TMI Blog2011 (3) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to ban export of cotton yarn beyond 720 million kgs. during 2010-2011 (upto 31-3-2011) - It is relevant to note that the notification dated 22-10-2010 issued under Section 5 of the 1992 Act permitting export of cotton yarn under licence has been made effective from 1-10-2010 - in the facts of the present case restriction imposed on permitting export under licence by a notification issued under Section 5 of the 1992 Act on 22-10-2010 cannot be faulted - Notification No. 14 dated 22-12-2010 issued under Section 5 of the 1992 Act is valid and the petitioners to whom EARC’s have not been granted are entitled to seek licence for export of cotton yarn in respect of their contract with the foreign customers - Application is rejected - WRIT PETITION (L) NOs. 2789, 2790 AND 3010 OF 2010 WRIT PETITION NO. 10085 OF 2010 - - - Dated:- 9-3-2011 - J.P. Devadhar and Mridula Bhatkar, JJ. REPRESENTED BY : S/Shri Haresh Jagtiani, Sr. Counsel with Anil D Souza, Suprabh Jain, Vikram Nankani, Sushant Murthy, Nitya Beggaria, i/by M.R. Baya and Abhay Nevagi, for the Petitioner. S/Shri A.J. Rana, Sr. Counsel with B.M. Chatterjee, Ms. S.V. Bharucha, Riyaz Chagla, i/by H.V. Mehta and Pradee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of cotton yarn instead of receiving the application form physically. Thus, from 23-11-2010 the EARC s were issued by receiving applications under the online registration system. 8. Suddenly, on 1-12-2010, the on-line registration system was stopped as per office memorandum/press release dated 1-12-2010 issued by the Under Secretary to the Government of India, Ministry of Textiles. In the press release dated 1-12-2010, it was stated that the Cotton Yarn Advisory Board ( CYAB for short) constituted by the Government in September 2010 for the purpose of formulating cotton yarn balance sheet on the basis of the cotton yarn production/consumption/export situation in the country, had opined that in view of the increased domestic demand/price volatility, the cotton yarn exports beyond 720 million kgs. should not be permitted for the year 2010-11 and accordingly the Government has decided that there shall be no further registration of the cotton yarn exports beyond 720 million kgs. The office memorandum dated 1-12-2010 reads thus :- No. 7/32/2010-CT-II Government of India Ministry of Textiles .. New Delhi Date : 1-12-2010 Office Memorandum Government has decided tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5207 Cotton yarn (other than sewing thread), put up for retail sale. Transitional Arrangement :- (i) The Transitional Arrangements as available under para 1.4 and 1.5 of FTP 2009-14 will not be applicable to the export of Cotton Yarn, under this notification. (ii) However, Exporters who have obtained Registration Certificate from Textile Commissioner, Mumbai before 1st December 2010 would be permitted to export Cotton Yarn within the quality limit for which such registration certificate has been issued and within the validity of such registered contract. (iii) If the validity of such registered contract has expired then the registered contract holder will have no right to export under such registered contract. The effect of this notification :- The export of cotton yarn (Tariff Codes 5205, 5206 5207) was earlier subject to registration of export contracts with Textile Commissioner, Mumbai. Now, the export of Cotton yarn has been restricted and export will now be permitted under licence. Sd/- (Anup K. Pujari) Director General of Foreign Trade E-mail: dgft@nic.in 10. Simultaneously, the Jt. DGFT with the approval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tile Commissioner on or before 1-12-2010 could export cotton yarn within the quantity limit for which such registration certificate has been issued. Writ Petitions have been amended to challenge the notification dated 22-12-2010 as also the policy circular dated 22-12-2010. 11. Mr. Jagtiani, learned Senior Advocate appearing on behalf of some of the petitioners, submitted that : (a) Neither the press release nor the office memorandum dated 1-12-2010 constitute an order or notification under Section 3 or Section 5 of the 1992 Act and hence do not have legal force. Therefore, the press release/office memorandum dated 1-12-2010 which seek to restrict the export of cotton yarn in excess of 720 million kgs. are illegal and bad in law. In support of the above contention, reliance is placed on the decision of the Apex Court in the case of Atul Commodities Private Limited v. Commissioner of Customs reported in 2009 (235) E.L.T. 385 (S.C.), decision of this Court in the case of Parag Milk Milk Products Limited v. Union of India reported in 2007 (5) Bom. C.R. 544 = 2007 (216) E.L.T. 664 (Bom.), Narendra Udeshi v. Union of India reported in 2003 (1) Bom. C.R. 500 = 2003 (156) E.L.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... striction on export of cotton yarn can be imposed by the Central Government and not by the Jt. DGFT/DGFT. Moreover, the Central Government can impose such restrictions only in public interest. No material is produced to show that the ceiling fixed is in public interest. (g) The corrigendum issued on 29-12-2010 provides that the EARC s obtained on 1-12-2010 are valid and eligible for export as contemplated in paragraph 3(ii) of the notification dated 22-10-2010. Since the petitioners had applied for registration on or before 1-12-2010 and their applications were complete and valid in all respects, the petitioners be treated as EARC holders in respect of the contracts for which registration was sought and must be allowed to export cotton yarn under those contracts. 12 Mr. Nankani, learned counsel appearing on behalf of some of the petitioners while adopting the arguments of Mr. Jagtiani submitted that neither the office memorandum/press release dated 1-12-2010 nor the notification dated 22-12-2010 nor the policy circular dated 22-12-2010 are valid, because, the above memorandum/notification/circular have not been issued under Section 3 of the 1992 Act. He submitted that an ite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion) Rules, 1993 prescribes the grounds on which licence can be refused. The ceiling or the quantity limit has not been prescribed by the Rules prescribed under the 1992 Act and, therefore, the restriction sought to be imposed by way of policy circular dated 22-12-2010 is illegal and unauthorized. 16 Mr. Nevagi, learned counsel appearing on behalf of Nagreeka Export Limited, while adopting the argument of Mr. Jagtiani and Mr. Nankani submitted that the object of the 1992 Act is to provide a level-playing field for all domestic exporters and importers and not meant to restrict the exports. If the Government wishes to restrict export of a particular item, it can do so only under the Essential Commodities Act or Section 3 of the 1992 Act or under Section 11 of the Customs Act, 1962. The notification dated 22-12-2010 is not issued under any of the aforesaid provisions and, therefore, the restrictions imposed cannot be said to be legally tenable. He further submitted that the purpose for which the notification dated 22-12-2010 was issued does not fall within the scheme of Section 11(2) of the Customs Act, 1961 and, therefore, the DGFT has exceeded its power under the 1992 Act read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra), counsel for the Revenue submitted that the policy decision of the Central Government notified on 22-12-2010 to ban export of cotton yarn in excess of 720 million kgs. does not take away the vested right of the exporters, because the notification dated 22-12-2010 as well as the corrigendum issued on 29-12-2010 make it abundantly clear that the exporters to whom EARC s have been granted on or before 1-12-2010 would be entitled to export cotton yarn within the period specified therein. The fact that the exporters had applied for EARC s on or before 1-12-2010 under the on-line registration system and the fact that the said applications were complete in all respects does not make them EARC holder s and, therefore, the exporters who have not been granted EARC s are not entitled to export cotton yarn. Counsel submits that since some of the EARC holders within the overall limit of 720 million kgs. have failed to export cotton yarn within the stipulated period, the exporters who have entered into contracts with foreign purchases can apply for licence as per the policy of the Government and the same would be considered and licenses would be issued in accordance with law. 22. Relying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wers the Central Government to amend the policy as also to make provision to prohibit, restrict or otherwise regulate the export of goods as provided under Section 5 and Section 3 of the 1992 Act respectively. 27. The Apex Court in the case of Asian Food Industries (supra) has further held (see para 29 of the judgment), that the powers conferred on the Central Government under Section 3 and Section 5 of the 1992 Act has to be exercised in the manner set out therein. Section 3 and Section 5 of the 1992 Act read thus : 3. Powers to make provisions relating to imports and exports. - (1) The Central Government may, by Order published in the Official Gazette, make provision for the development and regulation of foreign trade by facilitating imports and increasing exports. (2) The Central Government may also, by Order published in the Official Gazette, make provision for prohibiting, restricting or otherwise regulating, in all cases or in specified classes of cases and subject to such exceptions, if any, as may be made by or under the Order, the import or export of goods. (3) All goods to which any Order under sub-section (2) applies shall be deemed to be goods and imports or ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 2010-2011 (as on 1-10-2010) was 644 million kgs. However, looking to the sudden spurt in export, the CYAB suggested cap of 720 million kgs. during 2010-2011. 31. The question, therefore, to be considered is, whether the Central Government was justified in accepting the recommendation of the CYAB and take a policy decision to ban export of cotton yarn beyond 720 million kgs. during 2010-2011 (upto 31-3-2011). 32. The fact that there was sudden spurt in export is evident from the on-line registration of contracts sought during September, October and November 2010. Whatever may be the reason for sudden spurt in export of cotton yarn, the target of 720 million kgs. expected to be achieved by 31-3-2011 was achieved by the end of November 2010. It is the case of the Revenue that unless export of cotton yarn was banned, the domestic industry as also the public interest would have been in serious jeopardy. In these circumstances, the Central Government accepted the recommendation of the CYAB in banning the export of cotton yarn beyond 720 million kgs. during the year 2010-2011 (upto 31-3-2011) as against the 589.02 million kgs. of cotton yarn exported during the year 2009-10. 33. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th be permitted under a licence instead of export under EARC; and (two) there would be quantity restriction on export of cotton yarn upto 720 million kgs. during the year 2010-2011 (upto 31-3-2011). These policy decisions were required to be published in the Official Gazette as an order under Section 3(2) or as a notification under Section 5 of the 1992 Act. 39. However, in the notification issued under Section 5 of the 1992 Act and published in the Official Gazette on 22-12-2010, it is merely stated that the export of cotton yarn would henceforth be under a licence effective from 1-12-2010. The said notification does not refer to the policy decision of the Central Government to ban export of cotton yarn beyond 720 million kgs. Till date, no notification or order has been issued as contemplated under the 1992 Act to implement the policy decision of the Government to ban export of cotton yarn. Therefore, it is evident that the Central Government has not given effect to the policy decision in banning the export of cotton yarn beyond 720 million kgs. during the year 2010-2011 (upto 31-3-2011) in the manner contemplated under the 1992 Act. 40. The argument of the Revenue that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22-12-2010 would not have any force of law. 42. Thus, irrespective of the policy decision taken by the Central Government to permit export under licence and upto the limit of 720 million kgs. till 31-3-2010, in view of notification dated 22-12-2010 which only refers to the restricting of permitting export under licence, it must be held that the Central Government has chosen to implement its decision only in relation to export under licence and has chosen not to implement its decision to restrict export of cotton yarn beyond 720 million kgs. Since the Central Government has not published in the Official Gazette its policy decision to restrict export of cotton yarn upto 720 million kgs. during 2010-11 (upto 31-3-2011) in the manner provided under the 1992 Act, the Jt. DGFT could not have issued the impugned policy circular. Therefore, the policy circular dated 22-12-2010 must be held to be contrary to law. 43. It is relevant to note that the notification dated 22-10-2010 issued under Section 5 of the 1992 Act permitting export of cotton yarn under licence has been made effective from 1-10-2010. As held by the Apex Court in the case of Asian Food Industries (supra), order/notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case restriction imposed on permitting export under licence by a notification issued under Section 5 of the 1992 Act on 22-10-2010 cannot be faulted. 45. Strong reliance was placed by the counsel for the Revenue on the unreported judgment of the Delhi High Court in the case of Gujarat Ambuja Exports Limited (supra). In our opinion, the learned Judge of the Delhi High Court in the aforesaid case proceeded on an erroneous assumption that the notification issued under Section 5 of the 1992 Act on 22-12-2010 imposes a restriction that the export of cotton yarn had to be within the overall limit of 720 million kgs. The learned counsel for the Revenue fairly stated that the aforesaid findings recorded by the learned Single Judge of the Delhi High Court in para 49 of the judgment is erroneous and contrary to the facts on record. In other words, it is admitted that the notification issued under Section 5 of the 1992 Act on 22-12-2010 merely provides that the export of cotton yarn would now be under licence instead of EARC and the said notification does not refer to the policy decision of the Central Government to restrict export of cotton yarn up to 720 million kgs. during the year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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