Calcutta High Court
Lgw Limited vs Union Of India & Ors on 8 April, 2011
Author: Indira Banerjee
Bench: Indira Banerjee
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Order Sheet Serial No........
W.P No. 64 of 2011
IN THE HIGH COURT AT CALCUTTA
CONSTITUTIONAL WRIT JURISDICTION
ORIGINAL SIDE
In the matter of :
LGW LIMITED.
Vs
UNION OF INDIA & ORS.
Before:
The Hon'ble Justice
INDIRA BANERJEE
Date: 08.04.2011
JUDGMENT
The only issue involved in this application under Article 226 of the Constitution of India is, whether goods entered and cleared for export under Sections 50 and 51 of the Customs Act within the period of validity of Export Authorization Registration Certificates, hereinafter referred to as EARCs, can be stopped from crossing the border on the sole ground of subsequent expiry of the EARCs.
The petitioner No.1, a private company within the meaning of the Companies Act, 1956, carries on business inter alia of import and export of raw cotton, holding Import Export Code No.0288017048. The Joint Director of Foreign Trade h as accorded the petitioner No.1 the status of Trading House in accordance with the provisions of the Foreign Trade Policy.
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Section 3 of the Foreign Trade (Development and Regulation) Act, 1992, hereinafter referred to as the Foreign Trade Act, empowers the Central Government, by order published in the Official Gazette, to make provisions for development and regulation of foreign trade by facilitating imports and increasin g exports.
Section 3(2) of the Foreign Trade Act provides that the Central Government might by order published in the Official Gaz ette, make provisions prohibiting, restricting or otherwise regulating import or export of goods.
Section 5 of the Foreign Trade Act empowers the Central Government to formulate and announce, from time to time, the Import Export Policy, by notification in the Official Gazette and in like manner, to amend that policy.
In exercise of power conferred by Section 5 of the Foreign Trade Act, the Central Government, by notification in the Official Gazette, formulated and announced the Foreign Trade Policy for the years 2009-14.
Paragraph 2.1 of the policy provides that exports and imports shall be free, except where regulated by F oreign Trade Policy or any 3 other law in force. The item-wise export and import policy is specified in the Indian Trade Classification (Harmonized System), which is commonly referred to as ITC (HS), notified by the Director General of Foreign Trade, as amended from time to time.
Paragraph 2.2 of the policy makes it obligatory for every importer and exporter to comply with the provisions of the Foreign Trade Act and the rules and orders made thereunder and the Foreign Trade Policy, in addition to domestic laws, orders, regulations, technical specifications, environmental and safety norms as applicable to domestically produced goods.
Paragraph 2.4 of the Foreign Trade Policy empowers th e Director General of Foreign Trade to specify the procedure to be followed by an exporter or importer or by any licensing authority or any other competent auth ority for implementing the provisions of the Foreign Trade Act, the Rules and Orders made thereunder and the Foreign Trade Policy. Such procedures are to be published by means of a public notice and might in like manner be amended from time to time.
In exercise of powers conferred by Section 5 of the Foreign Trade Act read with Paragraphs 1.3 and 2.1 of the Foreign Trade 4 Policy 2009-14, the Central Government issued Notification No.58/2009-14 New Delhi dated 17 t h August, 2010 whereby Seri al No.161 A of Table 'B' of Schedule II to ITC (H.S.) was amended inter alia making raw cotton a free item of export, subject to th e restriction that contracts for export of cotton would have to be registered with the Textile Commissioner prior to shipment. In terms of the aforesaid notification customs authorities were to clear consignments after verifying that the contracts had been registered.
The office of the Textile Commissioner, thereafter issued guidelin es for filing of applications for EARCs. The applications were to be made on line with effect from 15 t h September, 2010, in the manner stipulated in the guidelines.
The Textile Commissioner issued a Press Note No.1/162/2010/Cotton/Vol.VIII/222 dated 30 t h September, 2010, the contents whereof are extracted herein below:
"Attention is invited to the Press Note No. 1/162/2010/Cotton/Vol.VIII/138 dated 15.09.2010 issued by the Textile Commissioner, notifying the date of commencement of process of registration of contract for export of Raw Cotton (5201), Cotton Waste (5202) and Cotton, carded and combed (5203) as 1.10.2010.
Now, th e Ministry of Textiles has conveyed the decision taken by the Group of Ministers (GoM) in their meeting on Sept.,28, 2010 as follows:5
1. Actual exports (i.e., shipment) would commence from 01.11.2010;
2. The exportable surplus is identified as 55 lakh bales in respect of Raw cotton (5201);
3. There would be no registration after the exportable surplus is reached.
In pursuance of the above decisions of GoM., the office of the Textile Commissioner, Mumbai will register the contracts for export of Raw Cotton (5201) for an aggregate quantity of 55 lakh bales on first-cum-first served basis w.e.f. 01.10.2010 and the 45 days of shipment period to be allowed would be reckoned from th e date of issue of EARC or 15.12.2010, whichever is later." The petitioner applied for, and was issued EARCs for export of raw cotton to Bangladesh, of the total value of 14 million U.S . Dollars, particulars of which are given hereinbelow:
Registration Date Valid Contract No. & Quantity Number upto Date 2010/1/163/07767 04.10.2010 15.12.2010 LGW/D/1000975/ 500 M.T. 10-11 dated:02.09.2010 2010/1/163/07772 04.10.2010 15.12.2010 LGW/VCM/100098 250 M.T. 8/10-11 dated:08.09.2010 2010/1/163/08128 12.10.2010 15.12.2010 LGW/VCM/100098 250 M.T. 9/10-11 dated:08.09.2010 2010/1/163/08215 12.10.2010 15.12.2010 LGW/AHB/100099 250 M.T. 7/10-11 dated:17.09.2010 2010/1/163/08207 12.10.2010 15.12.2010 LGW/AHB/100099 250 M.T. 6/10-11 dated:17.09.2010 2010/1/163/08245 12.10.2010 15.12.2010 LGW/AHB/100098 200 M.T. 4/10-11 dated:08.09.2010 2010/1/163/08258 12.10.2010 15.12.2010 LGW/AHB/100100 250 M.T. 3/10-11 dated:04.10.2010 2010/1/163/08531 13.10.2010 15.12.2010 LGW/AT/1001026/ 1000 M.T. 10-11 dated:08.10.2010 6 2010/1/163/08505 13.10.2010 15.12.2010 LGW/CON/100104 3000 M.T. 3/10-11 dated:08.10.2010 2010/1/163/08493 13.10.2010 15.12.2010 LGW/CON/100104 3000 M.T. 1/10-11 dated:08.10.2010 2010/1/163/08519 13.10.2010 15.12.2010 LGW/SKT/100102 1000 M.T. 5/10-11 dated:08.10.2010 2010/1/163/08514 13.10.2010 15.12.2010 LGW/AT/1001027/ 1000 M.T. 10-11 dated:08.10.2010 The aforesaid EARCs were all valid till 15 t h December, 2010.
The goods covered by the aforesaid EARCs were being exported by road, in trucks, through the Petrapole Land Customs Station at Bongaon in District 24 Parganas.
Accordin g to the petitioners, the goods covered by the aforesaid eleven EARCs were brought to the Petrapole Land Customs Station on diverse dates between 6 t h December, 2010 and 15 t h December, 2010 an d the bills of export were presented for entry. The goods were cleared for export and loaded into trucks proceeding to Bangladesh well within 15 t h December, 2010. The customs authorities made provisional appraisement of the goods. However, the goods could not cross the border within 15 t h December, 2010, allegedly by reason of congestion at the border.7
By a fax message dated 16 t h December, 2010, the customs authorities sought clarification from the Textile Commissioner as to whether they should allow export of raw cotton after 15 t h December, 2010 where the EARCs had been debited by them.
Accordin g to the petitioners, th e Textile Commissioner by a letter dated 16 t h December, 2010 clarified that this was a matter within the domain of customs authorities who were to act in terms of the Customs Act and Rules framed thereunder.
On 16 t h December, 2010, the Central Government, in exercise of powers conferred by S ection 5 of the Foreign Trade Act read with Paragraphs 1.3 and 2.1 of the Foreign Trade Policy 2009-14, issued a Notification No.12 (RE-2010)/2009-14 New Delhi dated 16 t h December, 2010 whereby Serial No.161 A of the ITC (H.S.) was further amended to provide that contracts for export of cotton would have to be registered with the Director General of Foreign Trade (DGFT) on and from 16 t h December, 2010. EARCs are now bein g issued by the DGFT.
The goods have not been allowed to cross the border on the purported ground that the validity of the EARCs have expired. In the circumstances, the petitioners have filed this writ petition for 8 orders directing the respondent Customs authorities to forthwith allow export of raw cotton covered by the EARCs aforesaid.
When the writ application was moved, the DGFT had not been impleaded as party. However, pursuant to an order dated 2 n d March, 2011, Joint Director of Foreign Trade has been impleaded as respondent No.8. The Joint Director of Foreign Trade duly appeared through counsel.
In course of h earing of this writ application, this Court directed the Counsel appearing on behalf of the DGFT to obtain instructions as to whether export of the goods covered by the EARCs could be allowed as a special case, having regard to the peculiar facts and circu mstances where the EARCs had been debited by the Customs authorities and the goods had been cleared for export before 15 t h December, 2010 but could not cross the border within the aforesaid date for reasons beyond the control of the petitioner.
Counsel submitted, on instructions, that export could not be permitted unless the contracts were registered with the DGFT in terms of Notification No.12 (RE-2010)/2009-14 dated 16 t h December, 2010.
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Registration with DGFT would take time. Furthermore, registration, at this belated stage may not at all be possible, in view of the maximum quantity of 55 lakh bales on 'first-cum-first served' basis.
It is not necessary for this Court to adjudicate the factual issue of whether the goods could not cross the Indo-Bangladesh border within 15 t h December, 2010 by reason of congestion as alleged by the petitioners. Suffice it to note that it is nobody's case that the petitioners deliberately delayed despatch.
As rightly pointed out by Mr. N.C. Roychowdhury, appearing on behalf of the petitioner, "export" has been defined in the Custo ms Act, 1962 to mean "taking out India to a place outside India".
"Export goods" means "any goods which are to be taken out of India".
The question is whether goods entered and cleared for exportation under Sections 50 and 51 of the Customs Act within the period of validity of EARCs, can be stopped from crossing the border on the ground of subsequent expiry of th e EARCs. 10
Under Section 5 of the Customs Act, 1962, officers of the customs are required to discharge such duties and exercise such powers as may be imposed by the said Act, including prevention of illegal export. "Illegal export" has been defined in Section 11H(a) of the Customs Act to mean export of any goods in contravention of the Customs Act or any other law for the time being in force, which includes the Foreign Trade Policy, which has the force of law.
The notification dated 17 th August, 2010, provides for registration of contracts for export of cotton with the Textile Commissioner prior to shipment. Cotton consignments meant for export are to be cleared by customs officers after verifying whether the contracts covering the consignments have been registered. It was, therefore, within the powers of customs officers to check whether the contracts covering the consignments for export had duly been registered with the Textile Commissioner and whether proper EARCs had been issued.
In this case, it is not in dispute that EARCs had been issued. The EARCs had not only been produced before the concerned customs officers, within the period of their validity, but also endorsed by them. The goods covered by the EARCs, had been cleared for export under Section 51, subject, however, to checking, to see whether the goods were as per declaration in the invoice, packing list and bill of export etc. 11 The bills of export were presented for entry along with EARCs and were cleared for export within 15 th December, 2010, that is, within the period of validity of the EARCs, on condition of the goods being in order in all respects. The question is whether the movement of the goods out of India could have been stopped if the goods were in order in all respects. The answer to the aforesaid question has to be in the negative, for reasons discussed hereinafter.
Section 12(1) of the Customs Act provides that except as otherwise provided in the Customs Act or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 or in any other law for the time being in force, on goods imported to India or exported out of India.
Sections 15 and 16 of the Customs Act, which stipulate the date of determination of the rate of duty and tariff valuation of imported goods and export goods respectively, are set out hereinbelow for convenience:
"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;12
(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 s h a l l b e d e e m e d t o h a v e b e e n p r e s e n t e d o n t he d a t e o f s u c h 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.
16. Date for determination of rate of duty and tariff valuation of export goods.--(1) The rate of duty and tariff valuation, if any, applicable to any export goods, shall be the rate and valuation in force,-
(a) in the case of goods entered for export under section 50, on the date on which the proper officer makes an order permitting clearance and loading of the goods for exportation under section 51;
( b ) i n t h e c a s e o f a n y o t h e r g o o d s , o n t h e da t e o f payment of duty;
(2) The provisions of this section shall not apply to baggage and goods exported by post."
While in case of imported goods, the relevant date is the date of presentation of Bill of Entry or in certain cases, the date of payment of duty, that is, after the goods enter the Indian territory, in case of export goods, the applicable rate of duty and tariff valuation is the rate and valuation in force when the proper officer makes an order under Section 51 permitting clearance and loading of the goods entered for exportation, that is, before the goods actually leave the Indian territory, and/or cross the Indian border.
Section 50 and 51 of the Customs Act provides as follows:
"50.Entry of goods for ex portation.--(1) The exporter of any goods shall make entry thereof by 13 presenting to the proper officer in the case of goods to be exported in a vessel or aircraft, a shippin g bill, and in the case of goods to be exported by land, a bill of export in the prescribed form.
(2) The exporter of any goods, while presenting a shipping bill or bill of export, shall at the foot thereof make and subscribe to a declaration as to the truth of its contents.
51.Clear ance of goods for exportation.--Where the proper officer is satisfied that any goods entered for export are not prohibited goods and the exporter has paid the duty, if any, assessed thereon and any charges payable under this Act in respect of the same, the proper officer may make an order permittin g clearance and loading of the goods for exportation."
Customs duty is leviable under Section 12(1) of the Customs Act on goods exported out of India. The duty is assessed and paid at the rate and valuation at the time of clearance and not the rate and valuation at the time when the goods move out of the country. Once duty is assessed and paid, and the goods cleared and allowed to be loaded into the vessel and/or vehicle for export, export cannot be stopped except on grounds inter alia of fraud, misrepresentation, mis-declaration, evasion of duty, criminality, grave risk or danger.
An exporter is not to suffer by reason of delay on the part of the authorities in clearance of goods, be it by reason of procedural checks, congestion or any other reason. Once goods are taken to the customs station and presented for entry within time, the process of export would 14 necessarily have to be allowed to be completed unless there is any fault on the part of the exporter.
The endorsement on the reverse of the EARCs and other relevant export documents reveal that the goods in question were entered for export and even cleared on or before 15 t h December, 2010. The Superintendent of Customs passed the goods for clearance on or before 15 t h December, 2010. However, the goods could not cross the Indo-Bangladesh border within 15 t h December, 2010, for reasons not attributable to the petitioners, perhaps on the ground of congestion as alleged. It is nobody's case that the petitioners deliberately kept the vehicles idle with any ulteri or intention.
In Lucas TVS, Madras vs. Assistant Collector of Customs, Madras & Ors. reported in 1987 (28) ELT 266 (Mad.) cited by Mr. P.K. Ghosh, appearing on behalf of the petitioner, a Division Ben ch of the Madras High Court held:
"Section 51, in our view, is an important provision. Under the provision, if the proper officer is satisfied that any goods entered for export are not proh ibited goods and the exporter has paid the duty, if any, assessed thereon and any charges payable under the Act in respect of the same, he may make an order permitting clearance and loading of the goods for exportation. Once the exporter has complied with the provisions of these sections, so far as he is concerned, whatever is required to be done for the purpose of exportation of the goods has been done by him.15
As a matter of fact, Section 51 deals with the last stage upto which the exporter has control over the goods, an d once the goods have been cleared and directed to be loaded for the purpose of exportation and the goods are subsequently loaded, the goods passed out of the control of the exporter.
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We are in respectful agreement with the view taken by the Gujarat High Court that when section 12 of the Act refers to goods exported from India, it does n ot mean goods exported from the territorial water of In dia. Th e export of the goods clearly takes place on the landmass of the country. If the construction canvassed on behalf of the respondents is to be accepted, then there is nothing in the Customs Act to indicate wh at is the position of th e goods from the time of loading the goods on the ship till they cross the boundary line of the territorial waters. Within the region between the boundary of the landmass of India on one side and the outer limit of the territorial waters the goods are beyond the control of the exporter. The customs duty is payable on export, and if export takes place only at the place where the territorial waters of India cease, the strictly speaking the customs duty will have to be collected only at that place which is almost an impossibility."
Mr. Ghosh also cited the Collector of Customs, Calcutta vs. Sun Industries reported in 1988 (35) ELT. 241 (SC) where the Supreme Court referred to Lucas TVS (supra) and held:
"Shri Ganguli submitted that taking out to a place outside India meant and comprehended delivery of goods to a place outside India. Section 35 of the Act as it stood prior to the amendment in 1983 was relied on. The Madras High Court had occasion to consider this question in the case of Lucas TV S vs. Assistant Collector, [1987 (28)E.L.T. 266]. We are of the opinion that in view of th e wording of the section, the goods went out of the territorial waters. When the ship got clearance and move d out of the territorial waters the export was complete. Th e title to the same goods passed to the exporters."16
In Sun Industries (supra), the question in issue was wh ether goods had to be delivered to a place outside India to constitu te export. The aforesaid contention was negatived. The Supreme Court held that when the ship got clearance and moved out of the territorial waters, export was complete. In this case the goods did not move out of Indian territory. As rightly argued by Mr. Roy Chowdhury, the judgment is of n o assistance to the petitioner.
A judgment is a precedent for the proposition of law that it decides, and not what might logically be deduced therefrom. In Sun Industries (supra) the Supreme Court made a passing reference to the judgment of Madras High Court in Lucas TVS (supra). The Supreme Court did not expressly approve the said judgment. Since the issue before the Supreme Court was different, it cannot even be said that the finding in Lucas TVS (supra) that export took place in the territory of India was impliedly approved. In my view, mere reference by the Supreme Court to the judgment of a High Court does not in itself amount to approval of all the findings and observations in the judgment of the High Court.
In Union of India & Ors. vs. APAR Pvt. Ltd. & Ors. reported in (1999) 6 SCC 117, cited on behalf of the respondents, the Supreme Court was concerned with goods which were exempted from customs 17 duty on the date on which the goods entered the territorial waters of India from the foreign country and also on the date on which they were stored in the bonded warehouse. The Supreme Court fou n d that the exemption had been withdrawn on the date on which the Bill of Entry was presented. The Supreme Court relying on its earlier decision found that the relevant date would be the date on which the Bills of Entry were presented under Section 46. The judgment has no application in the facts of this case.
The respondents also referred to Faridabad City Scan Centre vs. D.G. Health Services reported in 1997 (95) ELT 161 (SC), even though the judgment was not formally cited. The proposition of law that emerges from the said judgment is that Article 14 of th e Constitu tion can not be attracted where wrong orders are issued in favour of some others. The benefit of an exemption notification cannot be exten ded to some on the grou nd that such benefit had wrongly been exten ded to others. The proposition is unexceptionable but has no relevance in this case.
There is no statutory provision of the Customs Act and/or the Foreign Trade Act which governs goods between the stage of clearance for export and loading into vessels till the stage of crossing the territorial limits of the country except for the 18 provisions for reassessment of duty or imposition of penalty in case of any goods being detected not to be as per declaration. The attention of this Court has not been drawn to any statutory rule, regulation, government notification, government orders or even any circular in this regard an d there is perhaps none.
On a conjoint reading of Sections 12, 14, 16, 17, 50 and 51 of the Customs Act, this Court holds that goods are to be deemed to have been exported as soon as th e goods are cleared for export and loaded into vessels and are outside the control of the exporter, as held by the Division Bench of the Madras High Court in Lucas TVS (supra).
The Division Bench of Madras High Court has, in my view, correctly laid down the law in Lucas TVS (supra). I am in full agreement with the view taken by the Division Ben ch of Madras High Court in Lucas TVS (supra) that export takes place when the goods are cleared under Section 51, loaded into the vessels and/or vehicles and are beyond the control of the exporter.
In any case, under the Foreign Trade Policy export of raw cotton is free. The notification dated 17 t h August, 2010 clearly provides that export of cotton is free, but subject to the restriction 19 of registration of the contract of export with the Textile Commissioner, prior to shipment.
The EARCs being valid till 15 t h December, 2010, shipment was to be done within 15 t h December, 2010. Shipment means loading into ships. In case of transportation by road, shipment would necessarily mean loading into vehicles/trucks for the purpose of export, upon clearance by the customs authorities. Export would, therefore, have to be allowed to be completed.
For the reasons discussed above, the writ application is allowed.
The respondent authorities are directed to allow clearance of goods covered by EARCs debited and cleared for export within 15 t h December, 2010.
(Indira Banerjee, J.)