FEBRUARY 14, 2018

By Ravindran V & R Alwan, Advocates

EXISTING Section 11 in the Customs Act, 1962 enables the government to prohibit absolutely or conditionally imports or exports of specified description of goods. Sub-section 2 of section 11 spells out the purposes of prohibition. List of such purposes includes public interest in general.

Section 3(2) in the Foreign Trade (Development and Regulation) Act, 1992 [FTDR] is also a similar provision enabling by executive order prohibitions, restrictions or other regulatory measures relating to import and export of goods (as also services or technology). Sub-section 3(3) states that such order relating to goods is deemed prohibition of such goods under section 11 of the Customs Act.

The said two sets of legal provisions are juxtaposed below:

An order under Section 3 read with Sec.4 FTDR - S.O.1056(E) dated 31.03.1993 - superseded the Import (Control) Order, and Export (Control) Order issued under the said 1947 Act. Therefore, Section 4 FTDR is of no effect since 31.03.1993. The said S.O.1056(E) dated 31.03.1993 is called Foreign Trade (Exemption from application of Rules in certain cases) Order, 1993. This Order does not impose any prohibition, restriction or regulation as above. It merely exempts specified imports and exports from the application of Foreign Trade (Regulation) Rules, 1993. Therefore, presently, Section 3 and 4 FTDR are not followed by any subordinate legislation as envisaged therein except S.O.1056(E) dated 31.03.1993 which is in the nature of facilitation of certain categories of imports and exports . However, we may note that goods to which any order under Section 3 applies shall be deemed to be goods, the import or export of which has been prohibited under Section 11 of the Customs Act. In other words, no separate notification under Section 11 Customs Act would be required.

The above Table would show that two substantially identical provisions in two different enactments exist to enable the government to prohibit or restrict imports and exports. There are also other allied Acts. CBEC's Customs Manual in Chapter 8 states that “… importers and exporters and other connected with international trade require to be well conversant with the provisions of Customs Act, 1962, the Foreign Trade Policy, as well as other relevant allied Acts and make sure that before any imports are effected or export planned, they are aware of any prohibition/restrictions and requirements subject to which alone goods can be imported/exported". The said Chapter 8 goes on to discuss various enactments, though not exhaustively. For example, Livestock Importation Act, 1898 as amended by Livestock Importation (Amendment) Act, 2001 enables government to regulate, restrict, or prohibit import of livestock which may be liable to be affected by infectious or contagious disorders etc., or livestock products which may be liable affect human or animal health. It provides that a notification so issued shall operate as if it has been issued under Section 11 of the Customs Act. Hazardous Wastes (Management, Handling and Trans boundary Movement ) Rules, 2008 states, among other things, "No import of the hazardous wastes from any country into India for disposal shall be permitted". It does not refer to Section 11 Customs Act. Section 10 of Arms Act, 1959 provides that "No person shall bring into, or take out of India by sea, land or air any arms or ammunition unless he holds in this behalf a license issued in accordance with the provisions of this Act and the rules …". Under section 11 “… Government may, by notification in the Official Gazette prohibit the bringing into, or the taking out of, India, arms or ammunition of such classes and descriptions …". This enactment too does not refer to Section 11 Customs Act. Section 2(33) of the Customs Act defines that "prohibited goods" means any goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with". This would also imply that non-compliance to a condition would amount to the goods being prohibited. Therefore, for a cause of action under the Customs Act to arise, a prohibition under section 11 is not a pre-requisite. Prohibition under any other law for import or export of the goods in question would suffice. Therefore, it would appear that, the deeming provision under some illustrative enactments cited above to deem the prohibition under those enactments to be ones under Section 11 of the Customs Act, was not all that necessary. Section 2(33) is wide enough.

Now, clause 57 of the Finance Bill, 2018 seeks to add a sub-section 3 in Section 11 of the Customs Act to say "Any prohibition or restriction or obligation relating to import or export of any goods or class of goods or clearance thereof provided in any other law for the time being in force, or any rule or regulation made or any order or notification issued thereunder, shall be executed under the provisions of that Act only if such prohibition or restriction or obligation is notified under the provisions of this Act, subject to such exceptions, modifications or adaptations as the Central Government deems fit".

Notes on clauses to the Bill explains the proposed amendment stating that "regulatory requirements relating to import or export of goods or class of goods or clearance thereof, in any other law or the rules or regulations made, or any order or notifications issued, thereunder, shall be required to be notified under this Act, with such exceptions or modifications or adaptations as the Central Government deems fit".

When this amendment is enacted and brought into force, a customs notification shall be a pre-requisite for enforcement of a prohibition, restriction or obligation arising out of an allied enactment relating to import or export. Until then, the allied enactment - be it plenary or subordinate - cannot be executed under the other allied enactment (and, consequently, under the Customs Act as well) and such other enactment would be dead letter and of no effect.

We may take a look at a few examples. Under the Foreign Trade (Development & Regulation), Act, 1992, no person shall make any import or export except under an Importer-exporter Code Number granted by the specified authority. This is an obligation imposed by a plenary legislation. It relates to imports and exports of goods by any person and their clearance by the customs. Another example is Legal Metrology (Packaged Commodities) Rules, 2011 which requires, among other things, an importer to register under the said rules. The said rules further mandate declaration of importer's name and address, maximum retail sale price etc., on the packages. This is subordinate or executive-made law. It would appear that, post-amendment to the Customs Act as proposed and with effect from the future date to be notified, such enactments would not be executable unless backed by a customs notification in that regard.

It is strange that an executive notification under Customs Act determines even the execution of an existing plenary legislation of a prohibition, restriction, or obligation relating to import or export of any goods and their clearance - purportedly with exceptions or modifications or adaptations. In other words, the government, acting under the new Section 11(3) would amend the plenary legislation! If the existing enactment is (or a future enactment would be) a rule made by the government, expressly for prohibition, restriction or obligation relating to import and export of goods and their clearance, the need for the very same government again notifying it - albeit, under another enactment - is baffling. The given reason of exception, modification or adaptation in the proposed customs notification for the proposed sub-section 3 appears to cut no ice as the other enactment which is to be so notified again is one expressly made for import or export of any goods and their clearance. For example, when the Foreign Trade (Development and Regulation) Act stipulates that no person shall make any import or export except under an Importer-exporter Code Number (IEC) granted by the specified authority, where is the need for exception, modification or adaptation? In fact, the Foreign Trade (Development and Regulation) Act empowers the DGFT to prescribe a procedure for issue of IEC and such procedure with special treatment to certain categories is stated in paragraph 2.07 of the Handbook of Procedures issued by the DGFT.

Similar would be the example of Packaged Commodities Rules cited above. The proposed sub-section 3 itself states that it is to deal with execution of other laws made relating to import or export of any goods and their clearance. Sub-section 3 would obviously be duplication when it is to notify other laws which are expressly made relating to import or export of any goods and their clearance.

Foreign Trade Policy, 2015-20, (as updated) with effect from 05.12.2017 is notified by Central Government, in exercise of powers conferred under Section 5 of the Foreign Trade (Development and Regulation) Act. Paragraph 2.03 of the FTP says "Domestic Laws/ Rules/ Orders/ Regulations/ technical specifications/ environmental/safety and health norms applicable to domestically produced goods shall apply, mutatis mutandis, to imports, unless specifically exempted". With such sweeping application of even domestic statutory enactments including executive prescriptions to imports, the proposed sub-section is in dire conflict.

Paragraph 2.01 of the FTP reads as follows:

"(a) Exports and Imports shall be 'Free' except when regulated by way of 'prohibition', 'restriction' or 'exclusive trading through State Trading Enterprises (STEs)' as laid down in Indian Trade Classification (Harmonized System) [ITC (HS)] of Exports and Imports. The list of 'Prohibited', 'Restricted', and STE items can be viewed by clicking on 'Downloads' at http://dgft.gov.in

(b) Further, there are some items which are 'free' for import/export, but subject to conditions stipulated in other Acts or in law for the time being in force".

If we look up the ITC (HS) of Exports and Imports, chapters therein carry licensing notes. Those notes specify the other legislation dealing with the goods in that chapter. For example, notes under chapter 1 for Live Animals refers to Wild Life (Protection) Act; notes under chapters 2 to 4 for meat etc., fish, dairy products etc., refer, in addition of reference to Wildlife (Protection) Act, 1972, also to requirement of sanitary import permit under Live-stock Importation Act, 1898. Chapter 5 for other wild life products, in addition to above, notes that "Import of Bovine Embryos shall be subject to compliance of the guidelines issued by Department of Animal Husbandry, Dairying & Fisheries. The guidelines are available at 'www.dahd.nic.in' under icon 'trade' at 'Procedure for Import". It goes on in each chapter of the ITC (HS) wherever other prescriptions by various pieces of legislation or subordinate legislation are involved. The proposed sub-section 3, it would appear, would be duplication apart from bristling with legal infirmities. Foreign trade and its regulation (development and regulation of foreign trade by facilitating imports into, and augmenting exports from India and for matters connected therewith or incidental thereto ) are vested with DGFT under Section 6 of the FTDR. Customs have an agency function to enforce it. They need not duplicate the literature already codified in the above manner by the DGFT.

It is hoped that the government would examine the issues cropping up or explain the rationale behind the clause.