DGFT has No Authority to Violate the Foreign Trade
Policy, Power Lies Only with Central Govt: Karnataka High Court – Patanjali
Foods in Sunflower Oil Import Case
The Karnataka High Court has held that only the
Central Government can make provision for prohibiting, restricting, or
regulating the import or export of goods or services, or technology and not the
Director General of Foreign Trade (DGFT).
The single bench of Justice
S.R. Krishna Kumar has observed that only the Central Government can
formulate and announce the Foreign Trade Policy by ‘Notification’ in the
Official Gazette and may also, in like manner, amend that policy. The power of
the Central Government to formulate and amend the Foreign Trade Policy cannot
be exercised by DGFT. As per Section 3(2) of Foreign Trade (Regulation and
Development Act), 1992(FTDR Act), only the Central Government can by Order
published in the Official Gazette make provisions for prohibiting, restricting,
or regulating the import or export of goods or services or technology and the
power of the Central Government cannot be exercised by the DGFT.
The petitioner/assessee is engaged
in the business of solvent extraction, refining of oils, manufacture of soya
food products, and import, export, and trading of agricultural commodities.
The petitioner had entered
into a contract with its foreign supplier viz. Aston Agro-Industrial SA,
Switzerland for import of the subject goods, Crude Sunflower Seed Oil of Edible
Grade in Bulk. The foreign supplier supplied 6000 MTs of the subject goods. The
subject goods were shipped with a port of discharge Mangalore Port, India.
The Director
General of Foreign Trade (DGFT), in the exercise of his powers under paragraphs
1.03 and 2.04 of the Foreign Trade Policy (FTP), issued a Public Notice dated
24.05.2022, by which Tariff Rate Quota (TRQ) was allocated for the financial years
2022-23 and 2023-24. The Public Notice amended paragraphs 2.60 and 2.61 of the
Handbook of Procedures by laying down procedural conditions for Crude Soya-bean
oil, whether or not degummed and Crude Sunflower seed oil.
The Duty structure in regard
to the goods is Basic Customs Duty at the rate of 0% plus 5% Agriculture
Infrastructure and Development Cess (AIDC) plus 10% Social Welfare Surcharge
(SWS) plus 5% IGST.
Since the goods were urgently needed, the petitioner had no
option but to clear the goods without tendering a TRQ license for the
clearance. Petitioner had accordingly filed Ex-Bond Bills of Entry seeking
clearance of500 MTs and 1000 MTs respectively of the goods for home
consumption. The Bills of Entry were processed by the department and payment of
applicable duty out of charge was given.
The petitioner contended that the ‘condition x’ in the Public
Notice dated14.06.2022 issued by the DGFT was illegal, arbitrary, and without jurisdiction
or authority of law. It is contrary to Clause 2.13 of the FTP and has the
effect of altering and amending the FTP which is impermissible in law since it
lies within the exclusive domain of the Central Government and not the DGFT.
The petitioner contended that the FTP is framed by the
Central Government under the FTDR Act and it provides for the DGFT to issue a Handbook
of Procedure by way of a Public Notice and also amend/vary/alter the Handbook
of Procedure by way of a Public Notice. The DGFT is empowered or authorized
only to issue a public notice as aforesaid to regulate the procedure and not
change/alter/modify the FTP which can be done only by the Central Government.
The department contended
that the DGFT functions not only as the Director General of Foreign Trade but
he is also as the Ex-Officio Additional Secretary to the Government of India.
Consequently, both the Public Notices having been issued after due approval
from the Ministry of Commerce and Industry are deemed to have been issued by
the Central Government only. The DGFT is an authority constituted under the
FTDR Act and is entitled to issue public notices prescribing the procedure.
The court held that mere reference to the DGFT in the
judgments cannot be made the basis to come to the conclusion that the DGFT has
the power and jurisdiction to amend the FTP as contended by the respondents.
The court directed the department to refund the entire excess
duty paid by the petitioner as expeditiously as possible back to the petitioner
and at any rate, within a period of one month.
Case Title: M/S
Patanjali Foods Limited Versus Union Of India
Citation:
Writ Petition No.14963 Of 2022
Date:
16.02.2023
Counsel
For Petitioner: Rajesh Rawal
Counsel For
Respondent: V.C.Jagannathan