2024 (5) TMI 83 - HC - Customs

Seeking grant of permission to export of rice - Non-fulfilment of the conditions entitling it to an exemption - Notifications for imposition of ban on export of non-basmati white rice - export of Non-Basmati white rice was changed from free to prohibited with immediate effect - Whether the Appellant ought to be allowed to export 11,000 MT quantity of rice which is lying at private warehouses near the customs port at Kandla, Gujarat, on the test of substantial compliance of the conditions of exemption - HELD THAT - It is the case of the Appellant, that despite best of its efforts and due to no fault of it, the quantity of 11,000 MT could not be handed over to the Custodian at Deendayal Port Authority prior to 20th July, 2023, due to lack of storage space at the Port, as evidenced by letter dated 2nd August, 2023, issued by the Custodian. In addition, the Appellant contends that the vessel call number was allocated to it prior to the Notification and the non-berthing of the vessel before 20th July, 2023, was beyond its control. It is, thus, the case of the Appellant that in its facts though it could have otherwise fallen within the exception of Paragraphs 2(ii) and (iii) of the Notifications, entitling it to export 11,000 MT, it was unable to strictly complete the conditions despite all actions taken at its end, due to the circumstances beyond its control. It is noted that the Appellant initially in the writ petition and in the present appeal pleaded that despite best efforts it was unable to comply with condition no. (v) of Paragraph 2 with respect to payment of export duty on ten shipping bills for 10,000 MT, despite filing the same on to the Portal (ICEGATE) of the Respondent. The Appellant s averment itself is vague. However, the Respondent in the counter affidavit at Paragraph 21 and 22 as well as in this appeal vehemently opposed the said allegation and asserted that the Appellant was making an incorrect statement. The Appellant asserted that its Portal ICEGATE was fully functional and there was no hindrance to any exporter (including the Appellant) in making payments of export duty within the stipulated period. The Appellant herein has since abandoned the said plea and not relied upon the same in its written submissions dated 27th February, 2024. We find merit in the submission of the Respondent that each condition at Paragraph 2 in the Notifications is an independent exception and the exporter seeking to invoke the said exception has to fulfil each of the stipulations set out in the said condition. This is for the reason that each condition in the Notifications is intended to independently carve out an exception for facilitating export of shipments, which were in transition and the test to determine if the shipment is in transition was identified separately as condition nos. (i) to (iv) in the Notifications. Under the Notification, the Respondent has carved out five independent exemptions so as to entitle the exporters with transitional arrangements to comply with their export obligations. The Respondent admittedly was granted the benefit of the exemption for 17,000 MT as it complied with condition no. (v) in its entirety with respect to payment of export duty. Each of the five independent exemptions have essential requirements which the applicant exporter must comply with for completing the export. The Appellant fails to comply with the essential conditions in each of the exceptions. Therefore, the doctrine of substantial compliance relied upon by the Appellant is of no assistance as the Courts have held that latitude can be shown to the applicant only with respect to requirements which are directory in nature, the non-compliance of which would not affect the essence of the Notification granting exemption. Since the vires of the Notifications and reasonableness of exemption condition nos. (i) to (v) is not under challenge; and the Appellant admittedly fails to satisfy the essential conditions contained in each of the independent exemptions, we are unable to accept the contention of the Appellant that it can be permitted by Respondent to export 11,000 MT by taking an overall view of substantial compliance, which in the opinion of this Court is in essence a subjective evaluation, which is not the remit of the Notifications. Keeping in view the objective of the Central Government in imposing this ban with immediate effect was to avert a food crisis in the country, a strict compliance of the exemption conditions would further the said intent of the Notifications. The Appellant had also placed reliance upon the interim order dated 06th December, 2023 passed by the High Court of Chhattisgarh in I.A. No. 01/2023 filed in W.P.(C) permitting the exporter therein to export non-basmati rice. In this regard, we may note that the learned Single Judge of the High Court has referred and relied upon the order dated 19th October, 2023 passed by High Court of Andhra Pradesh while passing the interim order. The Respondent has stated that it is in the process of filing a SLP against the order passed by High Court of Chhattisgarh. The High Court of Chhattisgarh has considered the fact that the exporter therein has a pre-existing contract with the foreign importer along with letter of credit for granting ad-interim permission for export. We are of the considered opinion that in view of the express suspension of the FTP, 2023, the said fact stands expressly excluded from the scope of the Notifications and therefore, could not have formed the basis for granting relief. We have been unable to satisfy ourselves in the present appeal that the Appellant herein has satisfied the exemption conditions of the Notifications. Thus, we find that there is no merit in the appeal. Accordingly, the same is dismissed.

Summary

Issues Involved:
1. Challenge to the impugned judgment dismissing the petition for export of banned non-basmati white rice.
2. Interpretation and application of the exemption conditions under the Notification dated 20th July 2023 and its amendment on 29th August 2023.
3. The applicability of the doctrine of substantial compliance.
4. The impact of previous judgments from other High Courts on similar matters.

Summary:

1. Challenge to the Impugned Judgment:
The Appellant challenged the judgment dated 09th January 2024, which dismissed the petition seeking permission to export 11,000 MT of banned non-basmati white rice. The learned Single Judge held that the Appellant did not fulfill the conditions for exemption from the export ban imposed by Notification No. 20/2023 dated 20th July 2023, as amended by Notification No. 29/2023 dated 29th August 2023.

2. Interpretation and Application of the Exemption Conditions:
The Appellant, an exporter of rice, argued that it had substantially complied with the exemption conditions. Despite filing shipping bills and obtaining a rotation number for the vessel before the Notification, the vessel had not berthed or arrived before the Notification. The Appellant contended that the inability to store the entire quantity at the port due to lack of space should not prejudice its right to export.

The Respondent argued that the exemption conditions are independent and must be fulfilled in their entirety. The Appellant failed to meet any single condition completely, and thus, the export was rightly prohibited. The Notification aimed to manage domestic rice availability and prevent a food crisis, necessitating strict compliance with the conditions.

3. Applicability of the Doctrine of Substantial Compliance:
The Appellant invoked the doctrine of substantial compliance, asserting that it had taken all steps within its control and should be permitted to export the rice. The Court, however, held that the doctrine could not apply as the conditions set out in the exemption were essential and mandatory. The Court emphasized that exceptions in the Notification must be strictly construed, and partial compliance was insufficient.

4. Impact of Previous Judgments:
The Appellant cited various High Court judgments permitting exports under similar circumstances. The Respondent countered that these judgments were either under challenge or not accepted. The Court noted that the Appellant had not challenged the vires of the Notifications or the clarification issued by the Directorate General of Foreign Trade (DGFT).

The Court concluded that the Appellant did not meet the essential conditions for any of the exemptions and dismissed the appeal, emphasizing the need for strict compliance to support the Government's objective of averting a food crisis.

Conclusion:
The appeal was dismissed, with the Court upholding the requirement for strict compliance with the exemption conditions under the Notifications. The doctrine of substantial compliance was deemed inapplicable in this context, and previous judgments cited by the Appellant did not alter the outcome.