Ms Kaka Gold Llp v. Director General Of Foreign Trade & ORS.

$~91 to 104, 106 to 108 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 16809/2024, CM APPL. 71133/2024, CM APPL.

71134/2024 & CM APPL. 71135/2024 MS KAKA GOLD LLP .....Petitioner versus DIRECTOR GENERAL OF FOREIGN TRADE & ORS.

.....Respondents With W.P.(C) 16810/2024, W.P.(C) 16814/2024, W.P.(C) 16816/2024, W.P.(C) 16819/2024, W.P.(C) 16822/2024, W.P.(C) 16824/2024, W.P.(C) 16825/2024, W.P.(C) 16826/2024, W.P.(C) 16827/2024, W.P.(C) 16828/2024, W.P.(C) 16829/2024, W.P.(C) 16830/2024 & W.P.(C) 16831/2024, W.P.(C) 16838/2024, W.P.(C) 16842/2024, W.P.(C) 16843/2024 For Petitioners:

Mr. Tarun Gulati, Senior Advocate with Mr.

Rajat Mittal, Mr. Dharan Gandhi, Mr.

Gautam Swarup, Mr.

Priyanshu, Mr.

Suprateek Neogi, Mr. Devyansh Garg, Mr.

Pramod & Ms. Prena Pandya, Advocates in item no. 91 to 104, 106 to 108.

For Respondents:

Ms. Shiva Lakshmi, CGSC with Mr. Amit Acharya, GP for UOI in Items 100 to 102, 104.

Mr. Gibran Naushad, Sr. Standing counsel with Mr. Harsh Singhal, Advocates for R-2 in item no. 92 to 99, 101, 102 & 104, 106, 108.

Mr. Rajesh Gogna (CGSC) along with Ms.

Priya Singh, Mr. Nishant Sharma & Mr.

Nipun Jain, Advocates.

Mr. Ripudaman Bhardwaj (CGSC) with Mr.

Kushagra Kumar, Mr. Abhinav Bhardwaj, Advocates & Mr. Rudra Paliwal, Mr.

Vedansh Anand, GPs in item no. 108 W.P.(C) 16809/2024 and other connected matters Page 1 of 9 The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

Ms. Shiva Lakshmi, CGSC with Mr.

Rishabh Verma, Advocate for GDFT in Items 91 to 102, 104 to 108.

Mr. Rohan Jaitley, CGSC with Mr. Hussain Taqvi, GP, Mr. Dev Pratap Shahi, Mr.

Yogya Bhatia and Ms. Ranjana Jetly, Advocates for R-1 to 3 in Item 104.

Ms. Nidhi Raman, CGSC with Ms. Archana Surve, GP, Mr. Zubin Singh and Mr.

Aakash Mishra, Advocates for UOI in Item 102.

CORAM:

HON'BLE MR. JUSTICE SANJEEV NARULA

O R D E R

% 05.12.2024 1.

All the Petitioners are engaged in the business of importing gold bullion, which is used for the manufacturing of gold ornaments. Pursuant to a Comprehensive Economic Partnership Agreement,1 between India and UAE, the Petitioners have been allotted certain Tariff Rate Quota2 by the Respondents for the import of bullion. The said TRQs have now been reviewed and revised as per the Minutes of Meeting held on 08th November, 2024, which is the subject of challenge in the present petition. Since all the Petitioners impugn the same Minutes of Meeting, raising similar grounds of challenge, it is considered apposite to dispose of the petitions by way of a common order. The distinct facts of each case will be noted to the extent required.

2.

The factual background to the instant cases is as follows: 2.1 The governments of India and United Arab Emirates executed the CEPA on 18th February, 2022, which included specific tariff commitments 1 "CEPA"

2 "TRQ"

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in relation to trade of goods. As per Article 2.4 (2) of the CEPA, the Indian Government agreed to eliminate custom duties on import of goods originating from UAE, in accordance with Annexure 2A. 2.2 It was inter alia agreed between the governments that tariff concession/relief of 1% will be provided to the Indian gold importers in a phased manner, prescribing the quantity of gold bullion available for allotment for each year. For the Financial Year 2024-25, gold TRQ of 160 tonnes was decided.

2.3 Thereafter, the Handbook of Procedure, 20233 was notified through public notice dated 01st April, 2023 in exercise of powers conferred under Paragraph Nos. 1.03 and 2.04 of the Foreign Trade Policy, 2023. Paragraph No. 2.16 of the Handbook specifies the validity period of license/ certificate from the date of issuance. The table following Paragraph No. 2.16 prescribes different validity periods, the minimum being 12 months, with the exception of Serial No. 7. Further, Paragraph No. 2.20 of the Handbook provides for re-validation of license/ certificate, allowing for an extension for a further period of 6 months.

2.4 The Petitioners applied for TRQ in CEPA for import of gold bars. Subsequently, a meeting was held on 15th April, 2024 at the DGFT (HQ) for consideration of the allocation of bullion TRQs under CEPA for FY 202425. The relevant part of the Minutes of the said Meeting are as follows: "6. The Committee decided to allocate the said TRQs based on the said Modalities - i. Notwithstanding the subsequent conditionalities, the allocation shall be subject to a maximum of the quantity as applied. ii. Applicants who had utilised more than 95% of their previous TRQ quantities shall be allocated 3 times their previous TRQ imports (as per Bills of Entry records received by DGFT) iii. Applicants who had utilised less than 95% of their previous TRQ quantities shall be allocated 2.5 times their previous TRQ imports (as per 3 "Handbook"

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Bills of Entry records received by DGFT) iv. Notwithstanding conditionalities (i) and (ii), Qualified Jewellers as notified by IFSCA till March'2024 shall be allocated a minimum of 200 Kgs.

v. Applicants who are not QJs and have no prior imports shall be allocated 80 kgs.

7. Details of allocation made are submitted at Annexure. Further, the Committee decided to review the utilisations of given TRQs in the October'2024. The Committee may thereafter choose to revise the extant TRQ allocations based on the TRQ imports made till September'2024." 2.5 On the basis of the aforenoted decision, the Petitioners were issued certificates/licenses with validity up to 31st March, 2025. 2.6 Subsequently, in terms of Paragraph No. 7 of the Minutes of the aforesaid Meeting, the Committee held a mid-year review of allocation of bullion TRQ under CEPA for FY 2024-25. In the said Minutes, the following decision has been taken:

"In Chair: Shri Santosh Kumar Sarangi, DG (DGFT)

2. The following officers attended the meeting: • Ms. Shubhra, Additional DGFT • Smt. Priya Nair, Economic Advisor, FT(WANA), Dept. of Commerce • Shri Gaurav Pundir, Director, FT(WANA), Dept. of Commerce • Shri Satya Rajasekhar G, Dy. DGFT, DGFT(HQ) • Shri Deepak Jhalani, Dy. DGFT, DGFT(HQ)

3. In compliance of the Committee Decision vide EFC Meeting held on 15.04.2024, the EFC is reconvened to review the utilization of allocated Bullion TRQs (falling under ITC HS Codes 71081100, 71081200 & 71081300) for India-UAE CEPA for the FY 2024-25.

4. The Committee noted that the information on the utilization up to 30th September 2024 has been compiled based on the information available on DGFT's Bills of Entry Repository and submissions made by the importers. The summary of the requests received are as under Table - Summary Table of Requests Sr.

No.

Quantity (In KG) Surrender/PartSurrender Requests Count of Requests Retain NA W.P.(C) 16809/2024 and other connected matters Page 4 of 9 The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

Enhancement 2,18,372.5 The Committee noted that the requests received for additional allocations are way above the quantity available.

5. The Committee also took note of the Delhi High Court Order dated 06.09.2024 in matters of Writ Petition (C) No. 9503 of 2024 and Writ Petition (C) No. 9503 of 2024 and accordingly, decided to consider the request of allocation in compliance of the Court Order.

6. The Committee decided to re-allocate the TRQs of the balance quantity based on the following Modalities - i. Applicants who had utilised 25% or less than 25% allocated TRQ quantities in 6 months i.e. upto 30th September, 2024, their allocations shall be revised to half (50%) of their original allocations. ii. Applicants who had utilised 75% or more (& less than 95%) of their allocated TRQ quantities in 6 months i.e. upto 30th September, 2024, shall be eligible for additional allocation of 1 time of their original TRQ allocations.

iii. Applicants who had utilised 95% or more of their allocated TRQ quantities in 6 months i.e. upto 30th September, 2024, shall be eligible for additional allocation of 1.5 times of their original TRQ allocations.

iv. Notwithstanding the above conditionalities, the additional allocation shall be subject to a maximum of the quantity requested.

7. The authorisation holders receiving additional allocations will be required to file applications for amendments for availing enhancements.

8. The revised reduced quantities for the authorisation holders as decided by the Committee will be transmitted to Customs online and intimated to the authorisation holders. Such authorisation holders shall not make imports beyond the revised reduced quantity and shall be required to ensure that revised reduced allocations are suitably registered at Customs Ports after amendment." 2.7 In terms of the above decision, the originally allocated TRQ has been revised based on the extent of the utilisation of the previously allocated TRQs. In so far as the Petitioners are concerned, some had utilised ≤ 25% of the allocated TRQ quantities up to 30th September, 2024, while others had utilised 25%- 75% of their TRQs. Pursuant to Paragraph No. 6 of the Minutes of Meeting dated 8th November, 2024, the allocated quantity for the former set of Petitioners was reduced to half, whereas for the latter group, no upward/ downward revision was made. The impugned revision in all the petitions is delineated as follows:

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W.P.(C) No.

Originally allotted Revision 16809/2024 Allocation reduced by half 16810/2024 Allocation reduced by half 16814/2024 No revision 16816/2024 777.5 No revision 16819/2024 No revision 16822/2024 662.5 No revision 16824/2024 No revision 16825/2024 803.75 No revision 16826/2024 No revision 16827/2024 812.5 Allocation reduced by half 16828/2024 Allocation reduced by half 16829/2024 437.5 Allocation reduced by half 16830/2024 787.5 Allocation reduced by half 16831/2024 No revision 16838/2024 No revision 16842/2024 926.09 Allocation reduced by half 16843/2024 Allocation reduced by half 3.

Mr. Tarun Gulati, Senior Counsel representing the Petitioners, argues that the review decision is unreasonable and arbitrary, on the following grounds:

3.1 The Petitioners have not been afforded any opportunity of hearing, and without sufficient prior notice, a mid-year review of the TRQ allocations has been conducted by the Respondents. As a result, the TRQ allocations have been reduced by half in some of the cases, and the Petitioners' requests for enhancement of allocation have not been accepted. 3.2 The criteria for the revision of the TRQ allocation were never communicated to the Petitioners and therefore, they had no basis to anticipate that their imports would need to align with the criteria subsequently notified in the meeting held on 8th November, 2024. 3.3 The licenses of all the Petitioners are valid up to 31st March, 2025 and therefore, the allocation of the TRQs could not have been revised before the expiry of the said period.

3.4 The mid-term review of the quota also contravenes the provisions of W.P.(C) 16809/2024 and other connected matters Page 6 of 9 The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

the Handbook. Paragraph 2.16 of the Handbook specifies a minimum validity period of 12 months, with the exception of the items listed in Serial No. 7, which does not apply to the present case. Therefore, the impugned action of revised allocation is in violation of the Handbook. 3.5 Without prejudice to the above, Mr. Gulati submits that the Petitioners should, at the very least, be given an opportunity to present their grounds to the Respondents before the impugned Minutes of Meeting are implemented. He emphasizes that each case must be assessed on its individual merits, as there may be several critical factors that could have prevented the Petitioners from submitting the reports, as per the criteria notified in the Minutes of the Meeting dated 8th November, 2024.

3.6.

Mr. Gulati further submits that as of now, no rights have crystallised amongst any of the license holders. Therefore, he contends that the Respondents should be directed to reconsider the matter and take a fresh decision after providing all the Petitioners with an opportunity to be heard. 3.7.

As per the Minutes of Meeting dated 8th November, 2024, certain importers have made requests to surrender as much as 630 KG of bullion and accordingly, the Petitioners can be benefited pursuant to such surrender. 3.8.

There is still a four-month period remaining before the licenses of the Petitioners expire. Therefore, if the Respondents were to reconsider their decision, they could impose strict terms, which could be accepted by the agreeable Petitioners, in order to ensure that the prescribed TRQ allocation for the CEPA is achieved.

4.

Ms. Shiva Lakshmi and Mr. Ripudaman Bhardwaj, CGSCs for Respondents, on the other hand, oppose the petitions on following grounds: 4.1 The Petitioners were all throughout aware of the conditions, which form the basis of the impugned decision. In this regard, reliance is placed on Public Notice No. 12/2023 dated 28th April, 2024 pertaining to the CEPA for W.P.(C) 16809/2024 and other connected matters Page 7 of 9 The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

FY 2023-24. The public notice specifically provided that TRQ allocation shall be subject to a 6-monthly review. The notice stipulates that in cases where TRQ utilization is found to be ≤ 25%, 50% of the balance TRQ quantities shall be deemed to be considered as surrendered, and shall be considered for re-allocation to other TRQ allottees. 4.2 The Petitioners have directly filed the present petitions without first approaching the Director General of Foreign Trade.4 In case they had any grievances, they should have sought recourse to the DGFT before approaching this Court.

5.

The Court has considered the aforenoted contentions. 6.

In the opinion of the Court, there is significant merit in the contentions raised by the Petitioners. While Paragraph No. 7 of the Minutes of Meeting dated 15th April, 2024 does indicate that a review exercise would be conducted based on the imports up to September 2024, however, as correctly pointed out by Mr. Gulati, this review can be deemed a 'blind' review, given that no criteria were specified in the said Minutes with respect to the potential allocation. Furthermore, the public notice referred to by the Respondents only addresses cases where TRQ utilization, in the review process, is ≤ 25%, without providing further details regarding other quantities of utilisation. Moreover, this public notice pertains to FY 202324, and there is no such public notice informing the Petitioners or the general public about such a criteria for FY 2024-25. 7.

That being said, the Court understands that the intent behind the review exercise is to ensure that the TRQ allocations are specifically adhered to. Therefore, the Respondents' objective in conducting the review appears to be solely to ensure that the TRQ imports under the India-UAE 4 "DGFT"

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CEPA are fully met. However, in light of the aforementioned circumstances, since the review decision was made without affording the Petitioners an opportunity to be heard, and Ms. Shiva Lakshmi has also indicated that the Petitioners should have first approached the DGFT with their concerns, the Court is of the opinion that it would be more appropriate at this stage, without delving deep into the merits of the case, to direct the DGFT to examine all the issues raised by the Petitioners in the present petitions and issue a fresh decision on the basis thereof.

Furthermore, it is undisputed that as of today, no re-allocations have been made pursuant to the impugned Minutes of Meeting in the present proceedings. Therefore, it is directed that the current allocations be maintained until a decision is made following the review process. The above exercise shall be carried out within three weeks from today. 9.

It is clarified that the views expressed by this Court are of a prima facie nature. Therefore, the Respondents, while taking the same into consideration, shall also examine each case on its own merits and take a fresh decision, in accordance with law.

10.

In the event that the Respondents are inclined to accept the Petitioners' requests, the DGFT may introduce additional conditions to ensure that the Petitioners comply with the TRQ allocation and carry out the imports, in accordance with law.

11.

With the above directions, the present petitions are disposed of, along with pending applications.

SANJEEV NARULA, J DECEMBER 5, 2024 d.negi W.P.(C) 16809/2024 and other connected matters Page 9 of 9 The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.