Notification Under S. 5 of FTDR Act Can’t Be Applied Retrospectively To Refuse Advance Authorization To Importer: Delhi High Court

The Delhi High Court has ruled that a notification issued under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act), which empowers the Central Government to formulate and announce the foreign trade policy, cannot be applied retrospectively by the Central Government. The bench of Justice Prathiba M. Singh held that once a notification issued under Section 5 of the FTDR Act is quashed by the Court, the same cannot be relied upon by the Directorate General of Foreign Trade (DGFT) to refuse Advance Authorization to an importer seeking import of certain goods, on the ground that the importer was not a party to the said proceedings before the Court. The petitioner, Jindal Exports and Imports Pvt Ltd, is engaged in the manufacturing and export of gold jewellery, medallions and bars, and in trading of gold, silver, platinum and palladium. The petitioner, in June 2019, applied for issuance of an Advance Authorization from the DGFT for import of gold bars in order to enable manufacturing of gold jewellery and medallions. Relying on the public notice dated 26th September 2019, issued by the DGFT, which provided that Advance Authorization would not be issued where the items for export were ‘Gold Medallions and Coins’ or ‘any other jewellery/articles manufactured by a fully mechanized process’, the DGFT rejected the petitioner’s application. Noting that the Division Bench of the Delhi High Court in M.D. Overseas Limited vs. Union of India (2020) had quashed and set aside the said public notice (No.35/2015-2020), dated 26th September 2019, the petitioner sought to review the order passed by the DGFT. The DGFT, however, passed an order rejecting the review on the ground that the petitioner was not a party to the said writ petition. The DGFT thus concluded that the petitioner cannot be granted benefits of the High Court’s order. In its review order, DGFT further placed reliance on a fresh notification, dated 10th August, 2020, which disallowed the issue of Advance Authorization where the items of export were ‘Gold Medallions and Coins’ or ‘Gold jewellery/articles manufactured by fully mechanised process’. Challenging the order of the DGFT, the petitioner, Jindal Exports and Imports, filed a writ petition before the Delhi High Court, arguing that the DGFT could not have rejected petitioner’s application for Advance Authorization on the basis of the subsequent circular/notification, dated 10th August, 2020. The petitioner argued that the said circular/notification cannot have a retrospective effect. It averred that the petitioner’s case can only be processed on the basis of the legal position that existed on the day when the Advance Authorization was sought by it and the same was rejected by the DGFT. The petitioner, Jindal Exports and Imports, further argued that a public notice would apply to the entire industry, and since the notice dated 26th September 2019 was quashed by the Delhi High Court in M.D. Overseas Limited (2020), the petitioner’s Advance Authorization cannot be rejected on the basis of the said notice. To this, the revenue department contended that vide notification dated 10th August, 2020, the same public notice dated 26th September, 2019 has been reiterated and therefore, the notification dated 10th August, 2020 would be applicable to the petitioner. The High Court took note that the Division bench of the Delhi High Court in M.D. Overseas Limited (2020) had quashed the public notice dated 26th September, 2019 for being beyond the power, jurisdiction and authority of DGFT. The Division bench had held that categorisation or recategorization cannot be done by policy circulars, and that such an exercise can be undertaken only by a specific amendment made to the Foreign Trade Policy under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act). While observing that the review sought by the petitioner against the DGFT’s order, was rejected on the ground that it was not a party to the writ petition before the Division bench, the Court said, “This ground would be completely untenable inasmuch as the public notice which was under challenge was the identical public notice which was the basis of the Petitioner’s rejection. The said public notice upon being quashed, any action taken consequential to the said public notice, would also not stand in the eyes of law. The ld. Division Bench’s judgment would squarely apply to the facts of the Petitioner’s case as well. A quashed public notice cannot be relied upon by the department to refuse the Advance Authorization.” The bench further reckoned that the review was also dismissed by the DGFT by retrospectively applying the notification dated 10th August, 2020. Referring to the facts of the case, the Court remarked, “ ..the Advance Authorization of the Petitioner was applied for on 26th June, 2019 and the same...

Notification Under S. 5 of FTDR Act Can’t Be Applied Retrospectively To Refuse Advance Authorization To Importer: Delhi High Court

Parina Katyal

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