J.P Devadhar, J.:— This petition was originally filed on 22nd February, 2002 challenging the Circular dated 3rd September, 2001 issued by the Director General of Foreign Trade (DGFT) directing the Licensing Authorities not to issue any duty free advance licence for import of nature rubber until further orders. The petitioner had also challenged the inaction on the part of the State Trading Corporation of India Ltd. (S.T.C) in refusing to import natural rubber under the advance licence, granted to the petitioner on 8-10-2001. During the pendency of this writ petition, show cause notice dated 29-4-2002 was issued for cancellation of advance licence granted to the petitioner on 8th October, 2001. A public notice dated 20th May, 2002 was also issued by DGFT to amend the Hand Book of procedures for 2002–2007 so as to prohibit duty free import of natural rubber. The petitioner was allowed to amend the petition so as to challenge the validity of the aforesaid show cause notice dated 29th April, 2002 and also challenge the validity of the public notice dated 20th May, 2002.
2. The short question that arises for our consideration in this petition is when the statutory provisions of the import policy specifically permits import of natural rubber duty free under an advance licence, is it open to the implementing agency, namely the DGFT to prohibit/ban import of natural rubber under an advance licence?
3. Before dealing with the facts of the case, it is necessary to set out the relevant policy provisions.
4. Section 5 of the Foreign Trade (Development and Regulation) Act, 1995 (‘Act’ for short) empowers the Central Government to announce the export-import policy (EXIM Policy) and also amend that Policy form time to time. Section 6 of the Act empowers the Central Government to appoint any person as DGFT to advice the Government in the formulation of the policy, to carry out the policy and to exercise such powers as is conferred upon him by the Central Government in implementing the EXM policy. However, section 6(3) of the said Act provides that the power to amend the policy cannot be delegated to the DGFT and it is the prerogative of the Central Government only, to amend the policy. Section 7 of the said Act provides that no person shall make any import or export except under the importer and exporter code number granted by DGFT or any other officer authorised by him in accordance with the procedure specified in that behalf by the DGFT.
5. In exercise of its powers under section 5 of the said Act, the Central Government has been announcing and publishing EXIM Policy from time to time and for the period 2002–2007, the EXIM Policy announced by the Central Government came into force with effect from 1-4-2002 and is valid upto 31-3-2007. The said EXIM policy clearly provides that the right to amend the policy by a notification in the Gazette is vested in the Central Government only. Chapter 2 of the EXIM policy 2002–2007 contains general provisions regarding imports and exports. Para 2.1 of Chapter 2 provides that exports and imports shall be free except in cases where they are regulated by the provisions of the policy. Para 2.4 of Chapter 2 empowers DGFT to specify the procedure to be followed by an exporter or importer or by any licensing authority in implementing the policy and that, such procedure prescribed by the DGFT shall be included in the Hand Book and published by means of a public notice. Under the said para, DGFT is empowered to amend the procedure and publish the same by way of public notice.
6. Chapter 4 of the EXM policy 2002–2007 provides for grant of advance licence under which duty free import of inputs to be used in the export product afe permitted. Para 4.1.5 of the Chapter 4 provides that the advance licence shall be issued in accordance with the EXIM Policy and the procedure in force on the date of the issue of licence. The procedure for import/export of the items under the policy are contained in the compilation of Hand Book of procedure notified by DGFT in pursuance of the provisions of para 2.4 of the policy.
7. It is not in dispute that under the EXM policy 2002–2007 as well as earlier EXM policy for the period 1997–2002 published by the Central Government, the natural rubber could be imported freely in India, either on payment of duty or duty free under an advance licence, as an in put for the export product.
8. Now, turning to the facts of the case, the petitioner who manufactures rubber gaskets and exports the same, was entitled to import natural rubber as an input for using it in the manufacture of the final product namely rubber gasket. The Licensing Authority in accordance with the prevalent EXIM policy had issued an advance licence on 8-10-2001, thereby permitting the petitioner to import 14,230 Kgs. of natural rubber duty free as it was to be used in the manufacture of rubber gaskets (rings) and then exported. Since the imports were to be effected through the S.T.C (respondent No. 5), the petitioner approached the S.T.C who by their letter dated 19th December, 2001 (Exhibit-C to the petition) stated that the permissibility of duty free import of natural rubber under the advance licence, is under consideration of the Ministry of Commerce and only on clearance from the said Ministry, the imports can be effected under the advance licence granted to the petitioner. In the meantime, DGFT had issued various circulars, including the circular dated 3-9-2001 (Exhibit-H to the petition) directing all the-Licensing Authorities not to issue any advance licence until, further orders. Challenging these actions, as well as the subsequent action of the Jt. DGFT in purporting to cancel the advance licence issued to the petitioner as well as the amendment sought to be made to the Hand book of procedures by the public notice dated 20th May, 2002, the present petition has been filed.
9. Mr. Bharucha, learned Counsel for the petitioner submitted that when the statutory provisions contained in the EXIM policy published under section 5 of the Act permit import of duty free natural rubber under an advance licence, it is not, open to the implementing agency namely DGFT to lay down procedures contrary to the policy and prohibit import of natural rubber under an advance licence. It was submitted that if for any reason the Central Government thought it fit that in public interest it is necessary to prohibit the duty free import of natural rubber under an advance licence, then it is open to the Central Government to amend the policy to that effect. But in the absence of any amendment to the policy, it is not open to the DGFT to issue public notice to prohibit duty free import of natural rubber under an advance licence. Therefore, the impugned circulars and the public notice issued by the DGFT being in contravention of the policy are liable to be quashed and set aside. It was submitted that once the circulars issued by the DGFT seeking to prohibit the import of duty free natural rubber are quashed, then the show cause notice issued to the petitioner to cancel the advance licence based on the aforesaid circular, is also liable to be quashed, it was submitted that the public notice dated 20th May, 2002 (Exhibit H-6), which purports to amend the Hand Book of procedure by prohibiting import of duty free natural rubber under advance licence is without Jurisdiction, being in contravention of the EXIM policy and hence liable to be quashed and set aside. An alternative submission was made that the procedural amendment effected by public notice dated 20-5-2002 does not have retrospective effect and, therefore, cannot affect import permitted under the advance licence issued to the petitioner on 8-10-2001.
10. Mr. Rana, learned Counsel appearing on behalf of the Revenue, on the other hand submitted that the imports of natural rubber, permitted under the policy is not rendered nugatory by the circulars issued by the DGFT and the amendments effected to the Hand Book of procedures. It was submitted that even after the impugned circulars and amendment to the Hand Book of procedures, the natural rubber can be imported as per the EXIM Policy. It was submitted that it was open to the petitioner to import natural rubber on payment of duty and if the same are used as input in the export products, then on export, of the said goods, the petitioner is entitled to duty drawback and, therefore, the petitioner is not in any way prejudiced by the circulars issued by DGFT it was submitted that over the years there has been considerable decline in the price of natural rubber as a result, the domestic market, which is dominated by the small growers has been badly effected. Under the circumstances, the Government in the past had stepped in with a view to support domestic market and took measures in banning imports of natural rubber against the advance licence with effect from 20th February, 1999 and also took regulatory measures by permitting quantitative import of natural rubber through S.T.C, etc. However, with the lifting of quantitative restrictions with effect from 1-4-2001 under the new policy of the Government, the import of natural rubber have become free. This has led to surge in the imports of natural rubber, which has further depressed the prices of natural rubber in the domestic markets, which in turn has affected the domestic industry. It was submitted that in these circumstances, A.L.C circulars were issued by the DGFT to defer the issuance of duty free advance licence as the matter was under the active consideration of the Ministry of Commerce. It was submitted that since the advance licence dated 8-10-2001 was issued to the petitioner erroneously and in violation of the A.L.C circular, the show cause notice dated 29th April, 2002 was issued calling upon the petitioner to show cause as to why the advance licence erroneously issued should not be cancelled. It was submitted that the DGFT is empowered under the policy to amend the Hand Book of procedure and in view of the amendment effected to the Hand Book of procedure by the public notice dated 20th May, 2002, the petitioner cannot import the natural rubber duty free under the advance licence, but is entitled to import on the same payment of duty and it utilised in the manufacture of export product, then on export can claim duty drawback. Accordingly, it was submitted that the petitioner is not entitled to any relief in the present petition.
11. After hearing Counsel on both sides and after perusing the records placed before us, we are of the opinion that the A.L.C circulars and the public notice dated 20th May, 2002 issued by the DGFT, cannot be sustained as they are wholly inconsistent with the EXM policy framed by the Central Government and in fact they purport to amend the EXIM Policy provisions which power is exclusively vested in the Central Government and not with the DGFT. It is pertinent to note that the EXIM policy announced by the Central Government in exercise of the powers vested in it under section 5 of the said Act has statutory force. It is not in dispute that under the EXIM policy prevalent in 1997–2002 as well as 2002–2007, natural rubber could be imported duty free under an advance licence (except for the period when the Central Government had banned import of natural rubber under an advance licence). Under these circumstances, the implementing agency namely, the DGFT who is empowered to prescribe the norms and the procedures for implementing the EXIM policy could not prohibit import of natural rubber under advance licence, when the EXIM policy specifically permits import of natural rubber under an advance licence. The impugned Circulars and the public notice issued by DGFT, in fact, nullify the express provisions of the EXIM Policy framed by the Central Government. Power to amend the policy being within the exclusive domain of the Central Government the said powers cannot be usurped by the DGFT in the guise of laying down regularly measures. By prohibiting import of natural rubber under the advance licence in the Hand Book of procedures, the DGFT has encroached upon the powers of the Central Government and purported to amend the EXIM policy 2002–2007 which power is not conferred upon the DGFT. As stated hereinabove section 6(3) of the Act expressly prohibits the DGFT from exercising the power of amending the EXIM Policy. Therefore, in the absence of any power under the statute, the A.L.C circulars and the public notice dated 20th May, 2002 to prohibit import of natural rubber under Advance licence could not be issued by the DGFT. The said circulars and public notice being wholly contrary to the police provisions of the Central Government, cannot be sustained and are liable to be quashed and set aside.
12. The arguments of the revenue that the prohibition of duty free import of natural rubber under advance licence does not affect the right of the petitioner to import natural rubber without the advance licence, is without any merits because, the petitioner, as an exporter has every right under the policy to import inputs such as natural rubber duty free under the advance licence for use in the export product and in the absence of any amendment to the policy, that right of the petitioner cannot be taken away on the pretext of laying down the norms or the procedure in implementing the EXIM Policy. The Hand Book of procedures prescribed by the DGFT must be in consonance with the policy and must aid and advance the policy of the Central Government and not scuttle or defeat the policy. In the instant case, the Hand Book of procedure has been amended by the DGFT to prohibit duty free import of natural rubber under the advance licence when the EXIM Policy expressly permits duty free import of natural rubber under an advance licence. Therefore, the impugned circulars and the public notice are beyond the scope and ambit of the powers vested in DGFT and, therefore, liable to be quashed and set aside.
13. From the affidavit-in-reply filed by Shri Sanjay Lunia, Jt. Director, DGFT on behalf of the revenue, it is seen that in the past whenever deemed fit the Central Government had intervened and in fact prohibited import of natural rubber against advance licence with effect from 20th February, 1999 and even regulated import of natural rubber on quantitative basis through S.T.C However, with effect from 1st April, 2001, the Central Government lifted the restrictions imposed by it thus making imports/exports of natural rubber, totally free. From the said affidavit filed on behalf of the Revenue, it is further seen that in view of heavy import of natural rubber during the period in 2001–2002, the Central Government, especially the Ministry of Commerce, took up the issue of grant of duty free advance licence for reconsideration and in the meantime, DGFT issued A.L.C circulars to withhold the issuance of advance licence pending the final decision by the Ministry of Commerce. Thereafter, on 1st April, 2002 the Central Government announced the EXIM policy 2002–2007 wherein after considering the issue, the Central Government, decided to permit duty free imports of natural rubber under an advance licence. Thus when the Central Government in exercise of its statutory power and on reconsideration of the matter has taken a policy decision to permit duty free import of natural rubber under advance licence as late as on 2-4-2002, it is not open to the implementing agency namely the DGFT to prohibit duty free import of natural rubber under advance licence by issuing circulars or by amending the Hand Book of procedure. Thus, the action on the part of the DGFT in purporting to prohibit duty free import of natural rubber is totally in breach of the policy decision taken by the Central Government and, therefore, the circulars and the public notice issued by the DGFT to prohibit the import of natural Rubber under advance licence must be held to be null and void, without jurisdiction and liable to be quashed and set aside.
14. The Apex Court in the case of University of Kashmir v. Mohammad Yasin, (1974) 3 SCC 546 : AIR 1974 S.C 238 has laid down the following proposition of law:—
“When a statute creates a body and vests it with authority and circumscribes its powers by specifying limitations, the doctrine of implied engagement de hors the provisions and powers under the Act would be subversive of the statutory scheme regarding appointments of officers and cannot be countenanced by the Court. Power in this case has been vested in the University Council only and the manner of its exercise has been carefully regulated. Therefore, the appointment of the respondent could be made only by the Council and only in the mode prescribed by the statute.”
15. Respectfully following the aforesaid ratio of the Apex Court, we hold that the impugned circulars and the public notice amending the Hand Book of Procedures in fact, amount to amend the policy by an authority other than the Central Government which is not permissible in law. Hence the impugned circulars and the public notice issued by the DGFT being without authority of law, are liable to be quashed and set aside.
16. The procedures to be prescribed by an authority in implementing the policy must be in consonance with the policy. If the procedural norms are in conflict with the policy, then the policy will prevail and the procedural norms to the extent they are in conflict with the policy, are liable to be held to be bad in law. In the instant case, since the impugned circulars and the public notice issued by DGFT are in conflict with the policy, the same are liable to be quashed and set aside.
17. In the premise aforesaid, the petition succeeds. The A.L.C circulars including circular dated 3rd September (Exhibit-H) and the public notice dated 20th May, 2002 (Exhibit-H-6) purporting to prohibit duty free import of natural rubber under advance licence are quashed and set aside. Consequently, the show cause notice dated 29-4-2002 (Exhibit-H-1) issued in the light of circulars of DGFT is also quashed and set aside. Rule is made absolute in the above terms. However, in the facts and circumstances of the case, there will be no order as to costs.
Petition allowed.