2024 (8) TMI 729 - HC - Customs

Import of aircraft engines from the U.A.E. - invocation of Catch-all provisions under Para 10.05 of the Foreign Trade Policy (FTP), 2023 - SCOMET authorization from the DGFT for exporting the consignment of aircraft parts as per the Catch-all provisions - goods used for military purposes - HELD THAT - A perusal of Appendix 3 of the SCOMET lists shows the exception that has been carved out under Clause 8A901.1.A, i.e. Catch-all or SCOMET provisions do not apply to any of those aero gas turbine engines that are certified by civil aviation authorities of India and have a type rated certificate. Perusal of the DRDO report and the type certificate issued by the DGCA was that the GE CF-34-8E5 model of engines is a recognized type of civil engine and has also been further cleared by the DRDO as having civilian application. Further the Petitioner in this case has also provided end user certificates, from the party they are exporting the product, to help verify the civil nature of the end use of these products. The contention of the Respondent that these products have dual use and can potentially be used for military purposes, and hence should not be exported without further clearance of the DGFT finds no footing with this court. Almost everything can have a dual use, like soap being manipulated into a bomb, but rationality must guide the implementation of export regulations. Import and export regulation must be rational to effectively balance economic interests with national and global security concerns. Items that have been certified by subject matter experts as having civil use and are allowed within the ambit of the export policy, cannot be stopped from being exported to countries with which India has established export ties, with no restrictions in the realm of economic policy, on the pretext that the products may have a potential military use. In view of the fact that the products which the Petitioner company is trying to export are of civil nature and do not attract any of the restrictions established in the SCOMET list or Catch-All provisions, the impugned notification is quashed. The writ petition is allowed.

Summary

Issues Involved
1. Validity of the impugned letter/order dated 02.02.2024 issued by the Directorate General Foreign Trade (DGFT) Export Cell under the Catch-all provisions of the Foreign Trade Policy (FTP), 2023.
2. Requirement of SCOMET authorization for the export of aircraft parts by the Petitioner.
3. Determination of whether the aircraft parts in question fall under the SCOMET list or Catch-All provisions.

Issue-wise Detailed Analysis

1. Validity of the Impugned Letter/Order Dated 02.02.2024

The Petitioner challenged the letter/order F.No. 01/77/171/D86/AMQ24/EC(S) dated 02.02.2024, issued by the DGFT Export Cell, invoking the Catch-all provisions under Para 10.05 of the FTP, 2023. The letter directed the Petitioner to obtain SCOMET authorization for exporting aircraft parts. The Petitioner argued that the DGFT had no authority to modify the FTP and that the impugned order was contrary to the provisions of the FTP, 2023. The Court found that the items being exported were purely for civil application and did not attract the restrictions mentioned in the SCOMET list or Catch-All provisions. Thus, the impugned notification was quashed.

2. Requirement of SCOMET Authorization for Export

The Respondent argued that aircraft engines and certain other aircraft parts could have dual-use potential (civil and military) and therefore required SCOMET authorization. The Petitioner contended that the aircraft parts did not fall under the SCOMET list and that the DGFT's directive was unnecessary. The Court referred to the DRDO report and the type certificates issued by the DGCA, which confirmed that the engines were for civil use. The Court concluded that the items did not require SCOMET authorization as they were certified for civil application.

3. Determination of Whether the Aircraft Parts Fall Under SCOMET List or Catch-All Provisions

The Petitioner provided end-user certificates to verify the civil nature of the products. The DRDO conducted an on-site physical inspection and confirmed that the items were for civil application. The Court examined the SCOMET list and noted the exception under Clause 8A901.1.A, which exempts aero gas turbine engines certified by civil aviation authorities of India. The Court found that the items did not fall under the SCOMET list or Catch-All provisions, as they were certified for civil use and had type-rated certificates.

Conclusion

The Court quashed the impugned letter/order dated 02.02.2024, holding that the items being exported were for civil application and did not attract the restrictions under the SCOMET list or Catch-All provisions. The writ petition was allowed, and the requirement for SCOMET authorization was deemed unnecessary. Pending applications, if any, were disposed of.