TMI Blog2011 (10) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... handrachud, J 1. Rule, by consent returnable forthwith. With the consent of Counsel and at their request the Petition is taken up for hearing and final disposal. 2. In these proceedings the challenge is to the validity of a public notice issued on 31 March 2011 by the Director General of Foreign Trade stipulating that the export of cotton shall not be entitled to DEPB benefits with respect to shipments made on or after 21 April 2010. The Petitioner has also questioned the legality of consequential notices of demand seeking to recover DEPB benefits allowed in respect of the export of cotton. 3. The Petitioner engages in the business of the manufacture and export of cotton bales. The Union Government in exercise of the powers conferred by Section 4 of the Foreign Trade (Development and Regulation) Act 1992 has formulated the Foreign Trade Policy for 20-09-2014. Chapter IV of the Policy contains provisions for duty exemption and inter alia covers the Duty Entitlement Passbook (DEPB) scheme. The handbook of procedures, which has been notified by the Director General of Foreign Trade, makes provisions for implementing the DEPB scheme. The basic object of the DEPB scheme is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce when the intention of the Government is not to encourage exports of specific commodity, DEPB benefit on such a commodity would be contradictory to its intention. Accordingly, this Public Notice clarifies that DEPB benefit on export of cotton shall not be available. DEPB benefit on export of cotton yarn was withdrawn with effect from 21.4.2010, therefore, DEPB benefit on cotton (the basic raw material for cotton yarn) has been disallowed for exports made from 21.4.2010 onwards." 6. Subsequently on 4 August 2011, the DGFT has issued a further circular by which the export of cotton yarn including Melange yarn appearing at Sr. No.78 of the product group textiles has been mad' ' e entitled to DEPB benefits on exports made on or after 1 April 2011. Similarly, another public notice came to be issued on 4 August 2011 as regards the extension of DEPB benefits on the exports of cotton, with effect from 1 October 2010 under Sr. No.22D of the schedule of rates of the product group 'miscellaneous products'. Consequently, exports of cotton made on or after 1 October 2010 have been made entitled for the grant of DEPB benefits. 7. The dispute in the present case relates to exports of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cotton yarn and nonavailability of the quantity at reasonable prices to domestic manufacturers. Consequently, though the benefit under the DEPB scheme came to be withdrawn in respect of cotton yarn, no specific provision was introduced in Sr. No.22D of the schedule of rates clarifying that the benefit would not be available in respect of exports of cotton. Cotton is a raw material in the manufacture of cotton yarn. As a matter of fact, cotton exports were disincentivised by virtue of the export tax which was in place until 30 September 2010. After 1 October 2010, the export tax was removed on the exports of cotton and the policy intention of the Union Government was not to place disincentives on the exports of cotton after that cut off date. Hence, it was urged that it was open to the Director General of Foreign Trade to issue a policy circular on 31 March 2011 withdrawing the benefits under the DEPB scheme on the export of cotton with effect from 21 April 2010. 10. The Central Government is empowered to formulate and announce the export and import policy and to amend that policy under Section 5 of the Foreign Trade (Development and Regulation) Act 1992. The Director General o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PB benefits on cotton yarn exports were withdrawn on 21 April 2010 and on this ground DEPB benefits on cotton which is a basic raw material for cotton yarn were sought to be disallowed for exports. There can be no denying the fact that the Director General of Foreign Trade was entitled to withdraw the benefit which was available in respect of the exports of cotton by the issuance of a public notice. What in our view the Director General of Foreign Trade could not do, however, was to stipulate that the benefits available under the DEPB scheme on the exports of cotton would be withdrawn with retrospective effect from 21 April 2010. Though, the DEPB benefits on cotton yarn were withdrawn on 21 April 2010, no provision was made for the withdrawal of benefits in respect of the exports of cotton until 31 March 2011. There was no specific entry in the schedule of rates pertaining to cotton as there was in regard to cotton yarn including Melange yarn (Sr. No.78 of the product group textiles). Exports ' ' of cotton were governed by Sr. No.22D of the miscellaneous product groups. Sr. No.22D as noted earlier was a residuary item relating to export products covered under standard input output ..... X X X X Extracts X X X X X X X X Extracts X X X X
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