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TMI Blog2012 (5) TMI 328X X X X Extracts X X X X X X X X Extracts X X X X ..... Paragraph 3.7.1 provides that the object of the scheme is to accelerate growth in exports by rewarding Star Export Houses who have achieved a quantum growth in exports. High performing Star Export Houses became entitled to a duty credit based on incremental exports substantially higher than the general annual export target fixed. For instance, since the target fixed for 2005-06 was 17%, the lower limit of performance for qualifying for rewards was pegged at 20% for the then current year. All Star Export Houses which had achieved a minimum export turnover in free foreign exchange of Rs. 10 crores in the previous licensing year were eligible for consideration under the Scheme. Under Para 3.7.3, the entitlement under the scheme was contingent on the percentage incremental growth in the FOB value of exports in the current licensing year over the previous licensing year. The duty credit entitlement was prescribed in a table as a percentage of the incremental growth recorded in the FOB value of exports. Hence, (i) where the percentage incremental growth was above 20% but below 25%, the duty credit entitlement was 5% of the incremental growth; (ii) where the percentage incremental growth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation stipulates in clause (1) that goods for the purpose of the notification would mean "any inputs, capital goods including spares, office equipment, professional equipment, office furniture and agricultural products listed in Chapters 1 to 24 of the First Schedule to the Customs Tariff Act as may be notified by DGFT from time to time which are freely importable under the Foreign Trade Policy. The definition of the expression "goods" in the Customs' notification is thus pari-materia with clause 3.7.6 of the Foreign Trade Policy. 5. The Petitioner applied for and obtained a credit entitlement certificate under the Target Plus Scheme of the Foreign Trade Policy for 2004-09. This benefit was claimed in respect of the incremental growth of export of iron ore during the year 2004-05, as compared to exports for 2003-04. In the present case, the base year was 2003-04. The credit entitlement sought by the Petitioner was in respect of exports made during the year 2004-05. The Petitioner claimed to have achieved a 115% incremental growth over exports made during the year 2003-04. On this basis, the Petitioner claimed an entitlement to credit at the rate of 15% of the incremental grow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turer, as the case may be. For this purpose, the intended input must have a relationship with the export product." The conclusion which was drawn by the Union Ministry of Law has then been set out in the circular in the following terms : "In the light of this, the Ministry of Law has clarified that the holder of TPS certificate is permitted to import an item under the TPS and get the same processed into possible resultant products only if the same has a 'broad nexus' with the product group as an input in the export product and is required to be used as an input in the product exported for which TPS benefit is sought. The Ministry of Law has also clarified that the term 'broad nexus' with the product group is in addition to and not in substitution of the words "inputs" and "own use" in Para 3.7.6 of the Scheme." 7. The Petitioner has, in these proceedings under Article 226 of the Constitution, sought to impugn the validity of the circular issued by the Central Board of Excise and Customs on 8 May 2007. The ground of challenge is to the condition which the circular imposes that the input which is imported by an eligible exporter must be an input which is required to be used i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f import entitlements under the scheme, 'broad nexus' would mean goods imported with reference to any of the product groups of the imported goods within the overall value of the entitlement certificate. There is no dispute before the Court that this requirement under the Handbook of Procedures has been duly fulfilled. No submission to the contrary has been urged by Counsel for the Respondents. The fact that the goods imported were required by the Petitioner for its own use has not been disputed before the Court by Counsel for the Respondents. But the case of the Respondents is that the requirement which is stipulated in the circular dated 8 May 2007 is that there should not only be a broad nexus of the goods imported with reference to the product group of the exported goods but that the goods imported must constitute an input in relation to the very products which have been exported. Now, reading paragraph 3.7.6 of the Foreign Trade Policy, it is evident that an eligible exporter is entitled to utilize duty credit in the import of any inputs, provided (i) they are freely importable; and (ii) the inputs are imported by importers for their own use. Paragraph 3.7.6 does not stipulate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licy. In other words, the condition that the inputs which are imported must be used in the export of the resultant product was not incorporated as part of paragraph 3.7.6 of the Foreign Trade Policy. In that view of the matter, it is not possible to accept the contention of the Respondent that the conditions which were imposed by the circular dated 8 May 2007 were implicit in paragraph 3.7.6 of the Foreign Trade Policy. We, therefore, come to the conclusion that the conditions which were stipulated by the circular dated 8 May 2007 were ultra vires paragraph 3.7.6 of the Foreign Trade Policy and Customs notification dated 8 April 2005 (Customs Notification 32/05). 11. Before concluding, it would be necessary to note that during the course of the hearing of the Petition, Counsel appearing on behalf of the Petitioner and the Respondent had placed before this Court, a judgment of a Learned Single Judge of the Delhi High Court in Indian Exporters Grievance Forum v. Union of India (Writ Petition (Civil) 2497 of 2008 decided on 5 August 2010). An appeal against the judgment of the Learned Single Judge is pending before the Division Bench and the judgment of the Learned Single Judge ..... 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