Calcutta High Court
Bally Exports Pvt. Ltd. & Anr vs Union Of India & Ors on 28 February, 2011
Author: Indira Banerjee
Bench: Indira Banerjee
Order Sheet Serial No........
T No. 17 of 2011
IN THE HIGH COURT AT CALCUTTA
CONSTITUTIONAL WRIT JURISDICTION
ORIGINAL SIDE
In the matter of :
BALLY EXPORTS PVT. LTD. & ANR.
Vs
UNION OF INDIA & ORS.
Before:
The Hon'ble Justice
INDIRA BANERJEE
Date: 28.02.2011
JUDGMENT
In this writ application, th e petitioner has challenged a Circular No.17 (RE-2010)/2009-14 dated 10 t h February, 2011 issued by the Joint Director General of Foreign Trade, announcing that an administrative decision had been taken to consider allocation of cotton yarn for export only to ap plicants with export performance in 2009-10.
The petitioner No.1, a private company within the meaning of the Companies A ct, 1956, of which the petitioner No.2 is a Director, claims to carry on business inter alia of trading in cotton.
Accordin g to the petitioners, the petitioner No.1 imports an d exports cotton, its Import Export Code number being 0296024937.
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 provision 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.
As rightly argued by Mr. Abhrajit Mitra, appearing on behalf of the petitioner, and admitted by the learned Additional Solicitor General of India, appearing on behalf of th e respondents, the Foreign Trade Policy can only be amended by notification of the Central Government in the Official Gazette.
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 other law in force. The item-wise export and import policy is specified in ITC (HS), that is, the Indian Trade Classification (Harmonized System) 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.
It is significant to note that while the Foreign Trade Policy is required to be formulated and announced by notification of the Central Government in the Official Gazette and amended in the same manner, the procedure to be followed for the implementation of th e Foreign Trade Policy might be published by means of a public notice issued by the Director General of Foreign Trade and might also be amended by such public notice. There is no requirement for notification in the Official Gazette in the case of amendment of th e procedure for implementation of the Foreign Trade Policy.
Paragraph 2.7 provides that any goods, export or import of which is restricted under ITC (HS) might be exported or importe d only in accordance with an authorization or in terms of a public notice issued in this regard.
Paragraph 2.8 provides that every authorization shall be valid for the prescribed period of validity and shall contain such terms and conditions as may be specified, which may include quantity, description and value of goods, actual user conditions, export obligation, value addition to be achieved and minimum export/import price.
Cotton yarn was all along freely exportable. On 22 n d December, 2010, Notification No.14 (RE-2010)/2009-14 was issued by th e Central Govern ment amending Serial No.161B of ITC (HS) and thereby placing export of cotton yarn, u nder ITC (HS) Codes 5205, 5206 an d 5207, in the restricted category. The said notification was duly published in the Official Gazette.
The said notification inter alia provided as follows:
"3.Transitional Arrangement:-
(i) The Transition al Arrangement as available under para 1.4 & 1.5 of FTP, 2009-14 will not be applicable to the export of Cotton Yarn, under this notification.
(ii) However, Exporters who have obtain ed
Registration Certificate from Textile
Commissioner, Mumbai before 1 s t 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 su ch registered contract.
(iii) If the validity of such registered contract has expired then the registered contract holder wil l have no right to export under such registered contract.
4. 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."
By Circular No.15(RE-2010)/2009-14 dated 1 s t February, 2011, the respondent authorities announced that it had been decided to invite applications for allocation of quota for export of cotton yarn.
The relevant part of the said Circular is extracted hereinbelo w for convenience:
"Attention is invited to Notification No.14 (RE- 2010)/2009-14 dated 22.12.2010 whereby export of cotton yarn under ITC (HS) codes 5205, 5206 & 5207 was placed under the restricted category with export allowed subject to licencing.
The data for export made from 1/4/2010 to 15/1/2011 is being collected and allocation will be made for the balance quantity keeping in view the decision of GoM to limit the export of cotton yarn to 720 Million Kg. during the year 2010-11. Accordin gly, it has been decided to invite applications for allocation of quota for export of cotton yarn from 02.02.2011 to 07.02.2011 (till 5.00 PM).
2. All applications for grant of quota shall be sent only through E-mail at c o t t o n y a r n e x p o r t - d g f t @ n i c . i n . Annexure-1 of this Policy Circular gives a sample email for the purpose.
3. Allocation will be made after scrutiny of applications, as per the following criteria:-
(i) Allocation will be done on a prorata basis. The maximum that an applicant can apply is 100,000 Kg. per IEC or what has been exported by such IEC holder during 2009-
10, whichever is more. (Example: if an applicant has exported 120,000 kg. in 2009-10, then such applicant can apply for a maximum amount of 120,000 kg. only, similarly an applicant who has not exported at all in 2009-10 can apply upto 100,000 kg.)
(ii) Only one application per IEC will be accepted and an y subsequent application made by the same IEC holder will be rejected and n ot considered for allocation.
(iii) After the allocation is made, the applicants will be required to submit applications in prescribed format (i.e. ANF 2D) to concerned RAs from 11 t h February 2011 to 18 t h February 2011. The concerned RAs will then issue the export authorizations for the allocated quantities after scrutiny of the documents. The following documents will be submitted by allottees to the RA's:
(a) Application form (ANF 2D) duly filled and signed,
(b) Copy of Export Contract alongwith:
Either
(i) A copy of irrevocable Letter of Credit (LC) duly authenticated by an Indian Bank.
Or
(ii) FIRC showing receipt of remittance from
the concerned foreign buyer as proof of
having received 100% Advance Payment.
Or
(iii)
FIRC showing a minimum of 25% Advance
Payment and balance Cash Against
Delivery (CAD),
(c) Copy of IEC (against which the original application to DGFT has been sent) The process of issuance of authorization would be completed by 18 t h February, 2011. The export under such authorizations would need to be completed before 31 s t March, 2011 so as to ensure export of 720 Million Kg. of cotton yarn as per GoM decision ."
It is su bmitted that pursuant to the aforesaid circu lar the petitioners applied for grant of quota for export of cotton yarn, along with all necessary documents. The petitioners are aggrieved by the Circular No.17 (RE-2010)/2009-14 dated 10 t h February, 2011, layin g down the conditions and modalities for grant of quota for export of cotton yarn, which is set out hereinbelow for convenience:
"Attention is invited to Policy Circular No.15 (RE- 2010)/2009-14 dated 1 s t February, 2011 through which applications were invited for allocation of cotton yarn export. Approximately 2500 applications were received.
The balance amount was calculated by deducting amount already exported upto 15.1.2011 (from most recent DGCI & S data) from the existing ceiling of 720 Million Kgs. This balance quantity is very small.
2. When a very small residual amount is to be allocated amongst such a large number of applicants, the actual quantity that comes to the share of many applicants becomes commercially unviable because of its u n- economic size. Therefore, an administrative decision has been taken to consider only such applicants who have recent experience on such export. Hence, only those applican ts with export performance in 2009-10 will be considered for allocation in this round.
3. Line 6 & 7 of the e-mail sent earlier by the applicants contain details of export performance in 2009-10. As a matter of abundant caution the existing applicants are advised to sent a confirmatory e-mail by 14 t h February 2011 (addressed to c o t t o n y a r n e x p o r t - d g f t @ n i c . i n ) regarding their export performance during 2009-10. Th e e-mail confirmation from applicants needs to only specify their export in 2009-10, which was as ked in line 6 & 7 of the e- mail format in Annexure-I of Policy Circular No.15 dated1.2.2011. In case no such confirmatory e-mail is received from an applicant, the e-mail sent earlier will be taken as final.
4. The applicants receiving the allocation will have to submit proof of their past export in 2009-10 (as intimated in their e-mails) to concerned RAs at the time of filing their applications for grant of export licence in addition to other documents already mentioned in serial No.3 (iii) of Policy Circular No.15 dated 1.2.2011.
5. Since the last date of export is 31 s t March, 2011, th e allocation would be completed as expeditiously as possible, on receipt of the confirmatory e-mails (last date of receiving such e-mails is 14.2.2011). In view of the above, the allocation of cotton yarn for export as stipulated in Policy Circu lar No.15 dated 1.2.2011 is not being made today."
The petitioners, who have admitt edly not exported any cotton yarn in 2009-10, have questioned the decision to allocate quota for export of cotton yarn, only to those applicants with export performance in 2009-10.
The Circular dated 10 t h February, 2011 has been challenged mainly on the ground that the circular in effect purports to amend the Foreign Trade Policy without recourse to the procedure prescribed in Section 5 of the Foreign Trade Act for amendment of the Foreign Trade Policy.
Mr. Abhrajit Mitra, appearin g on behalf of the petitioner submitted that the Foreign Trade Policy could not be amended by an administrative circular, as has been done in the instant case. The Foreign Trade Policy could only be amended by notification in th e Official Gazette.
Mr. Mitra also argued that the Circular dated 10 t h February, 2011 is discriminatory since it discrimin ates against exporters who did not have export performance in 2009-10. There is no intelligible differentia for discriminating between persons who had export performance in 2009-10 and those who did not have export performance during that year.
The learned Additional Solicitor General, appearing on behalf of the respondent authorities has argued and rightly, that export of cotton yarn was placed in the restricted category, by the notification dated 22 n d December, 2010 of the Central Government, referred to hereinabove, which was duly published in the Official Gazette and made subject to licensing.
The Additional S olicitor General emphatically argued that there was a difference between formulation and announcement of policy and a policy decision. While the Foreign Trade Policy was required to be announced and amended by notification in the Official Gazette, a decision in implementation of the policy did not require notification in the Official Gazette.
The learned Additional Solicitor General submitted that a decision in implementation of the Foreign Trade Policy was circulated by the circular impugned. The learned Additional Solicitor General also pointed out that the Circular dated 10 t h February, 2011 was in effect and in substance a sequel to the Circular dated 1 s t February, 2011 pursuant to which the petitioners had applied for grant of quota. The petitioners were thus estopped from question ing the legality of th e Circular dated 10 t h February, 2011.
The learned Additional Solicitor General finally argued th at the petitioner No.1 had neither applied for nor obtained licence as required in terms of the notification dated 22 n d December, 2010 and was, therefore, not entitled to allocation of cotton yarn for export. The petitioner could not, therefore, challenge the decision as announced by the Circular dated 10 t h February, 2011 to allocate quota to applicants with export performance in 2009-10.
There is a difference between announcement and amendment of the Foreign Trade Policy and circulation of a decision in relation to the implementation of Foreign Trade Policy.
It is a well-established proposition of law that when statute requires a thing to be done in a particular manner, it is to be done in that manner alone or not at all. The proposition of law laid down by the Supreme Court in the judgments cited by Mr. Mitra cannot be questioned.
There can be no doubt that the mandatory requirement of publication of a statute in the Official Gazette cannot be dispensed with as held by the Supreme Court in Rajendra Agricultural University vs. Ashok Prosad & Ors. reported in (2010) 1 SCC 730 cited by Mr. Mitra.
In ITC Bhavor River Board & Anr. vs. Mondal Revenue Officer, AP & Ors. reported in (1996) 6 SCC 634, cited by Mr. Mitra, the Supreme Court held that where the parent statute prescribed the mode of publication of promulgation, that mode had to be followed and such a requirement was imperative and could not be dispensed with. The Court held that publication of exemption notification in the Andhra Pradesh Gazette as required by Section 11(1) of the AP Non-agricultural Lands Assessment Act, 1963 was mandatory and not really directory.
In MRF Ltd. vs. Manohar Parikkar & Ors. reported in (2010) 11 SCC 374, cited by Mr. Mitra, the Supreme Court held that the Business Rules framed under Article 166(3) of the Constitution of India were mandatory a decision could only be treated as a decision of the Government when the decision satisfied the rules of business framed under Article 166(3) of the Constitution of India. A decision having financial implications, taken by the Minister, without the concurrence of the Finance Department as provided by the rules of business could not be treated as decision of the Government.
There can be no dispute that the Foreign Trade Policy cannot be amen ded except by publication of a notification of the Central Government in the Official Gazette. Cotton yarn has been placed in the restricted category by notification of the Central Government in the Official Gazette. The circular, which is in implementation of the Foreign Trade Policy in terms whereof cotton yarn is now in the restricted category, merely lays down the mode of allocation amongst the applicants. The mode of allocation was not required to be published by notification in the Official Gazette.
There being a restriction on the total volume of cotton yarn that could be exported and there being numerous applicants, all applican ts could not be favoured with grant of quota for export. A method of selection had to be evolved. A decision was th us taken to grant qu ota to existing exporters with export performance in 2009-
10. The selection of existing exporters who continued with export till 2009-10 is neither arbitrary nor discriminatory nor violative of Article 14 of the Constitution of India. Th e authorities have preferred exporters who have continued with exports, to those who discontinued in 2009-10.
Unequal treatment of equals violates Article 14 of the Constitu tion of India. However, unequal treatment of unequals is permissible. There is, in my view, a rational differentia between exporters with export performance in 2009-10 and exporters who had stopped export and did not have any export performance in 2009-10. In any case, the decision to make allocation to existing exporter s was announced by the Circular dated 1 s t February, 2011 which has not been questioned by the petitioners.
There is a difference between amendment of policy, a clarification, and/or working out of details in implementation of policy. Under the scheme of the statute, one finds a clear distinction between an amendatory provision and a clarificatory provision. The power to amend the Foreign Trade Policy is conclusively vested in the Central Government and this has to be done by notification of the Central Government whereas the power to clarify is vested in the Director General of Foreign Trade.
Broadly imports fall in two categories, general and restricted and there is also a prohibited category. Change of categorization can only be done by amendment under Section 5 of the Foreign Trade Act. Categorization and re-categorization cannot be done by policy circulars as held by the Supreme Court in Atul Commodities (P) Ltd. Vs. Commissioner of Customs reported in (2009) 5 SCC 46. It is not open to the Director General of Foreign Trade to change categorization of items from the category of 'free export' to category of 'restricted export'.
Under paragraph 2.3 of the Foreign Trade Policy, the Director General of Foreign Trade is empowered to interpret the policy. If any doubt or question arises in respect of any provision in the Foreign Trade Policy or in the matter of classification of any item in the ITC (HS) or in the handbook, the said question or doubt has to be referred to the Director General of Foreign Trade whose decision is to be binding. Similarly, once an item is placed in the restricted category and made subject to licensing, the Director General of Foreign Trade is empowered to work out details for allocation of quota for export of such item.
In Hindustan Granites vs. Union of India a question arose as to whether policy circular No.24 dated 30 th August, 2005 limiting issuance of licence to those applicants who had imported crude marble between 1999- 2001 under the SIL (Special Import Licence) Scheme, constituted a change in policy, or a matter of detail within the existing policy. Pending decision on the issue, the Supreme Court passed an interim order to the effect that the Director General of Foreign Trade would be entitled to grant licences to those applicants who were so entitled under policy No.24 dated 30 th August, 2005. The aforesaid interim order is reported in (2007) 12 SCC 170. By a final judgment and order which is reported in (2007) 12 SCC 178, the Supreme Court upheld the validity of the circular.
In this case, as observed above, export of cotton yarn has been categorized in the restricted category by notification of the Central Government published in the Official Gazette. The Circulars of 1st February, 2011 and 10th February, 2011 lay down the matters of detail within the existing policy, which do not amount to amendment of the Foreign Trade Policy. Changes in details do not require publication in the Official Gazette. The policy has not been changed. A decision in implementation of policy, laying down details with regard to allocation of quota has been modified. Initially it was decided to allocate quota in a particular manner, that is, on prorata basis, amongst applicants. However, having regard to the large number of applicants for a limited quantity allowable for export, it was decided to restrict the allocation to applicants with export performance in 2009-10 and/or in other words, existing exporters who continued export upto the previous year.
The writ petition cannot be sustained and the same is dismissed.
(Indira Banerjee, J.)