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TMI Blog2025 (4) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... ma, Advocates for UOI. JUDGMENT 1. These petitions have been filed by the petitioner, seeking that notification no. 44/2024-25 dated 26.12.2024 issued by the respondent/s, whereby quantitative restrictions have been imposed on import of Low Ash Metallurgical Coke (hereinafter referred to as LAM Coke) should not affect import of such quantities of LAM Coke for which Irrevocable Commercial Letters of Credit (ICLC) have been opened by the petitioners prior to the issuance of the aforesaid notification dated 26.12.2024. 2. The genesis of the controversy involved in the preset case is that on 30.06.2023, the Directorate General of Trade Remedies (DGTR) issued a notification initiating a safeguard investigation concerning the imports of LAM Coke into India. This investigation, which focused on imposing quantitative restrictions, was initiated under Rule 5 of the Safeguard Measures (Quantitative Restrictions) Rules, 2012. Subsequently, on 29.04.2024, the DGTR, through its final finding, recommended the imposition of quantitative restrictions on the import of LAM Coke into India. Subsequently, on 26.12.2024, based on the DGTR's recommendations, the Central Government issued Notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the import of 22,000 MT of LAM Coke from Indonesia. At the time of execution, LAM Coke was classified as "free" under the prevailing import policy. It is emphasized that Sunflag had already received multiple shipments under previous ICLCs executed pursuant to the same contract. viii. Following the issuance of Notification No. 44/2024-25 on 26.12.2024 by the Central Government, which reclassified LAM Coke under the "Restricted" category, Sunflag submitted a representation to the DGFT on 04.01.2025. In its representation, Sunflag informed the DGFT of the ICLCs opened prior to the Notification, including the ICLC dated 07.12.2024, and requested the issuance of any necessary authorizations at the earliest. ix. Since, the DGFT failed to respond to Sunflag's representation, Sunflag filed the present Writ Petition. x. On 03.02.2025, this Court directed the DGFT to decide on Sunflag's representation within one week. On 10.02.2025, the DGFT issued an email advising Sunflag to submit an application through the DGFT Import Management System portal for ICLC registration. In compliance, Sunflag submitted its online application for registration of the ICLC dated 07.12.2024 on 11.02.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y within 15 days of the restriction being imposed. iii. It is pointed out that JSW and ARCL submitted their ICLCs for registration on 04.01.2025. Furthermore, Trafigura also submitted its ICLC for registration on 02.01.2025. It is submitted that, Sunflag submitted the details of its ICLCs via its representation dated 04.01.2025. Vide order dated 03.02.2025, this Court directed the DGFT to decide on the said representation. Thereafter, the DGFT advised Sunflag to apply through its online portal, and Sunflag has complied with that requirement as well. It is submitted that substantial compliance with Paragraph 1.05 of the FTP has been duly made by Sunflag. It is submitted that the requirement of registration within 15 days is a directory rule rather than a mandatory one. The said clause does not prescribe any penalty for failure to comply with the prescribed timeline. Therefore, this procedural requirement must be construed as a directory provision rather than a mandatory one. Reliance in this regard has been placed on Sharif-ud-din v. Abdul Gani Lone (1980) 1 SCC 403. It is submitted that a substantive right granted under law cannot be taken away merely due to an alleged procedural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. It is contended that Sections 3 and 9A of the FTDR operate in parallel. Section 3 has been part of the Act since its inception in 1992, whereas Section 9A was introduced through an amendment on 25.08.2010 to empower the government to address incidents of serious injury to the domestic industry, as per the rules notified in this respect. The authority of the respondent under Section 3 (2) to impose restrictions on the import or export of particular goods or services remains unaffected and unhindered by the procedures contained in Section 9A of Chapter IIIA, which pertains to quantitative restrictions. 9. It is further submitted that Section 9A is a self-contained and standalone provision that addresses a distinct situation in which quantitative restrictions are imposed on goods when they are imported into the country in such increased quantities and under such conditions that they threaten the domestic industry. It is contended that the objective and purpose of imposing quantitative restrictions under Section 9A of the FTDR Act is to provide a remedy for serious injury suffered by the domestic industry due to a surge in imports of a particular good. 10. Further, it is submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ested parties and exporting members. The intention behind transitional arrangement under Para 1.05 is to extend the benefit outside the safeguard measures to protect domestic industry. The objective of Para 1.05 (b) is to achieve normalcy within normal course of international trade against genuine hardships in cases of an unforeseen contingencies. 14. It is submitted that the intent behind Para 1.05 (b) of the FTP,2023 was to extend the benefit of "Transitional Arrangements" in case of genuine hardship, in as much as, where importers or exporters in customary course of proceedings would not have been aware of the restrictions to be imposed by the Govt. of India under Section 3 of the FTDR against unforeseen contingency. It is submitted that the words used in paragraph 1.05 of Foreign Trade Policy, 'restricted/prohibited/state trading' or 'otherwise regulated' are identical to the words used in Section 3 (2) i.e. for prohibiting, restricting or otherwise regulating. It is contended that a plain reading of Section 3 (2) and paragraph 1.05 of FTP demonstrates that paragraph 1.05 is applicable only in case of quantitative restriction imposed under Section 3 (2) of the Act. 15. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal Met Coke Requirement/ Availability Indonesia China Aus Poland 2021-22 38500 33507 - 45676 117683 6887231 647522 7652436 2022-23 103242 278888 72433 - 454563 7596003 206937 8257503 2023-24 84380 33000 22000 - 139380 8081131 192345 8412856 2024-25 (April 24 to 31st Dec 2024) 270121 - - - 270121 6244330 88820 6603271 Total 496243 345395 94433 45676 981747 28808695 1135624 30926066 20. It is further submitted that the petitioners' contracts include a Force Majeure clause on account of which the Buyer can rescind the contract citing a force majeure event (being quantitative restriction by the government in the present case). The Letter/s of Credit (LC) explicitly states that it is subject to US, EU, UN, and Indian sanctions, meaning the quantitative restrictions imposed by the Indian government fall within this clause. Therefore, the petitioners have already hedged their risks but are now selectively relying on certain contractual provisions to challenge the restrictions. 21. It is submitted that the notification dated 26.12.2024 was issued in larger public interest after extensive consultations under Section 9A of the Foreign Trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the said Chapter. In other words, the notification clearly seeks to amend the FTP and particularly provision in ITC (HS) 2022. 27. It is submitted that a bare reading of paragraph 1.05 (b) of the FTP shows that the provision concerns the item wise Import/Export policy as delineated in the ITC (HS) Schedule I and Schedule II respectively. The said paragraph also provides for 'change of policy from free to restricted...'. Hence, on the face of it the substantive subject matter of the DGFT Notification is fully covered under said paragraph 1.05 (b) of the FTP. 28. It is contended that on a fair reading of the provisions of Par 1.05 (b) of the FTP renders the DGFT's present submission untenable, inasmuch as:- a. Para 1.05 (b) of the FTP does not use any restrictive phrase, much less one indicating that the provision is limited to cases under Section 3 and Section 5 only. b. Even while using the phrase 'in case of change of policy from free to restricted..', Para 1.05 (b) does not employ any restrictive language suggesting that the provision is confined to cases under Section 3 and Section 5 only. c. Further it is contended that, if the DGFT's interpretation regarding the no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court was solely concerned with whether the Central Government can impose restrictions by exercising its powers under Section 3 (2) of the FTDR Act without invoking Section 9A. It is submitted that this issue is distinct from the one under consideration in the present case. Therefore, the judgment in Agricas LLP (supra) is inapplicable to the DGFT's case. 34. It was further submitted that mere knowledge of the final findings dated 29.04.2024 of the DGTR, recommending the imposition of quantitative restrictions on the import of LAM Coke, cannot be construed as prohibiting the petitioners from entering into contracts based on the prevailing legal position before the publication of the notification dated 26.12.2024. 35. The petitioners refer to the relevant contracts for importing LAM Coke to refute the DGFT's contention that they are protected and/or can seek shelter under the force majeure provisions of their respective contracts. 36. Lastly, it is contended that significant prejudice will be caused to the petitioners if they are not permitted to import LAM Coke to the extent of quantities covered by the ICLCs. It is submitted that this would adversely impact their op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... import of goods. Clause 1.02 of the FTP clearly provides that the "Central Government in exercise of the powers conferred by Section 3 and Section 5 of the FTDR Act, 1992, reserves the right to make any amendment to the FTP by means of notification, in public interest". 42. Clause 2.07 of the FTP provides as under:- "2.07 Principles of Restrictions DGFT may, through a Notification, impose 'Prohibition' or 'Restriction': (a) on export of foodstuffs or other essential products for preventing or relieving critical shortages; (b) on imports and exports necessary for the application of standards or regulations for the classification, grading or marketing of commodities in international trade; (c) on imports of fisheries product, imported in any form, for enforcement of governmental measures to restrict production of the domestic product or for certain other purposes; (d) on import to safeguard country's external financial position and to ensure a level of reserves; (e) on imports to promote establishment of a particular industry; f) for preventing sudden increases in imports from causing serious injury to domestic producers or to relieve producers who have suffered such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of a notification under Section 3, a notification under Section 9A (1) must be predicated on a satisfaction, arrived at pursuant to the conduct of an inquiry, that the goods are imported into India in such increased quantities and under such conditions so as to cause or threaten to cause, injury to domestic industry. 45. The issuance of a notification under Section 9A is also hedged by the limitation imposed under proviso to Section 9A (1) to the effect that no such quantitative restrictions shall be imposed on any goods originating from a developing country, "so long as the share of import of such goods from that country does not exceed 3%, or where such goods originate from more than one developing country, then so long as the aggregate of imports from all such countries taken together does not exceed 9% of the total imports of such goods into India". 46. Section 9A (3) provide that the Central Government may, by rules provide for the manner in which goods, the import of which shall be subject to quantitative restrictions under Section 9A, may be identified and the manner in which the causes of serious injury or causes of threat of serious injury, in relation to such g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upport and the services of such other persons and such other facilities as it deems fit. 4. Duties of authorised officer.-It shall be the duty of the authorised officer- (a) to investigate the existence of serious injury or threat of serious injury to domestic industry as a consequence of increased import of a goods into India; (b) to identify the goods liable for quantitative restrictions as a safeguard measure; (c) to submit its findings, to the Central Government as to the serious injury or threat of serious injury to domestic industry consequent upon increased import of goods into India from the specified country; (d) to recommend- (i) the nature and extent of quantitative restrictions which, if imposed, shall be adequate to remove the serious injury or threat of serious injury to the domestic industry; and (ii) the duration of imposition of safeguard quantitative restrictions and where the period so recommended is more than one year, to recommend progressive liberalisation adequate to facilitate positive adjustment; and (e) to review the need for continuance of the safeguard quantitative restrictions. 5. Initiation of investigation.-(1) The authorised officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts on which the allegation of serious injury or threat of serious injury is based; (d) reasons for initiation of the investigation; (e) the address to which representations by interested parties should be directed; and (f) the time-limits allowed to interested parties for making their views known. (2) The authorised officer shall forward a copy of the public notice to the Central Government in the Ministry of Commerce and Industry and other Ministries concerned, known exporters of the goods, the Governments of the exporting countries concerned and other interested parties. (3) The authorised officer shall also provide a copy of the application referred to in sub-rule (1) of Rule 5, to- (a) the known exporters, or the concerned trade association; (b) the Governments of the exporting countries; and (c) the Central Government in the Ministry of Commerce and Industry: Provided that the authorised officer shall also make available a copy of the application, upon request in writing, to any other interested person. (4) The authorised officer may issue a notice calling for any information in such form as may be specified in the notice from the exporters, foreign prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive terms, the share of the domestic market taken by increased imports, changes in the level of sales, production, productivity, capacity utilisation, profits and losses, and employment; and (b) the determination referred to in clause (a) shall not be made unless the investigation demonstrates, on the basis of objective evidence, the existence of the causal link between increased imports of the goods concerned and serious injury or threat thereof: Provided that when factors other than increased imports are causing injury to the domestic industry at the same time, such injury shall not be attributed to increased imports and in such cases, the authorised officer may refer the complaint to the authority for anti-dumping or countervailing duty investigations, as appropriate. 9. Final findings.-(1) The authorised officer shall, within eight months from the date of initiation of the investigation or within such extended period as the Central Government may allow, determine whether, as a result of unforeseen developments the increased imports of the goods under investigation has caused or threatened to cause serious injury to the domestic industry, and a casual link exists between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the date of publication of the notification in the Official Gazette, imposing such quantitative restrictions. 13. Duration.-(1) The safeguard quantitative restrictions imposed under Rule 10 shall be for such period of time as may be necessary to prevent or remedy serious injury and to facilitate adjustment. (2) Notwithstanding anything contained in sub-rule (1), safeguard quantitative restrictions imposed under Rule 10 shall, unless revoked earlier, cease to have effect on the expiry of four years from the date of its imposition: Provided that if the Central Government is of the opinion that the domestic industry has taken measures to adjust to such serious injury or threat thereof and it is necessary that the safeguard quantitative restrictions should continue to be imposed, to prevent such serious injury or threat and to facilitate adjustments, it may extend the period beyond four years: Provided further that in no case the safeguard quantitative restrictions shall continue to be imposed beyond a period of ten years from the date on which such restrictions were first imposed. 14. Liberalisation of safeguard quantitative restrictions.- If the duration of the safeguard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, there is adequate notice to all concerned as regards the initiation of investigation. 52. Secondly, and importantly, Rule 12 of the Safeguard Rules,2012 clearly provides as under:- "12. Date of commencement of safeguard quantitative restrictions.- The safeguard quantitative restrictions levied under these rules shall take effect from the date of publication of the notification in the Official Gazette, imposing such quantitative restrictions." 53. Thus, once the final determination is made after following the elaborate procedure in the Safeguard Rules, 2012, with the participation of all the concerned stakeholders, and upon a notification being issued under Rule 10 [thereby imposing quantitative restrictions], the same shall be taken into effect from the date of publication of said notification. There is no provision for any further transitional arrangement. As noticed, this is unlike in the case of an action/notification issued under Section 3 (2) of the FTDR Act. THE AGRICAS CASE: 54. The judgment of the Supreme Court in Agricas (Supra), which has closely analysed the scope of operation of Section 3 and 9A of the FTDR Act, 1992, also conclusively establishes that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 5 of the FTDR Act, is not pursuant to or referable to any treaty obligation. The court rejected the contention that Section 3 and/or Section 5 of the FTDR Act, 1992 be construed in light of the treaty obligation under Article XI of GATT, 19944. (iii) Paragraph 65 and 66 of Agricas (supra) specifically holds that:- "65. We have already reproduced and quoted Article XI [ Para 53, above.] of the GATT-1994 and have to say that the same has not been statutorily made a subject of "act of transformation" and incorporated in the domestic legislation i.e. the FTDR Act. The FTDR Act does not legislate and transform Article XI of the GATT-1994....... 66. Thus, the Central Government i.e. the Union of India has been given the necessary discretion and election with regard to framing of policies for import and export of goods, services and technology. Therefore, implementation of GATT-1994, including Article XI, is left to the Central Government by means of delegated legislation." It was specifically held that: "Section 9-A of the FTDR Act, is to be understood an enabling provision empowering imposition of "quantitative restrictions" after following the procedure in the situatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on dated 29.04.2024 of the DGTR. 59. In fact, the impugned notification dated 26.12.2024 specifically refers to the final findings of DGFT dated 29.04.2024 read with notification dated 28.05.2024; the relevant portion of the said notification is as under:- "S.O. (E): Whereas, the Authorized Officer i.e. DGTR in its final findings, vide Notification No. 22/4/2023-DGTR dated 29.04.2024 read with Notification dated 28.05.2024, published in the Gazette of India, Extraordinary, Part I, Section 1, following a safeguard investigation under the Safeguard Measures (Quantitative Restrictions) Rules, 2012, had recommended in terms of Section 9A (1) of the Foreign Trade (Development and Regulation) Act, 1992, to impose country-wise quantitative restrictions on import of the following product,, under the FTDR Act: "Low Ash Metallurgical Coke, that is, Metallurgical Coke having ash content below 18% under the HS Code 2704 excluding coke fines / coke breeze and ultra-low phosphorous metallurgical coke with phosphorous content up to 0.030% with size upto 30 mm with 5% size tolerance for use in ferroalloy manufacturing " 60. Thus, the impugned notification is clearly predicated on the investi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed, the same would set at nought the safeguard measures taken to protect the domestic industry. 65. It is also pointed out by the learned standing counsel that the petitioners have already imported 2,70,121 MT of LAM Coke from Indonesia uptill 31st December, 2024, i.e. in the current financial year (2024-25). The quantity already imported by Petitioners in the current financial year is more than the aggregate of the total imports from Indonesia in the last three financial years (2021-22, 2022-23 & 2023-24). 66. It cannot be lost sight of, particularly in the contemporary global trade context, that the leeway afforded to contracting states under Article IX of GATT, 1994 to take action to protect their domestic industry, cannot be whittled down by holding that safeguard measures be subject to 'transition provision/s'. The same is not mandated or contemplated under Article IX of GATT, 1994 nor under Section 9A of the FTDR, which, as held in Agricas (supra), is a product of an "act of transformation" to implement Article IX of GATT, 1994. 67. For the above reasons, this Court finds not merit in the present petitions; the same are consequently dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rictions imposed under this section shall, unless revoked earlier, cease to have effect on the expiry of four years from the date of such imposition: Provided that if the Central Government is of the opinion that the domestic industry has taken measures to adjust to such injury or threat thereof and it is necessary that the quantitative restrictions should continue to be imposed to prevent such injury or threat and to facilitate the adjustments, it may extend the said period beyond four years: Provided further that in no case the quantitative restrictions shall continue to be imposed beyond a period of ten years from the date on which such restrictions were first imposed. (3) The Central Government may, by rules provide for the manner in which goods, the import of which shall be subject to quantitative restrictions under this section, may be identified and the manner in which the causes of serious injury or causes of threat of serious injury in relation to such goods may be determined. (4) For the purposes of this section- (a) "developing country" means a country notified by the Central Government in the Official Gazette, in this regard; (b) "domestic industry" means the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to a concession with respect to a preference, the notice shall name the contracting party which has requested the action. In critical circumstances, where delay would cause damage which it would be difficult to repair, action under Para 1 of this Article may be taken provisionally without prior consultation, on the condition that consultation shall be effected immediately after taking such action. 3. (a) If agreement among the interested contracting parties with respect to the action is not reached, the contracting party which proposes to take or continue the action shall, nevertheless, be free to do so, and if such action is taken or continued, the affected contracting parties shall then be free, not later than ninety days after such action is taken, to suspend, upon the expiration of thirty days from the day on which written notice of such suspension is received by the contracting parties, the application to the trade of the contracting party taking such action, or, in the case envisaged in Para 1(b) of this Article, to the trade of the contracting party requesting such action, of such substantially equivalent concessions or other obligations under this Agreement the suspensio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l product the production of which is directly dependent, wholly or mainly, on the imported commodity, if the domestic production of that commodity is relatively negligible. Any contracting party applying restrictions on the importation of any product pursuant to sub-paragraph (c) of this paragraph shall give public notice of the total quantity or value of the product permitted to be imported during a specified future period and of any change in such quantity or value. Moreover, any restrictions applied under (i) above shall not be such as will reduce the total of imports relative to the total of domestic production, as compared with the proportion which might reasonably be expected to rule between the two in the absence of restrictions. In determining this proportion, the contracting party shall pay due regard to the proportion prevailing during a previous representative period and to any special factors* which may have affected or may be affecting the trade in the product concerned. 5. 70 Rules made in 2012 are also in conformity with the provisions of the WTO agreement on safeguards made in terms of Article XIX of GATT-1994. Sub-rule (3) to Rule 5 of the Safeguard Measures (Qua ..... X X X X Extracts X X X X X X X X Extracts X X X X
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