1999 (8) TMI 291 - HC - FEMA

Summary

Issues Involved:

1. Entitlement to Special Import Licence (SIL) based on Net Foreign Exchange (NFE) versus Free on Board (FOB) value.
2. Change in policy criteria for granting SIL.
3. Validity and processing of the petitioner's revised application under the new policy.
4. Arbitrary and unjustified refusal by the respondents to grant SIL based on NFE.

Detailed Analysis:

1. Entitlement to Special Import Licence (SIL) based on Net Foreign Exchange (NFE) versus Free on Board (FOB) value:

The petitioner challenged the refusal of the respondents to issue SIL for the licensing year 1993-94 based on NFE instead of FOB. The petitioner, a Trading House, argued that it was entitled to SIL on the basis of NFE due to the substantial foreign exchange earnings from exporting hand-knotted carpets made from local yarn, which involved negligible foreign exchange expenses.

2. Change in policy criteria for granting SIL:

Initially, SILs were granted based on NFE earned during the previous year. However, a Public Notice dated 31st March 1993 changed the basis to the FOB value of exports. This change disadvantaged the petitioner, who then applied for SIL based on FOB value. Subsequently, due to representations from exporters, particularly in the small-scale sector, another Public Notice dated 9th December 1993 provided an alternative route, allowing exporters to choose between NFE and FOB bases for SIL.

3. Validity and processing of the petitioner's revised application under the new policy:

The petitioner exercised the option under the revised policy and submitted a revised application on 3rd January 1994, along with the balance licence fee. The Licensing Authority initially processed this application but later issued SIL based on FOB value, resulting in a significant loss for the petitioner. The respondents' letter dated 9th April 1994 indicated that the application was being processed under the revised criteria, and deficiencies were pointed out for rectification.

4. Arbitrary and unjustified refusal by the respondents to grant SIL based on NFE:

The court found the refusal to grant SIL on NFE basis arbitrary and unjustified. The revised policy allowed exporters to choose the more beneficial route, and the petitioner was diligent in applying under the pre-revised policy and then revising the application under the new policy. The respondents' argument that those who applied under the pre-revised policy were not eligible for the revised benefits was rejected. The court held that the revised policy parameters should apply to all eligible exporters, and denying the petitioner the benefits was unjustified.

Conclusion:

The writ petition was allowed, directing the respondents to issue SIL to the petitioner based on NFE earned during the previous year, subject to compliance with any other necessary requirements. The petitioner was also entitled to the costs of the proceedings.