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2025 (6) TMI 1738 - HC - Customs


Issues Presented and Considered

The core legal questions considered by the Court were:

1. Whether the Director General of Foreign Trade (DGFT) possessed the jurisdiction and authority under the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act) and the Foreign Trade Policy (FTP) to issue Public Notice No. 15/2015-20 dated 14.06.2022, specifically to impose 'condition x' restricting clearance of warehoused goods imported prior to issuance of Tariff Rate Quota (TRQ) license;

2. Whether 'condition x' and the consequential Condition No. 3 in the Condition Sheet of the TRQ license issued to the petitioner were valid and sustainable in law;

3. The interplay between powers of the Central Government and DGFT under the FTDR Act, particularly regarding formulation and amendment of the FTP and issuance of procedural guidelines;

4. Whether the impugned condition contravened provisions of the Customs Act, 1962, especially Section 15 relating to the determination of applicable customs duty on clearance of warehoused goods;

5. Whether the petitioner was entitled to clearance of goods warehoused prior to the issuance of the TRQ license against the said license and refund of excess duty paid on goods cleared without the license;

6. The applicability of principles of estoppel or waiver in challenging the impugned condition;

7. The correctness of the respondent's contention that the DGFT acted as Ex-officio Additional Secretary to the Government of India in issuing the impugned Public Notice.

Issue-wise Detailed Analysis

Issue 1 & 2: Jurisdiction of DGFT to impose 'condition x' and validity of the impugned conditions

The Court analyzed Sections 3, 5, and 6 of the FTDR Act, which delineate the powers of the Central Government and DGFT. Section 5 empowers the Central Government exclusively to formulate and amend the Foreign Trade Policy by notification in the Official Gazette. Section 6(3) explicitly excludes powers under Sections 3, 5, 15, 16, and 19 from delegation to DGFT or any subordinate officer.

DGFT's powers, as per the FTP (paragraphs 1.03 and 2.04), are limited to issuing Public Notices to notify or amend procedural aspects, such as the Handbook of Procedures (HBP), for implementing the FTP. DGFT cannot amend or alter the substantive provisions of the FTP itself.

The impugned Public Notice No. 15/2015-20 dated 14.06.2022 introduced 'condition x', which restricted clearance under TRQ only to consignments landing after issuance of the TRQ license, thereby excluding warehoused goods imported earlier. The Court found that this condition effectively amended the substantive policy of the FTP by restricting the benefit of TRQ contrary to paragraph 2.13 of FTP, which permits clearance of warehoused imported goods against subsequently issued authorizations.

Reliance was placed on the Supreme Court decision in Director General of Foreign Trade v. Kanak Exports, which held that DGFT does not have power to amend the FTP, and any Public Notice issued by DGFT that alters substantive policy provisions is ultra vires. The Court also referred to the Delhi High Court decision in M.D. Overseas Limited v. Union of India, which similarly held that DGFT's power under paragraph 1.03 of FTP is procedural and cannot be used to amend substantive policy provisions.

The Court rejected the respondent's contention that DGFT issued the Public Notice in the capacity of Ex-officio Additional Secretary to the Government of India, noting that the Public Notice clearly showed the DGFT acting in his capacity as DGFT and not as the Central Government. Thus, the impugned 'condition x' and the consequential Condition No. 3 in the TRQ license were held to be beyond the powers of DGFT and therefore void.

Issue 3: Powers of Central Government versus DGFT under FTDR Act and FTP

The Court emphasized the statutory scheme under the FTDR Act, wherein the Central Government alone has the power to formulate and amend the FTP (Section 5), and to make provisions regulating import/export (Section 3(2)). DGFT's role is advisory and executive in nature, responsible for carrying out the FTP and issuing procedural guidelines (Section 6(2) and FTP paragraphs 1.03 and 2.04).

The Court held that DGFT's Public Notices cannot override or amend the FTP, which is a statutory policy issued by the Central Government. Any attempt by DGFT to impose substantive conditions that alter the FTP is ultra vires.

Issue 4: Conflict with Customs Act, 1962, particularly Section 15

Section 15(1)(b) of the Customs Act provides that the applicable duty on goods cleared from a warehouse is the duty in force on the date the Bill of Entry for home consumption is filed. The Court observed that 'condition x' conflicted with this statutory provision because it sought to deny the benefit of the TRQ license to goods warehoused before the license issuance date, effectively imposing a restriction not found in the Customs Act or FTP.

Paragraph 2.13 of the FTP also permits clearance of warehoused goods against authorizations issued subsequently, reinforcing that the impugned condition was contrary to both the Customs Act and FTP.

Issue 5: Entitlement to clearance of warehoused goods and refund of excess duty

The petitioner had cleared 5210 MTs of the subject goods without tendering the TRQ license, paying excess customs duty of Rs. 3,58,33,223/-. The Court held that the petitioner was entitled to clear the balance 2597.330 MTs of warehoused goods against the TRQ license and directed the respondents to permit such clearance under Section 68 of the Customs Act, 1962, extending the benefit of Notification No. 30/2022-Cus dated 24.05.2022.

The Court further directed refund of the excess duty paid on the 5210 MTs along with interest at 12% per annum, relying on the principle that the petitioner paid the duty under protest and was entitled to recovery of excess payment.

Issue 6: Applicability of estoppel or waiver principles

The Court rejected the respondents' contention that the petitioner was estopped from challenging the impugned condition because it had applied for the TRQ license and cleared goods under protest. Citing Supreme Court precedents, the Court held that estoppel and waiver do not apply where a party challenges an act done without jurisdiction. Since 'condition x' was void ab initio, the petitioner's challenge was maintainable.

Issue 7: DGFT's capacity as Ex-officio Additional Secretary

The Court examined the argument that the DGFT issued the Public Notice in his capacity as Ex-officio Additional Secretary to the Government of India, which might confer authority to amend the FTP. The Court found this argument unpersuasive, noting that the Public Notice itself did not indicate that the power exercised was that of the Central Government but rather that of the DGFT. Therefore, the DGFT could not cloak himself with powers reserved for the Central Government.

Significant Holdings

"The power to formulate and announce the Foreign Trade Policy (FTP) and consequentially to amend the said policy lies exclusively with the Central Government under Section 5 read with Section 6(3) of the FTDR Act and not by the DGFT."

"DGFT cannot be cloaked with the powers of amending, altering or modifying the Foreign Trade Policy which would have the essence of taking away something from or being contrary to the Foreign Trade Policy itself which is formulated by the Central Government exercising its powers under Section 5 of the FTDR Act."

"'Condition No. x' mentioned in paragraph No. 2 of the Public Notice No. 15/2015 -20 dated 14.06.2022 is contrary to the Foreign Trade Policy and beyond the powers of the DGFT."

"The impugned 'condition x' and Condition No. 3 in the Condition Sheet of the Tariff Rate Quota dated 05.07.2022 issued to the petitioner are quashed and set aside."

"The respondents are directed to permit clearance of 2597.330 MTs of the subject goods from the customs bonded warehouse in terms of Section 68 of the Customs Act, 1962 on production of the Tariff Rate Quota dated 05.07.2022, extending the benefit of Notification No. 30/2022-Cus dated 24.05.2022."

"The respondents are directed to refund the excess duty of Rs. 3,58,33,223/- paid on clearance of 5210 MTs of the subject goods to the petitioner along with interest at the rate of 12% per annum."

"Principles of estoppel, waiver or acquiescence do not apply to acts done without jurisdiction and the petitioner is entitled to challenge the impugned condition."

 

 

 

 

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