WP (C) 13091/09 & Cont Cas (C) 43/2010 Page 1 of 29 IN THE HIGH COURT OF DELHI AT NEW DELHI W.P.(C) 13091 of 2009 & CM APPL No. 14083/09 Reserved on: February 4, 2010 Decision on: March 4, 2010 SOPHISTICATED MARBLES & GRANITE INDUSTRIES ...... PETITIONER Through: Mr. Jayant Bhushan, Senior Advocate with Mr. Mohit Chaudhary and Mr. Gautam Talukdar, Advocates versus UNION OF INDIA AND ANR ..... Respondents Through: Mr. A.S. Chandhiok, ASG with Mr. Sachin Dutta and Mr. Manikya Khanna, Advocates CONT CAS (C) 43 of 2010 SOPHISTICATED MARBLES & GRANITE INDUSTRIES ...... PETITIONER Through: Mr. Jayant Bhushan, Senior Advocate with Mr. Mohit Chaudhary and Mr. Gautam Talukdar, Advocates versus MARGRET JOS ..... RESPONDENTS Through: Mr. A.S. Chandhiok, ASG with Mr.Sachin Dutta and Mr. Manikya Khanna, Advocates CORAM: JUSTICE S. MURALIDHAR 1. Whether reporters of local paper may be allowed to see the judgment? No 2. To be referred to the report or not? Yes 3. Whether the judgment should be referred in the digest? Yes JUDGMENT 1. The petitioner, an importer of rough marble blocks/slabs, challenges in this writ petition a circular dated 23rd October 2009 as well as notification dated 15th October 2009 issued by the Director General of Foreign Trade WP (C) 13091/09 & Cont Cas (C) 43/2010 Page 2 of 29 („DGFT‟) imposing a condition that for the purposes of securing an import licence the Petitioner would have to install a gang saw machine in its unit. 2. The Petitioner is a sister concern of the Litoller Group which was a pioneer in importing Italian marble into India. The petitioner was issued an import license for the import of marble slabs/blocks on 12th October 1999. On 22nd January 2003 the DGFT renewed the Petitioner‟s license for import of rough marble blocks/slabs. A conspectus of the DGFT Circulars on import of marble 3. In order to appreciate the challenge to the impugned circular, it is necessary to refer to the background in which it came to be issued. On 14th March 2002 the DGFT issued guidelines for import of rough marble slabs. It was clarified that the EXIM Facilitation Committee („EFC‟) which was an Inter-Ministerial Committee comprising of representatives from various Ministries/Departments, would be considering the applications for import license in the DGFT, New Delhi. The eligible categories included those who had set up manufacturing and processing units in the country and those who were already importing marble in the preceding years when marble was being imported under Special Import Licence („SIL‟). The said circular dated 14th March 2002 also fixed the floor price for rough marble blocks at US$ 300 per metric tonne (PMT) and for slabs at US$ 450 PMT. The floor price for crude and roughly trimmed marble was fixed at US$ 300 PMT. In case of the importers of marble who were operating when marble was included in the SIL list, the value of the licence to be issued in one year was limited to 50% of the average value of the sales made during the years when WP (C) 13091/09 & Cont Cas (C) 43/2010 Page 3 of 29 marble was under the SIL list. The licences were subject to actual user condition. 4. After the import restrictions on marble were removed in 2001, when India became part of GATT, rough marble slabs/blocks continued to be in the restricted list. It is stated that based on representations received after 1st April 2001, and in consultation with Department of Industrial Policy & Promotion („DIPP‟) and the Ministry of Mines, a policy circular was issued on 14th March 2002 permitting import of marble against licence, to those firms who had set up manufacturing/processing unit in the country and had also imported marble in the preceding year when it was under the SIL List. 5. By a circular dated 24th August 2004, the clause concerning value of yearly licence was amended and the limit was revised to the total CIF value of import made during 1999-2000 and 2000-2001. On 30th August 2005, further amendments were made to the following effect: I. eligibility to be considered by the EFC– only manufacturing/processing units and importers of these items in preceding years. II. Total import of rough marble blocks subject to a ceiling of 1.3 lakh MT per licensing year. The entitlement of individual firms to be worked out on the basis of the turnover of the preceding year. III. The last date for receiving applications 1st October of each licensing year. IV. Monthly returns regarding the imports to be filed with the Regional Licensing Authority. V. All applications forwarded through Chemicals and Allied Products Export Promotion Council who will certify the turnover of the applicant before sending it to DGFT(HQrs) WP (C) 13091/09 & Cont Cas (C) 43/2010 Page 4 of 29 6. In September 2005 the Government introduced floor prices for import of processed marble products i.e. tiles, slabs etc. at US$ 2700 per cubic meter. This was similar to the price fixed on processed marble during SIL period. The Domestic Tariff Area („DTA‟) sale of marble by 100% Export Oriented Units („EOUs‟) was banned during this period. This ban was imposed to address complaints that the 100% EOUs were diverting imported marble into the domestic market thereby adversely affecting the domestic mining industry and the livelihood of a large number of workers. The 100% EOUs protested this ban and challenged it in the various High Courts and the Supreme Court. These were consolidated and finally heard and disposed of by a judgment of the Supreme Court in Hindustan Granites v. Union of India (2007) 12 SCC 178. The Supreme Court rejected the challenge by the 100% EOUs to the aforementioned circular and notification. 7. On 30th November 2005, by a circular No. 34/2005-09, it was stipulated that the entitlement was to be calculated on only the basis of the turnover of marble imported under Chapter 25 of the ITC (HS) Classification of Export Import Items 2004-09. The companies which had been importing under Chapter 25 were also allowed to add their complete turnover for imported marble for the preceding year i.e. 2004-05. The same circular also introduced the eligibility criteria that the manufacturing/processing unit must have been established when marble was under SIL List or before. 8. On 26th July, 2007 the following amendments were made by Circular No. 01(RE-07)/2004-2009: floor prices were revised: for crude or roughly trimmed marble – US $350 PMT, for rough marble blocks – US $350 PMT WP (C) 13091/09 & Cont Cas (C) 43/2010 Page 5 of 29 and for slabs – US $500 PMT. The total import of rough marble blocks was subject to a ceiling of 1.85 lakh MT per licensing year. Entitlement of individual firms was to be worked out taking into account the growth in demand for these items, the unallocated quota of the preceding year i.e. 2006-07, on the basis of the eligible turnover of the eligible firm for 2006-07 i.e. the turnover of the eligible firm for 2005-06, or the turnover of the firm for 2004-05 with a cap of 10%, whichever is less. An additional quota of 10,000 MT could be allocated by the Government to actual users, such as hotels, places of worship etc. 9. Pursuant to the representations made by the domestic industry, a meeting of the Committee of the Secretaries („COS‟) was convened on 11th September 2007 to discuss grant of import licences for rough marble blocks. The DGFT has, in its reply to the present petition referred to the decision taken by the said COS and also placed on record minutes of the above meeting held on 11th September 2007. The COS arrived at the following decisions: “(i) The present system of quantitative restrictions combined with grant of licences only to a few importers who had imported under Special Import Licences during 1990-2001, is inequitable and hence needs to be changed. (ii) with a view to liberalizing imports of rough marble blocks/slabs while protecting the domestic industry, Secretary, DOC will in consultation with Secretary, M/o Mines and Secretary, M/o MSME, review the current restrictions on marble imports and formulate an alternative arrangement. The following two options may be considered in this regard. WP (C) 13091/09 & Cont Cas (C) 43/2010 Page 6 of 29 (1) Remove quantitative restrictions on imports and allow imports freely under OGL but at higher floor prices. (2) Continue the present quantitative restriction system, but grant licences without restriction on the number of importers so as to do away with monopoly of a few and prescribe suitable objective criteria for granting the same.” 10. Thereafter, the Secretary, Commerce held a meeting on 22nd October 2007 with the Secretary, Ministry of Mines and Ministry of MSME. Regarding option at (1) above, the unanimous view was that “if the import of rough marble blocks is brought under OGL, then the domestic mining would be definitely adversely impacted. It was the consensus view that the import of rough marble blocks needs to be kept on the restricted list and not under OGL.” It was recommended by the above Committee to continue with the present quantitative restriction of 140,000 tonnes per annum, but grant import licence to all persons who meet the following criteria: “(i) Marble processing units having their own gang saw, would be eligible. (ii) The processing units should have been in operation for a minimum of three years as on 1.10.2007. (iii) The processing units should have a minimum sales turnover of Rupees one crore per annum.” 11. Pursuant to the above recommendation, a dual policy was notified on 27th June 2008 and 30th June 2008. The circular dated 27th June 2008 introduced guidelines for import of rough marble blocks/slabs for the year 2008-09 permitting both groups i.e. SIL category as well as domestic WP (C) 13091/09 & Cont Cas (C) 43/2010 Page 7 of 29 processors to obtain import licence. The SIL category was entitled to a maximum import of 1.40 lakh MT per annum and the domestic category was also entitled to an equivalent amount. For the domestic units the eligibility was to be decided on the basis of the following two criteria: a) Units which have installed marble gang saw machine [except 100% EOUs, units in SEZ and units which have been granted marble block import licences under previous licencing years or are eligible to avail licence in the current licensing year (2008-09) under SIL category]. The units should have been in operation since prior to 31/03/2001. b) All eligible units as per (a) above should have indigenous sales turnover of marble slabs/tiles only, of Rs. One Crore and above in each of the three financial years 2004-05, 2005-06 and 2006-07. 12. Eligible units were entitled to an import licence pro rata on the basis of average indigenous sales turnover of marble slabs/tiles only, in the financial years 2004-05, 2005-06 and 2006-07. The quantity so calculated was to be subject to the following overall ceiling: a) Unit having one marble gang saw machine entitled to a maximum licence of 3,000 MT of marble blocks/slabs; and b) Unit having more than one marble gang saw machine will be entitled for a maximum licence of 3,000 MT of marble blocks/slabs for the first gang saw machine and 1500 MT of marble blocks/slabs per additional marble gang saw machine. 13. On 16th July 2008 the DGFT issued a policy circular whereby certain additional conditions were imposed for importing of rough marble blocks/slabs for the year 2008-09. These were in addition to the conditions imposed in the Circular dated 30th June 2008. For the eligibility and WP (C) 13091/09 & Cont Cas (C) 43/2010 Page 8 of 29 entitlement of the unit, the applicants would have to enclose certificates issued by the State Industry Department (District Industry Center) („DIC‟) as to the number of gang saws established by the unit. The DIC certificate had to state that the unit has been in operation since prior to 31st March 2001. The list of equipments/capital goods set up by the applicant showing processing equipment for marble slabs/tiles as per the balance sheet, duly certified by a Chartered Accountant („CA‟) or the year 2000-01 was also required to be enclosed. The certificate of the CA would also show the figures of indigenous sales turnover of marble slabs/tiles for the years 2004- 05, 2005-06, 2006-07. 14. Another policy circular was issued on 8th August 2008 stipulating therein the sales turnover as criteria for granting import license. It is stated the Petitioner fulfilled all the above conditions as well and therefore, its import licence was continued. On 20th August, 2008 the ceiling for total import of rough marble blocks was increased from 1.10 lakh MT to 1.4 lakh MT for the year 2008-09. 15.1 On 10th October, 2008 further amendments were made in the policy. The eligibility of the units was to be decided based on the following two criteria: a) Units which have installed marble gang saw machine (except 100% EOUs, units in SEZ and units which have been granted marble block import licences under previous licensing years or are eligible to avail licence in the current licensing year (2008-09) under SIL category). The units should have been in operation since prior to 31/03/2001. WP (C) 13091/09 & Cont Cas (C) 43/2010 Page 9 of 29 b) All eligible units as per (a) above should have indigenous sales turnover of marble slabs/tiles only, of Rs. Two Crore and above in each of the three financial years 2004-05, 2005-06 and 2006-07. 15.2 The floor prices were revised as under: i. For rough/unprocessed blocks of agglomerated/artificial stones – US $300 per MT for goods of Chinese origin and $400 per MT for others; and ii. For rough/unprocessed slabs of agglomerated/artificial stones US $22 per square meter for goods of Chinese origin and $28 per square meter for others. 15.3 The total ceiling was reduced to 40,000 MT while the individual units were to be entitled for an import licence pro rata on the basis of average indigenous sales turnover of marble slabs/tiles only, in the financial years 2004-05, 2005-06 and 2006-07. The quantity so calculated was to be subject to the following overall ceiling: a. Unit having one marble gang saw machine entitled to a maximum licence of 3,000 MT of rough/unprocessed blocks and slabs of agglomerated/artificial stones. b. Unit having more than one marble gang saw machine will be entitled for a maximum licence of 3,000 MT of rough/unprocessed blocks and slabs of agglomerated/artificial stones and 1500 MT of rough/unprocessed blocks and slabs of agglomerated/artificial stones per additional marble gang saw machine. 16. Subsequently, an amendment was made to the Circular dated 10th October 2008 and the total ceiling was increased to 60,000 MT. A further WP (C) 13091/09 & Cont Cas (C) 43/2010 Page 10 of 29 condition was added to be eligible; minimum turnover for the year 2006-07 to be Rs. 5 Crore. Units having a turnover of more than 50 Crore were to be considered after capping their turnover at Rs. 50 Crores. On 2nd March, 2009 in light of the demand for artificial stones going down, an option was given to the importers to import rough/unprocessed blocks and slabs of agglomerated/artificial stones or the items listed in their licence i.e. artificial/agglomerated stones. On 29th September, 2009 with reference to the policy circular 12(RE-08)/2004-09 dated 27/06/08, another 25% quota of the quantity granted for the year 2008-09 was permitted. 17. On 15th October 2009 a notification was issued by the DGFT introducing two new eligibility criteria to replace the earlier criteria. It appears that with this notification the Government did away with the dual policy of permitting not only the existing importers to import marble but also encourage the domestic manufacturers to import marble. 18. On 23rd October 2009 within eight days of the earlier issued notification dated 15th October 2009, the DGFT issued another notification amending the earlier notification by stipulating the following conditions: “(i) Serial No. 2 (C) 1 (a) of the DGFT notification No. 15 dated 15th October 2009, shall be substituted as under: (a) units who have installed marble gang saw machine (except 100% EOUs and units in SEZ). However, the marble gang saw machine shall be in the name of the applicant only. No gang saw on lease basis shall be considered for the purpose of allocation of import entitlement. WP (C) 13091/09 & Cont Cas (C) 43/2010 Page 11 of 29 The unit should have been in operation for five years prior to 1st April of the current licencing year.” 19. Pursuant to the above notification dated 23rd October 2009 the DGFT issued a policy circular on the same date. Para 3 (a) of the said circular read as under: “Para 3 (a) The established gang saw in the unit should be in the name of the unit as on date of this circular, as certified by the State Industry Department (District Industry Centre). The gang saw should also not be „on lease‟ from any other party.” 20. The Petitioner states that it was severely prejudiced by the introduction of the above conditions since the last date for receipt of the application for renewal of licence after fulfilling the conditions of the above policy circular dated 23rd October 2009 was to 2nd November 2009 i.e. barely seven days before the closing date. It is stated that there was no way the Petitioner could, within 17 days‟ time, establish a gang saw machine in its own name. Such condition could have helped only those importers who had already installed gang saw machines and were using them for processing and sale of marble. In para 8 of the grounds in the writ petition it is submitted as under: “8. Because the policy has been framed in order to benefit only a handful of players and is totally unjust and biased. The unit should be 5 years old we agree with that, the unit should have a minimum turnover of 1 crore a year petitioner also agree with that but regarding the gang saw the following needs to be done a) minimum 2 years should be given to the importer unit to set up at the required gang saws, b) The sole purpose of these gang WP (C) 13091/09 & Cont Cas (C) 43/2010 Page 12 of 29 saws should be for the processing of imported marble only and not for the processing of domestic marble and locally produced artificial marble, c) gang saws set up during the period from November 2009 – November 2011 should only be taken into consideration.” Proceedings in this Court 21. It may be recalled that the Petitioner had applied for import licence but had not received any response thereto. Along with the present petition filed on 20th November 2009, the Petitioner filed an application praying for stay of the notification dated 15th October 2009 and the subsequent policy circular dated 23rd October2009. A direction was sought to the Respondent to consider the Petitioner‟s application for issuance of import licence. On 11th November 2009 this Court passed the following order: “Learned counsel for the respondents will take instructions on the averments made in paragraph XVI of the writ petition for extension of time. Till the next date of hearing, the respondents will not reject the application filed by the Petitioner. List on 17th November 2009. Dasti.” 22. It must be recalled that the statement made by the Petitioner in para XVI of the writ petition was that the conditions stipulating the ownership by the unit of the gang saw machine was introduced on 23rd October 2009 giving barely seven days‟ time prior to the closing date of 2nd November 2009 for submitting the application. Therefore, it was not possible on the part of the Petitioner to comply with the said condition. WP (C) 13091/09 & Cont Cas (C) 43/2010 Page 13 of 29 23. Thereafter, the case came up for hearing on 17th November 2009 this Court was informed by learned counsel for the Respondents that 164 persons had been granted licenses and the Petitioner‟s request had been rejected. The following order was then passed by this Court: “Counsel for the respondents states that 164 persons have been granted licenses and the petitioner‟s request has been rejected. Issue notice to show cause returnable on 22nd January 2010. Notice is accepted by Mr. Sachin Datta, Advocate on behalf of the respondents. Counter affidavit will be filed within four weeks. Rejoinder affidavit, if any, will be filed within four weeks after counter is served.” 24. According to the Petitioner, as on 30th October 2009 its application had not been rejected as was evident from the DGFT‟s letter dated 5th November 2009 informing the Petitioner that its application for import license was under scrutiny. The defect pointed out in the Petitioner‟s application was that it had not submitted “DIC certificate indicating number of gang saws installed and operational as on 30.09.2009.” 25. The Petitioner contends that its application could not be rejected in view of the order dated 11th November 2009 passed by this Court. However, the Petitioner was sent a rejection letter dated 16th November 2009 which reads as under: “File No. 03/27-008/00246/AM19/234 30.10.2009 To, WP (C) 13091/09 & Cont Cas (C) 43/2010 Page 14 of 29 Sophisticated Marble & Granite Industries, Plot No. 17, Panchal Indl. Est. Bhimpur, Daman, UT 396210 Sub: Rejection letter Sir/Madam, Your application has been rejected due to following reasons: This has reference to your application for import licence for import of marble. In this regard this is to inform you that your application stands rejected because “you have not submitted the DIC certificate”. Also, you are requested to pay the balance application fee of Rs.19,000/- in your application is processed. Your case stands closed. Yours faithfully, Place: Mumbai Date: 16.11.2009 Sd/- ForeignTrade Development Officer” 26. It is the case of the Petitioner that the above rejection on 16th November 2009 was in the teeth of the order passed on 11th November 2009 passed by this Court. It is stated that the rejection letter was deliberately back dated to a day prior to 17th November 2009 on which date this Court was to be informed whether the Petitioner‟s application had been rejected. It is in the above context that Cont Case No.43 of 2010 has been filed in this Court asking this Court to hold the Respondent to be in contempt of the order dated 11th November 2009. Submissions of counsel 27. Mr. Jayant Bhushan, learned Senior counsel appearing for the Petitioner urges that if the Petitioner does not desire to process the imported rough marble for sale in the domestic market, then it makes little sense to require WP (C) 13091/09 & Cont Cas (C) 43/2010 Page 15 of 29 an importer like the Petitioner to install a gang saw machine. It is further submitted that the pattern of the earlier circulars issued by the DGFT show that even while they were encouraging domestic manufacturers to also import marble directly, those who were purely importers were not totally excluded. It is also pointed out that a gang saw machine requires a minimum of four months for installation. Therefore, some lead time had to be given for setting up such a machine. The conditions imposed by the impugned circulation dated 23rd October 2009 of the DGFT was therefore impractical and unrealistic. Mr.Bhushan pointed out that for an importer like the petitioner, who did not further process the rough marble or the slabs but sold them validly in the market in the same form in which they were imported, a gang saw machine was of no use. He was further critical of the ceiling imposed on the maximum quantity of marble that could be processed on the first and subsequent gang saw machines. According to him, with such a restriction, the gang saw machine would remain idle for most of the time thus not serving the purpose and resulting in avoidable wastage of money. 28.