.
Judgment Pronounced on : 9 th
March, 2011
.
JUDGMENT :(Per J.P. Devadhar, J.)
1. Rule, returnable forthwith. By consent taken up for final hearing.
2. In all these writ petitions, validity of the office memorandum / press release dated 1-12-2010, notification dated 22-12-2010 issued under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 ("1992 Act" for short) and validity of the policy circular dated 22-12-2010 issued by the Director General of Foreign Trade ("DGFT" for short) are challenged. Since the basic dispute in all these writ petitions is common, all these writ petitions are heard together and disposed off by this common judgment.
3. The petitioners are engaged in the manufacture / export of cotton yarn. In all the Foreign Trade Policy ("FTP" for short) announced by the Central Government from time-to-time, cotton yarn was freely exportable. For manufacture and export of cotton yarn, the petitioners have large establishments and have engaged thousands of workers.
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4. Para 2.1 of the current policy i.e. FTP 2009-2014 announced by the Central Government provides that exports and imports shall be free, except where regulated by FTP or any other law in force. Thus, even under the current FTP 2009-14 cotton yarn was freely exportable.
5. By a notification dated 9-4-2010 issued under Section 5 of the FTP 2009-2014, the Central Government for the first time imposed restriction on export of cotton yarn by directing that the contracts for export of cotton yarn shall be registered with the Textile Commissioner prior to shipment and clearance for export of cotton yarn consignments shall be given by customs authorities after verifying that the contracts have been registered.
6. On 9-4-2010 itself, the Textile Commissioner by a memorandum, prescribed the procedure for obtaining Export Authorization Registration Certificate ("EARC" for short) for export of cotton yarn. As per that procedure, every cotton yarn exporter was required to apply for EARC by submitting application in the prescribed form inter alia with a copy of the export contract for which registration was sought. Accordingly, from 9-4-2010 the exporters have been exporting cotton yarn after obtaining EARC from the office of the Textile Commissioner.
7. By a office memorandum dated 23-11-2010, the Office of the Textile Commissioner introduced the on-line registration for export of cotton ::: Downloaded on - 09/06/2013 17:04:08 ::: 7 wpl2790-10+ yarn instead of receiving the application form physically. Thus, from 23-11-2010 the EARC's were issued by receiving applications under the on-
line registration system.
8. Suddenly, on 1-12-2010, the on-line registration system was stopped as per office memorandum / press release dated 1-12-2010 issued by the Under Secretary to the Government of India, Ministry of Textiles. In the press release dated 1-12-2010, it was stated that the Cotton Yarn Advisory Board ("CYAB" for short) constituted by the Government in September 2010 for the purpose of formulating cotton yarn balance sheet on the basis of the cotton yarn production / consumption / export situation in the country, had opined that in view of the increased domestic demand / price volatility, the cotton yarn exports beyond 720 million kgs. should not be permitted for the year 2010-11 and accordingly the Government has decided that there shall be no further registration of the cotton yarn exports beyond 720 million kgs.
The office memorandum dated 1-12-2010 reads thus :-
"No.7/32/2010-CT-II Government of India Ministry of Textiles .....
New Delhi Date : 01-12-2010 Office Memorandum Government has decided that theres shall be no further registration of cotton yarn exports beyond 720 million kg. All applications in pipeline above the export registration of 720 ::: Downloaded on - 09/06/2013 17:04:08 ::: 8 wpl2790-10+ million kgs shall not be considered by the Textiles Commissioner, Mumbai.
You are advised to take necessary action in pursuance of the above decision. A press release to be issued in this regard is enclosed.
(Anita Puri) Under Secretary to the Government of India Tel. No. 23062256."
Thus, with effect from 1-4-2010 the office of the Textile Commissioner abruptly and without any prior intimation stopped registration of cotton yarn exports, as a result whereof, the petitioners who had firm contracts could not export cotton yarn which were manufactured and kept ready for export.
9. Challenging the office memorandum / Press Note dated 1-12-2010, writ petitions were filed in this Court. During the pendency of these writ petitions, the Central Government issued a notification on 22-12-2010 under Section 5 of the 1992 Act. By the said notification, the earlier notification dated 9-4-2010 was amended to the effect that export of cotton yarn with effect from 1-12-2010 would be permitted under licence instead of permitting export under EARC. The notification dated 22-12-2010 reads thus :
"Notification No. 14 (RE-2010)/2009-14 New Delhi, dated 22nd December, 2010 ::: Downloaded on - 09/06/2013 17:04:08 ::: 9 wpl2790-10+ Subject : Restriction on export of cotton yard - regarding.
10. (E) In exercise of the powers conferred by Section 5 of the Foreign Trade (Development & Regulation) Act, 1992 (No.22 of 1992) read with Para 2.1 of the Foreign Trade Policy, 2009-14, the Central Government hereby makes the following amendments in respect of Sl. No. 161 B {ITC (HS) Classification} in the Notification No.38/2009-14 dated 9-4-2010.
The existing entries of Notification No.38/2009-14 dated 9-4-2010 are substituted as follows with effect from 1-12-2010.
Sr. Tariff Unit Item of Export Nature of
No. Item ig Description Policy Restriction
Code
161B 5205 Cotton yarn (other than Restri- Export
sewing thread), cted permitted
containing 85% or under
more by weight of licence.
cotton not put up for
retail sale.
5206 Cotton yarn (other than
sewing thread),
containing less than
85% by weight of cotton
not put up for retail
sale.
5207 Cotton yarn (other than
sewing thread), put up
for retail sale.
Transitional Arrangement :-
(i) The Transitional Arrangements as available under para 1.4
and 1.5 of FTP. 2009-14 will not be applicable to the export of Cotton Yarn, under this notification.
(ii) However, Exporters who have obtained Registration Certificate from Textile Commissioner, Mumbai before 1st ::: Downloaded on - 09/06/2013 17:04:08 ::: 10 wpl2790-10+ December 2010 would be permitted to export Cotton Yarn within the quality limit for which such registration certificate has been issued and within the validity of such registered contract.
(iii) If the validity of such registered contract has expired then the registered contract holder will have no right to export under such registered contract.
The effect of this notification :-
The export of cotton yarn (Tariff Codes 5205, 5206 & 5207) was earlier subject to registration of export contracts with Textile Commissioner, Mumbai. Now, the export of Cotton yarn has been restricted and export will now be permitted under licence.
ig Sd/-
(Anup K. Pujari)
Director General of Foreign Trade
E-mail : [email protected]"
10. Simultaneously, the Jt. DGFT with the approval of the DGFT issued a policy circular dated 22-12-2010, which reads thus :-
"Policy Circular No.07(RE-2010)/2009-14 Dated : 22-12-2010 To, All Regional Authorities All Custom Authorities.
Sub. : Conditions and modalities for applications for grant of export licence for export of cotton Yard- regarding.
1. It has been decided in the meeting of Group of Ministers (GoM) on 21-12-2010 that for the present, 720 million kgs.
of Cotton Yarn is to be allowed for export during the year 2010-11 (i.e. upto 31-03-2011).
2. Accordingly, Notification No.14(RE-2010)/2009-14 dated ::: Downloaded on - 09/06/2013 17:04:08 ::: 11 wpl2790-10+ 22-12-2010 has been issued today, stipulating that henceforth export of cotton yarn will be restricted and will be allowed to be exported under licence. However, Exporters who have obtained Registration Certificate from Textile Commissioner, Mumbai before 1st December, 2010 would be permitted to export Cotton Yarn within the quantity limit for which such registration certificate has been issued and within the validity of such registered contract. The data for the quantity that has already been exported in 2010-11 is being collected. The representations received to review the extent of exportable surplus are also being examined.
3. Exact modalities for submitting applications for grant of export licence would be notified once the quantity of exports already made has been ascertained and the extent of exportable surplus has been reassessed.
4. This issue with the approval of Director General of Foreign Trade.
Sd/-
(Hardeep Singh) Joint Director General of Foreign Trade) Email : [email protected]"
Thus, notification dated 22-12-2010 was issued to permit export under licence with retrospective effect from 1-12-2010 and the policy circular dated 22-12-2010 was issued to implement the policy decision taken in the meeting of Group of Ministers on 21-12-2010, imposing restriction on the export of cotton yarn during the year 2010-11 (upto 31-03-2011) at 720 million kgs. The policy circular further provides that henceforth export of cotton yarn will be restricted and will be allowed to be exported under a licence. By a corrigendum notification dated 29-12-2010, the phrase "before 1st December 2010" in the notification dated 22-12-2010 has been ::: Downloaded on - 09/06/2013 17:04:08 ::: 12 wpl2790-10+ substituted by the phrase "on or before 1st December 2010" so that exporters who have obtained Registration Certificates from the Textile Commissioner on or before 1-12-2010 could export cotton yarn within the quantity limit for which such registration certificate has been issued. Writ Petitions have been amended to challenge the notification dated 22-12-2010 as also the policy circular dated 22-12-2010.
11. Mr.Jagtiani, learned Senior Advocate appearing on behalf of some of the petitioners, submitted that :
(a) Neither the press release nor the office memorandum dated 1-12-2010 constitute an order or notification under Section 3 or Section 5 of the 1992 Act and hence do not have legal force. Therefore, the press release / office memorandum dated 1-12-2010 which seek to restrict the export of cotton yarn in excess of 720 million kgs. are illegal and bad in law. In support of the above contention, reliance is placed on the decision of the Apex Court in the case of Atul Commodities Private Limited V/s. Commissioner of Customs reported in 2009 (235) ELT 385 (SC), decision of this Court in the case of Parag Milk & Milk Products Limited V/s. Union of India reported in 2007 (5) Bom. C.R. 544, Narendra Udeshi V/s. Union of India reported in 2003 (1) Bom. C.R. 500 and a decision of the Delhi High Court in the case of Agri Trade India Services Private Limited V/s. Union of India reported in 2006 (204) ELT 161 (Del.).::: Downloaded on - 09/06/2013 17:04:08 :::
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(b) Notification dated 22-12-2010 which seeks to restrict export of cotton yarn subject to obtaining licence cannot be applied retrospectively because on 1-12-2010 when the exporters applied for on-line registration, the licensing system was not in existence and, therefore, the vested right of the exporters to export cotton yarn by obtaining EARC that existed on 1-12-2010 cannot be taken away by issuing a notification on 22-12-2010 with retrospective effect from 1-12-2010.
(c) As held by the Delhi High Court in the case of Agri Trade (supra) which is approved by the Apex Court in the case of Union of India V/s. Asian Food Industries reported in (2006) 13 SCC 542, the notification dated 22-12-2010 issued under Section 5 of the 1992 Act cannot have retrospective effect.
(d) Assuming that the notification under Section 5 of the 1992 Act could be issued by the Central Government retrospectively, the notification dated 22-12-2010 has been issued by Shri Anup K. Pujari in his capacity as DGFT and not on behalf of the Central Government and, therefore, bad in law.
(e) As there were no quantity restrictions for export of cotton yarn under the FTP and the only restriction was to obtain EARC, the exporters as ::: Downloaded on - 09/06/2013 17:04:08 ::: 14 wpl2790-10+ on 1-12-2010 had entered in to firm contracts with their foreign customers for export of cotton yarn and had exposed themselves to commercial liability. The raw cotton procured by the petitioners were all meant for executing export orders and it would be impossible for them to dispose off such quantities in the domestic market. Petitioners have employed large task force and if they are not allowed to execute the export orders, the same will entail unaffordable expenses of labour cost. Moreover, the petitioners have hedged their foreign currency risks by making commitments with their bankers. Sudden imposition of ceiling on export of cotton yarn without giving any opportunity to the exporters to execute the contracts already entered into is wholly arbitrary and illegal.
(f) The policy circular issued by the Jt. DGFT / DGFT on 22-12-2010 fixing a ceiling on export of cotton yarn at 720 million kgs. is beyond the scope of the powers vested in them. The restriction on export of cotton yarn can be imposed by the Central Government and not by the Jt. DGFT / DGFT. Moreover, the Central Government can impose such restrictions only in public interest. No material is produced to show that the ceiling fixed is in public interest.
(g) The corrigendum issued on 29-12-2010 provides that the EARC's obtained on 1-12-2010 are valid and eligible for export as ::: Downloaded on - 09/06/2013 17:04:08 ::: 15 wpl2790-10+ contemplated in paragraph 3(ii) of the notification dated 22-10-2010.
Since the petitioners had applied for registration on or before 1-12-2010 and their applications were complete and valid in all respects, the petitioners be treated as EARC holders in respect of the contracts for which registration was sought and must be allowed to export cotton yarn under those contracts.
12. Mr.Nankani, learned counsel appearing on behalf of some of the petitioners while adopting the arguments of Mr.Jagtiani submitted that neither the office memorandum / press release dated 1-12-2010 nor the notification dated 22-12-2010 nor the policy circular dated 22-12-2010 are valid, because, the above memorandum / notification / circular have not been issued under Section 3 of the 1992 Act. He submitted that an item can be restricted for export only by an order issued by the Central Government under Section 3 of the 1992 Act. Therefore, the impugned memorandum / notification / circular which are not issued under Section 3 of the 1992 Act are liable to be declared illegal and contrary to law.
13. Mr.Nankani further submitted that an order under Section 3 of the 1992 Act cannot be equated with the notification issued by the Central Government under Section 5 of the 1992 Act. Although both Section 3 and Section 5 of the 1992 Act confer power on the Central Government, there is a vital difference between the two. He submitted that Section 3 specifically ::: Downloaded on - 09/06/2013 17:04:08 ::: 16 wpl2790-10+ contains the power to restrict export of any goods or class of goods. Section 5 provides for formulation and announcement of the Export and Import Policy. Order under Section 3 has to be laid before the House of Parliament in terms of Section 19(3) of the 1992 Act and thus subject to scrutiny by the Parliament. Notification under Section 5 is not required to be laid before the Parliament. Relying on a decision of the Apex Court in the case Bhavnagar University V/s. Palitana Sugar Mills Private Limited reported in (2003) 2 SCC 111, Mr.Nankani submitted that when the statute requires an act to be done in a particular manner, the same must be done in that manner or not at all. Accordingly, he submitted that what cannot be done directly, cannot be done indirectly. Accordingly, he submitted that the impugned memorandum / notification / circular which are not passed under Section 3 of the 1992 Act are legally unsustainable.
14. Mr.Nankani further submitted that the quantity restriction or ceiling on export of cotton yarn cannot be imposed by way of a policy circular. Such a circular which is administrative in nature has no statutory force. He submitted that the policy circular cannot add any condition or restriction to the notification dated 22-12-2010 and as such the ceiling or quantity limit contained in the policy circular dated 22-12-2010 would have effect of amending the impugned notification which is not permissible in law.
15. Mr.Nankani further submitted that Section 9(1) and (2) of the ::: Downloaded on - 09/06/2013 17:04:08 ::: 17 wpl2790-10+ 1992 Act provides for grant of licence subject to the conditions as may be prescribed. As per Section 2(i) of the 1992 Act, the expression "prescribed"
means prescribed by Rules made under the 1992 Act. Rule 7 of the Foreign Trade (Regulation) Rules, 1993 prescribes the grounds on which licence can be refused. The ceiling or the quantity limit has not been "prescribed" by the Rules prescribed under the 1992 Act and, therefore, the restriction sought to be imposed by way of policy circular dated 22-12-2010 is illegal and unauthorized.
16. Mr.Nevagi, learned counsel appearing on behalf of Nagreeka Export Limited, while adopting the argument of Mr.Jagtiani and Mr.Nankani submitted that the object of the 1992 Act is to provide a level-playing field for all domestic exporters and importers and not meant to restrict the exports. If the Government wishes to restrict export of a particular item, it can do so only under the Essential Commodities Act or Section 3 of the 1992 Act or under Section 11 of the Customs Act, 1962. The notification dated 22-12-2010 is not issued under any of the aforesaid provisions and, therefore, the restrictions imposed cannot be said to be legally tenable. He further submitted that the purpose for which the notification dated 22-12-2010 was issued does not fall within the scheme of Section 11(2) of the Customs Act, 1961 and, therefore, the DGFT has exceeded its power under the 1992 Act read with the Customs Act, 1962.
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17. Mr.Rana, learned senior Advocate appearing on behalf of the respondents, on the other hand, submitted that the decision to ban export of cotton yarn beyond 720 million kgs. during 2010-2011 (upto 31-3-2011) is a policy decision taken by the Central Government based on CYAB report. The CYAB arrived at the above conclusion after considering the total production, domestic requirement of cotton yarn and after hearing representatives from all sections connected with Textile Industry including representatives who are engaged in the manufacture and export of cotton yarn.
18. Mr.Rana submitted that once the Central Government has taken a policy decision in public interest based on the recommendations of the Advisory Board constituted by the Central Government, it is not open to the Courts to go into the sufficiency of the materials so as to hold that the decision taken is not in public interest. Strong reliance was placed on an unreported decision of the Delhi High Court in the case of Gujarat Ambuja Exports Limited V/s. Union of India (Writ Petition No.8406 of 2010) decided on 17-2-2011 by the learned counsel for the Revenue wherein the policy decision of the Central Government to ban export of cotton yarn in excess of 720 million kgs. has been upheld.
19. Mr.Rana further submitted that the right to export is not a fundamental right and it is open to the Central Government to impose such restrictions as are deemed fit in public interest. In the present case the policy ::: Downloaded on - 09/06/2013 17:04:08 ::: 19 wpl2790-10+ decision taken by the Textile Ministry on 1-12-2011 to ban export of cotton yarn has been further approved by the Group of Ministers in their meeting held on 21-12-2010 and accordingly notification and policy circular to implement the policy decision of the Government have been issued.
Assuming that the office memorandum / press release dated 1-12-2010 has no legal sanctity, in view of the notification / policy circular issued on 22-12-2010, export of cotton yarn beyond 720 million kgs. cannot be permitted.
20. Relying on a decision of the Apex Court in the case of Union of India V/s. C. Damani & Company reported in 1980 (Supp) SCC 707, Mr.Rana submitted that the policy decision of the Government should not be interfered by Courts unless compelled by glaring unconstitutionality.
21. Relying on the decision of the Apex Court in the case of Asian Food Industries (supra), counsel for the Revenue submitted that the policy decision of the Central Government notified on 22-12-2010 to ban export of cotton yarn in excess of 720 million kgs. does not take away the vested right of the exporters, because the notification dated 22-12-2010 as well as the corrigendum issued on 29-12-2010 make it abundantly clear that the exporters to whom EARC's have been granted on or before 1-12-2010 would be entitled to export cotton yarn within the period specified therein. The fact that the exporters had applied for EARC's on or before 1-12-2010 under the ::: Downloaded on - 09/06/2013 17:04:08 ::: 20 wpl2790-10+ on-line registration system and the fact that the said applications were complete in all respects does not make them EARC holder's and, therefore, the exporters who have not been granted EARC's are not entitled to export cotton yarn. Counsel submits that since some of the EARC holders within the overall limit of 720 million kgs. have failed to export cotton yarn within the stipulated period, the exporters who have entered into contracts with foreign purchases can apply for licence as per the policy of the Government and the same would be considered and licenses would be issued in accordance with law.
22. Relying on the decision of the Apex Court in the case of Darshan Oils Private Limited V/s. Union of India reported in 1995 (75) ELT 32 (S.C.), counsel for the Revenue submitted that the fact that the petitioners have entered into firm contracts with the foreign purchasers and the ban imposed under the Government policy would render the exporters to civil and penal liability cannot be a ground to set aside the policy decision of the Government which is taken in public interest. As per the policy, the exporters to whom EARC's have been granted are allowed to export and the exporters to whom EARC's have not been granted can apply for licence and the same would be granted to the extent of shortfall in the export of 720 million kgs. of cotton yarn upto 31-3-2010.
23. Mr.Chatterjee, learned counsel appearing on behalf of the ::: Downloaded on - 09/06/2013 17:04:08 ::: 21 wpl2790-10+ Revenue in one of the matter before us, on instructions, submitted that the policy decision of the Government to restrict export of cotton yarn during the year 201-02011 (upto 31-3-2011) is not required to be published in the Government Gazette either by issuing a notification or by issuing an order under the 1992 Act. He submitted that the policy decision of the Government has been widely published by way of press release / office memorandum / policy circular and, therefore, the exporters who are admittedly aware of the ban imposed by the Central Government cannot challenge the ban which is imposed in public interest. Accordingly, he submits that there is no merit in these writ petitions and are liable to be dismissed in limine.
24. We have carefully considered the submissions advanced by the counsel on both sides.
25. The basic question raised in these writ petitions is, firstly, whether the Central Government is justified in taking a policy decision to impose ban on export of cotton yarn beyond 720 million kgs. during the year 2010-2011 (upto 31-03-2011); and Secondly, whether the said policy decision to ban export has been imposed in the manner provided under the 1992 Act ?
26. As held by the Apex Court in the case of Asian Food Industries ::: Downloaded on - 09/06/2013 17:04:08 ::: 22 wpl2790-10+ (supra), a citizen of India has a fundamental right to carry on the business of export, subject, of course to the reasonable restrictions which may be imposed by law. Such a reasonable restriction is imposed in terms of the 1992 Act. The said Act empowers the Central Government to frame FTP and further empowers the Central Government to amend the policy as also to make provision to prohibit, restrict or otherwise regulate the export of goods as provided under Section 5 and Section 3 of the 1992 Act respectively.
27. The Apex Court in the case of Asian Food Industries (supra) has further held (see para 29 of the judgment), that the powers conferred on the Central Government under Section 3 and Section 5 of the 1992 Act has to be exercised in the manner set out therein. Section 3 and Section 5 of the 1992 Act read thus :
"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.
(3) All goods to which any Order under sub-section (2) applies shall be deemed to be goods and imports 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."::: Downloaded on - 09/06/2013 17:04:09 :::
23 wpl2790-10+ "5. Export and import policy. -- The Central Government may, from time to time, formulate and announce, by notification in the Official Gazette, the export and import policy and may also, in like manner, amend that policy."
28. From the aforesaid provisions, it is clear that the Central Government under Section 5 of the 1992 Act can amend the FTP by way of a notification in the Official Gazette. Similarly, the Central Government under Section 3(2) of the 1992 Act by order published in the Official Gazette, prohibit, restrict or otherwise regulate export of any particular class of goods.
29. In the present case, by a office memorandum / press release dated 1-12-2010 the general public including the exporters were informed that the Central Government has taken a policy decision to ban export of cotton yarn beyond 720 million kgs. during the year 2010-2011 (upto 31-3-2011). The said decision was based on the report of the CYAB. The CYAB was constituted by the Central Government in September 2010. The members of CYAB are Government Officials as well as Textile Associations.
The object of constituting the CYAB was to monitor the domestic and international prices of cotton yarn and suggest measures for increasing the availability of cotton yarn at reasonable prices for domestic consumption.
30. The members of the CYAB met from time-to-time and in the meeting held on 29-10-2010 prepared cotton yarn balance sheet. Following ::: Downloaded on - 09/06/2013 17:04:09 ::: 24 wpl2790-10+ particulars emerge from the said balance sheet :-
During Estimated Estimated
2009-10 during during
Item (million kgs) 2010-11 (as 2010-11 (as
on 01-10-10) on 29-10-10)
(million kgs) (million kgs)
Cotton yarn (total supply) 3168.35 3390 3460
Consumption by mills & other 288 300 300
industrial yarn
Consumption by powerloom 816 913 913
Consumption by Hosiery Yarn 921 973 973
Consumption by Hanks
ig 470 470 470
(Handloom)
Export 589.02 644 720
Closing Stock 84.23 90 84
Thus, as against export of 589.02 million kgs. during 2009-2010, the estimated export during 2010-2011 (as on 1-10-2010) was 644 million kgs. However, looking to the sudden spurt in export, the CYAB suggested cap of 720 million kgs. during 2010-2011.
31. The question, therefore, to be considered is, whether the Central Government was justified in accepting the recommendation of the CYAB and take a policy decision to ban export of cotton yarn beyond 720 million kgs.
during 2010-2011 (upto 31-03-2011).
32. The fact that there was sudden spurt in export is evident from the on-line registration of contracts sought during September, October and ::: Downloaded on - 09/06/2013 17:04:09 ::: 25 wpl2790-10+ November 2010. Whatever may be the reason for sudden spurt in export of cotton yarn, the target of 720 million kgs. expected to be achieved by 31-03-2011 was achieved by the end of November 2010. It is the case of the Revenue that unless export of cotton yarn was banned, the domestic industry as also the public interest would have been in serious jeopardy. In these circumstances, the Central Government accepted the recommendation of the CYAB in banning the export of cotton yarn beyond 720 million kgs. during the year 2010-2011 (upto 31-3-2011) as against the 589.02 million kgs. of cotton yarn exported during the year 2009-10.
33. The argument of the petitioners that the Central Government could not have imposed ban suddenly on 1-12-2010, thereby depriving their right to export under the contracts already entered into on or before 1-12-2010 cannot be accepted because, if the situation demands, the Central Government can legally impose ban with immediate effect. As held by the Apex Court in the case of Darshan Oils Private Limited (supra), public interest must outweigh individual interest. Therefore, in the facts of the present case, the policy decision of the Central Government to ban export of cotton yarn beyond 720 million kgs. during 2010-2011 (upto 31-3-2011) cannot be faulted.
34. The question then to be considered is, whether the policy decision to ban export of cotton yarn beyond 720 million kgs. has been ::: Downloaded on - 09/06/2013 17:04:09 ::: 26 wpl2790-10+ imposed in the manner specified under the 1992 Act ?
35. Under the 1992 Act, the Central Government can impose restriction on exports by an order published in the Official Gazette under Section 3(2) of the 1992 Act. Similarly, the Central Government has power to amend the FTP by a notification in the Official Gazette under Section 5 of the 1992 Act.
36. In the present case, the office memorandum / press release dated 1-12-2010 states that the Central Government has taken a policy decision to ban export of cotton yarn beyond 720 million kgs. during the year 2010-11. Admittedly, the said office memorandum / press release dated 1-12-2010 is neither an order under Section 3(2) nor a notification under Section 5 of the 1992 Act and the same has not been published in the Official Gazette. Therefore, the office memorandum / press release dated 1-12-2010 being not in consonance with the provisions of the law contained in the 1992 Act would have no legal force and the ban imposed thereunder cannot be said to be in accordance with law.
37. The next contention of the Revenue is that a Group of Ministers on 21-12-2010 decided that export of cotton yarn beyond 720 million kgs.
should not be allowed during 2010-2011 (upto 31-03-2011). If, policy decision to ban export of cotton yarn beyond 720 million kgs. was already ::: Downloaded on - 09/06/2013 17:04:09 ::: 27 wpl2790-10+ taken on or before 1-12-2010, what the necessity to take a decision again on 21-12-2010 is not explained by the Revenue.
38. In any event, the Group of Ministers in their meeting held on 21-12-2010 took two policy decisions. They are (one) export of cotton yarn would henceforth be permitted under a licence instead of export under EARC; and (two) there would be quantity restriction on export of cotton yarn upto 720 million kgs. during the year 2010-2011 (upto 31-3-2011). These policy decisions were required to be published in the Official Gazette as an order under Section 3(2) or as a notification under Section 5 of the 1992 Act.
39. However, in the notification issued under Section 5 of the 1992 Act and published in the Official Gazette on 22-12-2010, it is merely stated that the export of cotton yarn would henceforth be under a licence effective from 1-12-2010. The said notification does not refer to the policy decision of the Central Government to ban export of cotton yarn beyond 720 million kgs.
Till date, no notification or order has been issued as contemplated under the 1992 Act to implement the policy decision of the Government to ban export of cotton yarn. Therefore, it is evident that the Central Government has not given effect to the policy decision in banning the export of cotton yarn beyond 720 million kgs. during the year 2010-2011 (upto 31-03-2011) in the manner contemplated under the 1992 Act.
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40. The argument of the Revenue that the policy decision of the Government to ban export of cotton yarn need not be published in the Official Gazette is contrary to the express provisions contained in the 1992 Act. The said argument is also and contrary to the law laid down by the Apex Court in the case of Asian Food Industries (supra). In the case of Asian Food Industries (supra), the Apex Court has held that any restriction on import / export has to be in the manner specified under the 1992 Act. Moreover, the argument of the Revenue that the policy restriction to ban export need not be published in the Gazette cannot be accepted, because, the petitioners have brought on record various notifications issued under Section 5 of the 1992 Act, which are published in the Official Gazette so as to impose restrictions on import / export. For example, policy decision fixing minimum export price of onions has been published in the Official Gazette under Section 5 of the 1992 Act by way of notification No.29/2010 dated 1-3-2011. Similarly, quantity restriction on export of edible oil in branded consumer packs has been published in the Official Gazette by way of notification No.9/10 dated 1-11-2010 issued under Section 5 of the 1992 Act. There are several other notifications published in the Official Gazette, whereby restrictions on import / export have been imposed as per the provisions of the 1992 Act. Therefore, the argument of the Revenue that the policy restriction on export of cotton yarn need not be published in the Official Gazette cannot be accepted.
41. The policy circular dated 22-12-2010 issued by the Jt. DGFT / ::: Downloaded on - 09/06/2013 17:04:09 ::: 29 wpl2790-10+ DGFT cannot be said to be an order / notification issued by the Central Government under the 1992 Act. Wherever the order / notification is issued by the DGFT for and on behalf of the Central Government, it would be an order / notification issued by the Central Government. In the present case, the policy circular dated 22-12-2010 is issued by the Jt. DGFT with the approval of the DGFT. Jt. DGFT is not empowered to issue notification for and on behalf of the Central Government. Moreover, the policy circular dated 22-12-2010 has not been published in the Official Gazette. Therefore, quantity restriction of 720 million kgs. set out in the policy circular dated 22-12-2010 as per the Government policy, cannot be said to be a restriction imposed under the 1992 Act. Consequently, the policy circular dated 22-12-2010 would not have any force of law.
42. Thus, irrespective of the policy decision taken by the Central Government to permit export under licence and upto the limit of 720 million kgs. till 31-03-2010, in view of notification dated 22-12-2010 which only refers to the restricting of permitting export under licence, it must be held that the Central Government has chosen to implement its decision only in relation to export under licence and has chosen not to implement its decision to restrict export of cotton yarn beyond 720 million kgs. Since the Central Government has not published in the Official Gazette its policy decision to restrict export of cotton yarn upto 720 million kgs. during 2010-11 (upto 31-3-2011) in the manner provided under the 1992 Act, the Jt. DGFT could ::: Downloaded on - 09/06/2013 17:04:09 ::: 30 wpl2790-10+ not have issued the impugned policy circular. Therefore, the policy circular dated 22-12-2010 must be held to be contrary to law.
43. It is relevant to note that the notification dated 22-10-2010 issued under Section 5 of the 1992 Act permitting export of cotton yarn under licence has been made effective from 1-10-2010. As held by the Apex Court in the case of Asian Food Industries (supra), order / notification issued under the 1992 Act cannot be brought into force retrospectively so as to take away the vested right accrued to the exporters. That is why, the notification dated 22-12-2010 as amended by corrigendum permits exporters who have obtained EARC's on or before 1-12-2010 to export cotton yarn within the quantity limit prescribed under the EARC's and within the time prescribed therein. The notification dated 22-12-2010, thus does not seek to disturb the vested rights accrued to the exporters. The petitioners who have sought on-
line registration on or before 1-12-2010 cannot claim to be EARC holders, because admittedly EARC's have not been granted to the petitioners.
Admittedly, the DGFT who issued notification on 22-12-2010 is authorized to issue notification for and on behalf of the Central Government. Even if it is held that the notification dated 22-12-2010 could not be issued retrospectively and it is held that the notification would operate prospectively, in view of the fact that no EARC's have been issued from 1-12-2010, the question of directing the respondents to issue EARC's till 22-12-2010 does not arise at all. In other words, the exporters who have ::: Downloaded on - 09/06/2013 17:04:09 ::: 31 wpl2790-10+ applied for registration but EARC's have not been granted till 22-12-2010 are entitled to apply for licence and we are informed that the petitioners have applied for licence and the same would be considered and granted in accordance with law.
44. We see no merit in the argument of the petitioners that the restriction to permit export under licence or quantity restriction on export cannot be imposed by a notification under Section 5 of the 1992 Act and such restriction has to be imposed by an order published under Section 3(2) of the 1992 Act. In our opinion, the power of the Central Government under Section 5 of the 1992 Act is wide enough to amend policy and if the policy itself can contain restrictions relating to import / export, there is no reason as to why the Central Government in exercise of its power under Section 5 of the 1992 Act cannot enhance the restriction or lift the restriction imposed on import / export. In our opinion, the power of the Central Government to impose restriction under Section 3(2) of the 1992 Act does not take away the power of the Central Government to impose such restriction in exercise of its power under Section 5 of the 1992 Act. Therefore, in the facts of the present case restriction imposed on permitting export under licence by a notification issued under Section 5 of the 1992 Act on 22-10-2010 cannot be faulted.
45. Strong reliance was placed by the counsel for the Revenue on the unreported judgment of the Delhi High Court in the case of Gujarat Ambuja ::: Downloaded on - 09/06/2013 17:04:09 ::: 32 wpl2790-10+ Exports Limited (supra). In our opinion, the learned Judge of the Delhi High Court in the aforesaid case proceeded on an erroneous assumption that the notification issued under Section 5 of the 1992 Act on 22-12-2010 imposes a restriction that the export of cotton yarn had to be within the overall limit of 720 million kgs. The learned counsel for the Revenue fairly stated that the aforesaid findings recorded by the learned Single Judge of the Delhi High Court in para 49 of the judgment is erroneous and contrary to the facts on record. In other words, it is admitted that the notification issued under Section 5 of the 1992 Act on 22-12-2010 merely provides that the export of cotton yarn would now be under licence instead of EARC and the said notification does not refer to the policy decision of the Central Government to restrict export of cotton yarn upto 720 million kgs. during the year 2010-11 (upto 31-3-2011). In these circumstances, we find it difficult to agree with the decision of the Delhi High Court insofar as it holds that the notification dated 22-12-2010 seeks to restrict export of cotton yarn upto 720 million kgs.
46. For all the aforesaid reasons, we hold that the office memorandum / press release dated 1-12-2010 and the policy circular dated 22-12-2010 are not orders / notifications issued under the provisions of the 1992 Act and, therefore, the restrictions contained under those office memorandum / policy circular being contrary to law are quashed and set aside. Notification No.14 dated 22-12-2010 issued under Section 5 of the ::: Downloaded on - 09/06/2013 17:04:09 ::: 33 wpl2790-10+ 1992 Act is valid and the petitioners to whom EARC's have not been granted are entitled to seek licence for export of cotton yarn in respect of their contract with the foreign customers. Rule is made absolute in the above terms with no order as to costs.
47. At this stage, Mr.Rana, learned Senior Advocate seeks stay of the operation of this order. We see no reason to entertain the application.
Accordingly, the application is rejected.
(Mrs.Mridula Bhatkar, J.) (J.P. Devadhar, J.)
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