Secretry, Central Insecticide Board vs. M. Chandrasekhar

The 1st respondent is engaged in the manufacture of PVC, for which process he imports EDC used as a raw material in the production. The import had been carried out for the last very many years and clearance is effected from the Port of entry by giving an undertaking that the goods would be used only for the manufacture of PVC, a non-insecticidal purpose exempted under Section 38 of the Insecticides Act. The undertaking would be cancelled

The cause of action for the writ petition was a communication issued at Exhibit P11 requiring an import permit to be applied for and obtained from the CIB and RC. The requirement as evidenced from the communication at Exhibit P11 follows the decision of the RC, constituted under the Insecticides Act, which is produced at Exhibit P10. The importer contended that the import of insecticides for non-insecticidal purposes being exempted under Section 38 of the Insecticides Act, there could not be any insistence for an import permit as decided by the RC. The powers of the RC as conferred by the Act and Rules, does not extend to insistence of a permit under the Insecticides Act for a purpose which is clearly exempted from the provisions of the said Act. Before the learned Single Judge, the appellants contended that EDC is included as an insecticide under the Schedule to the Act and, hence, the provisions of the Act would apply to the import. It was also contended that a notification was issued by the Central Government on 01.01.2015 under Section 3 of the Foreign Trade (Development and Regulation) Act, 1992 [for brevity “Foreign Trade Act”];

The learned Single Judge found that there is no dispute that the importer imports EDC for a non-insecticidal purpose. Exhibit P7 trade notice issued by the competent authority under the Customs Act was noticed, wherein such import for non-insecticidal purposes was permitted without insisting for a registration and import permit from the CIB and RC under the Insecticides Act. The only condition in the trade notice was that the importer shall produce a certificate from the concerned Excise Inspector within three months as to the utilization of the imported goods in the manufacturing activity. Exhibit P9 Circular issued by the Central Board of Excise and Customs also referred to Section 38 of the Act and clarified that the clearance of insecticides for non-insecticidal purposes would not be subject to the requirement of registration and import permit of the CIB and RC. Exhibit P10 decision of the RC constituted under Section 5 of the Insecticides Act was found to be a mere prescription of a proforma for issuance

Maliakkal Industrial Enterprises was also noticed, wherein there was a specific restriction under the Foreign Trade Act insofar as import of Boric Acid (the subject of import in that case) was concerned. The appellants further contented before the learned Single Judge that all insecticides being included under EXIM Code 3808 of Chapter 29 of the Indian Trade Classification [ITC] brought out under the Foreign Trade Policy [FTP], a statutory document issued under Section 4 of the Foreign Trade Act, there is requirement for an import permit. The learned Single Judge negatived the said contention noticing that the Note under EXIM Code 3808 refers to insecticides, rodenticides and other products which are put up in forms or packings for retail sale or as preparations or articles. The importer in the present case, has not put up the imported

In the appeal, the learned Additional Solicitor General, as a preliminary objection, pointed out that the challenge is against Exhibit P11 notice, which was been issued on the basis of the decision of the RC, which decision is not challenged herein. To urge his contention, the learned Additional Solicitor General places reliance on Pune Municipal Corporation v. State of Maharashtra [(2007) 5 SCC 211]. We are of the opinion that the aforesaid decision or the law declared thereunder would not apply to the present case for more than one reason. Therein the proceedings were under an Urban Land (Ceiling and Regulation) Act, which prescribed an elaborate procedure for take over and vesting of excess lands. The land holders having filed a statement of the lands held by them, the Competent Authority prepared a draft statement, which was sought to be served but was returned 'undelivered'. Service was deemed since notice was sent properly and when none

The decision at Exhibit P10, which is relevant for the above case, is extracted hereunder: “11.1 Proforma for issuance of Import Permit for import of insecticides for non-insecticidal purposes. The Committee deliberated the issue in detail and decided that the proforma as at Annexure-V shall be used for issuance of import

The learned Additional Solicitor General then takes us to Section 111 of the Customs Act, which deals with confiscation of improperly imported goods. Sub-clause (d) of Section 111 is pointed out to contend that any goods imported contrary to any prohibition imposed under the Customs Act or any other law would be liable to confiscation under the Customs Act. Section 3 of the Foreign Trade Act is pointed out, wherein the Central Government has been conferred with the power to prohibit, restrict or otherwise regulate the import or export of goods or services or technology in all cases or in specified classes of cases. Section 3 confers power on the Central Government to make an Order, by publication in the Official Gazette, under sub-section (2), prohibiting, restricting or otherwise regulating import or export of goods, services or technology. On such order made, by virtue of sub-section (3), it is deemed to be a prohibition, under the Customs Act. It is admitted that under the ITC, whatever items have been declared under the FTP as “free” are those items which do not require any licence/authorisation/permission from the Director General of Foreign Trade [DGFT]. However, this does not fetter any provision or condition being prescribed in any other enactment. This would also not preclude the WA.NOS.1579 OF 2018 & 1745 OF 2018 Central Government from making a condition or prescription under the Foreign Trade Act also.

It is admitted that EDC is a commodity described as “free” under the FTP. The FTP is also referred to and Para 2.03 under Chapter 2 is specifically pointed out, which makes applicable all “Domestic Laws/Rules/Orders/ Regulations/technical specifications/ environmental, safety and health norms mutatis mutandis to imports, unless specifically exempted”. The preamble of the Insecticides Act is pointed out to emphasise the object underlining the enactment, which is to prevent risk to human beings or animals, by use of insecticides. Section 4 of the Insecticides Act speaks of constitution, of a CIB and Section 5, of a RC. Section 36 confers rule making power on the Central Government under which the Insecticides Rules, 1971 [for brevity “Insecticides Rules”] have been brought out. The Insecticides Rules, specifically by Rules 3 and 4 respectively, delineate the functions of the CIB and the RC. It is the contention of the learned Additional Solicitor General that Section 38, exemption clause applicable for non-insecticidal purposes has to be verified and end-use ascertained; for which an import permit has been insisted by the RC. The RC, constituted under the Insecticides Act, as WA.NOS.1579 OF 2018 & 1745 OF 2018 per the Insecticides Rules has the power to carry out the incidental or consequential matters necessary for carrying out the functions assigned to it under the Act or the rules. The RC's decision only provides a mechanism to examine the eligibility to exemption which is devised keeping in mind the object of the Act, is the compelling plea.

Emphasising the object of protection of human and animal life and with the intention only to avoid any risk to them, Maliakkal Industrial Enterprises is extensively read. The learned Additional Solicitor General specifically points out that the Division Bench of this Court had looked into the object of the Act and the need to ensure the safety of human beings and animals from the indiscriminate use of insecticides and has upheld the import permit insisted in the case of Boric Acid, which is also included under the Schedule of the Insecticides Act. Therein also the substance was imported for non-insecticidal purposes. It is urged that Courts would normally find out the intention of the legislature in interpreting a statute and the statutory rules and would also favour a construction which advances such intention avoiding any mischief that may be present due to shoddy drafting. The learned Additional Solicitor General relies on State of Tamil Nadu v. Hind

The Insecticides Act having been enacted with the avowed object of avoiding risk to human beings and animals by indiscriminate use of insecticides, there should be a proper monitoring of insecticides used for non-insecticidal purposes also. When huge quantities of insecticides are imported purportedly for the purpose of a manufacturing process and used as a raw material, there should be a monitoring of such activity and it should be ensured that the end use to which the imported goods are put to, is of a raw material in the manufacturing process. The learned Additional Solicitor General urge that the requirement be upheld.

At the outset we have to express our helplessness in not being able to place our hands on or put our eyes to, any requirement for import permit for import of EDC, either in the Insecticides Act, the Rules framed or even the extracted decision of the RC, constituted under the Act. The appellants also do not have a contention that there is any such requirement made under the Foreign Trade Act for WA.NOS.1579 OF 2018 & 1745 OF 2018 import of EDC, as is made in the case of Boric Acid, which requirement was dealt with in Maliakkal Industrial Enterprises. At best we can only understand the prescription made of the proforma of import permit for non-insecticidal purposes, in Exhibit P-10, to be applicable to Boric Acid wherein by a notification under the Foreign Trade Act, there was mandated an import permit by the RC, constituted under the Insecticides Act.

Be that as it may, there is no dispute that EDC, the substance imported by the 1st respondent, is exempted for reason of the purported use of the substance to which it is put by the respondent. The respondent has also been importing the goods for very many years for the manufacturing activity carried on by him. The end use of non-insecticidal purpose is ensured by obtaining undertaking from the respondent at the time of clearance of the goods from the Port of entry and then a certificate of end use issued by the Central Excise authorities. The respondent has been scrupulously complying with the same and the said procedure is stipulated in a trade notice issued by the Customs authorities which has application across the board to all Ports of entry. Apart from this there is no other requirement and the Circular of the Central Board also WA.NOS.1579 OF 2018 & 1745 OF 2018 approves the procedure and clarifies the exemption from registration or requirement of import permit under the Insecticides Act. As was noticed, the non-insecticidal purposes has been specifically exempted under the Insecticides Act and the provisions of the Act or the Rules would not have any application.

Even looking at the powers conferred on the CIB and RC, we are not convinced that such authorities created under the statute could have devised a measure to ensure the end use when there is no such power conferred on them under the statute or the Rules. Section 4 of the Insecticides Act directs the Central Government to constitute a Board to advise the Central Government and State Governments on technical matters arising out of the administration of the Act and carry out the other functions assigned to the Board or under the Act. Under sub-section (2), the Board is empowered to advise the Governments on the risk to human beings or animals in the use of the insecticides and the safety measures necessary to prevent such risk [clause (a)]. Clause (b) includes the aspects of manufacture, sale, storage, transport and distribution of insecticides with a view to ensure safety to human beings or animals. The role of the CIB is only advisory. Section 5 of the Insecticides

The functions of the RC under Rule 4 speaks of the following: “(a) specify the precautions to be taken against poisoning through the use or handling of insecticides; (b) carry out such other incidental or consequential matters necessary for carrying out the functions assigned to it under the Act or these rules”.

There is absolutely no provision under the Act or prescription under the Rules for issuance of an import permit or an application in that respect wherein import is made of a substance, included under the Schedule to the Act, for non-insecticidal purpose. The mere prescription of a proforma for issuance of an import permit by the RC under the Insecticides Act cannot be termed to be a requirement under the statute. We are, hence, of the view that neither

The decision of the Constitution Bench of the Hon'ble Supreme Court in Commissioner of Customs (Import), Mumbai v. M/s.Dilip Kumar and Company & Ors. in Civil Appeal No.3327 of 2007 decided on 30.07.2018, which overruled the earlier declaration of law with respect to exemption notifications, also would not be applicable. The Constitution Bench reiterated the law declared as to exemption notifications requiring strict interpretation and the burden of proving eligibility being squarely on the assessee; to prove that his case come within the parameters of exemption clause or exemption notification. The decision took a different path insofar as the ambiguities in exemption notifications not enabling the authorities or WA.NOS.1579 OF 2018 & 1745 OF 2018 Courts to lean in favour of the assessee. It was held that in the event of an ambiguity, the interpretation should be in favour of the Revenue. In the present case, there is absolutely no ambiguity pointed out insofar as the provision for exemption or the conditions under which such exemption has to be granted. There is, in fact, no condition prescribed and the minute the substance is used for an non-insecticidal purpose, the provisions of the Act are not applicable, under Section 38. 18. Maliakkal Industrial Enterprises was read to drive home, with emphasis the object of the enactment. The Division Bench had held that the primary concern of the enactment is to ensure safety of both human beings and animals from the use of insecticides and protecting them from the use of such substance as insecticides. The substances which are included under the Schedule of the Act are insecticides, but have multiple uses and hence, Section 38 exempts such insecticides which are intended for non-insecticidal purposes, from the provisions and the rigour of the Act. The Division Bench also categorically held that the Parliament intended that restrictions and regulations under the Act were not meant to apply to insecticides covered by Section 38 of the Act. Hence, when a WA.NOS.1579 OF 2018 & 1745 OF 2018 substance is used for non-insecticidal purposes and there is an import made of such substance, the restrictions under the Act would not apply. The statutory authorities constituted under the Act also cannot devise any regulatory measure to control such import for non-insecticidal purposes; without such power being conferred on them.

In Maliakkal Industrial Enterprises the issue dealt with was import of Boric Acid, admittedly an insecticide, requiring a permit even if it is for non-insecticidal purposes. However there a notification was issued by the Central Government under the Foreign Trade Act insisting on an import permit from the RC constituted under the Insecticides Act. The Division Bench held that when non-insecticidal purposes were exempted under the Insecticides Act, such aspects were not controlled by that enactment and when no legislation controls the subject, then, the executive Government could exercise its powers under Article 73 of the Constitution of India, though there was no such contention for the appellants in the said case. Therein, the requirement was by a notification issued under the Foreign Trade Act, which was a “command of dedicated legislation” (sic) under the Foreign Trade Act. It was also held that it was perfectly legitimate and competent for the WA.NOS.1579 OF 2018 & 1745 OF 2018 Government to have entrusted the RC constituted under the Insecticides Act for the purpose of granting import permit to Boric Acid, which was imported for non-insecticidal purposes; since the RC under the Insecticides Act is an expert committee with the know-how of the composition of the substance and its deleterious effects. The requirement for an import permit in Maliakkal Industrial Enterprises was upheld only in the context of a statutory requirement having been made under the Foreign Trade Act, which is absent in the present case. As was noticed, on the basis of the proforma for import permit as prescribed by the RC; the authorities had issued Exhibit P11 notice insisting on such an import permit. There is no mandate either by a statutory command or an executive direction to obtain such permit for the import of insecticides to be used for non-insecticidal purposes. The object of the Insecticides Act though salutary, there is not enough safeguards provided by the Act or power conferred on the executive government to deal with substances coming under the Schedule of the Insecticides Act; used for non-insecticidal purposes. We, hence, find no reason to interfere with the judgment of the learned Single Judge and dismiss the appeals. Any import of the subject substance for non-insecticidal purpose shall be released as WA.NOS.1579 OF 2018 & 1745 OF 2018 per the procedure prescribed by the Customs Authorities, by trade notices without insisting for registration under the Insecticides Act or an import permit. Parties are left to suffer their respective costs. K.VINOD CHANDRAN JUDGE ASHOK MENON JUDGE Vku/- [] P.S. to Judge