IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
Mohinder Pal, J.
Om Siddh Vinayak Impex Pvt. Ltd. and Others – Appellants
Versus
Union of India and Others – Respondents
Special Civil Application Nos. 6806 to 6811 and 10748 to 10750 of 2014
Decided On : 14-02-2017
Development Commissioner prior to publication of Special Economic Zone Act, 2005 – Foreign Trade Development and Regulation Act, 1992 – Section 2(m)(i) – Special Economic Zone Rules, 2006 – Rule 18 (4) (C) and 53 – Board of Approval – Policy – Export means taking goods, or providing services, out of India – Notification – Petitioner Challenged policy in its entirety and letter issued by Ministry of Commerce and Industry – Policy imposes conditions of physical exports out of India to extent of 40% at the end of second year, 80% at end of fourth year, 100% at the end of fifth year and thereafter 100% every year – Letter issued by respondents deletes provisions of 15% of un-mutilated worn clothing which was provided in policy unilaterally and arbitrarily – Petitioners sought in their SCA that defects of Notification can only be prospective and not retrospective – Petitioners should be allowed to sell in DTA their past accrued entitlement of un-mutilated clothing up to 15% of the imports made – By virtue of notification issued by "DGFT" petitioners were allowed to sell un-mutilated worn clothing in DTA to the extent of 15% of CIF value of imports made in the previous year – By notification this provision came to be deleted – Held, Authority has bye-passed the mandatory provisions and issued the impugned instructions against the prescribed law which was beyond their jurisdiction – Parliamentary committee on petitions or otherwise, it is evident that worn clothing units of SEZ provide large employment, they fulfilled their NFEE requirement by way of exporting same products to the various countries outside India – The worn clothing imported is non-hazardous in nature, further import is fumigated at the origin to ensure that imported worn clothing is free from germs and they earn valuable foreign exchange for our country – Thus there is no reason to impose extra conditions to regulate functioning of the worn clothing units in SEZ that are over and above the provisions already provided in SEZ Act/Rules – Impugned policy set aside – Consequently LOAs of petitioners are to be amended deleting extra conditions imposed vide policy – Since policy set aside – Petitions allowed. (Paras 33 to 36)
Mohinder Pal, J.
1. Rule. Learned advocates, Mr. Devang Vays and Mr. Parth Bhatt, for the respondents waive service of rule.
2. These petitions arise in a common background. They would, therefore, be disposed of by this common order.
3. Brief facts as emerging in Special Civil Application No. 6806 of 2014 are as under:
"2.1 The petitioners were granted Letter of Approval (for short, "LOA") issued by the Development Commissioner prior to publication of Special Economic Zone Act, 2005 (for short, "the Act") and Special Economic Zone Rules, 2006 (for short, "the Rule"). They are engaged in the business of sorting, segregating and grading worn and used clothing. Their LOA has been renewed from time to time and lastly it was renewed in December, 2013 and subsequently revised in May, 2014. As per the Rule 18 (4) (C), their LOA was renewed by the Board of Approval (for short, "BOA") as they were existing units. They were allowed to import worn clothing and after sorting, segregating and grading, they export clothing which is export-worthy and they earn their foreign exchange from those exports as required under Rule 53. Whatever is not export-worthy is being completely mutilated and cleared in Domestic Tariff Area (for short, "DTA") on payment of applicable duties and after examination by the Customs. As per Foreign Trade Policy (for short, "FTP"), mutilated used cloth is classified in Open General License (for Short, "OGL") category. As per the terms of their LOA, the petitioners are under only one obligation that is to be positive in Net Foreign Exchange Earnings (for short, "NFEE") and this is to be monitored cumulatively at the end of block period of 5 years. Defaulters are subjected to penal action under Foreign Trade Development and Regulation Act, 1992 (for short, "FTDR"). By virtue of notification dated 30th March 2006 issued by the Director General of Foreign Trade (for short, "DGFT"), the petitioners were allowed to sell un-mutilated worn clothing in DTA to the extent of 15% of CIF value of imports made in the previous year. By notification dated 19.05.2010, this provision came to be deleted. The petitioners may not be eligible for sale of 15% of un-mutilated worn clothing after the date of notification dated 19.5.2010 but they were eligible for their past accrued entitlement for the period from 1.4.2009 to 18.5.2010. This is because the notification dated 30.03.2006 provided that the petitioners would be entitled to sell in DTA un-mutilated worn clothing to the extent of 15% of CIF value of imports made in the previous year. This was denied to the petitioners by the respondents. On 3.4.2013, the respondents issued a Circular along with the draft policy to regulate the functioning for worn clothing units in Special Economic Zone (for short, "SEZ") and the same was circulated to all the Ministries including Ministry of Textile, Ministry of Environment, Ministry of Finance and to the stakeholders. After considering the feedback from all the concerned, the respondents framed a policy dated 17.9.2013 wherein it was prescribed that in addition to achieving NFEE, the petitioners will be required to make physical exports out of India to the extent of 40% at the end of second year, 80% at the end of fourth year and 100% at the end of fifth year and thereafter, 100% every year of their total turnover. Apart from this condition, the units were shown to be entitled to sell their un-mutilated worn clothing being export surplus and export rejects to the extent of 15% of their FOB value of their exports. After issue of policy dated 17.9.2013, the LOA of the petitioners were renewed in December, 2013, wherein all the conditions of their policy were inserted. The petitioners agreed to the terms and conditions in its totality. On 30th January, 2014, the respondents unilaterally, arbitrarily deleted the portion of entitlement of selling of un-mutilated worn clothing being export surplus and export rejects in DTA on payment of applicabl
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