The Court quashed a notification by the Director General of Foreign Trade that restricted marble imports from Sri Lanka to Kolkata Port only. It held that the objective to neutralize duty-free imports under a treaty was illegitimate and not in public interest.
The Rule in the petition made absolute dismissing the notification restricting marble imports.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
1
AGK IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.6613 OF 2008
Gopal Lal Sarda ..Petitioner
V/s.
Union of India & Others ..Respondents.
Mr.Kamal Bulchandani with Ms.L.K. Bulchandani &
Ms.Tulsi Zaveri i/by M/s.Kamal & Co. for the
petitioner.
Mr.R. Ashokan for the respondents.
CORAM : D.K. DESHMUKH &
J.P. DEVADHAR, JJ.
DATED : 20TH OCTOBER, 2008.
P.C. :
1. Rule returnable forthwith. Heard finally
by consent of the parties.
2. The petitioner by this petition
challenges notification dated 19-3-2008 issued by
respondent No.2 - Director General of Foreign Trade
in exercise of powers conferred by Section 5 of
Foreign Trade (Development & Regulation) Act, 1992
read with para 2.1 of the Foreign Trade Policy. By
that notification, the respondent No.2 has amended
Schedule I (Imports) of the ITC (HS)
Classifications of Export and Import Items. It is
common ground that as a result of this
notification, now raw and polished marble can be
2
imported from Sri Lanka under the India-Srilanka
Free Trade Treaty Agreement, only through the Port
of Kolkata. It is common ground that previously
raw and polished marble could be imported from Sri
Lanka at any Port in India under the treaty. It is
also common ground that because of the notification
issued by the authorities under Customs Tariff Act,
items which are part of India-Srilankan Treaty the
importers are not liable to pay any customs duty.
3. The petitioner challenges validity of the
notification dated 19-3-2008 basically on two
grounds. According to him, notification could not
have been issued under Section 5 of the Foreign
Trade (Development & Regulation) Act, 1992
(hereinafter referred to as the said Act for the
sake of brevity) as it is beyond the powers of the
Respondent No.2. It is further contended that even
assuming that such a notification could have been
issued, according to the petitioner exercise of
powers is not proper in as much as it has been
issued with the sole intention of denying the
benefit of duty free import to the petitioner on
importing marble from Sri Lanka.
4. The Respondents have not filed any
affidavit in this writ petition, but it appears
3
that Writ Petition No.1026 of 2008 was filed by the
petitioner earlier, which was subsequently
withdrawn by the petitioner and in that petition,
affidavit in reply was filed on behalf of the
respondents. The learned counsel for the
respondents stated before us that the said
affidavit in reply filed in Writ Petition No.1026
of 2008 be treated as reply of the Respondents in
this writ petition.
5. We have heard learned counsel appearing
for both the sides. The learned counsel appearing
for the petitioner relied on various clauses of the
India-Srilankan Treaty to point out that the
respondent no.2 had no authority to withdraw the
concession which is given by the Treaty, without
amending the Treaty. The learned counsel further
submitted that because of the Treaty and the
notification issued under the Customs Tariff Act,
there is no customs duty payable on marble imported
from Sri Lanka. In the affidavit filed on behalf
of the Respondents, the Respondents however have
stated that they have issued notification for two
purposes; i) to make it uneconomical for the
importers to import marble from Sri Lanka by
neutralizing the duty-free benefit that they were
getting, and ii) the object is to prevent misuse of
4
concession by importing marble which is not of
Srilankan origin.
The learned counsel submits that the first
object stated in the notification is opposed to the
law in as much as the object to defeat the
concession granted by issuing notification under
the Customs Tariff Act. The learned counsel
further submits that if the marble imported by the
petitioner and others from Sri Lanka is found not
to be permitted to be imported duty free under the
Treaty, then it can be detained and action in
accordance with law, at any Port, could have been
taken and for that purpose it was not necessary to
restrict the import only to one Port in India i.e.
Kolkata. We have heard the learned counsel
appearing for the Respondents, who basically
reiterated what is stated in the affidavit in
reply.
6. So far as first contention is concerned,
in our opinion the same does not appear to have any
substance because what has been done by the
notification is that the Schedule has been amended
and under Section 5 of the Act, the Central
Government can even amend the trade Policy in
public interest, but the amendment has to be in
5
accordance with law. Perusal of the Policy
decision of the Central Government further shows
that any amendment in the Policy has to be in
public interest. Therefore, basically we have to
see whether the amendment that has been brought out
is in public interest and is for legal object.
Perusal of the affidavit in reply filed on behalf
of the Respondents shows that they have given two
reasons for issuing notification and restricting
the import of marble from Sri Lanka only at the
Kolkata Port, i) the traders are misusing the
facility and were importing marble from Sri Lanka,
which is not of Srilankan origin and ii) to
neutralize the benefit of concession granted under
the Customs Tariff Act to protect the domestic
marble industry.
So far as the first reason is concerned, in our
opinion for this reason restricting import to only
Kolkata Port will serve no purpose. If marble
which is not of Srilankan origin cannot be imported
under the Treaty free of payment of duty, then that
can be prevented by the Respondents, at whatever
Port the marble is imported. For that reason, it
is not necessary to restrict the import to Kolkata
Port only. It is to be noted here that it is not
the case of the Respondents that the facility of
6
checking the marble which arrives from Sri Lanka is
available only at Kolkata Port and not at other
Ports. In our opinion, therefore, this reason
given is incapable of being accepted, because it
has no nexus with restricting the import to only
Kolkata Port.
7. So far as second reason given is
concerned, it is to be found in para 8 of the
Reply, which reads as under :
"8. I say and submit that the present
standard rate of customs duty on
processed marble products under chapter
68 is 10% of the CIF value. Since no
import of marble below the floor price of
US$.2700 per cubic meter is allowed the
effective duty on processed marble comes
to US$.270 per cubic meter. By virtue of
the trade agreement in the case of
imports from Sri Lanka this duty becomes
0%. Therefore, an importer taking
advantage of tariff concession under
ISFTA can save to the extent of US$.270
per cubic meter. It is respectfully
submitted that the import of marble from
Sri Lanka is restricted through the
Kolkata Port is intended to neutralize
the duty gain through transportation cost
thereby discouraging the import of
marbles into India to protect the
domestic marble industry. However the
importers are liable to pay the normal
customs duty for the imports through any
port other than Kolkata."
7. It is common ground that by issuing the
notification under the Customs Tariff Act, the
Government of India has granted total exemption
from payment of customs duty so far as import of
7
marble amongst other commodities from Sri Lanka
under the treaty. It is clear from the abovequoted
portion from the reply of the Respondents that the
object of issuing notification is to deny the
benefit of statutory notification or concession
issued under the Customs Tariff Act to the
petitioner and others, who import marble from Sri
Lanka. In our opinion, the object of defeating the
statutory notification or concession cannot be said
to be a legitimate object. The Government could
have, if it was so advised, withdrawn the
concession given in the Customs Tariff Act or it
could have gone in for amendment of the Treaty
between India and Sri Lanka. In our opinion, the
object which is specified in the affidavit defeats
both the notification issued under the Customs
Tariff Act, as also the provisions of the India-Sri
Lanka Treaty and, therefore, it cannot be said that
the purpose of issuing the notification is
legitimate and, therefore, in our opinion, it
cannot be said that the notification impugned in
the present petition has been issued in public
interest, because what is opposed to law cannot be
said to be in public interest.
8. For all the aforesaid reasons, in our
opinion, therefore, the petition has to succeed.
8
The Rule in the petition is made absolute in terms
of prayer clause (a). No order as to costs.
D.K. DESHMUKH, J.
J.P. DEVADHAR, J.
3 issues framed by the court
Whether the notification restricting import of marble from Sri Lanka to Kolkata Port only was issued under proper powers of Section 5 of the Foreign Trade (Development & Regulation) Act, 1992.
Whether the objective of issuing the notification to defeat the duty-free concession granted under the Customs Tariff Act and the India-Sri Lanka Treaty constitutes a legitimate public interest.
Whether restricting imports to a specific port serves the stated purpose of preventing misuse of the treaty facility.
2 provisions across 2 enactments
Gopal Lal Sarda
Union of India
D.K. DESHMUKH
J.P. DEVADHAR
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court