Patanjali Foods Limited Vs Union of India (Karnataka High Court)
Karnataka High Court held that amendment to Foreign Trade Policy (FTP) can be done only by the Central Government and not by DGFT. Whereas, amendment to the procedure can be done by DGFT.
Facts- In this petition, petitioner, M/s. Patanjali Foods Limited, has sought to issue writ of Certiorari or any other appropriate writ, order of direction while calling for records pertaining to the public Notice No. 15/2015-20 dated:14.06.2022 and quash / set aside ‘ condition x’ mentioned in pare 2 of the said Public Notice No. 15/2015-20 dated: 14.06.2022.
Further, it is also sought to issue a Writ of Mandamus or any other appropriate writ, order or direction while directing Respondent No.2 to delete Condition No. 3 in the condition sheet of the Tariff Rate Quota dated 05.07.2022 vide Annexure – M issued / allotted to the Petitioner.
Conclusion- Held that amendment to the FTP can be done only by the Central Government under Para 1.02 of the FTP, whereas amendment to the procedure can be done by the DGFT under Para 1.03 and Para 2.04 of the FTP.
Under these circumstances, in the light of the undisputed fact that the Public Notice dated 14.06.2022 containing the impugned ‘condition x’ has been issued by the DGFT by tracing his powers to Para 1.03 and Para 2.04 and not to Para 1.02, it is clear that the said Public Notice has been issued only by the DGFT alone and not by the Central Government and consequently, in the facts of the present case, the said judgment has no application and cannot be relied upon by the respondents.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
In this petition, petitioner has sought for the following reliefs :
“(a) Issue a Writ of Mandamus or any other appropriate writ, order or direction while directing the Respondents to permit clearance of balance quantity of the subject goods i.e., 1973.04 MTs. after clearance from the customs bonded warehouse in terms of Section 68 of the Customs Act, 1962 on production of Tariff Rate Quota dated: 05.07.2022 vide Annexure-M by the petitioner and also extended the benefit of Notification No. 30/2022-Cus dated: 24.05.2022 on such clearance.
(b) Issue a writ of Mandamus or any other appropriate writ, order or direction while directing the Respondents to account for the clearance of 4000 MT’s of of the subject goods, as stated above, against the Tariff Rate Quota dated: 05.07.2022 vide Annexure-M issued to the petitioner while also extending the benefit of Notification No. 30/2022-Cus dated: 24.05.2022 vide Annexure-F on such clearance and refund excess duty of Rs.3,79,33,896/-paid on clearance of the said 400 MTs of the subject goods with interest @ 12 % p.a.
(c) Pass any other appropriate Order(s) as this Hon’ble Court may deem fit and proper in the facts and circumstances of the instant case and in the interest of justice.
d) Issue a writ of Mandamus or any other appropriate writ, order or direction while directing the Respondents to account for the clearance of 4000 MT’s of of the subject goods, as stated above, against the Tariff Rate Quota dated: 05.07.2022 vide Annexure-M issued to the petitioner while also extending the benefit of Notification No. 30/2022-Cus dated: 24.05.2022 vide Annexure-F on such clearance and refund excess duty of Rs.3,79,33,896/- paid on clearance of the said 400 MTs of the subject goods with interest @ 12 % p.a.
(e) Pass any other appropriate Order(s) as this Hon’ble Court may deem fit and proper in the facts and circumstances of the instant case and in the interest of justice.
2. The brief facts giving rise to the present petition as contended by the petitioner in its amended petition are as follows:-
Petitioner Company is engaged in the business of solvent extraction, refining of oils, manufacture of soya food products, import, export and trading of agricultural commodities. Petitioner Company was earlier known as M/s. Ruchi Soya Industries Ltd. and the name of the Petitioner Company has changed from M/s. Ruchi Soya Industries Ltd. to M/s. Patanjali Foods Limited w.e.f. 24.06.2022. Petitioner had entered into a contract with its foreign supplier viz. Aston Agro Industrial SA, Switzerland for import of the subject goods, Crude Sunflower Seed Oil of Edible Grade in Bulk. The said foreign supplier had supplied 6000 MTs of the subject goods vide its Invoice dated 10.06.2022. The subject goods were shipped vide vessel ‘MT Loyal’ with port of discharge being Mangalore Port, India. The subject goods were dispatched against Eight Bills of Lading dated 04.06.2022 and four Bills of Lading dated 07.06.2022. The aforesaid vessel carrying the subject goods arrived at Mangalore port and was granted Entry Inward on 30.06.2022. Petitioner had filed Warehouse Bill of Entry No. 9296578 dated 27.06.2022 under Section 46 of the Customs Act, 1962 and the subject goods were warehoused accordingly.
2.1 The Respondent No.2 is the Director General of Foreign Trade (DGFT). In exercise of his powers under paragraphs 1.03 and 2.04 of the Foreign Trade Policy (FTP), the DGFT issued a Public Notice bearing No.10/2015-20 dated 24.05.2022, whereby Tariff Rate Quota (TRQ) was allocated for the financial years 2022-23 and 2023-24 by amending paragraphs 2.60 and 2.61 of the Handbook of Procedures, thereby laying down procedural conditions for Crude Soya-bean oil, whether or not degummed and Crude Sunflower seed oil. The Duty structure in regard to the aforesaid goods is Basic Customs Duty @ 0% plus Agriculture Infrastructure and Development Cess (AIDC) @ 5% plus Social Welfare Surcharge (SWS) @10% plus IGST @ 5%. It is stated that import of the above mentioned goods is exempted from levy of whole of Basic Customs Duty and from whole of Agriculture Infrastructure and Development Cess as per Notification No. 30/2022-Cus dated: 24.05.2022. It is also contended that the aforesaid goods are freely importable as per the ITC (HS) Schedule 1 – Import Policy, 2022. Further in regard to the aforesaid goods, there is no restriction for trading thereof by State Trading Corporations.
2.2 Petitioner contends that as per the aforesaid Public Notice No. 10/2015-20 dated 24.05.2022, fresh applications for allocation of TRQ Authorisation/License were called for by the respondents. Petitioner was eligible for all the conditions mentioned therein and the Petitioner accordingly applied online to the office of Respondent No.2 for allocation of TRQ Authorisation/ License for import of Crude Soya-bean oil and Crude Sunflower seed oil by means of Application dated 17.06.2022 and the said application was duly acknowledged by the office of Respondent No.2 vide its email dated 17.06.2022.
2.3 Petitioner submits that subsequently, Respondent No.2-DGFT, in exercise of his powers under Para1.03 and 2.04 of FTP, issued another Public Notice No.15/2015-20 dated 14.06.2022 amending para-2 of the aforesaid Public Notice No. 10/2015-20 dated 24.05.2022 in addition to imposing/inserting certain further conditions. Amongst others, an additional condition was imposed as per ‘condition x’ whereby import consignments landing at Indian Ports after the date of issuance of TRQ license shall only be considered for clearance under TRQ. The said ‘condition x’ also stipulates that any quantities lying at the Indian ports (under warehousing etc) before the date of issuance of the TRQ license shall not be considered for import clearance under TRQ.
2.4 It is contended that after the aforesaid vessel carrying the subject goods secured berth, discharge of the subject goods in the custom bonded tanks commenced and the cargo stood discharged on 02.07.2022. On discharge of the subject goods in the bonded tanks, there was short quantity receipt of 26.96 MTs and the total quantity of the subject goods that was discharged in the bonded tanks was 5973.04 MTs. Petitioner needed the subject goods urgently to keep its manufacturing unit functioning and to avoid losses, so awaiting issuance of TRQ license, Petitioner had filed Ex-bond Bill of Entry No.9407307 dated 04.07.2022 under Section 68 of the Customs Act, 1962 seeking clearance of 500 MTs of the subject goods for home consumption. The said Bill of Entry was processed by the revenue and on payment of applicable duty out of charge was given on 05.07.2022.
2.5 Petitioner had applied to the office of Respondent No.2 for allocation of TRQ licenses for import of Crude Soya-bean oil and Crude Sunflower seed oil. The said application of the Petitioner was duly scrutinized by the Office of Respondent No.2 and Petitioner was given TRQ dated 05.07.2022, being the Authorisation/License/Scrip, for import of Crude Soya-bean oil and Crude Sunflower seed oil, as so stated therein. It is contended that the aforesaid ‘condition x’ is forming part of the Condition Sheet of the aforesaid TRQ license dated 05.07.2022 as Condition No. 3. Petitioner wanted to clear the subject goods against the aforesaid TRQ authorization/license and had approached the Department accordingly, who, however it was pointed out that the said request cannot be entertained since the goods stood warehoused before issuance of TRQ license. Though the petitioner objected, it was told that the same was a legal issue and till the same was resolved, goods will not clear against the aforesaid TRQ license. Since the goods were urgently needed, Petitioner had no option but to clear the goods without tendering TRQ license for such clearance. Petitioner had accordingly filed Ex-Bond Bills of Entry dated 07.07.2022 and 12.07.2022 seeking clearance of 500 MTs and 1000 MTs respectively of the subject goods for home consumption. The said Bills of Entry were processed by the revenue and on payment of applicable duty out of charge were given.
2.6 Petitioner had written letters dated 11.07.2022 and 13.07.2022 to the office of Respondent No.3 while stating therein, amongst others, that the Petitioner had cleared the aforesaid subject goods (2000 MTs) on account of compelling circumstances and without prejudice to Petitioner’s rights and contentions in law to challenge ‘condition x’ imposed by public Notice No. 15/2015-20 dated:14.06.2022. Petitioner had taken clearance of 2000 MTs of the subject goods on payment of applicable duty and on such clearance, Petitioner had paid excess duty amount of Rs.1,89,66,948/-, without prejudice its rights and contentions in law.
2.7 It is contended that subsequent to filing of the present petition on 20.07.2022, petitioner urgently needed the subject goods to keep its manufacturing unit functioning and to avoid losses. Petitioner wanted to clear the goods against the aforesaid TRQ license and had approached the Department accordingly, who pointed out that the said request cannot be entertained since the goods stood warehoused before issuance of TRQ license. Since the goods were urgently needed, Petitioner had no option but to clear 2000 MTs out of the balance quantity of 3973.04 MTs of the subject goods without tendering TRQ license for such clearance. Petitioner had accordingly filed Ex-Bond Bills of Entry dated 22.07.2022 and 28.07.2022 seeking clearance of 2000 MTs for home consumption. The said Bills of Entry were processed by the revenue and on payment of applicable duty.
2.8 Petitioner had written letters dated 25.07.2022 and 29.07.2022 to the office of Respondent No.3 while stating therein, amongst others, that the Petitioner had cleared the aforesaid subject goods (2000 MTs) on account of aforesaid compelling circumstances and without prejudice to Petitioner’s rights and contentions in law to challenge “condition x” imposed by public Notice No. 15/2015-20 dated:14.06.2022. Petitioner had taken clearance of aforesaid 2000 MTs of the subject goods on payment of applicable duty and on such clearance, Petitioner had paid excess duty amount of Rs.1,89,66,948/-without prejudice to its rights and contentions in law. In total, Petitioner has made excess payment of Rs.3,79,33,896/- for clearance of 4000 MTs of the subject goods, without prejudice to its rights and contentions in law.
2.9 It is contended that the instant writ petition was listed before this Court on 01.08.2022 and after hearing both sides, this Court had permitted clearance of the balance quantity of the subject goods viz. 1973.04 MTs on furnishing of Bank Guarantee by the Petitioner to the tune of Rs.1,89,66,948/-. The said interim order was passed without prejudice to the rights and contentions of the parties and subject to the final outcome of the writ petition. In pursuance to the aforesaid order, Petitioner had furnished Bank Guarantee No. 0963222BG0000172 dated 05.08.2022 of State Bank of India, Indore for Rs.1,89,66,948/- and the aforesaid quantity of 1973.04 MTs was cleared accordingly. Under these circumstances, petitioner is before this Court by way of the present petition seeking the aforesaid reliefs.
3. The respondents have filed their statement of objections opposing the petition and have sought for its dismissal. While admitting the facts leading to the present petition, respondents deny the various contentions of the petitioner as regards the legality and validity of the impugned notifications and contend that there is no merit in the petition and the same is liable to be dismissed.
4. Heard learned counsel for the petitioner and learned counsel for the respondents-revenue and perused the material on record.
5. In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned counsel for the petitioner submitted that the impugned ‘condition x’ in the Public notice dated 14.06.2022 issued by the DGFT is illegal, arbitrary and without jurisdiction or authority of law, inasmuch as the same is contrary to Clause 2.13 of the FTP and has the effect of altering and amending the FTP which is impermissible in law, since the same lies within the exclusive domain of the Central Government and not the DGFT. The FTP is framed by the Central Government under the Foreign Trade(Regulation and Development Act), 1992 (for short, ‘the FTDR Act’) and the same provides for the DGFT to issue a Handbook of Procedure by way of a Public Notice and also amend/vary/alter the Handbook of Procedure by way of a Public Notice. The DGFT is empowered or authorized only to issue a public notice as aforesaid to regulate the procedure and not change/alter/modify the FTP which can be done only by the Central Government. In the instant case, the impugned ‘condition x’ in the Public Notice is issued by the DGFT and not by the Central Government and the same being contrary to the FTP and having the effect of altering and modifying clause No.2.13 of the FTP is clearly illegal and without jurisdiction. It is therefore contended that the impugned ‘condition x’ in the Public Notice dated 14.06.2022 and the consequential condition No.3 in the Condition sheet of the TRQ dated 05.07.2022 issued / allotted to the petitioner are illegal and arbitrary and deserve to be quashed and consequential directions have to be issued to the respondents.
In support of his contentions, learned counsel for the petitioner has placed reliance upon the following judgments:-
(i) Director General of Foreign Trade vs. Kanak Exports – 2015 (326) E.L.T.26 (S.C.);
(ii) D.Overseas Ltd., vs. Union of India – 2020 (373) ELT 151 (Delhi).
6. Per contra, learned counsel for the respondents – revenue submits that the DGFT functions not only as the Director General of Foreign Trade but he is also the Ex-Officio Additional Secretary to the Government of India and consequently, both the Public Notice dated 24.05.2022 and the impugned Public Notice dated 14.06.2022 having been issued after due approval from the Ministry of Commerce and Industry are deemed to have been issued by the Central Government only. It is submitted that the DGFT is an authority constituted under the FTDR Act and entitled to issue the public notices prescribing the procedure including the impugned ‘condition x’ in the Public Notice dated 14.06.2022.
6.1 It is also submitted that as per Authentication (Orders and Other Instruments) Rules, 2002, the DGFT is the Authenticating Officer, who is entitled to sign the Notification on behalf of the Central Government. It is therefore submitted that the DGFT was perfectly justified in inserting the impugned conditions in the Public Notice dated 14.06.2022 and the TRQ dated 05.07.2022 issued in favour of the petitioner, which do not warrant interference by this Court in the present petition.
In support of his contentions, learned counsel for the respondents has placed reliance upon the following judgments:-
(i) Union of India & others vs. AGRICAS LLP & others – 2020 SCC Online SC 675.
(ii) Chowgule & Company Limited vs. Assistant Director General of Foreign Trade & Others – 2022 Live Law (SC) 919;
(iii) SCA No.14959/2019 by the Gujarath High Court;
(iv) P.No.15921 to 15924/2018 etc., by the High Court of Madras;
(v) P.No.552 & connected cases/2019 by the High Court of Andhra Pradesh;
(vi) DGFT & Anr. Vs. Mustafa Traders & Anr.- W.A.No.480/2011 dated 02.11.2020 – High Court of Kerala at Ernakulam.
7. The only question that arises for consideration in the present petition is with regard to the legality and validity of ‘condition x’ mentioned in para-2 of the Public Notice at Annexure-J dated 14.06.2022 and consequential condition No.3 in the Condition sheet of the TRQ dated 05.07.2022 (Annexure-M) issued / allotted to the petitioner, whereby the subject goods of the petitioner lying at Indian Ports (under warehousing etc.,) before the date of issuance of TRQ licence are directed by the respondents not to be considered for import clearance under TRQ.
8. Before adverting to the rival contentions, it is necessary to refer to certain provisions of the Foreign Trade (Development and Regulation) Act, 1992 (for short ‘the FTDR Act) and the Foreign Trade Policy 2015-2020 (FTP);the Foreign Trade Policy cannot be exercised by DGFT; so also, as per Section 3(2) of FTDR Act, only the Central Government can by Order published in the Official Gazette make provision for prohibiting, restricting or otherwise regulating import or export of goods or services or technology and this power of the Central Government cannot be exercised by the DGFT.
FTDR Act:
