Case Note & Summary
The petitioners, Sandoz Private Limited and Lupin Limited, are pharmaceutical companies engaged in the manufacture and export of pharmaceutical products. They applied for Advance Authorization under the Foreign Trade Policy to import inputs duty-free for export production. The respondents, including the Union of India and the Director General of Foreign Trade, denied the applications on the ground that the petitioners did not directly physically handle the goods, as they procured the inputs from third-party suppliers. The petitioners challenged these denials by filing writ petitions before the Bombay High Court. The court considered the interpretation of the Foreign Trade Policy, particularly Paragraph 4.1.3, and the condition of 'direct physical handling'. The court held that the Policy does not impose a condition of direct physical handling by the applicant. The only requirement is that the applicant is the actual user of the imported goods for export production. The court found that the denial of benefits based on an extraneous condition not found in the Policy was ultra vires and unsustainable. The court allowed the petitions, quashed the impugned orders, and directed the respondents to reconsider the applications in accordance with the Policy.
Headnote
A) Foreign Trade Policy - Advance Authorization Scheme - Condition of Direct Physical Handling - The condition of 'direct physical handling' of goods by the applicant is not a mandatory requirement for grant of Advance Authorization under the Foreign Trade Policy. The Policy does not prohibit third-party procurement or supply. The court held that the denial of benefits on the ground that the applicant did not physically handle the goods is unsustainable. (Paras 1-33) B) Foreign Trade Policy - Interpretation - Paragraph 4.1.3 - The court interpreted Paragraph 4.1.3 of the Foreign Trade Policy and held that it does not impose a condition of direct physical handling. The Policy only requires that the applicant is the actual user of the imported goods for export production. (Paras 10-20) C) Foreign Trade (Development & Regulation) Act, 1992 - Section 5 - The court held that the power to issue Advance Authorization under Section 5 of the Act must be exercised in a manner consistent with the Policy. The denial of benefits based on an extraneous condition not found in the Policy is ultra vires. (Paras 21-25)
Issue of Consideration
Whether the condition of 'direct physical handling' of goods by the applicant is a mandatory requirement for grant of Advance Authorization under the Foreign Trade Policy, and whether the Policy prohibits third-party procurement or supply.
Final Decision
The court allowed the writ petitions, quashed the impugned orders, and directed the respondents to reconsider the applications for Advance Authorization in accordance with the Foreign Trade Policy, without imposing the condition of direct physical handling.
Law Points
- Interpretation of Foreign Trade Policy
- Advance Authorization Scheme
- Condition of direct physical handling
- Third-party procurement
- Export obligation
- Paragraph 4.1.3 of Foreign Trade Policy
- Section 5 of Foreign Trade (Development & Regulation) Act
- 1992
