2020 (8) TMI 705 - SC - Customs

Power of Central Government to impose quantitative restrictions - Import of Peas - Powers u/s 3 versus u/s 9A of the FTDR Act - HELD THAT - The impugned notifications were in the nature of quantitative restrictions under Section 9A of the FTDR Act, which could be only imposed by the Central Government after conducting such enquiry, as is deemed fit, and on being satisfied that the goods are imported into India in such quantities and under such conditions as to cause or threatens to cause serious injury to domestic industry. Further, in exercise of power under sub-section (3) to Section 9A the Central Government has framed the Safeguard Measures (Quantitative Restrictions) Rules, 2012, that prescribe mandatory and detailed procedure for initiation, investigation, hearing to parties and adjudication by the Authorised Officer, which statutory mandate has not been followed. Under sub-rule (4) to the above Rule, the Authorised Officer has power to initiate suo moto action if he is satisfied with the information received from any source that sufficient evidence exits regarding increased imports; serious injury or threat of serious injury to the domestic industry; and causal link between increased imports and serious injury or threat of serious injury to the domestic industry. By another order dated 2nd July, 2020 the Union of India was directed to file an affidavit clearly stating whether the impugned notifications are in the nature of quantitative restrictions and if so whether the procedure under Section 9A of the FTDR Act read with Safeguard Measures (Quantitative Restrictions) Rules, 2012 had been followed and to produce the relevant record thereof. Challenge to the role and authority of the DGFT to issue the Notifications and Trade Notice and interpretation of the words total quantity - HELD THAT - The effect of the Notifications, as noticed and beyond doubt, is to bring the specified commodities from free to the restricted category and therefore the imports in question would require a prior authorisation for import. The requirement of licence is nothing but authorisation. Therefore, in terms of paragraph 2.10, the imports of the specified commodities would only be by the actual user , unless the actual user condition was specifically dispensed with or diluted by the DGFT. The Directorate by specifying that the licence would be issued to the miller or refiner has, therefore, just clarified that the actual user alone will be permitted to import the restricted goods mentioned in the notification for which a prior authorisation or licence is required. The importers are traders and it is not the case of any of the importers that they are the actual users . Further, none of the importers have applied for a licence or authorisation for import of the restricted commodities - Actual user condition, therefore, applies by default when imports require an authorisation. However, the DGFT can specifically dispense with or dilute the actual user condition. Section 9A of the FTDR Act and it s interpretation - General Agreement on Tariff and Trade 1947 and 1994 - HELD THAT - The Panels are normally composed of three persons, and in exceptional cases five, who are well qualified government or non-government individuals selected from a roaster of persons suggested by WTO members. The panel members serve in their individual capacities and not as representatives of WTO members. The Appellate Body reviews Panel decisions. The Appellate Body is a standing institution composed of seven persons appointed by DSB for four-year term. Members of the Appellate Body must be persons with recognised authority with demonstrated expertise in law and international trade who are not affiliated with any government. Membership of the Appellate Body is broadly representative of the membership of the WTO. The procedure adopted for the dispute resolution mechanism is to facilitate prompt settlement of situations with the objective and purpose that the Marrakesh Agreement is preserved and not nullified or impaired. Obligations of the contracting party and effect of international treaty, namely, GATT-1994 on the domestic law - HELD THAT - Where the treaty or portion thereof become a part of the domestic law by act of transformation , it is obvious that only the part incorporated or transformed into domestic law is invocable and justiciable and not the parts that are not codified into domestic law. However, invocability can embrace several ideas which are intertwined and is of specific concern in cases of constitutions allowing direct application. Here invocability is a generic term which means to embrace a small inventory of means of judicial control over the use in a particular law suit of the direct applicability of the treaty. As in case of act of transformation , even in direct application cases, some jurisdictions accept the principle of partial direct application and, therefore, the treaty is directly applicable for some purposes and not others. While interpreting the domestic law enshrining Human Rights (and sometimes environment issues) this Court on some occasions has relied on international conventions and treaties where the terms of any legislation are absent, not clear or are reasonably capable of more than one meaning. In such cases, where there are statutes, rules etc. the meaning which in consonance with the treaties can be relied upon, for there is a prima facie presumption that the Parliament did not intend to act in breach of international law, including State treaty obligations. Part-III of the Indian Constitution a-priori incorporates and recognises the Human Rights, consequently recourse to international conventions can be made to interpret and borrow explicit terminologies and nuances to bailiwick Human Right jurisprudence. However, in the present case we are examining an economic and fiscal legislation or rather economic policy decision taken by the Union of India. In the affidavit filed on 6th July 2020, with reference to Section 9A of the FTDR Act, the Union of India has stated that the said section is attracted only when the goods are imported into India in increased quantity and under such conditions as to cause or threaten to cause serious injury to domestic industry. Section 9A is enacted as a safeguard mechanism in terms of Article XIX of the GATT-1994 and Article II of the WTO Agreement on Safeguards vide the Amendment Act, 2010. The notifications under challenge have been issued within the express terms of Section 3 of the FTDR Act which permits the Central Government to impose restrictions without any qualification of the nature specified in Section 9A. Power of the Central Government to restrict imports to limited quantities under Section 3 and quantitative restrictions under Section 9A of the FTDR Act are completely distinct and have no connection or interplay. The power under Section 3(2) of the FTDR Act is of a wide amplitude. Reference is also made to Rule 5(2) to assert that there is necessity of evidence that the imports had increased as a result of unforeseen developments in addition to the necessity for evidence disclosing serious injury or threat of serious injury to domestic industry and a causal link between imports and serious injury. The restrictions have been imposed not due to increased quantities of imports but to prevent panic disposal by farmers as the prices of Gram would come down. Interpretation of Sections 3 and 9A of the FTDR Act - HELD THAT - The Central Government i.e. the Union of India has been given the necessary discretion and election with regard to framing of policies for import and export of goods, services and technology. Therefore, implementation of GATT-1994, including Article XI, is left to the Central Government by means of delegated legislation - Clause (2) of Article XI of GATT-1994 states that provisions of paragraph (1) shall not extend to three specified situations as stated in sub-clauses (a), (b) or (c). Clause (c) deals with import restrictions on any agricultural or fisheries product, imported in any form necessary for enforcement of governmental measures specified therein. Similarly, Article XII of GATT-1994 states that notwithstanding the provisions of paragraph (1) of Article XI, any contracting party, in order to safeguard its external financial position and its balance of payments, may restrict the quantity or value of merchandise permitted to be imported, subject to the provisions of paragraphs of that Article. Notwithstanding Section 9A, the Central Government continues and has authority to impose quantitative restrictions by an order under Section 3(2) of the FTDR Act. Principle of Lex specialis derogat legi generali, therefore, is not applicable to the case in hand - Section 9A has to be interpreted as an escape provision when the Central Government i.e. the Union of India may escape the rigours of paragraph (1) of Article XIX of GATT-1994. Section 9A is not a provision which incorporates or transposes paragraph (1) of Article XI into the domestic law either expressly or by necessary implication. The impugned notifications would be valid as they have been issued in accordance with the power conferred in the Central Government in terms of sub-section (2) to Section 3 of the FTDR Act. The powers of the Central Government by an order imposing restriction on imports under sub-section (2) to Section 3 is, therefore, not entirely curtailed by Section 9A of the FTDR Act - In the present case, this Court is not called upon to decide and examine the obligations of the Contracting Parties in terms of GATT-1994. The impugned notifications and the trade notices are upheld and the challenge made by the importers rejected. The imports, if any, made relying on interim order(s) would be held to be contrary to the notifications and the trades notices issued under the FTDR Act and would be so dealt with under the provisions of the Customs Act 1962. Petition dismissed.

Summary

Issues Involved:
1. Validity of Notifications and Trade Notice under FTDR Act.
2. Role and authority of DGFT.
3. Interpretation of "total quantity" in notifications.
4. Applicability of Section 9A of FTDR Act.
5. Bona fide imports under interim orders.

Detailed Analysis:

1. Validity of Notifications and Trade Notice under FTDR Act:
The Supreme Court examined the validity of the notifications dated 29th March 2019 and the Trade Notice dated 16th April 2019 issued by the Directorate General of Foreign Trade (DGFT). The Court found that the notifications were issued by the Central Government under Section 3 of the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act), and not by the DGFT, which merely performed the ministerial act of publication. The notifications were held to be intra vires and not ultra vires, as they were issued by the Central Government in exercise of powers conferred under Article 77 of the Constitution.

2. Role and Authority of DGFT:
The Court clarified that the DGFT, an authority constituted under the FTDR Act, is responsible for advising the Central Government on foreign trade policy and carrying out that policy. The DGFT's role in issuing the notifications was merely ministerial, and the decision to amend and issue the notifications was made by the Central Government. Therefore, the DGFT's actions were within its authority, and the notifications were validly issued.

3. Interpretation of "Total Quantity" in Notifications:
The Court rejected the importers' contention that the expression "total quantity" in the notifications referred to the quantity per licensee. The Court held that the notifications expressly used the term "total quantity" to refer to the aggregate quantity of the commodity specified, which could be imported. The interpretation suggested by the importers was found to be contrary to the express language of the notifications and would frustrate the intent and object of restricting imports by prescribing a quota.

4. Applicability of Section 9A of FTDR Act:
The importers argued that the notifications imposed "quantitative restrictions" under Section 9A of the FTDR Act, which requires specific conditions and procedures to be followed. The Court, however, held that Section 9A is an enabling provision that allows the Central Government to impose quantitative restrictions after following the prescribed procedure. It does not limit the Central Government's power to impose restrictions under Section 3(2) of the FTDR Act. The Court concluded that the Central Government has the authority to impose quantitative restrictions under Section 3(2) without necessarily invoking Section 9A.

5. Bona Fide Imports Under Interim Orders:
The importers relied on interim orders passed by various High Courts to continue importing despite the notifications. The Court found that the importers acted for personal gain and profit, knowing that similar petitions had been dismissed by other High Courts. The Court held that the importers could not claim bona fide belief in their right to import and would face the consequences in law.

Conclusion:
The Supreme Court upheld the validity of the notifications and the Trade Notice, rejecting the importers' challenges. The imports made under interim orders were deemed contrary to the notifications and Trade Notices and would be dealt with under the provisions of the Customs Act, 1962. The Court dismissed the writ petitions subject to the observations regarding statutory appeals, if any, preferred by the importers.

What is Not Decided:
The Court did not examine or decide the statutory appeals against orders suspending or terminating import-export codes, leaving them to be decided in accordance with the law.