TMI Blog2015 (8) TMI 997X X X X Extracts X X X X X X X X Extracts X X X X ..... material produced on record to show how impugned Notification would affect interests of consumers – Section 3 empowers Central Government to make provision for: (i) prohibiting; (ii) restricting; or (iii) otherwise regulating 'the import or export of goods or services or technology', such action cannot be arbitrary or irrational and should be backed sound reasons – Calcutta High Court in Kalindi Woolen Mills (P) Ltd. [1994 (2) TMI 70 - HIGH COURT AT CALCUTTA] overlooked aforesaid pertinent aspect which gives sufficient powers to Central Government to act in manner it has acted – Therefore, no fault found with view taken by High Court upholding Notifications in question – Decided against Appellant. - Civil Appeal No. 4027 of 2009, Civil Appeal No. 4028 of 2009, Civil Appeal No. 4029 OF 2009 - - - Dated:- 21-8-2015 - A. K. Sikri And Rohinton Fali Nariman,JJ. For the Petitioner : Mr. Radha Shyam Jena For the Respondent : Mr. B. Krishna Prasad JUDGMENT A. K. Sikri, J. Vide Notification No.39 (RE-2007)/2004-2009 dated 16.10.2007, the Central Government (respondent No.1 herein) prohibited the import of palm oil through Kochi port in Kerala. It was followed by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication No.39 (RE-2007)/2004-2009 dated 16.10.2007, certain items mentioned therein, which are all different varieties of crude palm oil, were not allowed to be imported through Kochi port. The Notification gives the description of the items and mentions the policy condition in respect thereof by stipulating: import not permitted through Kochi port . This Notification was amended thereafter with the issuance of Notification No.63 (RE-2007)/2004-2009 dated 24.12.2007 in respect of same items by enlarging the scope of restriction/prohibition with the stipulation: import not permitted through any port in Kerala . 4. Again, as already pointed out above, these Notifications were challenged on two grounds, viz.: (i) The Notifications are issued purportedly in exercise of powers under Section 5 read with Section 3 of the Act, but these provisions do not confer any such power on the Central Government. Therefore, the Notifications are ultra vires the provisions of Section 3(5) of the Act; (ii) Imposition of selective restriction and confining the prohibition of import of crude palm oil to the ports in Kerala has not only resulted in invidious discrimination, such an action is m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manifested the fact that percentage difference between the two stood at 109% in the year 2004, reduced to 50% in December, 2006, to 12% in September 2007 and 0.6% in October 2007. The Board also observed that the import of palm oil in one particular year had a cascading downward impact on coconut oil prices in the subsequent years. For example, the huge import of 1,53,513 tonnes of palm oil in 2004-05 had led to a price decline in coconut in 2005-06 and 2006-07. While the average price of coconut oil is ₹ 6,155/- per quintal in 2004-05, in 2005-06, it declined sharply to ₹ 4,978/- per quintal with further fall in 2006-07 when the price was ₹ 4,459/- per quintal. This raised concern with the policy makers to protect the interest of huge number of small time farmers in the State of Kerala. Such concerns were raised by the Board as well as Union of Coconut Farmers with the concerned authorities including Chief Minister, who in turn, took up the matter with the Central Government at the highest level. The narratives in this regard are stated in the impugned judgment of the High Court itself and the discussion goes, somewhat, in the following manner: A letter dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rices of coconut oil move together with price of palm oil. Even though coconut oil and palm kernel oil are not perfect or close substitutes, many consumers tend to substitute these oils in their use as edible oils. As such the possibility of palm oil imports having a dampening effect on coconut oil prices cannot be ruled out . This is the report of the independent agency set up to make a detailed study on the effect of import of palm oil on the coconut economy in the State. They have given a gloomy picture of the whole scenario in regard to the importation of palm oil into the State and what would be its impact on the coconut oil industry in the State. The report contains the facts and figures for a few previous years and how the large importation of palm oil has cascading effect not only on the prices of coconut and also on the prices of coconut oil. On 05.06.2007, the Chairperson of the Board while bringing to the notice of the Ministry of Agriculture the need for imposing total ban on import of palm oil through the ports of Southern States, has indicated certain details with regard to the price effect of import of palm oil into the State of Kerala on the coconut oil industry in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (e) Letter dated 08.05.2007 by Deputy Secretary, Ministry of Commerce. (f) Report of Centre for Development Studies on import of palm oil on the coconut economy in Kerala: The report in clear and unequivocal terms has stated, Some of the recent years that have witnessed large imports of palm oil have also reported high prices. The influence of palm oil imports on domestic coconut oil prices also works out in an indirect manner. The international prices of coconut oil move together with the price of palm oil. Even though coconut oil and palm kernel oil are not perfect or close substitutes, many consumers tend to substitute these oils in their use as edible oils. As such the possibility of palm oil imports having a dampening effect on coconut oil prices cannot be ruled out. On analysing the report, the High Court has made the following remarks: This is the report of the independent agency set up to make a detailed study on the effect of import of palm oil on the coconut economy in the State. They have given a gloomy picture of the whole scenario in regard to the importation of palm oil into the State and what would be its impact on the coconut oil industry in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the High Court rejected it without suitably dealing with the same. He also submitted that the interest of the consumers was equally important and if the prices of the palm oil are increased upwardly because of increase in transportation cost etc., consumers would also be adversely effected and, therefore, the decision was not in public interest. 11. Having regard to the material that is produced and taken note of by us in extenso, which led to the issuance of the impugned Notifications, we are unable to countenance the submissions made by Mr. Naphade. It is well known that State of Kerala is the largest producer of Coconut and, in turn, there is substantial production of coconut oil as well. It is also a matter of common knowledge that coconut oil as well as palm oil are used for cooking and other common purposes. In that sense, coconut oil and palm oil are competing products. Whereas coconut oil produced from indigenous raw material and for the production of palm oil in India, the raw material i.e. crude palm oil is largely imported. Since the import price of crude palm oil has been much less than the price of coconut oil, the perception of Coconut growers in the State of Ker ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Article 14 of the Constitution, power of judicial review would not extend to determine the correctness of such a policy decision or to indulge into the exercise of finding out whether there could be more appropriate or better alternatives. Once we find that parameters of Article 14 are satisfied; there was due application of mind in arriving at the decision which is backed by cogent material; the decision is not arbitrary or irrational and; it is taken in public interest, the Court has to respect such a decision of the Executive as the policy making is the domain of the Executive and the decision in question has passed the test of the judicial review. In Union of India v. Dinesh Engineering Corporation (2001) 8 SCC 491, this Court delineated the aforesaid principle of judicial review in the following manner: there is no doubt that this Court has held in more than one case that where the decision of the authority is in regard to the policy matter, this Court will not ordinarily interfere since these policy matters are taken based on expert knowledge of the persons concerned and courts are normally not equipped to question the correctness of a policy decision. But then this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce with law and to determine whether the legislature or the executive has acted within the powers and functions assigned under the Constitution and if not, the court must strike down the action. While doing so the court must remain within its self-imposed limits. The court sits in judgment on the action of a coordinate branch of the government. While exercising power of judicial review of administrative action, the court is not an appellate authority. The Constitution does not permit the court to direct or advise the executive in matters of policy or to sermonize qua any matter which under the Constitution lies within the sphere of legislature or executive, provided these authorities do not transgress their constitutional limits or statutory powers. 14. The aforesaid doctrine of separation of power and limited scope of judicial review in policy matters is reiterated in State of Orissa and Others v. Gopinath Dash and Others (2005) 13 SCC 495: 5. While exercising the power of judicial review of administrative action, the Court is not the Appellate Authority and the Constitution does not permit the Court to direct or advise the executive in the matter of policy or to sermonis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this Court also accepted the principle that the legislative power to classify is of wide range and flexibility so that it can adjust its system of taxation in all proper and reasonable ways. It is indicated in Willis on Constitutional Law , at p. 590, that a State can make a territory within a city a unit for the purpose of taxation. So, the impugned section in permitting in the matter of taxation geographical classification, which has reasonable relation to the object of the statute, namely, for providing special amenities for a particular unit the peculiar circumstances whereof demand them, does not in any way impinge upon the equality clause. 16. We would also like to refer to the judgment of this Court in the case of Premier Tyres Limited v. Kerala State Road Transport Corporation 1993 Supp. 2 SCC 146 wherein this Court held that when a policy decision is taken in the public interest, Courts need not tinker with the same. 17. The locus classicus allowing freedom to the Executive to take economic decisions is remarkably dealt with by this Court in R.K. Garg v. Union of India (1981) 4 SCC 675 and the following discussion from the said judgment is again worth quoting: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States Supreme Court in Secretary of Agriculture v. Central Roig Refining Company, 94 L Ed 381 : 338 US 604 (1950) be converted into tribunals for relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation which may be made by those subject to its provisions and to provide against such distortions and abuses. Indeed, howsoever great may be the care bestowed on its framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The Court must therefore adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the legislature can always step in and enact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... City of Chicago, 57 L Ed 730 : 228 US 61 (1912): The problems of government are practical ones and may justify, if they do not require, rough accommodations, illogical it may be, and unscientific. But even such criticism should not be hastily expressed. What is best is not always discernible, the wisdom of any choice may be disputed or condemned. Mere error of government are not subject to our judicial review. It is true that one or the other of the immunities or exemptions granted under the provisions of the Act may be taken advantage of by resourceful persons by adopting ingenious methods and devices with a view to avoiding or saving tax. But that cannot be helped because human ingenuity is so great when it comes to tax avoidance that it would be almost impossible to frame tax legislation which cannot be abused. Moreover, as already pointed out above, the trial and error method is inherent in every legislative effort to deal with an obstinate social or economic issue and if it is found that any immunity or exemption granted under the Act is being utilised for tax evasion or avoidance not intended by the legislature, the Act can always be amended and the abuse terminated. We ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om and advisability of economic policies are ordinarily not amenable to judicial review unless it can be demonstrated that the policy is contrary to any statutory provision or the Constitution. In other words, it is not for the courts to consider relative merits of different economic policies and consider whether a wiser or better one can be evolved. For testing the correctness of a policy, the appropriate forum is Parliament and not the courts. Here the policy was tested and the motion defeated in the Lok Sabha on 1-3-2001. 19. Insofar as judgment of Calcutta High Court in Kalindi Woolen Mills (P) Ltd. (supra) is concerned, we have our reservations on the correctness thereof wherein the High Court found that Notification dated 28.04.1989 allowing imports of Woolen rags, Synthetic rags, Shoddy wool through two ports only, namely, Bombay and Delhi ICD. In any case, insofar as argument based on Article 14 is concerned, the said judgment is distinguishable as in that case the Court did not find any intelligible basis which was disclosed before the Court either in the affidavits filed by the Customs Authorities or in the Import Licensing Control Authorities of the Government of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , only when the service or technology provider is availing benefits under the foreign trade policy or is dealing with specified services or specified technologies. (3) All goods to which any Order under sub-section (2) applies shall be deemed to be goods the import or export of which has been prohibited under section 11 of the Customs Act, 1962 (52 of 1962) and all the provisions of that Act shall have effect accordingly. (4) Without prejudice to anything contained in any other law, rule, regulation, notification or order, no permit or licence shall be necessary for import or export of any goods, nor any goods shall be prohibited for import or export except, as may be required under this Act, or rules or orders made thereunder. 23. Scope and ambit of the aforesaid provision was considered in Abdul Aziz Aminudin v. State of Maharashtra (1964) 1 SCR 830 : AIR 1963 SC 1470, wherein this Court held as under: 11. It is clear therefore that the power conferred under Section 3(1) of the Act is not restricted merely to prohibiting or restricting imports at the point of entry but extends also to controlling the subsequent disposal of the goods imported. It is for the appropria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment of foreign trade and it has also empowered to regulate the foreign trade. The two key words here are 'development' and 'regulation'. It is also important to note that such development and regulation is aimed at facilitating imports as well as increasing exports. First argument of Mr. Naphade was that regulatory provision has to be for facilitating imports whereas in the present case, it was to curb the imports insofar as ports in Kerala are concerned. Sub-section (2) of Section 3 further empowers the Central Government to make provision for: (i) prohibiting; (ii) restricting; or (iii) otherwise regulating 'the import or export of goods or services or technology'. It can be done in all cases or in specified classes of cases. The submission of Mr. Naphade was that such provisions prohibiting, restricting or otherwise regulating are to be made in respect of import or export of goods or services or technology which essentially were custom based. He referred to the definition of 'import' and 'export' contained in Section 2(e) of the Act which, in relation to goods, means bringing into, or taking out of, India any goods by land, sea or air. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned Notifications may be considered with reference to Section 3(2) of the Act not in isolation, but on a harmonious construction of the same with reference to the statement of objects and reasons to the Act along with Sections 2(e), 3(3) and 5 of the Act along with Sections 7 and 11 of the Customs Act, 1962. The Foreign Trade Policy of 2004-2009, the relevant provisions which have already been extracted herein before at Para 5 may also be considered. This approach, according to him, would be in consonance with the ratio of the judgment of this Court in Union of India v. Asian Food Industries (2006) 13 SCC 542: 25. Would the terms 'restriction' and 'regulation' used in Clause 1.5 of the Foreign Trade Policy include prohibition also, is one of the principal questions involved herein. 26. A citizen of India has a fundamental right to carry out the business of export, subject, of course to the reasonable restrictions which may be imposed by law. Such a reasonable restriction was imposed in terms of the 1992 Act. 27. The purport and object for which the 1992 Act was enacted was to make provision for the development and regulation of foreign trade inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia 1957 SCR 701: .......... In modern times, the export and import policy of any democratic State is bound to be flexible. The needs of the country, the position of foreign exchange, the need to protect national industries and all other relevant considerations have to be examined by the Central Government from time to time and rules in regard to export and import suitably adjusted. It would, therefore, be idle to suggest that there should be unfettered and unrestricted freedom of export and import or that the policy of the Government in regard to export and import should be fixed and not changed according to the requirements of the country. xx xx xx It was open to the Government, and indeed national interests made it their duty, to intervene and regulate the distribution of the commodity in a suitable manner. 27. According to us, we need not deal with these submissions elaborately as the aforesaid contention of the learned senior counsel for the appellants need to be discarded on altogether different reason. These arguments ignore the crucial words appearing in sub-section (2) of Section 3, namely, provision for prohibiting, restricting or otherwise regulating, the im ..... X X X X Extracts X X X X X X X X Extracts X X X X
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