Gujarat High Court
Om Siddh Vinayak Impex Pvt. Ltd. & vs Union Of India & 2 on 14 February, 2017
Author: Mohinder Pal
Bench: Mohinder Pal
C/SCA/6806/2014 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 6806 of 2014
TO
SPECIAL CIVIL APPLICATION NO. 6811 of 2014
With
SPECIAL CIVIL APPLICATION NO. 10748 of 2014
TO
SPECIAL CIVIL APPLICATION NO. 10750 of 2014
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE MOHINDER PAL
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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OM SIDDH VINAYAK IMPEX PVT. LTD. & 1....Petitioner(s)
Versus
UNION OF INDIA & 2....Respondent(s)
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Appearance:
MR PERCY KAVINA, SR. ADVOCATE WITH JINESH H KAPADIA,
ADVOCATE for the Petitioner(s) No. 1 - 2
MR SAVAN N PANDYA, ADVOCATE for the Petitioner(s) No. 1 - 2
MR DEVANG VYAS, ADVOCATE for the Respondent(s) No. 1 - 3
MR. PARTH H BHATT, ADVOCATE for the Respondent(s) No. 1 - 3
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HC-NIC Page 1 of 24 Created On Wed Feb 15 02:52:11 IST 2017
C/SCA/6806/2014 CAV JUDGMENT
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CORAM: HONOURABLE MR.JUSTICE MOHINDER PAL
Date : 14/02/2017
CAV JUDGMENT
1. Rule. Learned advocates, Mr.Devang Vays and Mr.Parth Bhatt, for the respondents waive service of rule.
2. These petitions arise in a common background. They would, therefore, be disposed of by this common order.
2. Brief facts as emerging in Special Civil Application No.6806 of 2014 are as under:
2.1 The petitioners were granted Letter of Approval (for short, "LOA") issued by the Development Commissioner prior to publication of Special Economic Zone Act, 2005 (for short, "the Act") and Special Economic Zone Rules, 2006 (for short, "the Rule"). They are engaged in the business of sorting, segregating and grading worn and used clothing. Their LOA has been renewed from time to time and lastly it was renewed in December, 2013 and subsequently revised in May, 2014. As per the Rule 18 (4) (C), their LOA was renewed by the Board of Approval (for short, "BOA") as they were existing units. They were allowed to import worn clothing and after sorting, segregating and grading, they export clothing which is export-worthy and they earn their foreign exchange from those exports as required under Rule 53. Whatever is not export-worthy is being completely mutilated and cleared in Domestic Tariff Area (for short, "DTA") on payment of applicable duties Page 2 of 24 HC-NIC Page 2 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT and after examination by the Customs. As per Foreign Trade Policy (for short, "FTP"), mutilated used cloth is classified in Open General License (for Short, "OGL") category. As per the terms of their LOA, the petitioners are under only one obligation that is to be positive in Net Foreign Exchange Earnings (for short, "NFEE") and this is to be monitored cumulatively at the end of block period of 5 years. Defaulters are subjected to penal action under Foreign Trade Development and Regulation Act, 1992 (for short, "FTDR"). By virtue of notification dated 30th March 2006 issued by the Director General of Foreign Trade (for short, "DGFT"), the petitioners were allowed to sell un-
mutilated worn clothing in DTA to the extent of 15% of CIF value of imports made in the previous year. By notification dated 19.05.2010, this provision came to be deleted. The petitioners may not be eligible for sale of 15% of un- mutilated worn clothing after the date of notification dated 19.5.2010 but they were eligible for their past accrued entitlement for the period from 1.4.2009 to 18.5.2010. This is because the notification dated 30.03.2006 provided that the petitioners would be entitled to sell in DTA un-mutilated worn clothing to the extent of 15% of CIF value of imports made in the previous year. This was denied to the petitioners by the respondents. On 3.4.2013, the respondents issued a Circular along with the draft policy to regulate the functioning for worn clothing units in Special Economic Zone (for short, "SEZ") and the same was circulated to all the Ministries including Ministry of Textile, Ministry of Environment, Ministry of Finance and to the stakeholders. After considering the feedback from all the concerned, the respondents framed a policy dated 17.9.2013 wherein it was prescribed that in addition to achieving NFEE, the Page 3 of 24 HC-NIC Page 3 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT petitioners will be required to make physical exports out of India to the extent of 40% at the end of second year, 80% at the end of fourth year and 100% at the end of fifth year and thereafter, 100% every year of their total turnover. Apart from this condition, the units were shown to be entitled to sell their un-mutilated worn clothing being export surplus and export rejects to the extent of 15% of their FOB value of their exports. After issue of policy dated 17.9.2013, the LOA of the petitioners were renewed in December, 2013, wherein all the conditions of their policy were inserted. The petitioners agreed to the terms and conditions in its totality. On 30th January, 2014, the respondents unilaterally, arbitrarily deleted the portion of entitlement of selling of un-mutilated worn clothing being export surplus and export rejects in DTA on payment of applicable duties and accordingly renewed LOA issued to the petitioners in May, 2014 directing the petitioners to accept the terms and conditions. The petitioners accepted the terms and conditions subject to outcome of this petition that they had filed and which is being disposed of.
3. The petitioners have challenged the policy dated 17.9.2013 in its entirety and letter dated 13.1.2014 issued by the Ministry of Commerce and Industry. Policy dated 17.9.2013 imposes conditions of physical exports out of India to the extent of 40% at the end of second year, 80% at the end of fourth year, 100% at the end of fifth year and thereafter 100% every year. The letter dated 30th January, 2014, issued by the respondents deletes the provisions of 15% of un-mutilated worn clothing which was provided in policy dated 17.9.2013, unilaterally and arbitrarily. The petitioners have sought in their SCA that Page 4 of 24 HC-NIC Page 4 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT defects of Notification dated 19.5.2010 can only be prospective and not retrospective. Therefore, the petitioners should be allowed to sell in DTA their past accrued entitlement of un-mutilated clothing up to 15% of the imports made till 18.5.2010.
4. Learned senior advocate, Mr. Percy Kavina, has put in appearance on behalf of the petitioners while learned advocate, Mr.Devang Vays and Mr.Parth Bhatt have appeared for the respondents.
5. Mr.Kavina, learned senior counsel has argued that the definition of "exports" is given in Section 2(m) of the Act, which does not say "exports", export means physical export out of India. Rule 53 of SEZ Rules, 2006, provide various transactions of SEZ units against payment of foreign exchange as exports. Rule 19(6) says that SEZ unit has only one obligation that is at the end of block period of 5 years the unit should remain positive, when their NFEE is cumulatively monitored. Section 30 of the Act read with Rule 47 to 49 says that a unit in SEZ can make DTA clearances on payment of applicable duties without any limits so long as they are positive in NFEE. In the entire SEZ Act / Rules, there is no any condition which can compel the SEZ units to make export physically out of India. Therefore, the impugned order i.e. policy dated 17.9.2013 and the letter dated 30.1.2014 of the respondents are unreasonable, arbitrary, irrational and illegal without authority of law. Since the same have seriously impelled the activities of the petitioners and are violative of Article, 14, 19 (1) (g), 265 and 300-A of the Constitution of India. Vide Notification dated 30th March, 2006 issued by DGFT, the worn clothing units in SEZ Page 5 of 24 HC-NIC Page 5 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT were permitted to clear their un-mutilated clothing as export surplus and the export rejects to the extent of 15% of CIF value of imports made in the previous year. Vide notification dated 19.5.2010, the worn clothing units are debarred from clearance of 15% of the import of worn clothing in DTA. The Notification is not retrospective and therefore, imports made after 19.5.2010 will not be eligible to avail the benefits of the notification dated 30th March, 2006. But the fact remains that worn clothing unit in SEZ should be eligible for clearance of 15% of the un-mutilated worn clothing in India on applicable duties to the extent of 15% of CIF value of imports made in the previous year. Thus, the petitioners are entitled for the past accrued entitlement of 15% of CIF value of imports at least for imports made for a period upto 19.5.2010. If the past accrued entitlement which was legally available to the petitioners is not allowed by the respondents, it will be promissory estoppal on the part of the Government. There are number of varieties of units for e.g. ready-made garments, cosmetics, engineering, pharmaceuticals, perfume products, agarbatties and wax-candle etc. in SEZ, which are governed by the provisions of SEZ Act / Rules including worn clothing units. But the respondents have formulated the policy dated 17.9.2013, (impugned order) imposing various restrictions on worn clothing units only, this is discriminatory. It will be necessary to point out here that Government has issued similar notification regarding plastic industry in SEZ, however, which was challenged by other writ petitions pending before coordinate Bench. I have been informed that the said writ petitions have been allowed and the notification issued by SEZ has been quashed and set aside. However, the petitions in hand can be independently disposed of without making Page 6 of 24 HC-NIC Page 6 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT any further reference to such decision.
6. As soon as, the un-mutilated worn clothing being export surplus and export rejects were disallowed with effect from 19.5.2010, the petitioners made representation for releasing their past accrued entitlement and in response to that, respondent No.3 vide his letter dated 26.12.2013 / 1.1.2014, informed the Petitioners- Association that the matter is being taken up with the Ministry of Commerce and Industry. Therefore, there is no question of any limitation as SCA was filed in time.
7. The respondents filed affidavit in reply in July, 2014 claiming that under Section 5 of FTDR, the Government has right to amend the policy / provisions. Further, learned counsel of the respondents claimed that the worn clothing units are falling under Rule 18 (4) (C) and their LOAs are renewed by BOA and BOA is empowered to put such conditions as they may deem fit. The Government had to consider and issue in its totality that it has to take account of all positive and negative of an issue and therefore disallowing 15% in DTA are justified. Further, the clearance of 15% of un-mutilated clothing were subject to issue of amendment of notification dated 19.5.2010 by DGFT. Learned counsel for the respondents has also argued that notification dated 30th March, 2006 that allowed the petitioners to sell 15% in DTA of their total imports made in the previous year was deleted vide notification dated 19.5.2010, thus the issue is now time barred and petitioners have now lost their entitlement. He also claimed that the petitioners have accepted all the terms and conditions of policy dated 17.9.2013. Thus, they cannot challenge the same. Learned counsel for the Page 7 of 24 HC-NIC Page 7 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT respondents justified the special policy to be made by the respondents only to regulate the functioning of the plastic recycling units and worn clothing recycling units as these industries imposes health hazards and Government would like to discourage the operation of this Industry and eventually would like to phase them out. They also argued that the past entitlement to sell un-mutilated clothing in DTA prior to Notification dated 19.5.2010 should not be allowed as this will have the serious effects on the new garment manufacturing industry in India.
8. Learned counsel for the respondents further argued that the petitioners have accepted the terms and conditions of the renewed LOA issued in December, 2013 and they have filed the petition before this High Court in May, 2014 and they have concealed this material fact in the petitions. As the petitioners are not approaching the Court with the clean hands, their petitions deserve to be dismissed on this ground itself. The clearance of 15% of the un-mutilated worn clothing in DTA was only an exemption given by the Government and withdrawal of an exemption at any stage is the competence of the Government. The worn clothing is causing substantial damage to the local domestic manufacturers of the readymade garments and further that the worn clothing imported in India is unhygienic and is an health hazard. In support of these submissions, learned counsel has relied upon a decision of the Apex Court in the case of Kasinka Trading and Another V/s. Union of India and Another reported in (1995) 1 SCC 274, and has argued that the Courts are not vested with the powers to inference with the fiscal policy where the Government acts in public Page 8 of 24 HC-NIC Page 8 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT interest.
9. The petitioners in their affidavit in rejoinder in September, 2014, has submitted that the withdrawal of this 15% vide letter dated 30th January, 2014, was unilateral and illegal. Further, prescribing the minimum level of the export out of the country in the phased manner at the end of 2nd year, 4th year, 5th year and 100% thereafter is inconsistent with the Act and Rules. According to Rule 53, they are required to remain positive in NFEE and provisions of the Act/ Rules only allow the respondents to monitor their NFEE only at the end of block of 5 years cumulatively. Although Government has power to amend the policy as per the powers vested under Section 5 of the FTDR but what petitioners are challenging is that the revision in policy cannot delete their past accrued entitlement which has already been earned before notification dated 19.5.2010 as the same was pertaining to their imports made in the previous year
10. Learned counsel for the petitioners argued that because 15% of the previous year's value was allowed to be sold in DTA in the immediate next proceeding year, the benefit was only to be enjoyed in the next subsequent year. The petitioners are having vested accrued right to sell the worn clothing in the DTA to the extent of 15% of the value of imports made in the previous year (Notification dated 30th March, 2006). By way of notification dated 19.05.2010 vested rights of the petitioners were curtailed with retrospective effect. The said notification, on the face of it, does not have any retroactive order, retrospective operation. The interpretation put by the respondents is not supported by Page 9 of 24 HC-NIC Page 9 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT the plain wordings of the said notification. Also, the word "stands deleted" imply that the deletion would operate, hereafter, not before the date of notification. The petitioners are entitled to benefit of DTA entitlement by allowing to clear un-mutilated clothing upto 15% of CIF value of imports made in the previous year accrued pursuant to the Notification dated 30th March, 2006. This has to be done at the valuations prevalent prior at the time of the notification, i.e. 19.5.2010. Such clearance was permitted to those who were positive in earning of foreign exchange of course, on payment of applicable duties. There was no concession in the customs duties or state taxes on such clearance. Vide Notification dated 19.5.2010, such permission of 15% of imported worn clothing in DTA was withdrawn. By way of such notification dated 19.5.2010 the Government cannot take away the vested rights of the petitioners i.e. for the period of 1.4.2009 to 19.5.2010. Language of notification is prospective in nature. Promissory estoppal can be applied against the notification published by the Government as petitioners are having vested rights. The petitioners have made representation to release their past accrued entitlement in respect to the same, the respondent No.3 vide his letter dated 26.12.2013 and 1.1.2014, informed the Petitioners Association that that the matter is being taken up with the Ministry of Commerce and Industry. Therefore, the question of time barring does not arise. Thus, the petitioners are entitled for the past accrued entitlement at the rate of 15% of CIF value of imports for the period from 1.4.2009 to 19.5.2010 and also for un- utilized DTA entitlement as on 19.5.2010, DTA entitlement quantity of un-mutilated worn clothing to be calculated as per the valuation norms as prevalent on 19.5.2010.
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11. Learned counsel for the petitioners challenged the validity of the policy dated 17.9.2013 on the ground that it is against the provisions of SEZ Act / Rules. Power to impose condition in the Letter of Permission or Letter of Approval (Fort short, "LOP" or "LOA") is provided in Section 15(8)(B) read with Section 2(w) and Section 55 of the Act.
12. The Government under Section 15(8) (b) of the Act may prescribe the terms and conditions. The word "prescribed" has been defined in Rule 2(w) and means by way of framing Rules only. That the imposition of conditions without amending rule as laid down in Section 2 (w) read with Section 15(8)(b) of SEZ Act is against the law. The Authority has to follow the mandate of Section 2(w) read with Section 15(8)(b). That is also mandatory condition that every rule made by the Government has to be laid in each house of the Parliament. Section 55(3) of this Act prescribe powers to make rules. The Authority in this case has bypassed the mandatory conditions of laying of the rules and therefore, it is against the law, and therefore, indirect imposition of the conditions is against the prescribed law and therefore, the authority has no power to impose such conditions on the existing units. Only those terms and conditions which have been enacted by way of rules can be imposed and therefore, impugned conditions imposed by the respondents is dehors, the act and rules, without jurisdiction and the Board of Approval, by an executive decision has no power to impose the condition not prescribed by the Act or Rules.
13. In the entire SEZ Act and Rules, there is no any Page 11 of 24 HC-NIC Page 11 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT condition which can compel the SEZ units to make export physically out of India and therefore, it cannot be imposed by way of such policy. Section 2 (w) defines "prescribed" means prescribed by the rules made by the Central Government under this Act. Section 15(8)(b) defines the terms and conditions, subject to which the Unit shall undertake the authorized operations and its obligations and entitlements. Section 55 (3) provides power to make Rules, every rule made by the Central Government under this Act shall be laid, as soon as may be after it is made, before each House of Parliament while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.
14. Learned counsel further argued that the policy dated 17.9.2013 is inconsistent with the current provision of the SEZ Act / Rules. It has been argued that imposition of conditions of physical export of 100% to be achieved in slab as provided under Section 2(m) of the Act which defines "export" which includes not only physical export but also other modes. Definition of export is given in Section 2(m) of the Act and further as per Rule 53 (deemed exports) are also considered "export" for discharge of export obligation. Under Section 2(m)(i) "export means Page 12 of 24 HC-NIC Page 12 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT taking goods, or providing services, out of India, from a Special Economic Zone, by land, sea or air or by any other mode, whether physical or otherwise". Imposition of extra conditions in policy dated 17.9.2013 for achieving the minimum upward level in physical export out of India to extent of 40% at the end of second year, 80% at the end of fourth year and 100% at the end of 5th year and thereafter, 100% every year, is inconsistent with the provisions of Section 2(m) of the SEZ Act and Rule 53 of SEZ Rules and since Central Government has not prescribed such conditions, the same cannot be imposed indirectly, as no new conditions can be imposed under the existing units and no new terms and conditions can be prescribed by the BOA for the existing units.
15. Learned counsel for the petitioners has further argued that even after expiration of the period of 5 years, the LOA has to be extended for another period of 5 years at a time and therefore, the breaking in period of LOA is not permissible in any manner by way of such imposition of absolute new condition which breaks the monitoring of LOA. That the validity of the LOA is of 5 years and its extension is also for a period of 5 years is fixed by the statute to meet the conditions of Rule 53 i.e. for calculation of NFEE cumulatively for a period of 5 years and therefore, no slab calculation or break up is allowed in LOA.
16. Learned counsel for the petitioners has also referred to the report of the Parliamentary Committee on Petitions for worn clothing industry in SEZ and pointed out that according to the findings of the parliamentary committee even if 20% DTA sales of the import value if allowed would Page 13 of 24 HC-NIC Page 13 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT be equal to 0.01% of the market size of the Indian Garment industry, therefore, there is no question of destroying the domestic market as observed by the Parliamentary Committee.
17. Learned counsel also referred to blanket industry of Panipat and has contended that as many as 1,50,000 workers are engaged in this industry. Apart from workers at Panipat, about 12,000 workers are working at SEZ. If these industries are brought to grinding halt, all the employment which has been provided to these workers will be put to end and these workers will be left with no job whatsoever. Learned counsel has also replied regarding the fumigation etc. According to him, before the worn clothes are put to use in the local market or handled at their units, it is fumigated and only then put to reuse. According to him, there is no case of health hazard as pointed out by counsel for the respondents. He has also explained in detail as to how the notification will put an end to Industry. However, this Court is not inclined to go into such details at this stage.
18. On law points, learned counsel for the petitioners argued that the Competent Authority cannot issue order / office memorandum, instructions in contravention to the statutory rules. It can only be issued to supplement the statutory rules but not to supplant it. In the present case, the authority has issued policy which is inconsistent with the provisions of SEZ Act and Rules, when the administrative instructions are not in conformity with the statutory rules then it is invalid. According to him, in the present case, the instructions by way of policy are against provisions of SEZ Act and Rules.
Page 14 of 24HC-NIC Page 14 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT Specifically, the imposition of conditions regarding physical export out of India in slab basis is absolutely dehors the Act and Rules. Notification / Policy cannot enlarge or amend the scope of substantive provisions of the parent Act. It can be done only by amending the statute if the legislature is competent to take subject matter. That even the imposition of new condition is required to be amended by the legislature itself and therefore, the policy of the Government cannot amend the Act itself and therefore, the conditions cannot be imposed by way of policy as it is against the law. That the administrative instructions are issued without following procedure prescribed against the provisions of SEZ Act and SEZ rules. It has been argued in the present case, that Notification / policy are administrative instructions only and it cannot be enforced without due process of law and it has no force of law. The BOA has no power to impose such condition directly without framing adequate rules. The BOA can impose only those conditions which are prescribed in the Act and or the Rules and in absence of that, the Board does not have any independent right to frame new conditions which are in contravention with the provisions of the Act and the Rules. In support of these arguments, learned counsel has relied upon following judgments.
(A) AIR 2007 SC 750, Union of India V/s. M/s. Asian Food Industries;
(B) AIR 2006 SCW 5272, MRF Ltd. Kottayam V/s.
Assistant Commissioner of Sales Tax (C) 2013 (16) SCC 147, Union of India V/s.
Ashokkuamar Aggarwal (D) 1997 (4) SCC 301, P. Sadagopan and others V/s Page 15 of 24 HC-NIC Page 15 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT Food Corporation of India (E) 2013 (4) SCC 656, Tata Sky V/s. State of MP and others.
19. This Court has gone through the entire record of the case and having heard the learned advocates for the respective parties. The definition of export given in Section 2(m) of the Act says that the exports can be physically or otherwise. For this purpose, Rule 53 provides number of transactions which are considered to be "deemed export" for the purpose of calculation of NFEE and to discharge of export obligation of the petitioners. Even in the policy dated 17.9.2013, the respondents have provided that the petitioners will be allowed to sell un- mutilated worn clothes, being export surplus and export rejects on payment of applicable duty to the extent of 15% of FOB value of their exports. The unilateral withdrawal of 15% from retrospective effect may not be justified. This industry is providing large employment to unskilled workers in the local area and phasing them out will result in loss of employment of about 12,000 workers. One of the key motive of establishment of SEZ is to generate maximum employment, which would be defeated if their LOAs are not renewed.
20. Learned counsel for the petitioners has drawn attention of this Court to the report of the Parliamentary Committee on petitions, which says that if the petitioners are allowed 15% of the worn clothing in DTA it will contribute to mere 0.01% of the total turnover of the entire ready-made garments industry in India. Further, it is mandatory to get the consignments fumigated at the port of loading before dispatch so that the worn clothing Page 16 of 24 HC-NIC Page 16 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT brought in to India are free from germs and bacteria and therefore, it cannot be called hazardous.
21. Counsel pointed out that the worn clothing does not fall within the hazardous material as prescribed by the Hazardous and other Wastes (Management and Trans-boundary Movement) Rules or any other Act or Rules. On the contrary, the Parliamentary Committee on petitions recommended that worn clothing SEZ units if given reasonable incentives can earn substantial foreign exchange for the country which will otherwise be paid to the overseas labourers.
22. Learned counsel for the respondents laid emphasis on judgment passed in Kasinka Trading and Another V/s. Union of India and other (supra). This judgment requires to be gone into. It will be relevant that in this judgment Supreme Court has laid down that Courts have to balance the equities between the parties and indeed the Courts would bind the Government by its promise "to prevent manifest injustice or fraud".
23. In para Nos. 22 and 23, it has been laid down as under:
22. The argument on behalf of the appellants, vehemently pressed by Mr.Ashok Desai and Mr.Harish Salve, their learned Senior Advocates, is to the effect that since the Notification No.66 of 1979 had itself indicated that it shall be operative till 31.3.1981, the Government could not withdraw the same before the expiry of that date. It was argued that the appellants had placed orders for the import of PVC resin relying upon the exemption notification on the understanding that it was to remain operative till 31.3.1981 and had made arrangements for importing the goods accordingly and they could not be prejudiced by the Page 17 of 24 HC-NIC Page 17 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT withdrawal of that notification before 31.3.1981.
We cannot persuade ourselves to accept this submission of the learned counsel. Merely by mentioning the date 31.3.1981, as the date upto which the exemption notification No.66 of 1979 was to be operative, no unequivocal representation could be said to have been made that it could not be rescinded or modified before that date even if the Government was satisfied that it was necessary in the public interest to rescind it. Since the notification had been issued under Section 25(1) of the Act, the very same power was available to the authority for rescinding or modifying that notification and the appellant ought to have known that the said notification was capable of or liable to be revoked, modified or rescinded at any time even before the expiry of 31.3.1981 if the "public interest" so demanded to hold that after the Government had issued the Notification No.66 of 1979 indicating that it was to remain operative till 31.3.1981, it could not be rescinded or modified before the expiry of that date would amount to prohibiting the Government from discharging its statutory obligation under Section 25(1) of the Act, if it was satisfied that it was in the "public interest" to withdraw, modify or rescind the earlier notification. The plain language of Section 25 of the Act is indicative of the position that it is the public interest and public interest alone which is the dominant factor. It is not the case of the appellants that the withdrawal of Notification No.66 of 1979 by the impugned notification was not in "public interest". Their case, however, is that relying upon the earlier notifications they had acted and the Government should not be permitted to go back on its assurance as otherwise they would be put to huge loss. The Courts have to balance the equities between the parties and indeed the courts could bind the government by its promise "to prevent manifest injustice or fraud. The following observations from Malhotra & Sons V/s. Union of India have been noticed with approval by this Court in Excise Commissioner V/s. Ram Kumar and in M.P. Sugar Mills case".
"The Courts will only bind the Government by its promises to prevent manifest injustice or fraud and will not make the Government a Page 18 of 24 HC-NIC Page 18 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT slave of its policy for all times to come when the Government acts in its governmental, public or sovereign capacity."
The burden of customs duty etc. is passed on to the consumer and therefore the question of the appellants being put to a huge loss is not understandable. No injustice has been done much less fraud practiced by the Government in withdrawing the exemption.
23. The appellants appear to be under the impression that even if, in the altered market conditions and continuance of the exemption may not have been justified yet Government was bound to continue it to give extra profit to them. That certainly was not the object with which the notification had been issued. The withdrawal of exemption "in public interest" is a matter of policy and the courts would not bind the Government to its policy decisions for all times to come, irrespective of the satisfaction of the Government that a change in the policy was necessary in the "public interest". The Courts, do not interfere with the fiscal policy where the Government acts in "public interest" and neither any fraud or lack of bona fides is alleged much less established. The Government has to be left free to determine the priorities in the matter of utilization of finances and to act in the public interest while issuing or modifying of finances and to act in the public interest while issuing or modifying or withdrawing an exemption notification under Section 25(1) of the Act.
24. The aforementioned decision of the Apex Court emphasis is laid down on the point that the Government is empowered to withdraw the exemption in public interest and such withdrawal is a matter of policy and Courts would not bind the Government to its policy decision. Now, it is to be seen whether the impugned notifications by the respondents do serve any public interest or are beneficial to the Government or to the people of the country.
25. As reproduced earlier, Parliamentary Committee has Page 19 of 24 HC-NIC Page 19 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT recommended otherwise and has said that if SEZ units are given reasonable incentives they can earn substantial foreign exchange and provide employment opportunities to unskilled labours.
26. The entire business of shoddy / blanket industry of Panipat procures their raw material from the worn clothing units in SEZ and thus huge number of indirect labour employment has to be appreciated. Considering the provision of Section 15(8) (B) read with Section 2(w) of the Act it is apparently clear that no new condition can be imposed on the petitioners in their LOA without amending the relevant rules as such, policy dated 17.09.2013 is without any authority of law. The provisions of Section 55(3) lays a certain provision for making any amendment in the rules, which obviously has not been done in the present case. Imposing condition of physical export in phased manner as inserted LOAs of the petitioners is inconsistent with the provisions of Rule 53 and Rule 19(6). The subsequent deletion of 15% of the clearance of un-mutilated worn clothing in DTA vide letter dated 30.1.2014 is also arbitrary and illegal. Resultantly, aforementioned judgment relied upon by learned counsel for the respondents is not helpful to advance their case.
27. In regard to the past accrued entitlement, it is abundantly clear to this Court that the petitioners were entitled for the DTA sales of un-mutilated worn clothing being export surplus and export rejects on payment of applicable duties to the extent of 15% of their CIF value for their imports made in previous year i.e. from 1.4.2009 to 18.5.2010 and for the unutilized DTA entitlement as on 19.5.2010. If this is not allowed to them then it will be Page 20 of 24 HC-NIC Page 20 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT promissory estoppal on part of the Government. Had the respondents allowed past accrued entitlement of 15% at the relevant time, the petitioners would have cleared the same at the valuation norms prevalent prior to withdrawal of this 15% vide notification dated 19.5.2010.
28. In the the case Union of India Others V/s. Asian Food Industries (supra) relied upon by learned senior counsel is fully applicable to the facts of this case as notification can only have prospective effect and by reason of policy, vested or accrued right cannot be taken away. Such right cannot, therefore, be taken away by amendment thereof.
29. Learned senior counsel for the petitioners, Mr.Kavina, pressed into service number of other judgments. In the case of MRF Ltd. Kottayam V/s. Assistant Commissioner (Assessment), Sales Tax & Ors., on the point of promissory estoppal, it has been held that Board of Revenue cannot overwrite statutory notification issued by the Government. Further, it has been held that the provisions of the Act or Notifications are always prospective in operation unless the express language rendered it otherwise making it effective with retrospective effect. Similarly, in case P.Sadagopan and others V/s. Food Corporation of India (supra), it was held that executive instructions cannot be issued in derogation of statutory regulations.
30. In Tata Sky Ltd. V/s. State of M.P. and others (supra) it was laid down, "coming now to notification dated 5.5.2008, it is elementary that a notification is issued in exercise of powers under the Act cannot amend Page 21 of 24 HC-NIC Page 21 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT the Act. The Notification cannot enlarge either the charging section or amend the provisions of collection under Section 4 of the Act read with the 1942 Rules".
31. Similarly, in yet another decision Union of India and others V/s. Ashokkumar Aggarwal, in para Nos.58 and 59, it has been held that:
58. A Constitution Bench of this Court while dealing with a similar issue in respect of executive instructions in Sant Ram Sharma V/s. State of Rajasthan held: (AIR P.1914, para 7) "7...It is true that the Government cannot amend or supersede statutory rules by administrative instructions, but if the rules are silent on any particular point the Government can fill up the gaps and supplement the rules and issue instructions not inconsistent with the rules already framed".
59. The law laid down above has consistently been followed and it is a settled proposition of law that an authority cannot issue orders / office memorandum/ executive instructions in contravention of the statutory rules. However, instructions can be issued only to supplement the statutory rules but not to supplant it. Such instructions should be subservient to the statutory provisions.
32. So going through the aforementioned law laid down by the Apex Court, there is no hesitation to hold that the authority has bye-passed the mandatory provisions and issued the impugned instructions against the prescribed law which was beyond their jurisdiction.
33. On the issue of time barring for the past accrued entitlement that should have been allowed to the petitioners to sell DTA 15% of CIF value of the import made prior to 19.5.2010, this Court observes that the petitioners made numerous representations to the respondents to release their accrued entitlement and Page 22 of 24 HC-NIC Page 22 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT respondent No.3 vide their letter dated 26.12.2013 and 1.1.2014 informed the petitioners Industry-Association that the matter is being taken up with the Ministry of Commerce and Industry. The petitioners approached the Court well in time and thus their matter is not time barred.
34. From the observations and findings of the Parliamentary committee on petitions or otherwise, it is evident that worn clothing units of SEZ provide large employment, they fulfilled their NFEE requirement by way of exporting same products to the various countries outside India. The worn clothing imported is non-hazardous in nature, further import is fumigated at the origin to ensure that imported worn clothing is free from germs and they earn valuable foreign exchange for our country, thus there is no reason to impose extra conditions to regulate the functioning of the worn clothing units in SEZ that are over and above the provisions already provided in SEZ Act/ Rules.
35. For the foregoing reasons, the petitions succeed and are, accordingly, allowed. The impugned policy dated 17.9.2013 is set aside. Consequently, LOAs of the petitioners are to be amended deleting extra conditions imposed vide policy dated 17.9.2013. Since policy dated 17.9.2013 is set aside, letter dated 30.1.2014 will have no relevancy with the present policy which is now set aside. Respondents are directed to allow the petitioners to clear their past accrued entitlement of DTA sales of un-mutilated worn clothing to the extent of 15% of their CIF value of imports made prior to 19.5.2010 and for un- utilized DTA entitlement of un-mutilated worn clothing as Page 23 of 24 HC-NIC Page 23 of 24 Created On Wed Feb 15 02:52:11 IST 2017 C/SCA/6806/2014 CAV JUDGMENT on 19.5.2010, DTA entitlement quantity of un-mutilated worn clothing to be calculated as per the valuation norms as prevalent on 19.5.2010 on payment of applicable duties and taxes. Since their past accrued DTA entitlement for sale of un-mutilated worn clothing has been delayed for abnormal period of about 6 years, this should be allowed to them within a period of 2 months from the date of this order.
36. Rule is made absolute accordingly in each of the petitions with no order as to costs.
37. Registry to place a copy of this order in each of the petitions.
(MOHINDER PAL, J.) ashish Page 24 of 24 HC-NIC Page 24 of 24 Created On Wed Feb 15 02:52:11 IST 2017