2003 (11) TMI 319 - HC - Customs

Exemption from levy of import duty on imports of edible oils under Free Trade Agreement - domestic manufacturers have to suffer import duty on the import of basic raw material if the value addition to the Crude Palm Oil is to the tune of 20%, duty free imports of vegetable oils would not be permitted in terms of Rules of Origin under FTA.

Summary

Issues:
Challenge to notifications granting 100% exemption from import duty on edible oils from Sri Lanka under Indo-Lanka Free Trade Agreement (FTA) based on alleged lack of level playing field for domestic manufacturers.

Analysis:
1. Challenge to Preferential Treatment: The petitioners sought to quash Notifications No. 26/2000-Customs and No. 43/2003-Customs, alleging unwarranted preferential treatment to imports of edible oil from Sri Lanka under the FTA. They argued that while domestic manufacturers face a 65% import duty on raw materials with a 25% domestic market stipulation, Sri Lankan manufacturers enjoy duty-free imports and exports under the FTA, causing a potential threat to domestic producers.

2. Government's Response: The Union of India, in its reply affidavit, clarified that a 20% value addition to Crude Palm Oil is required to prevent duty-free imports under the FTA rules of origin. The government also cited a letter addressing concerns about value addition in Sri Lankan vanaspati production, indicating awareness of potential issues faced by domestic vanaspati manufacturers.

3. Government's Stance: The Court noted the government's acknowledgment of the challenges faced by domestic vanaspati producers if Sri Lankan exports do not meet value addition requirements under the FTA rules of origin. Additionally, the government highlighted the negligible impact of current vegetable oil imports from Sri Lanka on domestic producers, indicating no immediate threat to domestic industry under the FTA.

4. Disposition: Considering the government's position and the minimal impact of current imports, the Court found no immediate need to address the validity of the impugned notifications. Consequently, the Court disposed of the writ petition without issuing further orders, as no significant threat of serious injury to domestic producers under the FTA was evident at the present time.