Case: Daruka &amp; Co Vs. Union Of India &amp; Ors

2. The import and export of goods is regulated by the Imports and Exports Act, 1947 referred to as the 1947 Act. Section 3 of the 1947 Act empowers the Government to issue orders making provisions for prohibiting, restricting or otherwise controlling the import and export of goods of special description. In exercise of the powers conferred under Section 3 of the 1947 Act the Central Government from time to time issued orders regulating export of goods. The Export Control Order, 1968 referred to as the 1968 Order came into existence under these powers. Clause 3 (1) of the 1968 Order provides that no person shall export goods of the description specified in Schedule 1 of the 1968 Order except under and in accordance with the licence granted by the Central Government or by an Officer specified in Schedule 11 of the 1968 Order. Mica scrap and mica waste are included as item No. 22 (a) of Part B of Schedule 1 of the 1968 Order. Part B of Schedule 1 of the 1968 Order enumerates the items the export of which is allowed on merits or subject to ceilings or other conditions to be specified from time to time3. I he impugned Notice is issued by the Controller of Imports and Exports under the aforesaid statutory provisions. Under Trade Notice dated 13 March, 1968 reproducing Export Control Order No 1/68-ETC Dated 8 March, 1968 export of mica including mica splittings, blocks, scrap waste which are included in the list of items in Part B of Schedule 1 of the Export Control Order was allowed on merits4. Under the impugned notice the export of mica is decided to be under the scheme to canalise the export of all grades and variety of mica, excepting manufactured and fabricated mica, micanite, reconstituted mica powder and mica paper through the Minerals and Metals Trading Corporation of India Ltd. (hereinafter referred to as the Corporation). The impugned Notice further states that this canalisation of export scheme will be effective from 24 January, 1972. With regard to cases falling under pre-canalisation commitment category, the port licensing authorities may allow export if the shipping documents produced by the exporters are accompanied by documents showing that the contract was entered into with the foreign buyers before 24 January, 1972 or telegraphic offer and acceptance is dated prior to 24 January, 1972 and irrevocable letter of credit at sight is opened in a Bank in India or in foreign country before 24 January, 19725. The impugned Notice further states that exporters who wish to avail themselves of the pre-canalisation commitment category are to furnish particulars on or before 15 February, 1972 at the office of the Controller of Imports and Exports. The particulars are first, full statement showing quantity grade of the mica (blocks, splittings, condenser films, mica scrap and factory cuttings), delivery period name of the buyers, contract number and date with particulars of letter of credit number and date and second, quantities already shipped under these contracts and balance quantities to be shipped6. Pursuant to the decision notified under the impugned notice the Corporation issued immediately thereafter a Press Notice on export of mica prescribing the procedure to be adopted by the exporters taking recourse to the Canalisation Scheme7. The Press Note states that after consideration of the prevailing trade practices and with a view to causing least dislocation in the existing arrangements between the buyers abroad and the local sellers it has been decided to consider requests from the trade on furnishing full particulars of foreign buyers and other relevant details to negotiate sales of mica on behalf of the Corporation. The Corporation will enter into a sale contract with the foreign buyers on a principal to principal basis. The Corporation will simultaneously enter into a back to back contract for procurement of mica with the authorised supplier Foreign buyers will open letter of credit in favour of the Corporation. The Corporation will realise from the local suppliers as service charges not exceeding 1% of the FAS value. The price at which sales will be concluded will not be less than the FAS prices fixed under the Government of India Mica Export Policy Notification dated 27 June. 1966 as amended from time to time or voluntarily adopted on the recommendation of the Mica Export Promotion Council. The foreign buyers will open confirmed, irrevocable, assignable, divisible without recourse to drawer and unrestricted letters of credit in favour of the Corporation8. The Press Note further states that where letters of credit have been opened on or after 24 January, 1972 in the name of private shippers, foreign buyers have to be requested through cable, so that the letters of credit are duly amended in the name of the Corporation and contracts finalised directly by shippers are also to be amended in favour of the Corporation for the balance quantity. The payment due to the supplier will be paid by cheque after realising the proceeds of sales from the foreign buyers after retaining the marginal one per cent of the FAS value as service charges of the Corporation9. Subsequent to the Press Note the petitioner wrote to the respondent and gave details of contracts accepted by the petitioner from overseas buyers prior to the canalisation at export scheme which came into effect on 24 January. 1972. The petitioner stated that in some cases shipment had been made and there was a balance to be shipped subsequent to 24 January 1972. The petitioner gave details of nine such contracts10. After the publication of the impugned Notice several exporters represented that they did not understand the import of restrictions and went on opening letters of credit with respect to contracts entered into between the exporters and the foreign buyers. The Government with a view to lessen the hardships on the traders issued an Export Clarification Circular No. 3 of 1972 dated 17 April 1972 that in respect of cases where letter of credit was opened before 31 March, 1972 but the period of shipment had expired, exports might be allowed in the name of private parties provided the shipment is made not beyond 30 June, 1972.

Court's reasoning:
16. Policies of imports or exports are fashioned not only with reference to internal or international trade but also on monetary policy, the development of agriculture and industries and even on the political policies of the country but rival theories and views may be held on such policies.If the Government decides an economic policy that import or export should be by a selected channel or through selected agencies the court would proceed on the assumption that the decision is in the interest of the general public unless the contrary is shownthe dominant purpose of the scheme is canalisation of export and not to acquire the business or goodwill of traders in favour of the Corporation. The restriction on traders is reasonable. There is no acquisition of property of traders. The Corporation is an agency through which export is canalised to the total exclusion of citizens20. The contention that the Impugned Notice showed preference for the Corporation in infringement of Article 14 is unsound. The Corporation is a State owned body. The Corporation is appointed to undertake this export scheme. No preference is shown to the Corporation, where canalisation is decided no licence is granted in favour of any one. Therefore, there is neither any competition nor any choice in the matter of grant of licence. It is a total exclusion of citizens in order to enable all the countrys exports to be made by one licenceeTherefore the State gave concession to the traders in order to eliminate hardship. The traders were given the choice to export provided they fulfilled certain conditions. These were that they could export through the Corporation and they were to pay service charges. It is significant that if the Press Note had not laid down the procedure conferring the privilege of exporting goods even after 24 January. 1972 in performance of contracts which were not supported by irrevocable letters of credit being opened prior to 24 January, l972 the traders would have suffered loss. The traders could not perform the contracts with the foreign buyers after 24 January, 1972 where letters of credit had not been opened. Therefore, it is apparent that there was no transfer of business of goodwill m favour of the Corporation23. The service charge collected by the Corporation is not in the nature of a tax. The provisions of Article 265 are not therefore attracted. Counsel for the petitioner contended that the levy of service charges was not authorised by the 1947 Act which permitted only levy of fee in respect of applications for issue or renewal of licence. The Corporation is a licencee under the 1947 Act and the 1968 Order. The Corporation acts in accordance with the terms and conditions of the licence. It was said on behalf of the petitioner that Section 4 (a) of the 1947 Act and clause 4 of the 1968 Order excluded levy of any other fees under the Act. The Government and the licensing authority under the Act are not collecting any fee or charges from the traders. It is the Corporation which is collecting service charges from the traders who avail the services of the Corporation. The Corporation is in the nature of commercial undertaking to which a licence has been granted for the export of certain commodities. The service charges are nothing but quid pro quo for the services rendered by the Corporation25. In the present case, the affidavit evidence is that the obligation to export goods arises when the foreign buyers open letters of credit for the specified quantity of goods. If no date is fixed for bringing into effect the canalisation scheme with reference to opening of letter of credit it will give rise to ingenious devices of creating specious contracts. Contracts may be brought into existence by antedating such contracts. The entire purpose of the canalisation scheme with a view to increasing the export trade of the country assisting small mine-owners, exporters and processors, checking smuggling in foreign exchange under-invoicing illegal acquisition of foreign currency and eliminating the chances of contravention of various provisions of the Foreign Exchange Regulations Act and Exports (Control) Order will be stultified. The utility of a State agency in the smooth running of export trade in such commodity as mica blocks, condenser-films, splittings, scrap or waste forms a very significant part of exports of our country. Therefore, the opening of letters of credit has rational relationship with the object of the canalisation scheme and there is no violation of Article 14If an absolute prohibition of export supervenes upon a contract which is subject to the licence the duty cannot be absolute. Nothing has been show that contracts in the present case were not subject to the usual terms of Contract in such cases that the export was subject to the licence laws of our country for the export of goodsThe affidavit evidence on behalf of the State is that the exclusion of mica powder from the canalisation scheme is to develop mica powder industry in our country, because this industry is developing and is practically nascent in growth. Therefore, there is intelligible differentia between mica powder on the one hand and mica scrap and waste or, the other in excluding mica powder from the canalisation scheme29. The three representations received by the Ministry are from the Bihar Mica Exporters Association dated 25 January, 1972, the Mica Chamber of Commerce, Gudur, Andhra Pradesh dated 9 February. 1972 and the Bihar Mica Exporters Association dated 16 March 1972. Broadly stated, the representations of the traders were that the absence of any detailed information or direction as to the procedure to be followed under the new system presented three difficulties to the traders. First, there was serious set back in usual Dow of mica exports. Second, there was financial loss to the mica exporters. Third, there was financial crisis in the mica industry.The difficulties pointed out were that export consignments worth about Rs. 70 lakhs in the names of different exporters supported by valid contracts and letters of credit were under processing through Joint Chief Controller of Imports and Exports and Customs at Calcutta port for shipment within 31 January, 1972. The Orders and Credit were not assignable and were covered under Buyers Import Licence which stipulated specific dates for shipment and consequently the letters of credit could not be extended or amended if so desired under the new system. Under similar conditions export consignments worth about Rs. 130 lakhs were lying ready for shipment In the month of February, 1972. Goods worth about Rs. 150 lakhs were under manufacturing process against orders and letters of credit for shipment in March 1972. Goods worth about; Rs. 150 lakhs were awaiting processing line against shipment commitment for the months of April to June, 1972. There were other export contracts for shipment after the month of June. 1072. Some consignments of mica scrap; cuttings, powder, flakes and mica splittings were despatched by Rail Wagon from Giridih/Kodarma to Calcutta Port for shipment by specific steamer. If for the reason of the changed pattern of export steamers were not availed or shipment was delayed the traders would suffer loss for non-shipment of the goods and incur railway demurrage and Port Commissioners demurrage and storage charges. The Association therefore asked for relief in the matter of export in accordance with the contractual terms of existing contractsThe Andhra Pradesh Chamber of Commerce added that there were contracts prior to 24 January. 1972 stating shipment date subsequent to 24 January, 1972 for which letters of credit were to be established in due course. Certain contracts were executed in part and for the remaining part letters of credit were to be established in due course prior to the stipulated time of shipment. There were contracts prior to 24 January. 1972 for which letters of credit originally established had expired. Therefore, the Andhra Chamber of Commerce asked for extension of last date for registration of contracts up to 29 February, 1972In this background it cannot be said that the Government authorities acted mala fide in extending the date of the opening of the letter of credit from 24 January, 1972 to 31 March, 1972. The relaxation was to minimise hardships to the traders. The relaxation was to prevent dislocation of trade on a large scale. The Association gave instances of traders who could not succeed in opening letters of credit for reasons beyond their control.