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Riddhisiddhi Bullions Limited and Others Versus Union of India and Others

2016 (2) TMI 476 - BOMBAY HIGH COURT

Challenge to the RBI (FEMA) circular - validity and legality - Policy in relation to import of Gold - On or about 14th August, 2013, RBI issued another Circular no. 25, referring to the said Circular no. 15 dated 22nd July, 2013, for clarification / modification in supersession of the earlier instructions, and made it incumbent on all nominated agencies to make exclusively available at least one fifth i.e. 20% of every lot of gold imported to the country, for the purpose of exports and the balan .....

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was empowered to impose conditions while granting or issuing the Certificates. Pertinently, the conditions at page 83 and the power to impose them are not challenged.

Unable to agree with Mr. Chagla that a conjoint reading of these provisions in the 1992 Act together with the Customs Act, 1962, would not empower the Director General in this case to impose penalty. As we have already held, the Reserve Bank of India has enough powers and, therefore, there is no basis for the complaint t .....

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and Customs Rules and Regulations, then the import of 550 kgs of gold was governed by the same. The show-cause notice alleged that from the import of 550 kgs of gold only 350 kgs of gold was exported and as per the export details 200 kgs of gold was supplied to the domestic unit. This is a violation of the Reserve Bank of India’s Circular. Each of the terms and conditions, either in the certificates relied upon by the petitioners or the Reserve Bank of India guidelines are in consonance with the .....

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t petitioners raise conflicting pleas and versions only to avoid compliance with the conditions and which are invited by them on their own. The conditions as imposed on them in the Nominated Agency Certificate and which is issued in their favour right from 2010 have never been questioned. In these circumstances, they cannot place any reliance on the Division Bench judgment.

Writ Petition fails. Rule is discharged - Decided against the petitioners. - WRIT PETITION NO. 10001 OF 2014 - D .....

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tition. Hence, Rule. The respondents waive service. Since all pleadings are complete, by consent of both sides, the Writ Petition is disposed of finally by this judgment. 2. This Writ Petition under Article 226 of the Constitution of India questions the legality and validity of the Circulars, namely, Circular No.15 dated 22nd July, 2013, Circular RBI/2013-14/187 // A.P. (DIR Series), Circular No.25 dated 14th August, 2013 and RBI/2013-14/600 // A.P. (DIR Series) and Circular No. 133 dated 21st M .....

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s to be recognized as a Premier Trading House by the Government of India, Ministry of Commerce and Industry through the Office of the Zonal Joint Director General of Foreign Trade, which is valid till 31st March, 2016. On the basis of this certificate of recognition, a certificate as Nominated Agency is also granted every year to the petitioners by the authorities under the Foreign Trade (Development and Regulation) Act, 1992 (for short Act of 1992 ). All this enables the petitioners to import p .....

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d. 5. On or about 7th August, 1992, Foreign Trade (Development & Regulation) Act, 1992 was enacted to provide for the development and regulation of foreign trade by facilitating imports into, and augmenting exports from India and for matters connected therewith or incidental thereto. The Act confers powers upon Central Government for the development and regulation of foreign trade, by, inter alia, making provisions for prohibiting, restricting or otherwise regulating the import or export of .....

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d and sufficient reason, to be recorded in writing, and subject to such conditions as may be prescribed. Section 11 (2) of the said Act provides for imposition of penalty where any person makes or abets or attempts to make any export or import in contravention of any provision of the Act or any rules or orders made thereunder. Annexure-C to the petition is copy of the relevant provisions of the Foreign Trade (Development & Regulation) Act, 1992. 6. On or about 30.12.1993, the Foreign Trade R .....

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ed in the Gazette of India. 7. Policy Circular No.77 (RE-2008)/2004-2009 was issued by Director General of Foreign Trade (for short DGFT ) prescribing guidelines for import of precious metals by the Nominated Agencies which included Premier Trading Houses. The monitoring mechanism and the format of Certificate for the said purpose, were also provided in the said Policy Circular. Annexure-E to the petition is a copy of the said Policy Circular no. 77 (RE-2008)/2004-2009 issued by DGFT. Subsequent .....

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emier Trading House by the Ministry of Commerce. Prior thereto, the petitioner was awarded Certificate of Recognition as Star Trading House on 09.09.2009. Annexure-H to the petition is a copy of the said Premier Trading House Status Certificate awarded by the Ministry of Commerce. 9. On 18th May, 2010, a Certificate as Nominated Agency was granted to the petitioner No.1 by the DGFT for direct import of Precious Metals in terms of Para 4A.4 of Foreign Trade Policy. Annexure-I to the petition is a .....

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ated Agency dated 15th March, 2011, 17th April, 2012, 9th April, 2013 and 5th May, 2014, respectively. Certificate dated 5th May, 2014 was issued with validity from 1st April 2014 to 31st March 2015. The following quantities of gold were imported upon issuance of the said certificates as Nominated Agency in the financial years 2010-11 to 2013-14. F.Y. Quantity (kgs.) 2010-11 810 2011-12 1692 2012-13 21628 2013-14 22231 TOTAL 46361 Out of this total quantity of 46,361 kg of gold imported as Nomin .....

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into India. Annexures-N and O to the petition are copies of the said Invoices, both dated 22nd July, 2013 for Ahmedabad and Hyderabad. 12. The price for the shipment was fixed at LONDON-AM-FIX of 22nd July, 2013 on London Bullion Market Association at around 3.00 p.m. (10.30 a.m. London time) at US$ 1313.75 (London AM fixing rate for gold on 22nd July, 2013) + USD 0.25 (Fixing charges) + USD 2.50 (Supplier charges) = USD 1316.5 per ounce. Annexure-P to the petition is a copy of the said document .....

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bal Services evidencing handing over shipment at 4.30 p.m. and 4.35 p.m. on 22nd July, 2013. 14. The Customs procedure was completed in respect of the two shipments at Dubai time 18.00 hrs. and 18.05 hrs. and consequently, two airway bills bearing numbers 17652586273 (for Ahmedabad shipment) and 17652586262 (for Hyderabad shipment) both dated 22nd July, 2013 were issued at 19:21 hrs and 21:13 hours (both UAE time). Annexures-S, T-1 and T-2 to the petition are copies of the certificate issued by .....

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Section 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999). Both these provisions under FEMA empower RBI to issue directions to Authorized Dealers (Banks in the instant case). The said Circular also informed that - 5. Government of India will be issuing separate instructions, if any, to the customs authorities / DGFT to operationalize and monitor these import restrictions. 16. Two Bills of Entry, both dated 23rd July, 2013, were filed for the consignments upon their reaching .....

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001IMPOR13098756 & 001IMPOR13098455. Annexures-X and Y to the petition are copies of the said documents evidencing outward remittance vide ref. Nos.001IMPOR13098756 & 001IMPOR13098455. 19. Thereafter, the goods were released from the Customs Authorities. This release was after considering inapplicability of the RBI Circular dated 22nd July, 2013, in respect of these goods. 20. On or about 14th August, 2013, RBI issued another Circular no. 25, referring to the said Circular no. 15 dated 2 .....

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y are nominated agencies or not, are permitted to import gold exclusively for the purpose of exports only. Para 5 of the said RBI Circular reads as follows: 5. Government of India will be issuing separate instructions, if any, to the customs authorities / DGFT to operationalize and monitor the above requirements for import of gold. 21. Consequently, in order to operationalize the RBI Circular no. 25 dated 14th August, 2013, the Central Board of Excise and Customs issued Instructions on 04.09.201 .....

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ructions inter alia clarifying that gold imported between 22nd July, 2013 and 14th August, 2013, if pending clearance, should be cleared under the amended and clarified position in terms of RBI Circular dated 14th August, 2013 and CBEC Circular dated 4th September, 2013. Annexure-AA to the petition is a copy of the said Instructions dated 27th September, 2013 issued by Directorate General of Export Promotion, Department of Revenue, Ministry of Finance. 24. On or about 9th May, 2014, on being ora .....

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les/export was also submitted. 25. On or about 21st May, 2014, RBI Circular No.133 was issued providing revised Guidelines permitting thereby Premier Trading Houses , registered as Nominated Agencies to import gold under 20:80 Scheme, subject to certain conditions. There is no allegation of violation of any of the conditions imposed vide the said RBI Circular. 26. On or about 3rd June, 2014, the office of the Respondent No.3 requested petitioner No.1 to submit a statement showing details of impo .....

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r about 24th June, 2014, the office of the Respondent No.3 sought further details from the petitioner No.1. Annexure-DD to the petition is copy of the said letter dated 24th June, 2014 issued by the office of the Respondent No.3. 29. On or about 1st July, 2014, the petitioner No.1 provided the necessary details and clarifications, which, inter alia, included details of imports effected against the said two airway bills dated 22nd July, 2013. Annexure-EE to the petition is a copy of the said lett .....

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.2014, the petitioner No.1 submitted a letter dated 20.08.2014 seeking time of a fortnight for submitting the reply, as the concerned person was out of town and was to resume the office in the first week of September 2014. Annexure-GG to the petition is a copy of the said letter dated 20th August, 2014, issued by the petitioner No.1. 32. On or about 1st September, 2014, the petitioners submitted various details to the office of the Respondent No.3 with documentary evidence of time and negotiatio .....

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ccount the RBI Circular No.15 dated 22nd July, 2013. The petitioners also informed that exports were made against the consignments which were subsequently imported. Annexure-HH to the petition is a copy of the said letter dated 1st September, 2014, issued by the Petitioner. 33. On or about 8th September, 2014, RBI informed under the Right to Information Act that the exact timing of uploading of the Circular No.15 dated 22nd July, 2013 on RBI website was 19:47 hrs. on 22nd July, 2013. Annexure-II .....

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6th September, 2014. 35. The Respondent No.3, on 14th October, 2014 (received on 18th October, 2014) issued a show cause notice under Section 14 read with section 11(2) of the Act of 1992, informing thereby that request for renewal of the Nominated Agency certificate cannot be considered for non-compliance with the conditions and RBI Circular No.15 dated 22nd July, 2013. By alleging violation thereby of Rule 13(2) of the Foreign Trade Regulation Rules, 1993, the show cause notice proposed fiscal .....

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s unable to submit detailed reply and to seek legal advice, and requested for some time to furnish the detailed reply and a reasonable opportunity of hearing. Annexure-KK to the petition is a copy of the said preliminary reply dated 21st October, 2014 to the SCN submitted by the Petitioner. 37. On or about 31st October, 2014, an addendum to the show cause notice dated 14th October, 2014, was received at 3.42 p.m. from the office of the Respondent No.3 by fax. The said addendum to show the cause .....

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s the Customs Authorities were satisfied that RBI Circular had no applicability and hence permitted clearance thereof without obtaining any bond otherwise required to be submitted. Similarly, even the Authorized Dealer had permitted foreign remittances against the said two shipments on being satisfied that the restrictions placed if any vide Circular dated 22nd July, 2013 were inapplicable for the said two shipments. There is no proceeding issued against the petitioner in this regard by either R .....

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n of Indent) dated 31st October, 2014. 41. Promptly a reply was received from JP Morgan Chase Bank, NA London at 4:05 pm promising for scheduling the shipment. Annexure-MM to the petition is a copy of the said reply dated 31st October, 2014, received by e-mail from JP Morgan Chase Bank, NA London by the Petitioner. 42. Immediately thereafter, on the same date at 4.45 p.m., to utter shock of the petitioner, a drastic ex parte unreasoned suspension order issued by the Respondent no.3 was received .....

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rs. Moreover, a consignment of 10MT of Silver was confirmed by the petitioner No.1 vide Purchase Order dated 30th September, 2014 and the same was likely to reach Indian Port by sea route in the next week thereafter. The goods ordered vide Purchase Order dated 31st October, 2014, i.e 200 kg of gold had also been confirmed. 44. Aggrieved by the said Suspension Order dated 31st October, 2014, the petitioners challenged the same before this Hon ble Court by preferring Writ Petition No. 9873 of 2014 .....

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an order on 14th January, 2015 and which was communicated by fax on 15th January, 2015, to the petitioner. It is aggrieved by the above that the present Writ Petition has been filed. There are two affidavits-in-reply which have been filed by the contesting respondents. There is also an affidavit-in-reply filed by the respondent No.2 - Reserve Bank of India. The petitioners have filed their rejoinder affidavits. 46. The justification for the action in the affidavit-in-reply of the third responden .....

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. Thereafter it is urged that the condition for import of any item has to be seen with specific reference to the Indian Trade Classification (Harmonised System) for export and import items [for short ITC (HS)] Schedule I. In the instant case, the petitioners have imported gold under ITC (HS) Code 071081200 and the entry in ITC (HS) Schedule I has a specific condition that the import is permitted, subject to the Reserve Bank of India s Regulations. Moreover the Nominated Agency Certificate also h .....

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he Nominated Agency Certificate holder. The other importers are ineligible to import gold. Once the certificate issued in favour of the petitioners contain a specific condition of compliance with Customs and RBI Regulations, then, upon importing gold the petitioners cannot complain either with regard to the power of the RBI or the condition. 49. On facts, it is stated that the import of gold by the petitioners has taken place on 23rd July, 2013 and not on 22nd July, 2013. As per section 2(e) of .....

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l of entry No.2784490 and bill of entry No.2783704. Both these bills of entry are dated 23rd July, 2013. Thus, the imports were made after the Reserve Bank of India s Circular No.15 dated 22nd July, 2013, came into effect. The contention of the petitioners that they have not violated the conditions of the RBI Circular No.15 dated 22nd July, 2013 is without merit. Thus, any contrary contention cannot be accepted in the face of these admitted documents and their conditions. If the date and time of .....

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sions of para 4A.35 of the Handbook of Procedures. The NAC was renewed on 5th May, 2014, by the office of the Director General of Foreign Trade without verifying the half yearly return for the period 1st March, 2013 to 31st March, 2014. Further, it was observed that 550 Kgs. of gold had been imported by the petitioners between 22nd July, 2013 and 31st March, 2014. The Additional Director General of Foreign Trade on 9th May, 2014, sent a copy to the Director General of Foreign Trade Headquarters .....

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etitioners returned back this renewed NAC on 9th May, 2014. The petitioners were conscious of the fact that in the absence of the original or renewed certificate, they would not be able to import gold. On the advise of the Panel counsel, this renewed certificate was returned to the petitioners on 11th November, 2014. It is, therefore, urged that though not possessing this certificate, between 9th May, 2014 and 10th November, 2014, the petitioners imported 16000 Kgs of gold, the value whereof wou .....

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law contrary to what has been urged and referred by us hereinbefore. 53. The role of the Reserve Bank of India has been highlighted in paragraph 19 of the affidavit. Though this comes from an authority under the Foreign Trade Act, it would be advantageous to refer to it. The RBI manages foreign exchange. It is urged that the foreign exchange reserve level shows the country s economic strength. A continuous increase in the imports of gold was resulting in a continuous reduction in foreign exchang .....

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Trading House, Export Oriented Unit (EOU) and SEZ Unit, the imports were permitted exclusively for export purpose. In other words, Premier Trading Houses were under an obligation to export the resultant product to the extent of 100% of imported gold. By issuance of this Circular a clear line was drawn among the Nominated Agencies with one set of Nominated Agencies being put under obligation to export resultant product to the extent of 20% while another set of Nominated Agencies were subject to .....

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India is authorised to regulate the trade of precious metals, including gold. Under the Foreign Exchange Management Act, 1999 (For short FEMA ), the Reserve Bank or India has full authority to regulate remittances and this Act read with the provisions of the Foreign Trade Policy would enable the RBI to regulate import of gold. Once the bill of entry also refers to the condition that import is subject to the RBI Regulations and the petitioners being aware of the same, then, all the more the techn .....

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RBI guidelines. The issuance of this certificate is also in terms of the prescribed format and that is referred to in paragraph 27. Then the role of the two Circulars vis-a-vis import of gold by Export Oriented Units, Special Economic Zone Units, Premier Trading Houses and Star Trading Houses has been referred. 56. It is not necessary to refer to any denials nor is it necessary to then refer to further paragraphs of this affidavit, particularly on some factual details. 57. Thereafter reference .....

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h 2.1 of the Foreign Trade Policy. These provisions are that export and import shall be free, except when regulated. Such regulation would be as per Foreign Trade Policy and/or ITC (HS) and if ITC (HS) contains the itemwise export and import Policy regime. 58. It is, therefore, urged that if a specific item has to been seen with reference to the ITC (HS), then, in the instant case, the petitioners imported gold bars under ITC(HS) Code of 71081200 and that relevant import policy allows it subject .....

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r affidavit, it would be necessary to refer to the additional affidavit-in-reply. According to the Joint Director of Foreign Trade, the additional affidavit-in-reply filed on 8th June, 2015, was necessitated in view of the developments during the pendency of the petition. It was also necessitated because, according to this deponent, the Director General of Foreign Trade was required to place before the Court, a further fact that the petitioners imported 550 Kgs. of gold 100% of which had to be e .....

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s, import policy for gold and the Foreign Exchange Management Act, 1999. It is important for any country to address this problem since that would allow it to manage its foreign exchange reserves. Unsustainable deficit of foreign exchange in any country will result in macro financial instability and sudden reversal of capital flows which may occur. The high current account deficit is one of the biggest risks to the Indian economy and the Reserve Bank of India stated in May, 2013 that any further .....

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offences continually. Therefore, in the additional affidavit in paragraph 12 B reference has been made to the cases of violation noted by the Income-tax Department, the Enforcement Directorate (ED) and Directorate of Revenue Intelligence (DRI), Ahmedabad. The offences that are alleged to have been committed pertain to money laundering etc. 60. Then, there is a reference made to certain raids carried out on some 40 premises of the petitioners, mostly in Mumbai and the details of bogus imports an .....

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hen, the adjudication order passed is fully justified. 61. There is an affidavit-in-rejoinder, as stated above, and the petitioners state that there is no merit in the objection that the Writ Petition is not maintainable and should be dismissed for availability of alternate efficacious remedy. It is urged that the same is not an absolute bar for entertaining this petition. It is submitted that as a fundamental question of illegality and validity of the Circular applied by the Director General of .....

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he Foreign Trade Act, 1992, are relied upon to support this contention. Then, it is urged that there is no reasonable explanation or justification for passing the impugned order and imposing a penalty on the petitioner-company of ₹ 100 crore when the petitioners had paid total customs duty of ₹ 4,08,94,132/- for the consignments in question to the satisfaction of the proper officer of Customs at Ahmedabad for home consumption without any restriction on domestic sales thereof, which o .....

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nn Royale Ltd., Writ Petition No.2120 of 2009 decided on 6th April, 2010, this benefit was extended on the finding that there was no restriction on the importation of goods concerned when the contract was made. Therefore, the Director General of Foreign Trade is bound to act in accordance with its concession in the case of Stonemann (supra). It is then stated further that paragraph 5 of the impugned circular makes reference to the instructions. No separate instructions were issued by the Central .....

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ived and obtained under the RTI Act, 2005, copies of which are at Exhibits 1 and 2 of this affidavit-inrejoinder. 62. Thus, the petitioners reiterate their contention that the penalty is unsustainable and must be set aside. We need not refer to other contentions because throughout it is maintained that no Circulars are issued by the Central Government restricting or regulating the import. However, it is admitted that the petitioners are importing gold on the strength of their recognition as a No .....

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of entry was filed post the uploading of the impugned Circular on the RBI s website, that Circular itself provided that till the instructions were not issued by the Government of India, the Customs/Director General of Foreign Trade cannot operationalise the import restriction. In the absence of separate instructions issued by the Government of India, no proceedings could have been initiated by the Director General of Foreign Trade/Customs. Then it is urged that the petitioners have never conten .....

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Bank (herein after to be referred as Bank ) is a statutory corporation, established under the Reserve Bank of India Act, 1934, to regulate the issue of bank notes and keeping of reserves with a view to secure the monetary stability of the country generally to operate the currency and credit system of the country to its advantage. The Bank is the central bank and the principal monetary authority of the country. The Bank, has been, inter alia, entrusted with the statutory obligation of administeri .....

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at the foreign currency reserves of the country are utilized to the benefit and development of the country. In terms of Section 5 in the FEMA the Central Government may, in public interest and in consultation with Reserve Bank, impose such reasonable restrictions for current account transactions as may be prescribed. The said circulars were issued under Section 10(4) and 11(1) of the FEMA in consultation with Government of India. To curb the increasing Current Account Deficit (CAD) and in consul .....

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) and section 11(1) of FEMA in that behalf. It is stated that to curb the increasing Current Account Deficit, and in consultation with the Government of India, the RBI issued Circular No.15 dated 22nd July, 2013, requiring Premier or Star Trading Houses to import gold only for export purposes. Subsequent AP DIR Circulars on import of gold by nominated banks/agencies/entities were also issued in consultation with the Government of India to curb the above deficit. 66. It is urged that the Nominate .....

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oms Rules and Regulations. The affidavit states that paragraph 4 of the Policy Circular No.39 (RE-2010)/2009-14 dated 19th August, 2011, regarding Consolidated Guidelines for import of precious metal by the Nominated Agencies issued by DGFT provides that The Policy and Procedure for import of precious metal shall be as per the guidelines stated in Foreign Trade Policy (FTP) and the relevant RBI Guidelines . This circular also states that the Nominated Agencies may refer the RBI Guidelines as sta .....

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trade requirements. ITC(HS) Code 71081200 (for gold) of import policy are subject to RBI Regulations and Central Government has clearly allowed RBI to regulate the import of gold. Thus reading all these together proves that the RBI has power to issue the impugned Circular and these Circulars are applicable to the petitioners also. In these circumstances, all the contentions raised by the petitioners about lack of power in the RBI are denied. It is stated that allowing imports in no way permits t .....

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the statutes, laws and regulations of another authority. Even a failure to detect a violation by a monitoring authority at one point of time does not give blanket protection to the petitioners for violations detected subsequently. In the circumstances, there is a definite violation of the Circular and provisions of FEMA. 67. The assertion throughout in this affidavit is that the RBI is empowered to issue Regulations and restrict the import/export of bullion in pursuance of its duty to preserve .....

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ank of India has no jurisdiction to regulate import of bullion. Mr. Chagla has invited our attention to page 253 of the paper book which is Annexure-UU, namely, a copy of the Order-in-Original which is impugned in the petition. Mr. Chagla would submit that the Order-in-Original proceeds on the footing that the petitioners had supplied 200 Kgs of imported gold vide bill of entry dated 23rd July, 2013 to domestic units. Thus, they failed to comply with the conditions of RBI Circular No.15 dated 22 .....

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not eligible for renewal of the NAC for the period 2014-2015. That certificate is declared to be ab initio void. 70. Mr. Chagla submits that the findings in the impugned order would show that there is total non application of mind on the part of the Additional Director General of Foreign Trade. The Additional Director General of Foreign Trade ought to have realised that the reliance on the Circular of the RBI is totally misplaced. That Circular of the RBI (Annexure A-1 pages 43-44 of the paper- .....

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hat neither the Reserve Bank of India Act, 1934, nor the Foreign Exchange Management Act, 1999, particularly section 10(4) thereof or sub-section (1) of section 11 thereof would have application to a Nominated Agency. Section 10 speaks of an Authorised Person whereas section 11 spells out RBIs powers to issue directions to Authorised Person. There is no reference in these provisions to the Nominated Agencies. Further, the Reserve Bank of India is not the authority empowered by law to issue any i .....

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powder form. The item relied upon, namely, 71081200 shows that the import is free. Merely because that refers to Reserve Bank of India Regulations does not mean that the subject transaction would fall within the purview of the same. Once the Reserve Bank of India s power and nature of its jurisdiction are noted and the provisions in that regard are seen in proper perspective, it is evident that the impugned order so far it places reliance on the RBI Circular and the ITC(HS) Code is entirely erro .....

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paragraph 3 would make it clear that the only obligation is that at least 10% of the imports of each entity shall be supplied to the exporters. The Policy and procedure for import of precious metal shall be as per the guidelines stated in the Foreign Trade Policy and the relevant RBI guidelines. However, there were no RBI guidelines either in the form of Circular or otherwise when the imports by the petitioners took place. The petitioners have entered into the transaction prior to the Circular .....

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t only The Foreign Exchange Management Act, 1999, but The Foreign Exchange Regulation Act, 1973. Mr. Chagla has invited our attention to sections 13 to 17 incorporated therein to submit that these provisions are conspicuous by their absence in FEMA. Section 13 of the FERA contained restrictions on import and export of certain currency and bullion and no person shall, except with the general and special permission of the RBI or written permission of the person authorised in this behalf by the RBI .....

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to or from an authorised person if such sale or drawal is a current account transaction. The reasonable restriction in terms of proviso to section 5 could have been imposed only by the Central Government may be in consultation with the RBI. However, that power cannot be exercised by the RBI. Our attention is also invited to the fact that these Circulars are in public domain. The display thereof on the website of RBI would show that as far as the petitioners transactions are concerned, they would .....

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ce of jurisdiction or lack of power in the RBI. Mr. Chagla has placed reliance on a judgment of the Hon ble Supreme Court in the case of Atul Commodities Pvt. Ltd. vs. Commissioner of Customs, Cochin 2009 (235) ELT 385 (SC) which outlines the power of the Government to make amendments to Foreign Policy. It is the Central Government which can, according to Mr. Chagla, make any changes or amendment in the foreign policy. Mr. Chagla has then relied upon a Division Bench judgment delivered by this C .....

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sterisk in sub-section (1) any gold or silver or were omitted by Act 29 of 1993 with effect from 8th January, 1993. Similarly, the words gold, jewellery or precious stones were omitted from sub-section (2) of section 13 of FERA by the same Amendment Act and with effect from the same date. This is relevant and germane, according to Mr. Chagla, for understanding the controversy. Mr. Chagla has also placed before us the Transitional Arrangements in Chapter 1A of the Foreign Trade Policy 2009-2014 P .....

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ubmit that there is no substance in any of the contentions of Mr. Chagla. He would submit that Mr. Chagla s arguments can be divided into two parts. Mr. Dada submits that Mr. Chagla s first contention that the petitioners had no remedy, save and except approaching this Court in its jurisdiction under Article 226 of the Constitution of India is fallacious inasmuch as it overlooks section 15 of the Foreign Trade (Development & Regulation) Act, 1992. That Act by section 15 provides for an appea .....

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passing section 15 and when all contentions can be raised in Appeal is, therefore, impermissible in law. There may not be an absolute bar for entertaining a Writ Petition even in the face of an alternate equally efficacious remedy, but if it is complete and all the points can be raised therein, then, this Court should not entertain the present petition for that would set a wrong precedent. 75. The arguments of Mr. Chagla on the second point are met by Mr. Dada by pointing out the RBI guidelines .....

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lable to all concerned, in particular the exporting community requiring the metal for manufacture of its product. The guidelines cover the export of precious metal by Premier Trading Houses. Reference is made to para 4A.4 of the Foreign Trade Policy and Mr. Dada would submit that in clause 4 of these guidelines it is stated that the policy and procedure for import of precious metal shall be as per guidelines set out in the Foreign Trade Policy and relevant RBI guidelines. It is submitted that by .....

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page 80, yet there is nothing erroneous or illegal when the Director General of Foreign Trade relies upon the RBI Circular No.15 dated 22nd July, 2013. The attempt of Mr. Dada is to demonstrate that Mr. Chagla s contentions, on lack of power in the RBI or the impugned order is erroneous or illegal because it refers to extraneous material are inaccurate and unacceptable. Once there are guidelines of the RBI so as to guide the Nominated Agencies in the import of precious metal, then, reference to .....

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ing to the provisions of the Foreign Trade Policy 2009-2014 and the status of Premier Trading House is in accordance therewith. The certificate itself, copy of which is at pages 83 and 84 states that it is subject to the provisions of the Foreign Trade Policy and procedure laid down thereunder, RBI guidelines and the Customs, Rules and Regulations. Mr. Dada, therefore, submits that if the RBI is the controller and manager of foreign exchange, it controls the foreign exchange movement through its .....

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of the provisions of FEMA by Mr. Chagla is not proper inasmuch as it is a comprehensive enactment. Our attention is invited to the preamble to FEMA by Mr. Dada in this behalf. He also invites our attention to certain definitions and particularly the definition of the term Foreign Exchange as appearing in section 2 clause (n). He would also rely upon the allegations in the show-cause notice and in that regard our attention is invited to page 53 of the paper-book by Mr. Dada. He would submit that .....

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nced and the petition be dismissed. 77. Mr. Dada has relied upon the Foreign Trade Policy and the guidelines monitoring the import of precious metal by Nominated Agencies. He has also relied upon the Master Circular No.13 / 2013-2014 dated 1st July, 2013. Mr. Dada has also relied upon the Foreign Exchange Management (Current Account Transactions) Rules, 2000 and finally he would submit that the RBI Circular dated 28th January, 2014, would denote as to how the prior Circulars, particularly Circul .....

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ended upto 18th June, 2015. He would also support the stand of the Reserve Bank of India as enunciated in the affidavit-in-reply. 79. We have carefully perused the petition, the annexures thereto and all affidavits placed before us. We have also perused the compilation of documents tendered by the parties. We have also perused the statutory provisions and the decisions relied upon with the assistance of the counsel. 80. For properly appreciating the rival contentions, a reference will have to be .....

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II contains the provisions relating to incorporation, capital management and business. Chapter III is titled Central Banking Functions. Chapter III-A deals with collection and furnishing of credit information and Chapter III-B contains provisions relating to non-banking institutions receiving deposits and financial institutions. Then, the newly added Chapters viz. Chapter III-A, III-B, III-C and III-D have enabled the Reserve Bank to evolve such measures so as to prohibit acceptance of deposits .....

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y sub-section (12) which is substituted with effect from 21st July, 1978 by Act 24 of 1978, the Reserve Bank of India can transact the business of purchase and sale of gold or silver coins and gold and silver bullion and foreign exchange and the opening of gold account with the Principal Currency Authority of any foreign country or the Bank For International Settlements or any International or Regional Banks or Financial Institutions formed by such Principal Currency Authority or by authorities .....

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not be subject to any liability other than the liabilities of the Issue Department in terms of section 34. By section 33, the assets of the Issue Department consist of gold coin and gold bullion. The bank by section 40 undertakes transactions in foreign exchange and this section 40 has been substituted by Act 26 of 2006. Section 40 reads as under : 40. Transactions in foreign exchange.- The Bank shall sell to or buy from any authorised person who makes a demand in that behalf at its office in Bo .....

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- In the section authorised person means a person who is entitled by or under the Foreign Exchange Regulation Act, 1973 (46 of 1973) to buy, or as the case may be, sell the foreign exchange to which his demand relates. 83. A perusal thereof would indicate that the bank shall sell to or buy from any authorised person who makes a demand in that behalf, foreign exchange at such rates of exchange and on such conditions as the Central Government may from time to time by general or special order deter .....

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to which his demand relates. 84. A survey of the Reserve Bank of India Act, 1934, leaves us in no manner of doubt that there is substance in the contentions of the learned advocate appearing on behalf of the Reserve Bank of India that the bank is the Custodian of foreign exchange and regulates the sale, purchase of foreign exchange, including receipt of payment of exports etc. 85. Then, comes The Foreign Exchange Regulation Act, 1973, which was in force till it was replaced and repealed by The F .....

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13(1) and 13(2). So far as section 13(1) is concerned, the omission is of the words any gold or silver and gold, jewellery or precious stones . However, we do not think that such omission can have any impact or would affect the controversy raised before us. It is clear that so long as the dealings in foreign exchange and securities transactions indirectly affecting foreign exchange and the import and export of currency so also conservation of foreign exchange resources of the country and the pr .....

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development and maintenance of foreign exchange market in India. The terms/words authorised person , capital account transaction , current account transaction , foreign currency and foreign exchange are defined. We would only reproduce definition of the term authorised person as appearing in section 2 clause (c) of The Foreign Exchange Management Act, 1999 : 2. Definitions. - In this Act, unless the context otherwise requires, - … … … (c) authorised person means an authoris .....

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whom every deal and particulars of all transactions by whatever mode but in foreign exchange are routed. Section 8 reads as under : 8. Realisation and repatriation of foreign exchange.- Save as otherwise provided in this Act, where any amount of foreign exchange is due or has accrued to any person resident in India, such person shall take all reasonable steps to realise and repatriate to India such foreign exchange within such period and in such manner as may be specified by the Reserve Bank. 87 .....

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granted under sub-section (1) maybe revoked by the Reserve Bank at any time of the Reserve Bank is satisfied that - (a) it is in public interest so to do; or (b) the authorised person has failed to comply with the condition subject to which the authorisation was granted or has contravened any of the provisions of the Act or any rule, regulation, notification, direction or order made thereunder: Provided that no such authorisation shall be revoked on any ground referred to in clause (b) unless t .....

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n conformity with the terms of his authorisation under this section. (5) An authorised person shall, before undertaking any transaction in foreign exchange on behalf of any person, require that person to make such declaration and to give such information as will reasonably satisfy him that the transaction will not involve, and is not designed for the purpose of any contravention or evasion of the provisions of this Act or of any rule, regulation, notification, direction or order made thereunder, .....

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ade by him to authorised person under sub-section (5) does not use it or such purpose or does not surrender it to authorised person within the specified period or uses the foreign so acquired or purchased for any other purpose for which purchase or acquisition of foreign exchange is not permissible under the provisions of the Act or the rules or regulations or direction or order made thereunder shall be deemed to have committed contravention of the provisions of the Act for the purpose of this s .....

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visions of this Act or of any rule, regulation, notification, direction or other made thereunder, direct any authorised person to furnish such information, in such manner, as it deems fit. (3) Where any authorised person contravenes any direction given by the Reserve Bank under this Act or fails to file any return as directed by the Reserve Bank, the Reserve Bank may, after giving reasonable opportunity of being heard, impose on the authorised person a penalty which may extend to ten thousand ru .....

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ther manner as it deems fit. Sub-sections (2), (3), (4) and (5) of section 10 would enable us to hold that the Reserve Bank of India can monitor, regulate and control the activities of such Authorised Person and the dealings that he undertakes in foreign exchange. It is also able to check the unauthorised dealings in foreign exchange. Secondly, for all the above purposes the Reserve Bank of India is empowered to issue directions to the Authorised Person. That direction is in regard to making of .....

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reasons for rejecting this argument of Mr.Chagla based on sections 10 to 13 of the FEMA, it would be advantageous to refer to The Foreign Trade (Development & Regulation) Act, 1992. The argument in short and substance is that the Reserve Bank of India may be empowered to regulate the dealings in foreign exchange and foreign securities, but in exercise of such powers it can only proceed against the Authorised Dealer. In the garb of exercising such powers, it cannot regulate or restrict the i .....

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the Authorised Person to insist on certain compliances before the foreign exchange is released by it, then, it can proceed not only against the Authorised Person but others in the event they are not made. That would be evident from sub-sections (6) to (10) and from section 11 of the Act. Therefore, once foreign exchange is sought and to fulfill the commitments such as import, then, appropriate conditions and restrictions can be placed while releasing foreign exchange. The Reserve Bank of India c .....

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the authorities under the 1992 Act have proceeded. 90. The Foreign Trade (Development & Regulation) Act, 1992, is an Act to provide for the development and regulation of foreign trade by facilitating imports into and augmenting exports from India and for matters connected therewith or incidental thereto. After the definitions are set out in Chapter-I which include that of import and export, by Chapter II powers have been conferred in the Central Government to make order and announce foreign .....

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es of cases and subject to such exceptions, if any, as may be made by or under the order, import or export of goods or services or technology. By sub-section (3) of section 3 it is clarified that all goods to which any order under sub-section (2) applies shall be termed to be goods, the import or export of which has been prohibited under section 11 of the Customs Act, 1962 and all the provisions of that Act shall have affect accordingly. Thus, the Act of 1992 compliments the Customs Act,1962. It .....

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ulated and announced by Notification in the Official Gazette and its amendment is permitted to be made by the Central Government. 90. Chapter III contains section 7 which reads as under : 7. Importer-Exporter Code Number. - No person shall make any import or export except under an Importer-exporter Code Number granted by the Director General or the officer authorised by the Director General in this behalf, in accordance with the procedure specified in this behalf by the Director General : Provid .....

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neral in this behalf. This authorisation is to be made in accordance with the procedure specified in this behalf by the Director General. By sub-section (8), the Director General is empowered to suspend and cancel the Importer-Exporter Code number. Then comes section 9 and which enables issuance of licence, suspension and cancellation thereof and this could be either a licence, certificate, scrip or any instrument bestowing financial or fiscal benefits. By sub-sections (2), (3) and (4), a renewa .....

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Pertinently, the conditions at page 83 and the power to impose them are not challenged. 92. By Chapter IIIA, quantitative restrictions can be imposed by the Central Government and by Chapter IV search, seizure, penalty and confiscation is contemplated. By section 11, contravention of provisions of the 1992 Act, rules, orders and foreign trade policy is made punishable and sub-sections (2) and (3) of section 11 read as under : 11. Contravention of provisions of this Act, rules orders and foreign .....

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on signs or uses, or causes to be made, signed or used, any declaration, statement or document submitted to the Director-General or any officer authorised by him under this Act, knowing or having reason to believe that such declaration, statement or document is forged or tampered with or false in any material particular, he shall be liable to a penalty of not less than ten thousand rupees or more than five times the value of the goods or services or technology in respect of which such declaratio .....

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instant case, the Reserve Bank of India is doing precisely this and, therefore, it neither interferes nor takes over the powers of the competent authority either under the Act of 1992 or the Customs Act, 1962. 94. There is enough material on record which would indicate as to how the petitioners have understood the entire matter. In the Memo of the Petition and after referring to the relevant provisions, the petitioners refer to the Foreign Trade Regulation Rules, 1993, and Rules 10 and 13(2) of .....

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ecious metal by the Nominated Agency. These refer to Notification No.88 dated 28th February, 2009, wherein additional Nominated Agencies had been notified under paragraph 4A.4 of the Foreign Trade Policy for the purpose of direct import of precious metals for making it available to all concerned and in particular Exporting Community requiring precious metal for manufacture of its product. It is in terms of this paragraph that the agencies and entities mentioned in this Circular are entitled for .....

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both these Circulars were withdrawn by a further Circular bearing No. 14 dated 1st February, 2011. That relaxes the norms for doing away, inter-alia, with requirement of sale of 15% quantity to exporters. Annexure F is a copy of this Circular. It is evident that this relaxes the rigour of serial number 3(c) of the Circular No.1 dated 27th August, 2009 and to a certain extent of the Circular dated 31st March, 2009 (77 of 2009). However, the petitioners refer to the status of Premier Trading Hous .....

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inated Agency under paragraph 4A.4 of the Foreign Trade Policy as amended from time to time for the purpose of direct import of precious metal. This certificate is subject to provisions of the Foreign Trade Policy and the procedure laid down under the Reserve Bank of India guidelines and the Customs Rules and Regulations. This certificate as Nominated Agency has been renewed and even the renewals incorporate the same condition. It is, therefore, futile to urge that there was no obligation or dut .....

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ough the Reserve Bank of India guidelines would govern their dealings and that would include a Circular or directive issued by the Reserve Bank of India from time to time, but such imports do not violate the Policy Circular dated 22nd July, 2013. Such pleas being raised itself enables us to conclude that the petitioners are blowing hot and cold. They cannot approbate and reprobate as is rightly complained by Mr. Dada. We find much substance in the contentions of Mr. Dada that the petitioners hav .....

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ange and that control and exercise by the Reserve Bank of India is through the Authorised Dealer. The petitioners being importers, the Authorised Dealer remits foreign exchange abroad on behalf of its constituents, namely, the importer. It is in these circumstances that the petitioners are aware of what provisions of law they were required to comply and in terms of the Nominated Agency Certificate. All terms and conditions as imposed by the NAC would have to be fulfilled by them. Any breach ther .....

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ment Central Office Mumbai - 400 001 RBI/2012-13/499 A.P. (DIR Series) Circular No.103 May 13, 2013 To, All Scheduled Commercial Banks which are Authorised Dealers in Foreign Exchange Madam / Sirs Import of Gold y Nominated Banks/Agencies Attention of Authorised Persons is invited to paragraph 97 of the Monetary Policy Statement 20123-14 dated May 3, 2013 regarding import of gold. In terms of AD(G.P. Series) circular No.7 dated March 6, 1998 (copy enclosed for ready reference), nominated banks/a .....

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r gold for domestic use, it has been decided to restrict the import of gold on consignment basis by banks, only to meet the genuine needs of exporters of gold jewellery. 3. The above instructions will come into force with immediate effect. ADs may bring the contents of this circular to the notice of their constituents and customers concerned. 4. All other instructions relating to import of gold issued from time to time shall remain unchanged. 5. The directions contained in this circular have bee .....

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Sirs Import of Gold y Nominated Banks/Agencies Attention of Authorised Persons is invited to our A.P. (DIR Series) Circular No.103 dated May 13, 2013 on the captioned subject in terms of which, it was decided to restrict the import of gold on consignment basis by banks, only to meet the genuine needs of the exporters of gold jewellery. It has now been decided to extend the provisions of this circular to all nominated agencies/ premier / star trading houses who have been permitted by Government o .....

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old imports on Documents against Acceptance (DA) basis will not be permitted. These restrictions will however not apply to import of gold to meet the needs of exporters of gold jewellery. 3. The above instructions will come into force with immediate effect. ADs may bring the contents of this circular to the notice of their constituents and customers concerned. They are also advised to strictly ensure that foreign exchange transactions effected by / for their constituents are compliant with these .....

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ent Central Office Mumbai - 400 001 RBI/2012-13/520 A.P. (DIR Series) Circular No.122 June 27, 2013 To, All Scheduled Commercial Banks which are Authorised Dealers in Foreign Exchange Madam / Sirs Import of Gold by Nominated Banks/Agencies Attention of Authorised Persons is invited to our A.P. (DIR Series) Circular No.103 dated May 13, 2013 & A.P. (DIR Series) Circular No.107 dated June 04, 2013 on the captioned subject in terms of which, it was decided to restrict the import of gold on cons .....

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ports on Documents against Acceptance (DA) basis will not be permitted. 2. It is clarified that consequent upon the issue of above instructions, import of gold on unfixed price basis has to necessarily observe the discipline stipulated relating to cash margins and Documents against Payment (DP) basis. In other words, AD Category I Banks are required to ensure that credit in any form or name is not enabled for import of any form of gold. Import o gold on loan basis may, however, continue to be al .....

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emain unchanged. 5. The above instructions will come into force with immediate effect. Ads may bring the contents of this circular to the notice of their constituents and customers concerned. 6. The directions contained in this circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law. Yours faithfully, (Rudra Narayan Kar) Chief General .....

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ention of Authorised Persons is drawn to the Reserve Bank s A.P. (DIR Series) Circulars No.103, 107 and 122 dated May 13, June 04 and June 27, 2013 respectively on the captioned subject; As per these instructions, certain restrictions were imposed on the import of various forms of gold by nominated banks /nominated agencies/premier or star trading houses/SEZ UITS/ EoUs which have been permitted to import gold for use in the domestic sector. None of these restrictions was applicable to import of .....

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of import of gold (in any form/purity including import of gold coins/dore) is exclusively made available for the purpose of export. Such imports shall be linked to financing of exporters by the nominated agencies (i.e. average of last three years or any one year whichever is higher). Further, they shall make available gold in any form for domestic use only to entities engaged in jewellery, business/bullion dealers supplying gold to jewellers. b) They will be required to retain 20 per cent of th .....

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the scheme envisaged in terms the present instructions is given in the Annex. 3. Entities/units in the SEZ and EoUs, Premier and Star trading houses are permitted to import gold exclusively for the purpose of exports only. 4. AD Category I Banks are advised to strictly ensure that foreign transactions effected by / for their constituents are compliant with the above instructions. Head offices of nominated agencies/International Banking Divisions of banks would be responsible for monitoring opera .....

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ave been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act (FEMA), 1992 (42 of 1999), and are without prejudice to permissions / approvals, if required under any other law. Yours faithfully (Rudra Narayan Kar) Chief General Manager-in-Charge Annex An example of the working of the scheme. 1. Nominated agency ABC imports say 100 kg of gold in any form/purity. 2. Out of the above import of 100 kg 20 kg gold held in the bonded warehouse can be got released in part o .....

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itted which will again follow the procedure outlined above. At this stage, total gold with the bonded warehouse meant for the exporter will be (5 + 15) i.e. 20 kg. Out of this at least 15 kg (i.e. 75% of the above 20 kgs) will have to be actually exported to enable ABC to import again. This procedures will be followed for every lot of import. 5. If for any reason, ABC is not able to channelize the gold held in bonded warehouse for exports, no further imports can be undertaken by ABC who will als .....

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stipulations or clauses thereof. It is too late today to question either the authority of the Reserve Bank of India or the contents of these Circulars. Advisedly therefore, the petitioners try and urge that their import is prior to the issuance of this Circular and hence this Circular would not apply. 99. There is absolutely no substance in this contention. First of all, the affidavit-in-reply filed on behalf of the Director General of Foreign Trade makes it clear that there is no difference be .....

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July, 2013 to 31st March, 2014. In paragraph 32 of the affidavit-inreply, the import of four consignments with the details of the bills of entries have been referred. The petitioners and as a matter record, imported 200 kgs of gold evidenced by the bill of entry dated 23rd July, 2013 and they were not exported by the petitioners. Therefore, the show-cause notice. It was also alleged in the show-cause notice that there is a violation of the Circular dated 22nd July, 2013. This Circular was also, .....

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rsements on the Airway bills, particularly of date and time. We do not wish to enter into this controversy as it is factual. Apart from the same being factual, in the impugned order, it has been found and after detailed reference to the documents relied upon by the petitioners themselves that this Circular was very much in force and applied to the imports by the petitioners. 100. We should not disbelieve this factual finding and which is in consonance with the overwhelming record. The speaking o .....

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Rules and Regulations, then the import of 550 kgs of gold was governed by the same. The show-cause notice alleged that from the import of 550 kgs of gold only 350 kgs of gold was exported and as per the export details 200 kgs of gold was supplied to the domestic unit. This is a violation of the Reserve Bank of India s Circular. Each of the terms and conditions, either in the certificates relied upon by the petitioners or the Reserve Bank of India guidelines are in consonance with the policy of t .....

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erence in details to the denials in the petitioners reply and the stand therein that the Circular does not govern the subject import or in other words, it is inapplicable to the imports in question. The extensive arguments were noted and the observations therein are that the records available in the file would prove and establish import of gold and diversion of 200 kgs therefrom in the domestic market / sector. We have no reason, therefore, to reject this finding of fact. It is based on apprecia .....

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shipment of goods. The import into India and the above act of filing of Bills of entry are, therefore, rightly relied upon to enter a factual finding against the petitioner on the point of applicability of RBI Circular dated 22nd July, 2013. 101. We have, therefore, no hesitation in concluding that none of the contentions as raised before us by the petitioners have any merit. 102. Mr. Chagla s reliance on the judgments rendered by the Hon ble Supreme Court is of no assistance. In the first decis .....

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estricted was frowned upon for the Hon ble Supreme Court found that in the garb of interpretation of the policy and its implementation, the Director General of Foreign Trade has amended the Foreign Trade Policy itself. That power to amend vests exclusively in the Central Government. The Circulars of DGFT, therefore, were not upheld. No Circulars by which the Foreign Trade Policy is sought to be amended can, therefore, assist the Director General. This is a finding rendered in the peculiar factua .....

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the communication informing them that in the absence of any letters of credit they were not entitled for the benefit of the transitional arrangements under paragraph 1.5 of the Foreign Trade Policy. The Division Bench found that after execution of a contract and its registration with the Customs, a Notification was issued during the course of its execution and half way, making certain amendments in the Export-Import Policy 2004-09 in respect of goods involved which were freely importable, the co .....

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ading or contract documents that the Division Bench on the strength of the genuine material available on record directed that the Director General of Foreign Trade must consider the matter afresh. It must consider whether it was justified in refusing permission to complete the contract within the stipulated period. Pertinently, each of the factual materials were found to be genuine and bona fide. There was no attempt as before us to demonstrate that the Circular would not apply to the imports an .....

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