TMI Blog2010 (8) TMI 384X X X X Extracts X X X X X X X X Extracts X X X X ..... June 2007 and the further circular dated 19th December 2007, travelled beyond what was envisaged by para 3.7.6 of the FTP and severely restricted the benefit thereunder. It was a significant change that could be brought about only through a notification under Section 5 FTDR Act. The said circulars and public notice were, therefore, ultra vires para 3.7.6 of the FTP. - W.P.(C) No. 2497 of 2008 - - - Dated:- 5-8-2010 - S Muralidhar, J Appellant Represented by : Mr. Vikram Nankani with Mr. Tarun Gulati, Mr. Rony John, Kishore Kunal, Mr. Neil Hilderth, Mr. Shashi Mathews and Mr. Sparsh Bhargava, Adv Respondent Represented by : Mr. A.S. Chandhiok, Additional Solicitor General with Mr. Satish Agarwala with Mr. Shirish Aggarwal, Adv JUDGEMENT W.P.(C) No. 2497 of 2008 CM No. 4677 of 2008 (for stay) 1. Petitioner No.1 is the Indian Exporters Grievance Forum, which is a society registered under the Societies Registration Act, 1860 and having as its members professional exporting firms and Government recognised Export Houses, Trading Houses, Star Trading Houses and Super Star Trading Houses. It has, along with its authorised signatory Mr.Harish Kumar, Petitioner No.2, fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : (1) Incremental growth beyond 100% will not qualify for computation of duty credit entitlement. (2) For the purpose of this scheme, the export performance shall not be transferred to or transferred from any other exporter. In the case of third party exports, the name of the supporting manufacturer/ manufacturer exporter shall be declared. (3) Exporters shall have the option to apply for benefit either under the Target Plus Scheme or under the Vishesh Krishi Upaj Yojana, but not both in respect of the same exported product/s. provided that in calculating the entitlement under Para 3.7.3 the total eligible exports shall be taken into account for computing the percentage incremental growth but the duty credit entitlement shall be arrived at on the eligible exports reduced by the amount on which the benefit is claimed under para 3.8.2. (4) All exports including exports under free shipping bill verified and authenticated by Customs and Gems Jewellery Shipping bills but excluding exports specified under para 3.7.5, shall be eligible for benefits under the Target Plus Scheme. (5) In respect of export of Cut Polished diamonds only those shipments would be taken into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders shall be entitled to duty free credit entitlement certificate to the extent of 10% of the incremental growth in exports. Accordingly, status holders who will achieve more than 25% growth in exports in the year 2003-04 (in free foreign exchange) as compared to the exports made in 2002-03 (in free foreign exchange) subject to a minimum export of Rs. 25 crore (in free foreign exchange) shall be entitled for duty free credit entitlement certificate @ 10% of the incremental growth in exports. The duty free credit entitlement can be used for import of capital goods, office equipments and inputs provided the same is freely importable under ITC (HS). Such goods shall be non transferable. Goods imported against such entitlement certificate shall be used by status holder or his supporting manufacturer/jobworker provided the name and address of the supporting manufacturer/ jobworker is endorsed on the certificate issued by RLA. Application shall be filed with the jurisdictional regional licensing authority as per the address given in status certificate. The application for the duty free credit entitlement certificate would be made in Appendix-17D. The duty free entitleme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o as to dissociate the import from the inputs and use in the export goods would make it ultra vires the FTP. The MOL has further stated that the words inputs and use cannot be brushed aside and have to be in focus for the intended import. Together these words indicate that the item sought to be imported should be an input in the manufacture of the exported items which is required for use by the exporter or the supporting manufacturer, as the case may be. For this purpose, the intended input must have a relationship with the export product. Whereas SION will act as a prima facie evidence of the inputs, the exporter is not debarred from satisfying the authorities that there is a broad nexus between the intended import item as an input with the export product, both falling within the same product group. Ignoring to give effect to the words inputs in the beginning and own use towards the end in Para 3.7.6 of the FTP would mean to render a part of it redundant and would not be in keeping with the objective and framework of the scheme. 4. In the light of this, the Ministry of Law clarified that the holder of TPS certificate is permitted to import an item under the TPS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustoms dated 19th December 2007 was issued whereby the Respondents further clarified that the term broad nexus has to be construed with reference to the words use and inputs in the FTP. Thus Respondent No.3 restricted the benefit under the TPS by clarifying that only inputs used in the manufacture/production of goods exported will be allowed to be imported. Petitioners Submissions 12. It is contended by Mr. Vikram Nankani, learned counsel for the Petitioners, that members of Petitioner No.1 Society had made incremental exports and had become entitled to duty-free credit. By unduly seeking to restrict the items that could be imported, an accrued benefit had been taken away. It is submitted that the schedule of making imports was planned well in advance and in the present case the exports had already taken place between 1st April 2004 and 31st March 2006. Any change in the HBP made long after the completion of those exports should not be permitted even on the ground of legitimate expectation. Importantly, it is contended that such change cannot be brought about through circulars and Forms but only by means of an amendment through the notification under Section 5 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry objection to be tenable in law. Petitioner No.1 is a registered Society having as its members export houses and star trading houses all of whom are affected by the impugned Notification. Petitioner No.1 is entitled to represent the collective interest of its members. Recognizing the locus standi of Petitioner No.1 will avoid multifarious litigation by each of the members of the Petitioner No.1 seeking identical relief. The facts in Vaas Exports were different and, therefore that decision does not help the Respondents in the present case. Scope of petition restricted to challenging the procedure adopted for change in the policy 16. It is next submitted by the learned ASG that the impugned Circular and Notification are an expression of the policy decision taken by the Government of India and, therefore, in effect the Petitioners are challenging the policy decision of the Government of India. It is submitted that in exercise of its powers under Article 226 of the Constitution, this Court cannot judicially review the executive policy of the Government of India. 17. In the considered view of this Court, there is no merit in the above objection either. The precise legal iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UCO Bank, Calcutta v. Commissioner of Income Tax, W.B . (1999) 4 SCC 599. 20. This Court finds that a similar attempt made by the DGFT which issued Circulars and Public Notices to amend the EXIM Policy of 2002-07 was invalidated by a Division Bench of the Bombay High Court in Narendra Udeshi v. Union of India 2003 (156) ELT 819. The Bombay High Court observed that it was beyond the scope of the powers of the DGFT to bring out a change to the EXIM Policy. It was held that in the absence of any power under the FTDR Act, the Circulars and Public Notices to prohibit duty-free import of natural rubber under advance licence could not be issued by the DGFT. 21. This Court finds that para 3.7.6 of the FTP, by itself, does not indicate that the imported goods should constitute inputs in the goods exported. In fact the language of para 3.7.6 is wide enough to include any kind of inputs: capital goods including spares, office equipment, professional equipment and office furniture etc. It is not possible to read para 3.7.6 restrictively. In Atul Commodities Pvt. Ltd ., the Supreme Court explained that it was not open to the DGFT to change the nature of the imported items as specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r affidavit dated 12th September 2006 in Writ Petition (C) No. 12603 of 2006 as regards the incentive provided by the TPS and para 3.7.6 of the FTP is instructive. Paras 4, 5 and 6 of the said counter affidavit read as under: 4. That for the purposes of promotions of trade and export, Government of India promulgates Reward Schemes i.e. Target Plus Scheme (Erstwhile Duty Free Credit Entitlement for status holders under the then EXIM Policy), Vishesh Krishi Upaj Yojna, Served from India Scheme, Focus Market Scheme, and Others. It is submitted that the scheme in question i.e. Target Plus Scheme was continued with the objective of accelerating growth in exports by giving duty credit based on incremental exports, with such changes as were needed to curb malpractices noticed in erstwhile Duty Free Credit Entitlement for status holders (exports during 2003-04 period) under the then EXIM Policy. 5. That it is humbly submitted that as per Target Plus Scheme exporter can utilize duty credit to import any freely importable goods except those mentioned in Para 3.7.6 of the Foreign Trade Policy. There is no export obligation attached on the imported goods, as this is a post-export awa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessing the almond-in-shell to produce the final product i.e. either almond or roasted almond or salted almond, it will be taken to be in furtherance of the actual user condition. 25. Having taken the above stand in its affidavit dated 12th September 2006 in W.P. (C) No.12603 of 2006, it was not open to the Respondents to again introduce a change in the TPS with reference to the exports that had already been completed as on 31st March 2006. 26. It was sought to be argued by the learned ASG that the above affidavit was filed at a time when neither the circular dated 8th May 2007 nor the subsequent Public Notice dated 21st June 2007 were issued. This Court has referred to the affidavit dated 12th September 2006 only to understand what the Government of India itself meant by 'broad nexus' and 'actual user'. That understanding cannot keep shifting from time to time. 27. Given the objective of providing an incentive to exporters, para 3.7.6 of the FTP can reasonably be interpreted to require an exporter to show that the goods imported should have a broad nexus with reference to any product group of the exported goods within the overall value of the entitlement certificate. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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