2002 (10) TMI 646 - HC - FEMA

Summary

Issues Involved:
1. Validity of DGFT Circular dated 3rd September 2001.
2. Inaction by State Trading Corporation of India Ltd. (S.T.C.).
3. Validity of Show Cause Notice dated 29th April 2002.
4. Validity of Public Notice dated 20th May 2002.

Summary:

1. Validity of DGFT Circular dated 3rd September 2001:
The petition challenged the DGFT Circular dated 3rd September 2001, which directed licensing authorities not to issue any duty-free advance licence for the import of natural rubber until further orders. The court noted that the EXIM Policy 2002-2007, announced by the Central Government u/s 5 of the Foreign Trade (Development and Regulation) Act, 1995, permits duty-free import of natural rubber under an advance licence. The DGFT, being an implementing agency, cannot prohibit such imports when the policy explicitly allows it. The circular was found to be inconsistent with the EXIM Policy and thus quashed.

2. Inaction by State Trading Corporation of India Ltd. (S.T.C.):
The petitioner also challenged the inaction of S.T.C. in refusing to import natural rubber under the advance licence granted on 8-10-2001. The court observed that the S.T.C. had deferred the import based on the DGFT's circular, which was found to be without jurisdiction. Therefore, the inaction by S.T.C. was indirectly addressed by quashing the circular.

3. Validity of Show Cause Notice dated 29th April 2002:
During the pendency of the writ petition, a show cause notice dated 29-4-2002 was issued for the cancellation of the advance licence granted to the petitioner. The court held that since the circulars issued by the DGFT were quashed, the show cause notice based on those circulars was also without jurisdiction and thus quashed.

4. Validity of Public Notice dated 20th May 2002:
The petitioner challenged the public notice dated 20th May 2002, which amended the Hand Book of Procedures to prohibit duty-free import of natural rubber. The court held that the DGFT does not have the power to amend the EXIM Policy, which is exclusively vested in the Central Government u/s 6(3) of the Act. The public notice was found to be beyond the scope of DGFT's authority and thus quashed.

Conclusion:
The court concluded that the DGFT's circulars and public notice were inconsistent with the EXIM Policy and beyond the DGFT's jurisdiction. Consequently, the circulars, public notice, and the show cause notice were quashed and set aside. The petition was allowed, and the rule was made absolute with no order as to costs.