The Madras High Court has held that the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) can interpret the Foreign Trade Policy (FTP) while deciding appeals concerning customs exemptions.
A Division Bench of Chief Justice Sushrut Arvind Dharmadhikari and Justice G. Arul Murugan observed that a declaration barring CESTAT from interpreting the FTP would be too wide.
The Bench observed, “A declaration that CESTAT can never interpret the FTP is far too wide. The Tribunals have jurisdiction under the Customs Act. Paragraph 2.58 of the FTP, which makes the DGFT's interpretation final, is a policy provision. It cannot take away a jurisdiction that Parliament has given.”
The observations came while dismissing a public interest litigation filed by a 26-year-old Chennai resident. The petitioner had sought an inquiry into alleged non-compliance with actual-user conditions and value caps governing duty-free imports under the Duty Free Import Authorisation (DFIA) scheme. He had also sought a declaration that CESTAT had no jurisdiction to interpret the FTP and that its interpretation would not bind the Directorate General of Foreign Trade (DGFT).
The petition sought an inquiry against customs officers who had permitted duty-free imports under the DFIA scheme without first recording their satisfaction that the actual-user conditions and value caps prescribed under the Standard Input Output Norms (SION) had been complied with. It also sought show-cause notices against importers, exporters, and transferees who had benefited from such imports.
The petitioner relied on two CESTAT orders, Frunuts Exim LLP and Global Exim, concerning duty-free imports of dried cranberries and citric acid, respectively. In both cases, the tribunal held that value caps and actual-user conditions introduced through public notices could not be used to deny customs exemptions.
The petitioner argued that the DGFT had the authority to interpret the FTP and that its interpretation was final under Paragraph 2.58 of the policy. CESTAT's interpretation, therefore, could not bind the DGFT.
The court declined to entertain the PIL, finding that the petitioner had not placed sufficient material to substantiate the alleged violations.
It noted that the petitioner had relied on information gathered from internet reports but had not identified any importer, cited any Bill of Entry, or quantified the alleged revenue loss. He had also admitted that he had not made any representation to the authorities before approaching the court.
The Bench further observed that it could not direct customs officers to enforce conditions whose legal validity was itself in serious doubt. If the Central Government or DGFT considered such conditions necessary to protect revenue, they could issue a proper notification. However, the court could not direct the executive to frame one.
Rejecting the request for an inquiry against unnamed officers and importers, the bench observed:
“The prayer for an inquiry against officers is also unsustainable. No officer is named in the petition. The prayer for show cause notices to "all importers" is much wider. Recovery of duty is governed by the Customs Act, 1962. It needs a notice to a particular person, on particular facts, by the proper officer. A roving inquiry against unnamed persons cannot be ordered in a public interest petition.”
Turning to CESTAT's authority, the court noted that the tribunal had passed the two orders relied upon by the petitioner while deciding appeals concerning the availability of customs exemptions. It necessarily had to read the relevant FTP provisions to decide those appeals.
The Revenue was a party to those proceedings and could have challenged the orders through the remedies available under the Customs Act if it was aggrieved, the Bench observed.
The court further noted that the Union of India had not expressed any grievance against the orders. The petitioner, who was a stranger to those proceedings, could not seek to challenge them through a public interest litigation.
The High Court accordingly dismissed the writ petition and closed the connected miscellaneous petition without imposing costs.
For Petitioner: Advocate Pooja Thorat
For Respondent: A.Kumaraguru, Senior Panel Counsel for R1 and R2 and M.Santhanaraman, Senior Panel Counsel for R3