2023 (3) TMI 187 - HC - Customs

Seeking issuance of import licences in Form X format as per Rule 88 of the Arms Rules, 2016 in respect of the licences that it has already procured from the Department of Defence Production (DDP), Ministry of Defence - import of restricted item - It is the case of the Petitioner that it obtained seven licences from the DDP for import of restricted items from the U.S. and various other countries - HELD THAT - The factual situation reveals that in view of the applicability of the FTDR Act and the Arms Act, there has been some confusion between the authorities as to the manner in which licenses are to be granted for import of arms and parts thereof. The stand of the DGFT is that Form X license would be required for import of fire arms in India. However, on a specific query as to whether there was any methodology prescribed for filing an application under Form X on the DGFT portal, the Court has been informed that there is no procedure for online application under Form X and a physical copy would have to be filed by the importer. Insofar as the DDP is concerned, though, it is the delegatee of the DGFT under the FTDR Act, insofar as the Arms Act is concerned, the power of granting import licence under the said Act has not been delegated. Even during the submissions before this Court when officials from both the authorities have appeared, it is clear that there was a lack of clarity on this matter which led to the issuance of the circular dated 8thFebruary, 2023 by the DDP, which now seeks to clarify all the required forms to be filled, the authorities to deal with the same and the permissions thereof to be granted. The clear position that therefore emerges is that the Petitioner has been issued licences for imports by the DDP. Two consignments have already arrived in India. These two consignments are in respect of licences which are at pages 61 and 64 of the writ petition. Both these consignments are meant for indigenisation of rifle production in India under Technology Transfer Collaboration with LMT Defence, USA, and for indigenisation of shotgun production in India under Technology Transfer Collaboration with Hugul Firearms Cooperative, Turkey. Such imports are crucial and clearly are meant to expedite indigenisation which is an important aspect of achieving self-sufficiency for defence purposes. The holding-up of these consignments on procedural grounds, especially owing to confusion between two authorities would be contrary to the object behind issuance of the licences itself by the DDP. Insofar as the defence requirements are concerned, the DDP is well conversant of the same and has duly licensed the imports. The application shall be made within a period of one week from now to the DGFT along with the requisite fee and the permission under Form X shall be issued within a period of two weeks thereafter. It is made clear by the Petitioner that none of the products are meant for commercial sale and the same shall not be sold without obtaining requisite licenses and permissions. An undertaking to this effect shall be recorded by the DGFT at the time of processing the permission. The Petitioner is permitted to approach this Court by way of an application if there is any delay in processing of licence in Form X or if any other objections are raised by the concerned department - Petition disposed off.

Summary

Issues Involved:
1. Whether the already imported goods can be released to the Petitioner.
2. Whether the goods which are yet to be imported under the remaining five licenses can be permitted to be imported or not.

Detailed Analysis:

1. Release of Already Imported Goods:
The Petitioner, Werywin Defence Pvt. Ltd., sought the issuance of import licenses in 'Form X' format as per Rule 88 of the Arms Rules, 2016, for licenses already procured from the Department of Defence Production (DDP). The imported goods were held up because the Delhi Police required a 'Form X' license for inspection. The Court had earlier permitted the Petitioner to move the goods to a recognized warehouse under Section 49 of the Customs Act, 1962, to avoid high demurrage charges. The issue of recognized warehouses for full arms was resolved, and the Petitioner is in the process of shifting the goods. The Court directed the Petitioner to apply for a 'Form X' license with the DGFT within one week, and the DGFT to issue the license within two weeks. The Petitioner must use the products strictly as per the licenses granted and not for commercial sale without prior permission.

2. Import of Goods Under Remaining Licenses:
The Petitioner had obtained seven licenses from the DDP for importing restricted items, but imports under five licenses were pending due to the lack of 'Form X' licenses. The Petitioner argued that the DDP, as a delegatee under the FTDR Act, should issue the licenses, and there was no provision in the SOP for applying under 'Form X'. The Respondents contended that both the FTDR Act and the Arms Act apply, and the DGFT retains the power to issue 'Form X' licenses under the Arms Act. The Court noted the confusion between the authorities and the recent circular clarifying the requirement for licenses under both Acts. The Petitioner was directed to apply for 'Form X' licenses for the remaining consignments within one week, and the DGFT to process and decide on these applications within four weeks. The Petitioner was also required to provide an undertaking that the imported goods are not for commercial sale without obtaining requisite licenses and permissions.

Conclusion:
The Court recognized the confusion between the DDP and DGFT regarding the issuance of import licenses for arms and ammunition. It directed the Petitioner to apply for 'Form X' licenses with the DGFT and mandated the DGFT to process these applications promptly. The Petitioner was allowed to clear the already imported goods for use as per the licenses and to apply for licenses for the remaining imports. The Court emphasized the importance of clarity and compliance with both the FTDR Act and the Arms Act to avoid similar issues in the future.