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2011 (2) TMI 688 - HC - Customs100% Export-Oriented Unit ( EOU ) - manufacturers of cotton yarn - ban on the export - Whether this was on account of any deliberate omission on the part of the Textile Commissioner s office would require investigation into disputed questions of fact which is not possible to be undertaken by this Court in exercise of its jurisdiction under Article 226 of the Constitution.- Held that - The argument advanced on behalf of KKTL that it is an EOU and therefore constitutes a separate class, is indeed an attractive one. However, given the policy of the need to control the price of raw cotton and cotton yarn in the domestic market, and given the fact that KKTL also purchases raw cotton from the domestic market for the manufacture of cotton yarn, KKTL cannot be said to be outside the purview of the ban on the export of cotton yarn. - The arguments advanced on behalf of KKTL, therefore, do not merit acceptance. - Decided against the petitioner assessee However, as stated by learned ASG for the Respondents, this will not preclude KKTL from representing to the Respondents that in view of the hardship caused on account of the ban on export of cotton yarn, it should be granted relaxation in the matter of compliance with the export targets and also be permitted to sell its production in the domestic market - Such representation when made will be decided expeditiously by the central government.
Issues Involved:
1. Validity of the Press Release dated 1st December 2010. 2. Validity of the Notification dated 22nd December 2010. 3. Retrospective application of the Notification dated 22nd December 2010. 4. Impact on 100% Export-Oriented Units (EOUs). 5. Allegations of arbitrary and discriminatory issuance of Export Authorization Registration Certificates (EARCs). Detailed Analysis: 1. Validity of the Press Release dated 1st December 2010: The challenge was whether the ban on the export of cotton yarn could be imposed by a press release. The court referred to the case of Agri Trade India Services Pvt. Ltd. v. Union of India, where a similar issue was addressed. The court held that a ban on export must be notified in the Official Gazette as per Section 5 of the FTDR Act. The Supreme Court in Union of India v. Asian Food Industries upheld this view, stating that such prohibitory orders can only have prospective effect. Consequently, the court held that the Press Release dated 1st December 2010 was ultra vires the FTDR Act. 2. Validity of the Notification dated 22nd December 2010: The petitioners argued that the notification was issued by the DGFT, who had no authority to do so. The court clarified that although the notification was signed by the DGFT, it was issued by the Department of Commerce (DoC) in the Ministry of Commerce and Industry (MoCI), which is in line with the requirements of Section 5 FTDR Act. Therefore, the notification was validly issued by the central government. 3. Retrospective Application of the Notification dated 22nd December 2010: The court examined if the notification could retrospectively apply to exports already in the pipeline. The Supreme Court in Asian Food Industries held that prohibitory orders could only be prospective. However, the court noted that the notification dated 22nd December 2010 included a transitional arrangement allowing exports for which EARCs were issued on or before 1st December 2010. The court found that the intention of the central government was to cap exports at 720 million kgs, and once this limit was reached, the ban would apply. The court held that the retrospective application was valid as it was based on the quantity limit rather than the date of the notification. 4. Impact on 100% Export-Oriented Units (EOUs): KKTL, a 100% EOU, argued that the ban disproportionately affected it since it could not divert its produce to the local market. The court acknowledged the unique position of EOUs but held that the policy aimed to control domestic prices of cotton yarn, and EOUs were not exempt from this policy. The court referred to the principle that courts generally do not interfere with economic policy decisions unless they are arbitrary or unreasonable. The court found the policy reasonable and dismissed the argument. 5. Allegations of Arbitrary and Discriminatory Issuance of EARCs: The petitioners alleged that the Textile Commissioner's office acted with ulterior motives by selectively issuing EARCs. The court noted that the petitioners did not provide concrete evidence to substantiate these allegations. The court also pointed out the significant increase in EARC applications in November 2010, indicating that the industry was aware of the impending ban. The court held that these allegations required investigation into disputed facts, which was not possible under Article 226 jurisdiction. Conclusion: The court dismissed the petitions, holding that the Press Release dated 1st December 2010 was ultra vires the FTDR Act, but the Notification dated 22nd December 2010 was valid. The retrospective application of the notification was upheld, and the court found no merit in the arguments concerning EOUs and allegations of arbitrary issuance of EARCs. The court emphasized the need for judicial restraint in matters of economic policy.
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