By TIOL News Service

MUMBAI, JULY 19, 2018: THE question in these petitions is whether the Government of India, Ministry of Commerce and Industry, Department of Commerce, DGFT Notification No.4/2015-2020 dated 25th April, 2018, and particularly the Policy condition No.4 therein has been creating, according to some Regional authorities of the DGFT, a situation where clarification was required to be obtained from the Government of India and particularly the Ministry as aforesaid.

The petitioner is engaged in the business of import and export of agricultural products, including peas.

The petitioner entered into a contract with J.K. International Pty. Ltd. (the seller) for supply of yellow peas and also made an advance payment prior to 25.04.2018.

In terms of the powers conferred under the FTDR Act, the second respondent amended the import policy pertaining to import of peas (yellow peas) by Notification dated 25th April, 2018 and whereby the policy changed the categorization from free to restricted with regard to the subject product and further on the conditions mentioned in this Notification.

After the petitioner's application was processed, the Registration Certificate was granted on 14th May, 2018.

However, vide trade notice dated 18th May, 2018 it was communicated that only those contracts against which full or 100% advance payment was made prior to 25th April, 2018, are eligible to be registered in terms of the Notification dated 25th April, 2018.

Accordingly, instructions were issued to all the Regional authorities to cancel/recall the registration certificates already issued to various parties.

The prayers in the writ petition are for quashing and setting aside of the impugned trade notice and thereafter to restrain the respondents from giving effect to it and further commanding and directing by a writ of mandamus or any other appropriate writ, order or direction, the fifth respondent Commissioner of Customs to clear the goods as and when imported by the petitioner in line with the registration certificate dated 14th May, 2018.

After considering the extensive arguments made by the petitioners and the counsel for the Revenue, the High Court observed thus –

+ It is no doubt that the principle, which is settled as far as administrative law is concerned, in unequivocal terms says that the statutory notifications, if required to be altered or amended in future, then, the same route has to be adopted and no administrative orders/executive instructions and circulars can then be issued so as to interfere with, much less amend the statutory prescriptions.

++ A Notification, in this case, has been issued in exercise of the statutory powers conferred by section 3 of the FTDR Act. Therefore, an amendment to the Notification has to be in like manner.

++ Transitional provisions are to be found in para 1.05 (of FTP 2015-2020).

++ Clause (b) says that in case of an export or import that is permitted freely under FTP is subsequently subjected to any restriction or regulation, such export or import will ordinarily be permitted, notwithstanding such restriction or regulation, unless otherwise stipulated. This is subject to the condition that the shipment of export or import is made within the original validity period of an irrevocable commercial letter of credit, established before the date of imposition of such restriction and it shall be restricted to the balance value and quantity available and time period of such irrevocable letter of credit.

++ As far as the subject Notification is concerned, it is apparent from a bare reading thereof that it is issued in exercise of the powers conferred by section 3.

++ If the revision of the import policy results in import of peas being restricted, then, the restriction subject to policy condition would have to be understood and construed as a whole. Policy Condition 4 says that from 1st April, 2018 to 30th June, 2018, total quantity of one lakh metric ton of yellow peas minus the quantity already imported from 1st April, 2018 till 24th April, 2018, will be allowed against licence as per procedure to be notified by the DGFT.

++ There was never any intent, therefore, to allow any quantity to be imported exceeding this one lakh metric ton. This is the total quantity which is allowed to be imported between the period from 1st April, 2018 to 30th June, 2018. From this, what is to be subtracted is the quantity already imported from 1st April, 2018 till 25th April, 2018. That will include shipment already arrived and with regard to that part, there was never any dispute nor any confusion in understanding the condition. Thus, the shipment, which has arrived containing this deducted quantity between this 1st April, 2018 till 25th April, 2018, would be understood as the quantity already imported.

++ The next aspect of this is shipments, which are backed by irrevocable commercial letter of credit and advance payment made through banking channel before 25th April, 2018. We do not understand what could be the confusion for a irrevocable commercial letter of credit would back those shipments in regard to which the price has been stipulated in the contract and the price in full is secured by this ICLC. If it is so secured and backed up or it is a shipment backed by advance payment made through banking channel, then, that will be understood as complying with the Policy Condition 4. That would be taken as quantity already imported from 1st April, 2018 to 25th April, 2018.

++ One could not have, therefore, found any fault nor any confusion is resulting from this clear wording. No doubts should be entertained by the Regional Authorities.

Nonetheless, the High Court remarked that - possibly some vested interests have been able to persuade the Regional Authorities to seek a clarification resulting in issuance of a circular dated 9th May, 2018 .

The High Court further observed –

+ That circular refers to Notification No. 4 dated 25th April, 2018 and para 2 of this trade notice refers to the Policy Condition No. 4. Para 3 of the same enables assessing the remaining balance.

+ With regard to that, importers who have already contracted the import of peas before the date of issuance of the Notification and have paid any advance (full or part) for the same or have furnished irrevocable commercial letters of credit, before 25th April, 2018, were allowed to forward documents indicating the quantity contracted and the amount paid so as to enable the DGFT to lay down further procedure.

+ We do not see how from this paragraph any benefit can be derived, much less additional advantage, by the parties like the petitioners or importers placed on par with them. It is only to assess the remaining balance that the Regional Authorities could have sought the details in terms of para 3.

+ The Regional Authorities were of the view that whether advance payment in the above paragraph will include part advance or the full advance payment be clarified and for that the DGFT had to step in. It stepped in not to amend the notification, as is wrongly understood and argued before us. It is only to remove the doubts expressed by the Regional Authorities and issue the clarification that this trade notice was issued. Its language and particularly that of para 3 is consistent with the notification itself.

+ How that quantity, which is already imported, has to be dealt with is provided in this policy condition and because that condition employs the words “already imported”, the ambit and scope of these words and expression had to be clarified. If that is clarified in unequivocal, clear and unambiguous terms, as held above, then, we do not see how we can accept the argument that the impugned trade notice amends the Notification. It does not do anything of that kind, but removes the confusion in the minds of the Regional Authorities. It is not that there was confusion throughout, but some Regional Authorities entertained doubts. Else, the trade has clearly understood that condition.

+ If there is a ICLC, then, the shipments backed by such ICLC and already imported between 1st April, 2018 to 25th April, 2018 would be registered under the jurisdictional Regional Authorities as per paragraph 1.05 of the FTP 2015-20. In relation to those where advance payments have been made, but to the extent of 100% of the contracted quantity, they would also qualify to be registered by the Regional Authorities of the DGFT.

+ It is quite likely that taking advantage of the fact that the contracted quantity has to be delivered in part or the contracted quantity is agreed, but there are separate or distinct contracts under which the contracted quantity is sold, there is a party delivery and yet, the benefit would be taken by insisting that such contract should also be registered by the jurisdictional Regional Authorities, then, confusion to that extent has been removed by the impugned trade notice.

+ We do not see how we can accept the argument that this amends the Notification and it is a substantive exercise carried out in terms of the statutory powers. We see nothing of this kind resulting from the issuance of the trade notice dated 18th May, 2018 and impugned in this petition. It is but a clarification issued during the implementation of the Notification dated 25th April, 2018.

Concluding that the the transitional arrangement which has been clarified by the trade notice does not contravene the substantive provisions of the notification or section 3 of the FTDR Act, the Writ Petitions were dismissed.

(See 2018-TIOL-1390-HC-MUM-CUS)