1989 (2) TMI 248 - HC - Customs

Summary

Issues Involved:
1. Validity of Paragraph 7 of the Export Entitlement Distribution Policy.
2. Legality of the Open Tender System (OTS) for superfast categories.
3. Authority of the Government to impose a premium on export quotas.
4. Whether the premium constitutes a fee or a tax.
5. Violation of Articles 14, 19(1)(g), and 265 of the Constitution.

Issue-wise Detailed Analysis:

1. Validity of Paragraph 7 of the Export Entitlement Distribution Policy:
The petitioners challenged the validity of para 7 of the Export Entitlement Distribution Policy for the years 1988-1990, which introduced the Open Tender System (OTS) for certain categories of ready-made garments. The policy aimed to allocate export quotas based on sealed tenders indicating the premium offered to the Government.

2. Legality of the Open Tender System (OTS) for superfast categories:
The petitioners argued that the OTS was illegal and arbitrary, asserting that the premium-based allocation system was not aligned with the primary objective of maximizing foreign exchange earnings. They contended that the system favored those who could offer the highest premium rather than those who could achieve higher sale realizations.

3. Authority of the Government to impose a premium on export quotas:
The petitioners claimed that the Government had no power under the Import and Exports Control Act, 1947, or the Export (Control) Order, 1988, to impose such a premium. They argued that this premium amounted to a tax on exports, which was not authorized by any law.

4. Whether the premium constitutes a fee or a tax:
The court examined whether the premium could be considered a fee or a tax. The respondents argued that the premium was a service charge for securing export rights. However, the court found that the premium was a compulsory exaction without any element of quid pro quo, making it more akin to a tax rather than a fee.

5. Violation of Articles 14, 19(1)(g), and 265 of the Constitution:
The petitioners argued that the premium violated their fundamental rights under Articles 14 (equality before the law), 19(1)(g) (right to practice any profession or to carry on any occupation, trade, or business), and 265 (no tax shall be levied or collected except by the authority of law) of the Constitution. The court agreed, stating that the premium was an unreasonable restriction on the right to carry on trade and was not supported by any legislative authority.

Judgment Summary:
The court held that the premium imposed under the OTS was illegal and unauthorized. It found that the premium was a compulsory exaction resembling a tax, which was not sanctioned by the Import and Exports Control Act, 1947, or the Export (Control) Order, 1988. The court noted the absence of any element of quid pro quo and the lack of a reasonable co-relation between the premium charged and the services rendered. Consequently, the court struck down the entire Paragraph 7 of the Export Entitlement Distribution Policy, declaring it inconsistent with the Act and the Export Order. The writ petition was allowed, and the rule was made absolute, with costs awarded to the petitioners.