1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 2120 OF 2009 1. M/s.Stonemann Royale Ltd. 2. Shri Mukesh Shah. ... Petitioners. V/s. 1. Union of India, 2. Director General of Foreign Trade, Govt. of India. 3. The Commissioner of Customs, 4. Dy.Commissioner of Customs (I). ... Respondents. J.D.Mistry with V.M.Doiphode i/b. V.M.Doiphode and Co. for the petitioners. H.V.Mehta with R.A.Rodrigues and N.R.Prajapati for the respondents. CORAM : V.C.DAGA AND K.K.TATED, JJ. DATED : 6th April 2010. JUDGMENT : (Per V.C.Daga, J.) This petition filed under Article 226 of the Constitution of India is directed against the communication dated 20th October, 2008 issued by the 2 respondent No.2- Director General of Foreign Trade reading as under: “Dated 20th October, 2008. To M/s.Stonemann Royale Ltd. 75-76, Ashok Chambers, Plot No.56, Elphinston Estate, Devji Ratanshi Marg, Masjid (E), Mumbai- 400 009. Subject: (i) Contract No.:GM/SRL/AMS/1001 dated 27.8.2007. (ii) Contract No.:XY/SRL/AMS/001 dated 14.1.2008. (iii) Contract No.:BY/SRL/AMS/001 dated 14.1.2008. Sir, I am directed to refer to your three letters dated 26.9.2008 on the subject mentioned above and to inform that in the absence of any LCs you are not entitled for the benefits of the transitional arrangements under para 1.6 of the FTP. This issues with the approval of competent authority. Yours faithfully, Sd/- (Puneet Sharma) Foreign Trade Development Officer For Director General of Foreign Trade” The Factual Backdrop : 2. The factual backdrop emerging from the petition is that petitioner No.1- M/s.Stonemann Royale Ltd. is engaged in the business of import of marble slabs and blocks and trading thereof in India which is classifiable under sub-heading 6810 1190 of the ITC(HS) classification of the EXIM Policy. The marble and slabs imported by petitioner No.1 were freely importable under the Export and Import Policy of Government of India framed in pursuance of the Foreign Trade (Development & Regulations) Act, 1992 (“Act” for short) irrespective of the prices thereof. 3 3. The petitioner No.1 entered into a contract for import of marble slabs with M/s.Guangdong Yunfu Foreign Tradelight Industrial Products and Crafts Ltd. for import of 900 full container load admeasuring 4,98,834 sq.mtrs. at prices varying from US$16.00 to 21.60 per sq.mtr. vide contract bearing No.BY/SRL/AMS/001 dated 14th January, 2008. 4. The aforesaid contract was registered with the Customs House at J.N.P.T., through that port petitioner had intended to import aforesaid marble slabs,vide F.No.S/26/Misc.432/07 dated 8th February, 2008, before importing the marble slabs under this contract. The custom authorities after detailed examination accepted the contract and, thereafter, the petitioners imported artificial marble slabs admeasuring about 87,284 sq.mtrs. from the aforesaid suppliers from China and the same was assessed and cleared on payment of appropriate duty of custom by the Custom House at JNPT. According to the petitioners, they were under a contractual obligation to import remaining quantity admeasuring about 4,11,550 sq.mtrs., in view of their contracted commitment on or before January, 2010 since the contract was for valid two years. 5. It appears that when the execution of the aforesaid contract was half way, the respondent No.2 issued notification bearing No.41(RE-2008)/2004-09 dated 18th September, 2008 making certain amendments in the Export-Import Policy 2004-09; whereby in respect of the goods in question, which were freely importable, now, 4 the condition of free importability is confined to processed tiles/ slabs agglomerated/ artificial stone whose CIF value is above US$ 50/- per sq.mtr. The remaining goods falling under the sub-heading 68101190 are now restricted for import. The said notification, vide para-2 thereof, permits the importers, who wish to avail transitional arrangement under para- 1.5 of the Foreign Trade Policy to apply to the DGFT along with details of their respective Letters of Credit (Lcs) and contract so as to enable the DGFT to consider grant of necessary permission to complete contracted obligations. The petitioners applied pursuant to the aforesaid notification to the DGFT for permission to import under subsisting contract vide their letter dated 26th September, 2008. Copy of the said letter is produced on record. However, the permission was refused by the DGFT vide their letter dated 20th October, 2008, contents of which are already reproduced in the opening para of this judgment. 6. The aforesaid refusal by the DGFT is a subject matter of challenge in this petition. Submissions : 7. Mr.Mistry, learned counsel appearing for the petitioners urged that part of the subject contract has already been executed. The said contract was registered with the Customs House at J.N.P.T., on 8th February, 2008 and during execution of the said contract import policy came to be amended. He further submits that the refusal of the DGFT is in violation of the Circular No.4/2007 5 dated 16th August, 2007 which provides for transitional arrangements under para=1.5 of Foreign Trade Policy 2004-2009, which reads as under: 1.5 In case an export or import that is permitted freely under FTP is subsequently subjected to any restriction or regulation, such export or import will ordinarily be permitted notwithstanding such restriction or regulation, unless otherwise stipulated, provided that shipment of export or import is made within original validity with respect to available balance and time period of an irrevocable letter of credit established before date of imposition of such restriction. However, a time limit for operationalising such LCs may be prescribed.” 8. Mr.Mistry further brought to our notice the clarificatory statement contained in the DGFT circular, which reads as under: “3. Under the Transitional Arrangements (as amended), the reference is to `irrevocable commercial letter of credit established before the date of imposition of such restriction’. Clearly, the intention of Transitional Arrangements is that the principal mode of payment should be through an irrevocable commercial letter of credit, so that there is greater sanctity and assurance regarding the contract and that exporter may not be able to submit any back dated contracted documents under the Transitional Arrangement.” 6 9. Mr.Mistry submits that the requirement established by the irrevocable commercial letter of credit before the date of imposition is a condition to ensure greater sanctity regarding contract so as to prevent the exporter from submitting any back dated contracted documents under the transitional arrangement. He submits that so far as claim of the petitioner is concerned, the contract was already entered into. More than 50% imports were already made by importing goods. The contract was already registered with the Customs House, J.N.P.T. The documents were received and the payments were made through banking channel. In these circumstances, genuineness of the contract entered into much prior to the EXIM Policy cannot be doubted. At the cost of repetition, he submits that in the case in hand, there is absolutely no possibility of the petitioner making back dated contracted documents to seek advantage of the transitional arrangement. In his submission, establishment of irrevocable letter of credit would be one of the criteria to prevent the importers entering into a fresh import contract subsequent to change in the import policy and submit back dated contracted documents. So far as case in hand is concerned, in the submission of Mr.Mistry, petitioner’s prayer ought to have been considered on its own merits by the DGFT. He submits that in the facts of this case there is no possibility of creating back dated contracted documents by the petitioner. That the petitioner is, thus, entitled to permission from the DGFT. He, thus, submits that the impugned order not only suffers from the breach of principles of natural justice for want of reasons but also suffers from non- 7 application of mind on the part of respondent No.2. He submits that the impugned communication is liable to be quashed and set aside. Mr.Mistry in support of his submission relied upon the judgment of this Court in the case of Matraco (India) Ltd. v. Union of India, 2003 (162) ELT 1192 (Bom.) to which one of us (Daga, J.) is party and further on the order passed by this Court in Customs Appeal No.10/2005 (The Commissioner of Customs v. M/s.Viraj Impex Ltd.) (unreported). 10. Per contra, Mr.H.V.Mehta, learned counsel appearing with Mr.Rodrigues and Mr.Prajapati submits that the irrevocable EXIM Policy is brought into effect keeping in mind public interest as such doctrine of promissory estoppal is not attracted. He further submits that the Courts are not expected to interfere with the fiscal policy unless fraud or lack of bonafides on the part of the Government is shown. He placed reliance on two judgments of the Apex Court in the case of Kasinka Trading v. Union of India, 1994 (74) ELT 782 (SC) and Darshan Oils Pvt.Ltd. v. Union of India, 1995 (75) ELT 32 (SC) and one judgment of this Court in the case of P.Jayantilal & co. v. Union of India, 1995 (60) ECR 387 (Bom). He, thus, submits that the petition is liable to be dismissed. Consideration : 11. Having heard both parties and having examined the judgments cited at the bar in the light of the transitional arrangement clarified by the DGFT policy circular No.4/2007 dated 16th August, 2007, the reference 8 made to the establishment of irrevocable letter of credit before the date of imposition of restriction is to provide greater sanctity and assurance that the contract is not back dated and to arrest exporters from submitting back dated documents to take undue advantage. 12. Considered from this angle, in the case in hand, we are, prima facie; satisfied that there is no attempt on the part of the petitioners to create anti- dated bills of lading or contracted documents. The petitioners have already entered into a subject contract. More than half of the contract has already been executed by importing goods. The goods have been actually imported under the subject contract. They were assessed and released by the custom authorities. Half of the contract is yet to be executed. Under these circumstances, it is not possible to hold that the petitioners are taking any undue advantage with a view to by-pass the modified import policy. It is, no doubt, clear that irrevocable letter of credit has not been established by the petitioners, but that by itself cannot be a ground to say that the concluded contract which was entered into by the petitioners much before the change in the EXIM Policy was not a genuine contract. The condition relating to opening of the irrevocable letter of credit put in the modified policy was to prevent the importers from entering into an import contract subsequent to the change in the import policy. But on the strength of the genuine material available on record, if the petitioners can establish their transaction to import goods was genuine contract not based on any manipulation, then in that event, the 9 DGFT was not justified in refusing to grant permission to the petitioners to complete the contract within the stipulated period. 13. It was expected on the part of the DGFT to consider the request of the petitioners keeping in mind the aforesaid philosophy behind clause 1.5 of the amended import policy. The impugned order does not give any reason. It suffers from non-application of mind. It is not possible to read the mind of the adjudicating authority as to why benefit of transitional arrangement under clause 1.5 of the Foreign Trade Policy was denied to the petitioners. 14. In the result, we quash and set aside the impugned communication dated 20th October, 2008 and the decision incorporated therein and remit the matter back to the respondent No.2 for consideration afresh in the light of the observations made in this judgment with expeditious despatch, at any rate, within two weeks from the date of receipt of copy of this order. We hope in the event of grant of permission, the respondent No.2 shall fix the time frame during which the contract is to be completed by the petitioners. 15. Petition is allowed. Rule is made absolute in terms of this order with no order as to costs. (K.K.TATED, J.) (V.C.DAGA J.)