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2024 (8) TMI 32 - HC - CustomsExport of the Non-Basmati India White Rice - Compliance with export commitments - Issuance of N/N. 20 of 2023 dated 20.07.2023 and the clarification in Trade Notice No.23/2023 dated 18.08.2023 - effect of Foreign Trade Policy decision, retrospective or prospective? - violation of Fundamental Rights or not - violation of principles of natural justice or Doctrine of Legitimate Expectation. Whether the impugned Notification is in conformity with the Foreign Trade Policy and if not, the same is liable to be set aside? - HELD THAT - A conjoint reading of the statutory provisions, the Notifications and the Foreign Trade Policy would go to show that the Central Government is empowered to formulate and announce the Foreign Trade Policy and amend the existing policy and the same is not in dispute - In the present case, as is evident from the impugned Notification, the existing policy with regard to export of Non-Basmati White Rice is changed in public interest and the export of the same is prohibited by carving out certain exceptions. Therefore, the impugned Notification cannot be held to be contrary to the Foreign Trade Policy. Whether the policy can be given retrospective effect and allowed to take away the vested rights? - HELD THAT - In Shrijee Sales Corporation case 1996 (12) TMI 61 - SUPREME COURT , the Hon ble Supreme Court of India was dealing with an Appeal filed against the judgment of the High Court of Delhi challenging the Notification granting exemption to imports of Polyvinyl resins (PVC) falling within Chapter 39 of the First Schedule to the Customs Tariff Act, 1975. In the light of the provisions of the Customs Tariff Act under Section 25, the Hon ble Supreme Court of India inter alia, held ' The imposition and exemption of customs duty are the chief vehicles of the Government to protect a domestic market and to steady the level of prices. The tariffs are its chosen instruments to shield domestic production from foreign competition.' In Unicorn Industries case 2019 (9) TMI 791 - SUPREME COURT , the Hon ble Apex Court was dealing with exemption from payment of Excise Duty on the manufacture of pan masala and at para 37 held that ' The State could not be compelled to continue the exemption, though it was satisfied that it was not in the public interest to do so. The larger public interest would outweigh an individual loss, if any.' In the present case, the petitioners claim that Letters of Credit were issued in their favour by the foreign buyers prior to the issuance of the impugned Notification and the same is not in dispute. It is also their case that pursuant to the agreement / contracts entered with the foreign buyers they have procured the Non-Basmati White Rice and therefore vested rights accrued to them in terms of the Foreign Trade Policy 2023, which provides import / export on or after the date of the regulation / restriction will be allowed for importer / exporter, who has a commitment through an irrevocable Commercial Letter of Credit before the date of imposition of such restriction / regulation. Clause 1.05 of the Foreign Trade Policy which was in force prior to 20.07.2023 provides that wherever Government brings out a policy change of a particular item, the change will be applicable prospectively (from the date of Notification) unless otherwise provided for - the Foreign Trade (Development and Regulation) Act-1992 does not confer any right to the authorities or enable them to issue any Notification which has the effect of imposing prohibition with retrospective effect or take away the vested rights accrued to the petitioners by virtue of the Foreign Trade Policy, 2023 prior to the issuance of the impugned Notification. Whether the policy decision can be set aside, if the same is found arbitrary or violative of Fundamental Rights? - HELD THAT - The conditions imposed in the impugned Notification are clearly distinctive and enables the exporters who have already made arrangements for shipment of Non-Basmati White Rice in fulfillment of their contractual obligations. In the present set of cases, the petitioners are still at the stage of procurement of the Non-Basmati White Rice and they cannot be equated with those of exporters who made all arrangements for shipment. Therefore, the contention that the action of the respondents is arbitrary and hit by Article 14 of the Constitution of India cannot be accepted. Whether the policy decision can be interfered with, if the same is violative of principles of natural justice or Doctrine of Legitimate Expectation? - HELD THAT - In the present case the petitioners / exporters had acted upon the existing Foreign Trade Policy-2023, entered into agreement / contracts with foreign buyers, pursuant to which the Letters of Credit were issued in their favour and therefore justified in raising the contention based on doctrine of legitimate expectation. However, in the light of the Constitutional Bench decision of the Hon ble Supreme Court in SIVANANDAN CT AND OTHERS VERSUS HIGH COURT OF KERALA AND OTHERS 2023 (7) TMI 1438 - SUPREME COURT the contentions with reference to Doctrine of Legitimate Expectation cannot be upheld - In the light of the expression of the Hon ble Supreme Court that the legitimate expectation is not a legal right and that shall yield to the public interest, the question is answered against the petitioners and no prior notice need be issued. The Writ Petitions are disposed of holding that the impugned Notification shall have prospective effect only, in so far as the Writ petitioners herein are concerned, and the same shall not impede the petitioners exports of Non-Basmati White Rice in fulfillment of their contractual obligations with the foreign buyers, provided the Letters of Credit are issued in their favour prior to 20.07.2023 - Petition disposed off.
Issues Involved:
1. Conformity of the impugned Notification with the Foreign Trade Policy. 2. Retrospective effect of the policy and its impact on vested rights. 3. Arbitrariness and violation of Fundamental Rights by the policy decision. 4. Violation of principles of natural justice and Doctrine of Legitimate Expectation by the policy decision. Issue-wise Detailed Analysis: 1. Conformity of the Impugned Notification with the Foreign Trade Policy: The petitioners challenged the Notification No. 20 of 2023 dated 20.07.2023 and Trade Notice No. 23/2023 dated 18.08.2023, arguing that the prohibition on the export of Non-Basmati White Rice was not in conformity with the Foreign Trade Policy-2023. They contended that the policy allowed exports for those with irrevocable Letters of Credit issued before the restriction date. However, the court held that the Central Government has the authority under Sections 3 and 5 of the Foreign Trade (Development and Regulation) Act, 1992, and Para 1.02 of the Foreign Trade Policy-2023 to amend the policy in public interest. Thus, the Notification was found to be in conformity with the policy. 2. Retrospective Effect of the Policy and Its Impact on Vested Rights: The petitioners argued that the policy change should not have retrospective effect, which would take away their vested rights accrued through contracts and Letters of Credit issued before the Notification date. The court agreed, citing the Foreign Trade Policy-2023 and the Supreme Court's decision in Union of India v. Asian Food Industries (2006) 13 SCC 542, which held that policy changes should be prospective and cannot take away vested rights. The court concluded that the impugned Notification should have prospective effect only and should not affect the petitioners' contractual obligations. 3. Arbitrariness and Violation of Fundamental Rights by the Policy Decision: The petitioners claimed that the Notification was arbitrary and discriminatory, as it allowed some exporters to fulfill their obligations while prohibiting others. The court found that the conditions in the Notification were distinctive, allowing exporters who had already made arrangements for shipment to export, while the petitioners were still at the procurement stage. Therefore, the court held that the action was not arbitrary and did not violate Article 14 of the Constitution of India. 4. Violation of Principles of Natural Justice and Doctrine of Legitimate Expectation by the Policy Decision: The petitioners argued that the policy change violated the Doctrine of Legitimate Expectation, as they had entered into contracts based on the existing policy. The court acknowledged the principle but emphasized that legitimate expectation must yield to larger public interest, as stated in the Supreme Court's decision in Sivananda C.T. v. High Court of Kerala (2023 SCC Online SC 994). The court concluded that the policy change was in public interest and did not require prior notice to the petitioners. Conclusion: The court disposed of the Writ Petitions, holding that the impugned Notification shall have prospective effect only concerning the petitioners. The Notification should not impede the petitioners' exports of Non-Basmati White Rice in fulfillment of their contractual obligations, provided the Letters of Credit were issued before 20.07.2023. The authorities are allowed to verify the genuineness of such Letters of Credit. No order as to costs.
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