SC quashes Bombay HC order allowing import of yellow peas without licence

Subramani Ra Mancombu Chennai | Updated on June 18, 2021

Gives option to importers to re-export within two weeks after paying fine

The Supreme Court has quashed a Bombay High Court order that allowed unauthorised imports of yellow peas to be released after payment of fine to the Customs authorities.

In quashing the high court’s order, the apex court has asked the Customs Department to consider allowing re-exports of yellow peas consignments if the traders, who imported them unauthorisedly, opted for such a step within two weeks.

But they will have to pay penalties for the goods that were confiscated by the authorities for importing an item without proper licence. Besides, the traders would have to discharge statutory obligations failing which the yellow peas consignment would remain to be confiscated, the apex court ruled.

On Thursday, a single judge bench of Justice Dinesh Maheswari, allowing an appeal by the Centre against a Bombay High Court order, also called for imposing heavier costs on importers for bringing consignments into the country in an improper manner, apart from facing other consequences.

Case’s background

The Union Government had appealed against a Bombay High Court order of October 15 last year that ordered the release of the consignments of the traders after payment of the redemption fine or penalty for the goods that were confiscated under the Foreign Trade (Development and Regulation) Act, 1992.

In two separate notifications issued in August 2017, the Centre had “restricted” imports of urad, moong, beans and pulses. This meant that importers were governed by an annual import quota. Subsequently in April 2018, the Centre stipulated that prior licence was required for their imports and they would be governed by the import quota fixed for 2018-19.

One of the importers then moved the Madras High Court and obtained a stay of the government orders seeking permission to import peas as per contracts that had struck. This resulted in imports being permitted without the requisite licence.

Flood of petitions

Similar petitions were filed before various high courts across the country and the orders were stayed, resulting in unrestricted imports of the pulses.

All the petitions against the curb orders of the Centre were dismissed by the high Courts, while another petition filed in the apex court was also dismissed.

Subsequently, the Centre made these curbs part of the FTDR Act, 1992. This was followed by a notification from the Directorate General of Foreign Trade in April 2019 that laid down norms for application for import of these commodities.

This also led to a legal challenge by traders with 90 petitions alone being filed in the Rajasthan High Court, besides similar ones in other high courts.

‘Favourable’ interim orders

In all these petitions, interim orders were passed allowing importers to ship in the pulses without import licences. This resulted in the total quantity of the pulses imported exceeding the cap fixed by the Government for such imports.

The Centre pointed out that for 2018-19, a total of 8.51 lakh tonnes peas had been imported, while 6.52 lakh tonnes were shipped in for 2019-20 against the import quota of one lakh tonnes and 1.5 lakh tonnes, respectively. In view of this, it also decided to not allow any import of peas during 2020-21 fiscal.

Taking all this into consideration, the Centre moved the Supreme Court and got all the petitions transferred to the apex court. On August 26 last year, the Supreme Court upheld the Government’s notification, dismissing all petitions challenging them.

The current case

In this case, the two importers had moved the Bombay High Court after their consignments were confiscated in November 2019. In their petitions, the importers cited an interim order of the Rajasthan High Court issued in July 2019.

The two firms had struck deals to import 46,000 tonnes of yellow peas. Two more traders also impleaded themselves in the apex court appeal. While one of them had imported 1.03 lakh tonnes, the other shipped in 27,775 tonnes of which it had got 14,336 tonnes released.

The importers argument before the Bombay High Court has been that since the curbs had been stayed by the High Court, they were free to import the goods. However, the stays were subsequently removed and the petitions against the Centre’s orders were quashed.

‘Took chance for gains’

Upholding the apex court’s order issued last year, Justice Maheswari said importers took their chance for personal gains and they would have to face the “consequences in law”.

Rejecting the importers’ argument, the judge said that the importers had intended to get away with their acts by paying the fine. He held that any import of a product above the cap fixed by the government was “impermissible and prohibited” and rejected the importers argument to permit the goods.

However, Justice Maheswari accepted the importers argument that they ought to have been given an option to redeem their goods with fines rather than confiscation and said they could be given the choice.

Allowing re-exports of the confiscated goods after all statutory obligations are met, the judge called for a heavy penalty on those who got part of their goods released.

Justice Maheswari has also quashed all the orders of the Bombay High Court that allowed the release of the consignments, besides a contempt of court petition moved one of the importers against the Customs.

Ruling’s problems

Trade analysts see the ruling leading to two crucial problems. One, the consignment could be exported to an export processing zone and be re-imported into the domestic market. But it remains to be seen if they can enter the country since yellow peas are not part of the pulses that can be imported without restrictions till October 30.

Two, re-exports could result in the shipments flooding the export market that could result in prices declining. This could, mainly, affect Indian pulses that are bought by non-resident Indians elsewhere in the world.

There could be questions with regard to the quality of these goods since they have been in the warehouses over the last 20 months, and they could have been fumigated many times. It could, in turn, reflect on the quality of agri-products supplied by India, analysts fear.

Published on June 18, 2021

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