2006 (8) TMI 106 - HC - Customs

Revenue refused export of consignment of sugar on ground of amendment in Foreign Trade Policy by Not. 18/04 prohibiting export of sugar Above amendment cannot effect transactions covered by the irrevocable Letter of Credit dated 10 May 06 Shipment is effected within the period of validity of LC

Summary

Issues:
Export of sugar to Bangladesh; Refusal of export by respondents; Validity of Letter of Credit; Amendments to Foreign Trade Policy; Interference with export; Compliance with Sugar Control Order.

Analysis:
The petitioner had an agreement to export 15000 metric tonnes of sugar to Bangladesh. The petitioner sent a Pro-forma Invoice to the buyer and requested the opening of an irrevocable Letter of Credit. The buyer complied, and the Letter of Credit was valid until August 7, 2006. Subsequently, the petitioner filed necessary documents with Customs for export. However, the respondents refused to allow the export citing the lack of a release order from the Directorate of Sugar under the Sugar Control Order.

The Foreign Trade (Development and Regulation) Act governs export and import in India. The Foreign Trade Policy 2004-09 outlines items that are freely exportable, restricted, or prohibited. Initially, sugar was freely exportable, but an amendment on July 4, 2006, included sugar in the list of prohibited items. However, the petitioner's consignments, endorsed for inspection before the amendment, were protected under the Policy's transitional provision. The amendment was not applicable to consignments covered by the irrevocable Letter of Credit opened on May 10, 2006, before the imposition of export restrictions.

During the hearing, it was found that neither the Sugar Control Order nor the Commissioner's order allowed Customs to stop the export of freely exportable goods due to Directorate of Sugar clearance. Consequently, the Court allowed the writ application, restraining the respondents from interfering with the export of 4450 metric tonnes of sugar covered by the Letter of Credit, provided the shipment is within the Letter of Credit's validity period or any extension granted by the buyer. The prayer for stay was refused, and all parties were instructed to act upon the judgment.