Full Judgment Text
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CASE NO.:
Writ Petition (civil) 4695 of 2006
PETITIONER:
Union of India & Ors.
RESPONDENT:
M/s. Asian Food Industries
DATE OF JUDGMENT: 07/11/2006
BENCH:
S.B. Sinha & Markandey Katju
JUDGMENT:
J U D G M E N T
[Arising out of S.L.P. (Civil) No. 17008 of 2006]
WITH
CIVIL APPEAL NO. 4696 OF 2006
[Arising out of S.L.P. (Civil) No. 17558 of 2006]
S.B. SINHA, J :
Leave granted.
Both the appeals involving common questions of law and fact were
taken up for hearing together and are being disposed of by this common
judgment.
We would, however, notice the fact involved in both the matters
separately.
FACT RE: M/S. ASIAN FOOD INDUSTRIES
Respondent herein is exporter of various kinds of pulses and grains. It
received orders for supply of 20331 MT of pulses from the Overseas
Importers of Middle East wherefor several contracts were entered into. The
said contracts were executed between 22.4.2006 and 2.05.2006. It received
US $294942 being approximately 20% of the contract amount by way of
advance towards the said supply from the importers on 9.5.2006. Shipment
of 20 containers out of the 107 containers consisting of 415 MT took place
during the period between 22.06.2006 and 24.06.2006. The remaining 87
containers were cleared and Let Export Orders dated 23.06.2006, 24.06.2006
and 26.06.2006 were issued by the custom authorities at Kandla Port. Bills
of lading were also issued therefor.
In the meanwhile, a purported decision was taken by the Central
Government to ban export of pulses on 22.06.2006. The said decision is
said to have been widely reported in the electronic media and print media,
but the notification banning the export of pulses was issued by the Central
Government only on 27.06.2006 in purported exercise of its power under
Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (for
short "the 1992 Act") wherein the Central Government prohibited export of
various goods mentioned therein for a period of six months from the said
date, the relevant portion whereof reads as under:
"S.O.(E) In exercise of the powers conferred by Section 5 of the
Foreign Trade (Development & Regulation) Act, 1992 (No. 22
of 1992) read with Para 1.3 and Para 2.1 of the Foreign Trade
Policy, 2004-2009, the Central Government hereby makes the
following amendments in the ITC(HS) Classifications of the
Export and Import items, 2004-2009 as amended from time to
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time.
2. With immediate effect the following new entry may be
inserted after entry at Sl. No. 44 in Chapter 7 of Table B under
Schedule 2 of ITC(HS):
Sl.
No.
Tariff
Item
HS Code
Unit
Item Description
Export
Policy
Nature of
Restriction
44
A
*
*
*
07131000
Kg.
Peas (Pisum
sativum)
Prohibited
Not permitted to
be exported.
07132000
Kg.
Chickpeas
(garbanzos) Beans
(Vigna spp.,
Phaseolus spp.):
Prohibited
Not permitted to
be exported.
*
3. The above amendment shall remain in force for a period of
six months from the date of its issue and shall not apply to
imports already effected against Advance
Licences/Authorisations issued prior to the date of issue of this
notification.
4. This issues in Public Interest."
Superintendent (Customs) on or about 28.6.2006 directed the Kandla
Port Trust that no further consignment be allowed to be shipped which has
passed out of the charge of the customs. However, the Assistant Traffic
Manager in a communication made to M/s. Intermark Shipping Agency Pvt.
Ltd. dated 29.06.2006 informed that even if goods have been cleared by
issuance of Let Export Orders, the same should not be loaded on the
shipping vessels in view of the said prohibition.
Another notification was issued by the Central Government on
4.07.2006 purported to be under Section 5 of the 1992 Act permitting export
of pulses against irrevocable letter of credit opened prior to 22.06.2006, the
relevant portion whereof reads as under:
"S.O.(E) In exercise of the powers conferred by
Section 5 of the Foreign Trade (Development &
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Regulation) Act, 1992 (No. 22 of 1992) read with
Para 1.3 and Para 2.1 of the Foreign Trade Policy,
2004-2009, the Central Government hereby makes
the amendment in para 3 of Notification No 15
dated 27th June 2006, to include the following
sentence, at the end of the said para:
Further the transitional arrangements notified
under para 1.5 of the Foreign Trade Policy, 2006
shall not be applicable for export of pulses against
irrevocable Letters of Credit opened on or after
22.6.2006 as the decision of the Government
prohibiting the export of pulses was announced
and got widely publicised on 22.6.2006 in the
electronic and print media.
2. This issues in Public Interest."
The respondents, however, addressed various correspondences with
the authorities to grant permission to shift the 87 containers of vessels in
view of the notification dated 4.07.2006 but the same was refused. A writ
petition questioning the said action on the part of the authorities filed by
them in the Gujarat High Court has been allowed by reason of the impugned
judgment.
FACT RE: M/S. AGRI TRADE INDIA SERVICES P. LTD.
M/s. Agri Trade India Services P. Ltd., Respondent No. 1 herein was
awarded a contract by Trade Corporation of Pakistan for supply of 3000 MT
of chick peas. An irrevocable letter of credit was opened in favour of the
respondent on 24.06.2006. On 27.06.2006, the respondent filed shipping
invoices and bill with customs authorities for export of chick peas. In view
of notification dated 27.06.2006, the Kandla Port Trust issued instructions
that loading of chick peas would not be permitted. Thereafter, a notification
dated 4.7.2006 was also issued purported to be under Section 5 of the 1992
Act permitting export of pulses against irrevocable letter of credit opened
prior to 22.06.2006.
Inter alia questioning the validity of notification dated 4.07.2006, the
respondents filed a writ petition before the Delhi High Court which was
marked as W.P. (C) No. 11691-11692 of 2006. By reason of the impugned
judgment dated 18.08.2006, the said writ petition has been allowed.
STATUTORY PROVISIONS
Before adverting to the questions raised in these appeals, we may
notice the statutory provisions operating in the field.
The Parliament enacted the Customs Act, 1962 (for short "the 1962
Act") to consolidate and amend the law relating to customs. Section 11 of
the 1962 Act empowers the Central Government to prohibit importation and
exportation of goods. Section 16 provides for date for determination of rate
of duty and tariff valuation of export goods in the following terms:
"16. Date for determination of rate of duty and
tariff valuation of export goods.--
(1) The rate of duty and tariff valuation, if any,
applicable to any export goods, shall be the rate
and valuation in force,\027
(a) in the case of goods entered for export under
section 50, on the date on which the proper officer
makes an order permitting clearance and loading
of the goods for exportation under section 51 ;
(b) in the case of any other goods, on the date of
payment of duty.
(2) The provisions of this section shall not apply to
baggage and goods exported by post."
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Section 39 of the 1962 Act prohibits the master of a vessel not to
permit loading of any export goods other than baggage and mail bags, until
an order has been given by the proper officer granting entry-outwards to
such vessel.
Chapter VII of the 1962 Act inter alia provides for the procedures for
clearance of export of goods. Section 50 postulates that the exporter of any
goods shall make entry thereof by presenting to the proper officer in the case
of goods to be exported in a vessel or aircraft, a shipping bill and, while
presenting, shall at the foot thereof make and subscribe to a declaration as to
the truth of its contents. Section 51 provides for clearance of goods for
exportation in the following terms:
"51. Clearance of goods for exportation.--
Where the proper officer is satisfied that any goods
entered for export are not prohibited goods and the
exporter has paid the duty, if any, assessed thereon
and any charges payable under this Act in respect
of the same, the proper officer may make an order
permitting clearance and loading of the goods for
exportation."
The Parliament also enacted the 1992 Act to provide for the
development and regulation of foreign trade by facilitating imports into and
augmenting exports from India and for matters connected therewith or
incidental thereto.
"Export" has been defined to mean taking out of India any goods by
land, sea or air. Section 3 of the 1992 Act empowers the Central
Government to make provisions by order published in the Official Gazette
for the development and regulation of foreign trade by facilitating imports
and increasing exports. Sub-section (2) of Section 3 thereof empowers the
Central Government to make provisions for prohibiting, restricting or
otherwise regulating in all cases or in specified classes of cases and subject
to such exceptions, if any, as may be made by or under the order, the import
or export of goods. Sub-section (3) of Section 3 provides that all goods to
which an order under Sub-section (2) applies would be deemed to be the
goods of import or export of which has been prohibited under Section 11 of
the 1962 Act and all the provisions of that Act shall have effect accordingly.
Section 5 of the 1992 Act provides that the Central Government may
from time to time formulate and announce, by notification in the Official
Gazette, the export and import policy and in the like manner amend that
policy.
POLICY
The Central Government announced its Foreign Trade Policy in
exercise of its power conferred upon it under Section 5 of the 1992 Act by a
notification dated 7th April, 2006. The said policy was issued in public
interest.
Chapter 1A of the said policy also provides for legal framework.
Clause 1.5 thereof reads as under:
"1.5 In case an export or import that is permitted
freely under this Policy is subsequently subjected
to any restriction or regulation, such export or
import will ordinarily be permitted
notwithstanding such restriction or regulation,
unless otherwise stipulated, provided that the
shipment of the export or import is made within
the original validity of an irrevocable letter of
credit established before the date of imposition of
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such restriction."
Clause 2.4 of the policy empowers the Director General of Foreign
Trade to specify the procedures required to be followed by an exporter in
any case or class of cases for the purpose of implementing the provisions of
the 1992 Act, the Rules and the Orders made thereunder and the said policy.
Such procedures were to be included in the Handbook which would be
published by means of a public notice and such procedures may in the like
manner be amended from time to time. It was stated:
"The Handbook (Vol.1) is a supplement to the
Foreign Trade Policy and contains relevant
procedures and other details. The procedure of
availing benefits under various schemes of the
Policy are given in the Handbook (Vol.1)"
The Handbook of Procedures which inter alia supplements the
Foreign Trade Policy was also issued on 7th April, 2006 upon giving a public
notice therefor. It contains nine chapters. Chapter 9 comprises of
miscellaneous matters. Paragraph 9.12 lays down the manner in which date
of shipment/ dispatch of exports would be reckoned. It inter alia provides:
"However, wherever the Policy provisions have
been modified to the disadvantage of the exporters,
the same shall not be applicable to the
consignments already handed over to the Customs
for examination and subsequent exports upto the
date of the Public Notice.
Similarly, in such cases where the goods are
handed over to the customs authorities before the
expiry of the export obligation period but actual
Exports take place after expiry of the export
obligation period, such exports shall be considered
within the export obligation period and taken
towards fulfillment of export obligation."
HIGH COURT JUDGMENTS
Whereas the Gujarat High Court invoking Paragraph 9.12 of the
Handbook and having regard to the fact that the customs authorities cleared
and permitted the loading of the goods and moreover the bill of lading had
also been filed, opined that the respondents were entitled to export the goods
in terms of the policy decision despite the said notification dated 27.06.2006,
the Delhi High Court declared the notification dated 4.07.2006 as ultra vires.
SUBMISSIONS
Mr. Vikas Singh, learned Additional Solicitor General for Union of
India, has raised the following contentions:
(i) Clause 1.5 of the Foreign Trade Policy would not apply to a case
where the export of goods are totally being prohibited and not merely
regulated or restricted.
(ii) Having regard to the definition of export and in particular the
provision of Section 51 of the 1962 Act, the procedures laid down
thereunder as envisaged under Sections 16 and 39 must be complied
and they having not been complied with, the impugned judgment of
Gujarat High Court cannot be sustained.
(iii) Although the notification dated 4.07.2006 was wrongly worded but as
thereby benefit was sought to be conferred on those who were not
aware of the ban before 22.06.2006 and had opened letters of credit
prior thereto were exempted from operation of the said notification,
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the order of prohibition shall be effective even if a concluded contract
had been arrived at for export of goods.
The learned counsel for the respondents, on the other hand, submitted:
(i) In view of the Foreign Trade Policy issued by the Central Government
under Section 5 of the 1992 Act, the amendments carried out therein
shall only have a prospective effect and not a retrospective effect.
(ii) As the Handbook of Procedures lays down supplemental provisions to
the Foreign Trade Policy issued by the Director General of Foreign
Trade in exercise of its power under the 1992 Act, the purported
prohibition issued under the notification dated 27.06.2006 would not
apply to a case where the formalities contained in Section 51 of the
1962 Act had been complied with.
(iii) Clause 1.5 of the Foreign Trade Policy having provided for protection
to those who were holders of letter of credit, the retrospective effect
purported to have been given in terms of the notification dated
4.07.2006 was unconstitutional being hit by Article 14 of the
Constitution of India.
ANALYSIS
Would the terms ’restriction’ and ’regulation’ used in Clause 1.5 of
the Foreign Trade Policy include prohibition also, is one of the principal
questions involved herein.
A citizen of India has a fundamental right to carry out the business of
export, subject, of course to the reasonable restrictions which may be
imposed by law. Such a reasonable restriction was imposed in terms of the
1992 Act.
The purport and object for which the 1992 Act was enacted was to
make provision for the development and regulation of foreign trade inter alia
by augmenting exports from India. While laying down a policy therefor, the
Central Government, however, had been empowered to make provision for
prohibiting, restricting or otherwise regulating export of goods.
Section 11 of the 1962 Act also provides for prohibition. When an
order is issued under Sub-section (3) of Section 3 of the 1992 Act, the export
of goods would be deemed to be prohibited also under Section 11 of the
1962 Act and in relation thereto the provisions thereof shall also apply.
Indisputably, the power under Section 3 of the 1992 Act is required to
be exercised in the manner provided for under Section 5 of the 1992 Act.
The Central Government in exercise of the said power announced its Foreign
Trade Policy for the years 2004-2009. It also exercised its power of
amendment by issuing the notification dated 27.06.2006. Export of all
commodities which were not earlier prohibited, therefore, was permissible
till the said date.
The implementation of the said policy was to be made in terms of the
procedures laid down in the Handbook. The provisions of the 1992 Act, the
Foreign Trade Policy and the procedures laid down thereunder, thus, provide
for a composite scheme. In implementing the said provisions of the scheme,
in the event an order of prohibition, restriction or regulation is passed, the
provisions of the 1962 Act mutatis mutandis would apply.
Section 50 of the 1962 Act provides for entry of goods for
exportation. It enjoins a duty upon an exporter to make entry thereof by
presenting a shipping bill to the proper officer in a vessel or aircraft. On
receipt of the shipping bill, the proper officer has to arrive at its satisfaction
that (i) the export of goods is not prohibited; (ii) the exporter has paid the
duty assessed thereon and charges payable thereunder in respect of the said
goods.
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Once he arrives at the said satisfaction, he will make an order
permitting clearance and loading of the goods for exportation.
The scheme of the Foreign Trade Policy postulates that when the
policy provisions are amended which are disadvantageous to the exporters,
the modification would not be attracted.
It furthermore lays down that although actual export had not taken
place but in the event goods are handed over to the custom authorities before
expiry of the export obligation period but actual export takes place after
expiry thereof, the same shall be considered within the export obligation and
taken towards fulfillment of such obligation.
Section 51 of the 1962 Act, therefore, does not say that unless and
until the shipment crosses the international border, the notification imposing
prohibition shall be attracted.
Different stages for the purpose of the said Act would, therefore, be
different. For interpretation of the provisions of the 1992 Act and the policy
laid down as also the procedures framed thereunder vis-‘-vis the provisions
of the 1962 Act, the rate of custom duty has no relevance. What would be
relevant for the said purpose would be actual permission of the proper
officer granting clearance and loading of the goods for exportation. As soon
as such permission is granted, the procedures laid down for export must be
held to have been complied with.
Strong reliance has been placed by the learned Additional Solicitor
General upon a decision of this Court in Principal Appraiser (Exports),
Collectorate of Customs and Central Excise and Others v. Esajee Tayabally
Kapasi, Calicut [(1995) 6 SCC 536] wherein this Court was concerned with
the change in the rate of duty and in that context the construction of Sections
16(1), 39 and 51 of the 1962 Act fell for its consideration. In relation to the
rate of duty it was held that the date of "entry outwards" would be the
relevant date with reference to which the rate of custom duty on the exported
duty is to be worked out.
In that case, the goods were cleared for a vessel known as S.S. Neils
Maersk. However, for want of space therein goods were shut out.
Necessary space for exporting those were secured in another vessel named
S.S. P’Xilas wherefor fresh shipping bill was filed on 9.08.1996. It was in
the peculiar fact of that case, this Court opined that the rate of export duty
prevalent as on 9.08.1996 would be leviable stating:
"...It becomes thus clear that the shipping bill as
well as the ultimate entry outwards for the goods
concerned sought to be exported must have
reference to the vessel through which such goods
are to be exported. Therefore, before any goods are
exported out of Indian territorial waters which
vessel is to be utilised for exporting them, becomes
a relevant consideration. The shipping bill
concerned has to be lodged with reference to a
given vessel which is to carry these goods out of
the Indian territorial waters and in connection with
such a vessel the entry outwards has to be obtained
and only thereafter the master of the vessel should
allow the loading of the goods for being exported
out of India. The rate of duty payable on such
exported goods would, therefore, be the rate of
duty that was prevalent at the time when entry
outwards through a given vessel is obtained. There
cannot be an entry outwards in connection with a
vessel which does not actually carry such goods
for the purpose of export. In the facts of the
present case, therefore, conclusion is inevitable
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that earlier entry outwards for the vessel S.S. Neils
Maersk was an ineffective entry outwards for the
purpose of computing the rate of customs duty of
export on the goods in question. Only the
subsequent entry outwards for vessel S.S. PXilas
which actually carried these goods out of Indian
territorial waters and effected the export of these
goods was the only relevant and operative entry
outwards and the rate of duty prevalent on the date
of the said entry outwards for vessel S.S. PXilas
was the only effective rate of duty payable on the
export of these goods. Consequently it must be
held that the respondent has made out no case for
refund of Rs 4444.96 for which he lodged the
claim."
We may notice that a Constitution Bench of this Court in Gangadhar
Narsingdas Agarwal v. P.S. Thrivikraman and Another [(1972) 3 SCC 475]
opined that Section 16 of the 1962 Act speaks of the fictional date only in
relation to the order of date of entry outwards of the vessel, but the issue
with which we are concerned did not arise therein. The fundamental and
statutory right of an exporter, in that case, were not sought to be taken away.
Esajee Tayabally Kapasi (supra), therefore, has no application in the
instant case.
Reliance has also been placed on Union of India and Others v. M/s. C.
Damani & Co. and Others [1980 (Supp) SCC 707] wherein the vires of
Exports (Control) Fifteenth Amendment Order, 1979 prohibiting pre-ban
commitments was in question. It was held that there was no ground to
discredit the policy. The question raised therein, viz., the effect of failure to
honour foreign contracts owing to change in law imposing ban on goods
covered thereby whether would attract the plea of frustration of contract was
not decided stating:
"...This contention may have to be considered here
or elsewhere, but, if we may anticipate our
conclusion even here, this question is being skirted
by us because the kismet of this case can be settled
on other principles. The discipline of the judicial
process forbids decisional adventures not
necessary, even if desirable."
We may, however, notice that M/s. C. Damani (supra) was explained
by this Court in State Trading Corporation of India Ltd. v. Union of India
and Others [1994 Supp (3) SCC 40]. It is not necessary for us to advert
thereto as the said judgment has no application in the instant case.
We are, however, not oblivious of the fact that in certain
circumstances regulation may amount to prohibition. But, ordinarily the
word "regulate" would mean to control or to adjust by rule or to subject to
governing principles [See U.P. Cooperative Cane Unions Federations v.
West U.P. Sugar Mills Association and Others [(2004) 5 SCC 430] whereas
the word "prohibit" would mean to forbid by authority or command. The
expressions "regulate" and "prohibit" inhere in them elements of restriction
but it varies in degree. The element of restriction is inherent both in
regulative measures as well as in prohibitive or preventive measures.
We may, however, notice that this Court in State of U.P. and Others v.
M/s. Hindustan Aluminium Corpn. and others [AIR 1979 SC 1459] stated
the law thus:
"It appears that a distinction between regulation
and restriction or prohibition has always been
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drawn, ever since Municipal Corporation of the
City of Toronto v. Virgo. Regulation promotes the
freedom or the facility which is required to be
regulated in the interest of all concerned, whereas
prohibition obstructs or shuts off, or denies it to
those to whom it is applied. The Oxford English
Dictionary does not define regulate to include
prohibition so that if it had been the intention to
prohibit the supply, distribution, consumption or
use of energy, the legislature would not have
contended itself with the use of the word
regulating without using the word prohibiting or
some such word, to bring out that effect."
However, in Talcher Municipality v. Talcher Regulated Market
Committee and Another [(2004) 6 SCC 178], it was opined that regulation is
a term which is capable of being interpreted broadly and it may amount to
prohibition. [See also K. Ramanathan v. State of Tamil Nadu and another,
AIR 1985 SC 660]
The terms, however, indisputably would be construed having regard
to the text and context in which they have been used. Section 3(2) of the
1992 Act uses prohibition, restriction and regulation. They are, thus, meant
to be applied differently. Section 51 of the 1962 Act also speaks of
prohibition. Thus, in terms of the 1992 Act as also the policy and the
procedure laid down thereunder, the terms are required to be applied in
different situations wherefor different orders have to be made or different
provisions in the same order are required therefor.
We, however, need not dilate on the said question as in the case of
Agri Trade India Services (P) Ltd., the requirements of Section 51 of the
1962 Act had not been complied with whereas in the case of Asian Foods
Industries, it was done.
The Delhi High Court, however, in our view correctly opined that the
notification dated 4.07.2006 could not have been taken into consideration on
the basis of the purported publicity made in the proposed change in the
export policy in electronic or print media. Prohibition promulgated by a
statutory order in terms of Section 5 read with the relevant provisions of the
policy decision in the light of Sub-section (2) of Section 3 of the 1992 Act
can only have a prospective effect. By reason of a policy, a vested or
accrued right cannot be taken away. Such a right, therefore, cannot a
fortiori be taken away by an amendment thereof.
In construing such a prohibitory order, whereas the rule of strict
construction must be followed, the interpretation which subserves the
intention of the Central Government as laid down in the policy as well as in
the procedure should be given effect to. A statute as is well known may
have to be construed in the light of the subordinate legislations framed
thereunder. When subordinate legislation has been framed by the same
authority which exercises the power under the policy, the intention of such
policy maker must be found out from the words used therein albeit having
regard to the rights of the exporters which are sought to be protected
thereby.
We, therefore, are of the opinion that whereas the judgment of the
Gujarat High Court must be upheld, that of the Delhi High Court, albeit for
different reasons, cannot be sustained.
For the reasons aforementioned, whereas Civil Appeal arising out of
SLP (C) No. 17008 of 2006 is dismissed with costs and counsel’s fee
assessed at Rs. 1,00,000/-, Civil Appeal arising out of SLP (C) No. 17558 of
2006 is allowed and the parties shall pay and bear their own costs.