The Delhi High Court said that “import and export regulations must be rational to effectively balance economic interests with national and global security”.
The bench observed that the on-site physical inspection of the goods that were being exported were purely for civil application and therefore would not attract any of the restrictions that were mentioned in the SCOMET list or Catch-All provisions.
The court said that SCOMET lists shows the exception that has been carved out under Clause 8A901.1.A, i.e. Catch-all or SCOMET provisions do not apply to any of those aero gas turbine engines that are certified by civil aviation authorities of India and have a type rated certificate.
It was noted by the court that the GE CF-34-8E5 model of engines is a recognized type of civil engine and has also been further cleared by the DRDO as having civilian application. Further the Petitioner in this case has also provided end user certificates, from the party they are exporting the product, to help verify the civil nature of the end use of these products.
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Facts
The Petitioner company is engaged in the business of import and export of Civil/Commercial Aircraft Parts and has since been engaged in the said business, they received the Import code.
The Petitioner company entered into a Letter of Intent, with Siberian Airlines for export of Aircraft Engines.
Subsequently, the Petitioner imported the said aircraft engines from the U.A.E. and started the process for exporting the engines to Siberian Airlines, under Airway Bill.
While the consignment, Airway Bill was under process and the Petitioner was waiting for the Let Export Order (LEO), the Petitioner Company received a letter/order from the Director, DGFT Export Cell (SCOMET), informing the Petitioner Company that they had invoked the Catch-all provisions under Para 10.05 of the Foreign Trade Policy (FTP), 2023, against the export consignment and further directed the Petitioner company to obtain SCOMET authorization from the DGFT for exporting the consignment of aircraft parts as per the Catch-all provisions.
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Submissions
Counsel for the Petitioner contended that import and export of goods from India is governed by the Foreign Trade (Development and Regulation) Act, 1992.
The counsel added that under Section 5 of the act, the Central Government may notify the Foreign Trade Policy from time to time.
Counsel for the Petitioner further contended that the company has been importing civil/commercial aircraft parts from various countries, such as the U.A.E. and has then further exported such aircraft parts to Russia and other CIS countries on numerous occasions in the past after complying all legal and procedural formalities provided under the FTP.
Counsel for the Respondent stated that aircraft engines and certain other aircraft parts are components that can have the potential of both civil as we well as military use, and hence may be controlled under the SCOMET list. This potential for dual use is the reason why an extra license for its export is required.
He further added that as per Para 10.05 of the FTP if the exporter has been notified in writing by the DGFT or has reason to believe that an item may not be covered under the SCOMET list but has potential of use as a Weapon of Mass Destruction or can be diverged to production of Weapons of Mass Destruction, or in missile system or military use, the exporter has to apply for SCOMET Authorization.
Conclusion
“The contention of the Respondent that these products have dual use and can potentially be used for military purposes, and hence should not be exported without further clearance of the DGFT finds no footing with this court. Almost everything can have a dual use, like soap being manipulated into a bomb, but rationality must guide the implementation of export regulations. Import and export regulation must be rational to effectively balance economic interests with national and global security concerns. Items that have been certified by subject matter experts as having civil use and are allowed within the ambit of the export policy, cannot be stopped from being exported to countries with which India has established export ties, with no restrictions in the realm of economic policy, on the pretext that the products may have a potential military use”, the bench observed.
The bench quashed the notification in view of the fact that the products which the Petitioner company is trying to export are of civil nature and do not attract any of the restrictions established in the SCOMET list or Catch-All provisions.
Case Details
Case name: A R SALES PVT LTD. V/S Union Of India & Ors.
Citation: W.P.(C) 3121/2024 & CM APPLs. 12796/2024, 29652/2024, 35745/2024 & 35953/2024
Court: Delhi High Court
Decision Date: 06/08/2024
Coram: Justice Subramonium Prasad
