w w w . L a w y e r S e r v i c e s . i n

M/s. S. Mira Commodities Pvt., Ltd., Rep. by its Director & Others v/s Union of India, Rep. by its Secretary, Ministry of Commerce and Industry, Department of Commerce & Others

    W.P.(MD)Nos.5701,5284,6108,6119,6188,6189, 6324,6388, 6389 6438, 6455, of 2008 and M.P.(MD)Nos.1,1,1,1,1,1,1,1,1 and 1 of 2008 in P(MD).Nos.5284, 5701, 6108, 6188, 6189, 6324, 6388, 6389, 6438, 6455, 6119 of 2008 and M.P.(MD).Nos.2,2,2,2,2,2 and 2 of 2008 in W.P(MD).Nos.5284, 5701,6108 6119,6188, 6189,6324,6438,6455, of 2008 and M.P.(MD).Nos.3 and 3 of 2008 in W.P.(MD).Nos.5284 and 6108 of 2008
    Decided On, 08 September 2008
    At, Before the Madurai Bench of Madras High Court
    For the Petitioners : B. Kumar Senior Counsel, B. Satish Sundar, A.K. Jayaraj, P. Dhanapal, Advocate. For the Respondents: C. Arul Vadivel, Assistant Solicitor General.

Judgment Text
(PRAYER in 5701 of 2005:-Writ Petitions filed under Article 226 of the Constitution of India praying for issuance of a Writ of Declaration, declaring the Policy condition in impugned Notification No.15(RE-2008)/2004-2009, dated 04.06.2008, (in respect of all W.Ps) issued by the 2nd respondent in so far as it restricts the free import of Betel Nuts only to those of value of Rs.35/- per Kilogram and above as illegal, arbitrary, unconstitutional and in violation of the rights guaranteed under the Constitution of India.)

Common Order

The prayer in all these writ petitions is for declaring the policy condition imposed by the Director General of Foreign Trade vide its notification No.15 (RE-2008)/2004-2009, dated 04.06.2008, insofar as it restricts the free trade of Betal nuts for a value of Rs.35/ per kilo gram including C.I.F. value (Cost, Insurance and Freight) by notification dated 04.06.2008 as unconstitutional, arbitrary and violative of rights guaranteed under the Constitution.

2. Since the questions raised in all these writ petitions are one and the same, they were all heard together and a common order is passed.

3. Heard Mr. B. Kumar, learned Senior Counsel appearing for all the petitioners and Mr. C. Arul Vadivel @ Sekar learned Assistant Solicitor General and perused the records.

4. At the time of admission in all these cases, interim orders were granted. It is only when the second respondent filed a vacate stay application supported by a counter affidavit, the matter was taken up for final hearing by the consent of parties.

5. It is stated by the petitioners that the petitioners are all importers of betal nuts and spices. The petitioners were importing betal nuts from the countries such as Indonesia and Sri Lanka, since there is a great deal of demand in India. The local production in this country of betal nuts do not even meet 10% of the demand of the manufacturers. Therefore, import of betal nuts became a necessity as there is a wide spread requirement for such betal nuts for the manufacture of Supari, Sugants and Pan masala. The policy of betal nuts is not restricted and even as per the impugned notification, the import is made free. Apart from this, there is 100% duty imposed by the Customs on the imported betal nuts.

6. The cost of purchase of such betel nuts normally varies between Rs.15/- to Rs.20/- in foreign countries. This fact has been even admitted by the second respondent in the counter affidavit dated 01.08.2008, wherein it is shown that the import price of betel nuts (whole) comes to Rs.15.50 paisa per kilo gm and split betel nuts comes to Rs.13/- per kilo gm.

7. By the impugned notification the importers were directed to import the betel nuts provided C.I.F. value of the betel nuts is provided at Rs.35/- per kg. According to the petitioners, such a fixation of Rs.35/- per kg. with C.I.F. value is arbitrary and curtails the right of the importers under Articles 19(1)(g) and 301 of the Constitution.

8. It is further contended that when import policy with reference to particular good namely betel nuts is a free policy, then there is no question of restricting the right of the importers and the policy introduced by the second respondent has no legal sanctity. It is stated that in para.2.1 of the Foreign Trade Policy (for short 'FTP') provides exports and imports shall be free except where regulated by FTP or other law for the time being in force. Para 2.6 of the FTP, empowers the respondents to impose restrictions on imports by way of notifications for achieving the following purposes only:-

"i. Protection of public morals.

ii. Protection of human, animal or plant life or health.

iii. Protection of patents, trademarks and copyrights and the prevention of deceptive practices.

iv. Prevention of use of prison labour.

v. Protection of national treasures of artistic, historic or archaeological value.

vi. Conservation of exhaustible natural resources.

vii. Protection of trade of fissionable material or material from which they are derived; and

viii. Prevention of traffic in arms, ammunition and implements of war."

9. Since the policy introduced by the impugned notification does not advance any of the causes listed above, the said policy is arbitrary. It is further submitted that the Foreign Trade (Development Regulation Act) 1992, (for short 'FTDR') does not authorize the second respondent to restrict the import of betel nuts on the basis of fixing a minimum import price. It is also stated that the petitioners have long term contracts with their foreign suppliers and pursuant to the contracts, goods have arrived in various ports and therefore, they should be allowed to import without insisting the price of the goods fixed at Rs.35/- (C.I.F) per kg.

10. In support of their submissions, the petitioners have also filed various agreements between them and the foreign suppliers. The trade commitments that they have with the foreign suppliers were also mentioned in those correspondences. It is in the light of these submissions, they wanted their writ petitions to be allowed and consequently, the impugned notifications should be set aside.

11. In the counter affidavit filed by the second respondent the said policy id sought to be supported on the basis that the low price of import of betel nuts was causing declining the domestic prices and consequential loss for the domestic betel nut growers. This policy will prevent inferior quality of the betel nuts from being imported and also it will provide adequate remunerative prices for the local growers. By this protectionism, there will be a perfect competition in the home produce and imported betel nuts. It will also generate employment potentials and the notifications were issued setting forth the policy for the years 2004-2009 was in public interest and in exercise of powers conferred under Section 5 of the F.T.D.R.Act,1992 read with para 2.1 of the F.T.P.

12. It is averred in para No:2.J of the counter affidavit, which is as follows:-

".....Therefore, in order to protect the interests of the domestic growers of betel nut and to provide a level playing field to them and to ensure that the domestic prevailing price of betel nut does not fall down, the minimum floor price for import of betel nut has been fixed of Rs.35 per kgm and above vide Notification No.15/RE2008/2004-2009, dated 04.06.2008. Presently, the import duty on betel nut is 100%. The floor price of betel nuts @ Rs.35 per Kg. coupled with 100% custom duty would result in the landed price of betel nut to Rs.0.70 per kg, which is approximately at par with the rate prevailing during 2006-2007 (i.e.ranging from Rs.66 per kg. 75 per kg.) as reported by the Directorate of Arecanut and Species Development, Bangalore."

13. In the light of the above factual metrics Mr. B. Kumar, learned Senior Counsel appearing for the petitioners made the following submissions:-

(i) The second respondent DGFT has no power to issue a policy in terms of Section 5 read with Section 6(3) of the FTDR, Act,1992.

(ii) To test the validity of the impugned notifications the relative bearing of three enactments are to be looked into. They are Customs Act,1962, Customs Tariff Act,1975 and FTDR Act,1992. Each enactment places an assigned role and they must be read harmoniously and one cannot claim overriding effect over the provisions of other Acts.

(iii) That in so far as the present policy is not based on any anti-dumping policy, the policy is arbitrary.

(iv) After introducing a free policy the second respondent cannot create an artificial price fixing insofar as the local production satisfies only 10% of the requirement of the manufacturers. There is no necessity to introduce such artificial price fixing and label it as support price or floor pricing or Saving the local producers.

(v) When admittedly the price available in the countries of import does not exceed Rs,15/- to Rs.20/- per kg, there is no question of fixing the price at Rs.35/- per kg (CIF).

(vi) The importers of betel nuts such as the petitioners have not been informed as to what should be done with the money which will be found in the excess of the cost of import. This will only lead to fictitious billing, which is not the intention of a free import policy and it is not the power of Government to fix any price under FTDR, Act.

(vii) Fixing the value of goods can be done only under the Customs Act and Customs Tariff Act. Those Acts also provide for an appointment of Directorate General of Safeguards. The Customs Tariff Act, 1975, provides for differential tariff including imposition of increased import duties under Section 8A imposition of Safe Guards Duty under Section 8B and anti-dumping duties under Section 9A the Customs Tariff Act. It also provides for an appeal under Section 9C.

(viii) The customs Act also provides for appointment of Customs Officers to decide the value of the import. Therefore, where there are ample provisions under the special enactments, it is not open to the second respondent to issue a notification FTDR, Act, 1992 to bring an artificial price fixing for the imported betel nuts.

(ix) The learned Senior Counsel submitted that Section 6(3) only delegates certain powers on the DGFT and the present notification though claimed to have issued under Section 5, such a delegation is not available to the second respondent in terms of Section 6(3) of the FTDR Act. The power to frame a policy solely vests with the Central Government under Section 3 of the Act. Though in the notification impugned, it refers to the Central Government amending Schedule I of Imports for the years 2004-2009, it is not a notification issued by the Central Government. It only signed by the DGFT, who is also the ex officio Additional Secretary to Government.

(x) In the counter affidavit filed by the second respondent, there is no reference to the Central Government issuing the said policy and there is no details regarding the Central Government's decision mentioned therein.

14. Even though a specific contention was raised in this regard, the Central Government has not taken any policy decisions in terms Section 3 read with Section 5 of the FTDR Act and there being no delegation permissible for evolving such of policy in the light of Section 6(3) conferred on the second respondent, the impugned order to be set aside on this short ground alone.

15. In any event, when there is sufficient safeguard is provided under the special laws such as Customs Act as well as the Customs Tariff Act, it is not open to the respondents to invoke FTDR Act for making an artificial price fixation.

16. The learned Senior counsel for the petitioners relied upon the judgment of the Supreme Court in Allahabad Bank V. Canara Bank reported in AIR 2000 Supreme Court 1535 for the purpose of showing that at times a general law can be a specific law vis-?is a special law and it depends on the context. He relied upon the following passage found in para.39, which is usefully extracted below:-

"39.There can be a situation in law where the same statute is treated as a special statute vis-?is one legislation and again as a general statute vis-?is another legislation. Such situations do arise as held in Life Insurance Corporation of India V D.J. Bahadur, AIR 1980 Supreme Court 2181: (1980 Lab IC 1218. It was there observed.

"for certain cases, an Act may be general and for certain other purposes, it may be special and the Court cannot blur a distinction when dealing with finer points of law."

17. In the light of the above, it was further submitted that the FTDR Act cannot be a special law with reference to a price fixation of an imported commodity and the power is available only under the provisions of other two enactments, i.e. the Customs Act and the Customs Tariff Act.

18. He further submitted that even assuming that any policy guideline is issued, such a guideline can be scrutinized by this Court and it is not beyond the pale of judicial review conferred under Article 226 of the Constitution. The learned Senior Counsel referred to the decision of Supreme Court reported in Union of India and Others and Dinesh Engineering Corporation and another, (2001) 8 SCC 491. The learned counsel placed reliance upon the following passage found in para 12 of the said order:-

"12...There is no doubt that this Court has held in more than one case that where the decision of the authority is in regard to a policy matter, this Court will not ordinarily interfere since these policy matters are taken based on expert knowledge of the persons concerned and courts are normally not equipped to question the correctness of a policy decision. But then this does not mean that the courts have to abdicate their right to scrutinize whether the policy in question is formulated keeping in mind all the relevant facts and the said policy can be held to be beyond the pale of discrimination or unreasonableness, bearing in mind the material on record.

19. The learned Senior Counsel further submitted that when in the counter affidavit it was admitted that the prevailing price of the betel nuts in the countries of origin was only Rs.13/- to Rs.15/- there is no question of fixing the imported betel nuts @ Rs.35/- in an artificial manner. Protecting the local growers can be done only by either increasing the import duty or totally prohibiting the import. Further, for making the contention that the sub-standard goods will be brought in, there is no material produced by the respondents in support of that contentions. Even otherwise, if the goods are substandard, no manufacturers will buy such goods. Therefore, the attempt of the Central Government is to lead support to certain monopolists, who were also involved in using the betel nuts as raw metals in their production.

20. Per contra, the learned Assistant Solicitor General relied upon the contentions raised in the counter affidavit and also relied upon certain decisions of the Supreme Court in support of his arguments.

21. He referred to case of Dhargham Oils Pvt Ltd & another Vs. Union of India reported in 1995 (1) SCC 345 for a proposition that the Government can amend the policy of import even though there may be concluded contract with a foreign supplier.

22. He also cited the judgment in S.B. International Ltd Vs Assistant Director of Foreign Trade reported in 1996 (2) SCC 439 that the principles of promissory estoppel are not applicable in deciding the validity of a Foreign Trade Policy.

23. He further placed reliance upon the judgment of the Supreme Court in P.T.R. Export (Madras) Pvt. Ltd Vs Union of India and others and relied upon the following passages found in paras.4 and 5:-

"4.an applicant has no vested right to have export or import licences in terms of the policies in force at the date of his making application. For obvious reasons, granting of licences depends upon the policy prevailing on the date of the grant of the licence or permit. The authority concerned may be in a better position to have the overall picture of diverse factors to grant permit or refuse to grant permission to import or export goods. The decision, therefore, would be taken from diverse economic perspectives which the executive is in a better informed position unless, as we have stated earlier, the refusal is mala fide or is an abuse of the power in which event it is for the applicant to plead and prove to the satisfaction of the court that the refusal was vitiated by the above factors.

5..... When the Government is satisfied that change in the policy was necessary in the public interest, it would be entitled to revise the policy and lay down new policy. The Court, therefore, would prefer to allow free play to the Government to evolve fiscal policy in the public interest and to act upon the same. Equally, the Government is left free to determine priorities in the matters of allocations or allotment or utilization of its finances in the public interest. It is equally, entitled, therefore, to issue or withdraw or modify the export or import policy in accordance with the scheme evolved."

24. He further submitted that the Foreign Trade Policy expressed in the impugned notification is not susceptible for a judicial review and referred to the judgment of the Supreme Court in State of N.C.T of Delhi and another Vs. Sanjeev alias Bittoo reported in 2005 Supreme Court 2080. He placed reliance upon the following passages found in paras.15 and 16:-

"15....In the purported exercise of its discretion, it must not do what it has been forbidden to do, nor must it do what it has not been authorized to do. It must act in good faith, must have regard to all relevant considerations and must not be influenced by irrelevant considerations, must not seek to promote purposes alien to the letter or to the spirit of the legislation that gives it power to act, and must not act arbitrarily or capriciously. These several principles can conveniently be grouped in two main categories: (i) failure to exercise a discretion, and (ii) excess or abuse of discretionary power. The two classes are not, however, mutually exclusive. Thus, discretion may be improperly fettered because irrelevant considerations have been taken into account, and where an authority hands over its discretion to another body it acts ultra vires.

16.The present trend of judicial opinion is to restrict the doctrine of immunity from judicial review to those classes of

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cases which relate to de-ployment of troupes, entering into international treaties, etc. The distinctive features of some of these recent cases signify the willingness of the Courts to assert their power to scrutinize the factual basis upon which discretionary powers have been exercised. One can conveniently classify under three heads the grounds on which administrative action is subject to control by judicial review. The first ground is 'illegality' the second 'irrationality' and the third 'procedural impropriety'." 25. It is not clear as to how the citations referred to by the Assistant Solicitor General will help the case of the respondents. The notifications impugned in these writ petitions are without jurisdiction and made without any application of mind and they are liable to be set aside by this Court. 26. This Court has already found that the second respondent has no power to issue the notification under Section 5 read with 6(3) of the FTDR Act. Further, that the price fixing on an artificial basis cannot be done and that too under the FTDR Act. It has to be done in the light of the enactments such as the Customs Act and the Customs Tariff Act. No material data have been furnished for arriving at the figure of Rs.35/- per kilo (CIF) for the betel nuts imported. When the market for betel nuts requires 90% import and the free import policy has been evolved for such an import, the present notification goes contrary to such policy. It also makes the importers to commit further illegalities of retention of amounts in Foreign Countries. 27. The other arguments that sub-standard material are imported is not supported by any records. Further any sub-standard materials will be rejected by the Customs Department and even by the manufacturers who placed orders with the importers. 28. In the light of the above, all these writ petitions will stand allowed. However, there will be no order as to costs. All the connected M.P.s are closed.