TMI Blog2015 (11) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... r than the professional equipment and office equipment mentioned in paragraph 3.8 of EXIM Policy against DFCE to service providers. - misuse of the scheme had also come to the notice of DRI and other intelligence officials who had gathered the necessary information and collected supported documents. Based on the intelligence gathered, a note on the misuse of Duty From Credit Entitlement (DFCE) and Target Plus Scheme was prepared which is annexed with the counter affidavit. The Government has, thus, demonstrated that based on the aforesaid exercise undertaken, Notification dated January 28, 2004 as well as Public Notice of the even date were issued. - strenuous efforts made by learned counsel for the wit petitioners to show that the exports by them were genuine and there was no misuse, we have no hesitation in accepting the plea of the Union that the purport behind Notifications was bona fide which was actuated with the conditions of public interest in mind. - Decided in favor of revenue. Validity of notification - Held that:- Exactly the same benefit which is sought to be given to the status holders for achieving incremental growth as provided in the scheme was already confe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pril 21 and 23, 2004 in exercise of powers conferred on the Central Government by Section 5 of the Act and the same four items were excluded. Validity of subsequent Notification to exclude the export performance related to class of goods covered by para 2 of the Public Notice dated April 28, 2004 - retrospective or prospective - Held that:- delegated or subordinate legislation can only be prospective and not retrospective, unless rule making authority has been vested with power under a statute to make rules with retrospective effect. In the present case, Section 5 of the Act does not give any such power specifically to the Central Government to make rules retrospective - No doubt, this Section confer powers upon the Central Government to ‘amend’ the policy which has been framed under the aforesaid provisions. However, that by itself would not mean that such a provision empowers the Government to do so retrospective. - if the Status Holders had achieved 25% incremental growth in exports, they acquired the right to receive the benefit under the Scheme, which could not be taken away. Doctrine of Promissory Estoppel - Held that:- So far so good. The effect of the aforesaid discu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., Mr. Shashi Mathews, Adv., Mr. Anupam Mishra, Adv., Mr. Neilhiloreth, Adv., Mr. Manish Rastogi, Adv., Mr. Rony O.John, Adv., Mr. Praveen Kumar,Adv., Mr. S. S. Shroff,Adv., Mr. Kamlendra Mishra,Adv., Mr. K. R. Sasiprabhu,Adv., Mr. Somiran Sharma, Adv., Mr. Vishnu Sharma, Adv., Mr. Biju P. Raman, Adv., Mr. Rohan Shah, Adv., Mr. Alok Yadav, Adv., Mr. Raghav Shankar, Adv., Mr. Aswin Dave, Adv., Ms. Swati, Adv., Mr. E.R. Kumar, Adv., Mr. Nitin Thukral, Adv., Mr. Galav Sharma, Adv., Mr. Sameer Parekh, Adv., For M/s. Parekh Co., Ms. Bina Gupta,Adv., Ms. Sushma Suri,Adv., M/s. Parekh Co.,Adv. And Mr. V. K. Verma,Adv. JUDGMENT A.K. SIKRI, J. Civil Appeal No. 554 of 2006 Civil Appeal No. 658 of 2006 Civil Appeal No. 1587 of 2006 Civil Appeal No. 1589 of 2006 Transfer Case (Civil) No. 36 of 2007 Transfer Case (Civil) No. 1 of 2008 Transfer Case (Civil) No. 3 of 2008 Transfer Case (Civil) No. 49 of 2009 Writ Petition (Civil) No. 343 of 2009 Writ Petition (Civil) No. 246 of 2010 Export Import (EXIM) Policy 2002-2007 was framed by the Central Government under Section 5 of the Foreign Trade (Development and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s while giving relief on one particular aspect. Insofar as judgments of Bombay High Court and Gujarat High Court are concerned, both the Union of India as well as the writ petitioners preferred Special Leave Petitions, in which leave was granted, and these are now converted as Civil Appeal No. 658 of 2006 and Civil Appeal 554 of 2006 respectively. That apart, the Single Judge of the Gujarat High Court in one of the cases dismissed the writ petition and the LPA was filed by the said petitioner before the Division Bench of the High Court. Since the issue involved in these appeals is the same, which is raised in the LPA in the Gujarat High Court and still pending in the writ petitions filed in various High Courts, transfer petitions were filed by the Union of India seeking transfer of all those cases and to be heard along with these two appeals. Those transfer petitions were allowed. This is how all these cases are bunched together and heard simultaneously as the issue is substantially the same in all these matters. 4) With this background reflecting the nature of these cases, we now proceed to discuss the main provision of the EXIM Policy and how the aforesaid Notifications have a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Central Government in formulation of the EXIM Policy. He is also made responsible for carrying out that Policy. However, sub-section (3) of Section 6 empowers the Central Government to give the aforesaid functions of the DGFT even to other Officer subordinate to DGFT, except for powers conferred under Sections 3, 5, 15, 16 and 19 of the Act. 8) As already noted above, Sections 3 and 5 give certain powers to the Central Government and, therefore, these powers have to be exercised by the Central Government only and cannot be delegated to DGFT or an Officer subordinate to him. Sections 15 and 16 relate to appeal and revision which can be filed against the orders passed by the Adjudicating Authority against any person committing contravention of provisions of the Act, Rules, Orders and EXIM Policy. Appeal lies to DGFT if the Adjudicating Authority, who passes the order, is an Officer subordinate to DGFT. In those cases, where the Adjudicating Officer is DGFT himself, appeal lies to the Central Government. Under Sections 16, revisionary powers are conferred upon the Central Government. These powers of appeal and revision also cannot be delegated by virtue of Section 6(3) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces. (iii) To enhance the technological strength and efficiency of Indian agriculture, industry and services, thereby improving their competitive strength while generating new employment opportunities, and to encourage the attainment of internationally accepted standards of quality. (iv) To provide consumers with good quality goods and services at internationally competitive prices while at the same time creating a level playing field for the domestic producers. 12) Keeping in mind the aforesaid principal objectives, para 2.1 made it clear that exports and imports shall be free, except in cases where they are regulated by the provisions of the said Policy or any other law for the time being in force. As per para 2.4, DGFT was authorised to specify the procedure which needs to be followed by an exporter or importer or by any licencee or other competent authority for the purposes of implementing the provisions of the Act, the Rules and the Orders made therein and this Policy. Such a procedure was to be stipulated and included in the Handbook (Volume-I), Handbook (Volume-II), Schedule of DEPB and in ITC (HS) and published by means of a public notice. It was permissible to am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt As Well as Manufacturer Exporters, Service Providers, Export Oriented Units (EOU's) / Units Located in Special Economic Zones (SEZ's) / Agri Export Zone (AEZ's) / Electronic Hardware Technology Parks (EHTPs) / Software Technology Parks (STPs) shall be eligible for such recognition. Export Performance Level 3.7.2 The applicant is required to achieve the prescribed average export performance level: Category Total FOB/FOR during the current licencing year or during the preceding 1/2/3 licensing years (in Rupees) Export House 45 crores Trading House 300 crores Star Trading House 1500 crores Super Star Trading House 6000 crores Note: 1. Units in Small Scale Industry/Tiny Sector/ Cottage Sector/Units registered with KVICs or KVIBs/Units located in North Eastern States, Sikkim and J K/Units exporting handloom, handicrafts, hand kno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lement shall be 10% of the incremental growth in exports. Such entitlement can be used for import of capital goods, office equipment and inputs for their own factory or the factory of the associate/supporting manufacturer /job worker. The entitlement/goods shall not be transferable. The exporters who gets the Status Certificate are known as Status Holders . The term Status Holder is defined in para 9.53 and reads as under: Status Holder means an exporter recognised as Export House/Trading House by DGFT/ Development Commissioner or Star Trading House/Super Star Trading House by the Director General of Foreign Trade. 17) As noted above, the main objective of this EXIM Policy was to achieve the share of 1% of global trade and accelerated growth in exports. For this purpose, certain sectors, where such exports were to be given the necessary boost, were mentioned in para 3.10 describing them as Thrust Sector . These are as under: 3.10 With a view to achieve the share of 1% of global trade and accelerated growth in exports, the following shall be the thrust sectors: a) Electronic hardware b) Textile incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up for manufacture of goods and rendering of services. 21) Para 7.8 deals with DTA Sales and Supplies which these SEZ Units ma undertake. These SEZ Units are also entitled to export through status holder in terms of para 7.10, as under: Export through Status Holder 7.10 SEZ unit may also export goods manufactured/software developed by it through a merchant exporter/status holder recognized under this Policy or any other EOU/SEZ/EHTP/STP unit. 22) Chapter IX contains definition of various terms which are used in the EXIM Policy. We have already noted the definition of Status Holder as well as Third Party Exports . Some other definitions which require a mention are as under: 9.5 Actual User (Industrial) means a person who utilises the imported goods for manufacturing in his own industrial unit or manufacturing for his own use in another unit including a jobbing unit. 9.6 Actual User (Non-Industrial) means a person who utilises the imported goods for his own use in: (i) any commercial establishment carrying on any business, trade or profession; or (ii) any laborat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses, Trading Houses, Star Trading Houses and Super Star Trading Houses. In order to encourage these export categories, depending upon their category, the export incentives were provided for them; (d) in the same direction, certain categories were chosen for giving recognition as status holders, who could get such Status Certificate if they come within the purview of the definition of Status Holder contained in para 9.55. 24) The importance that was given to these status holders was highlighted by the then Commerce Minister while announcing special strategic package for status holders. Relevant extract of the said speech contained in para 19 thereof is noted as under: 19. The status holders have been a pillar of strength in increasing exports. There is a feeling among them that under the Exim Policy, substantive benefits are no longer available to them since the earlier benefits such as fast track clearance and relaxation from certain procedures, are now universally applicable in the liberalized environment. We recognize that the status holders will continue to play a significant and increasing role in boosting exports, particularly from the small scale sector, as most o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M Policy 2002-2007 (revised edition: March 2003). The revised edition came into force with effect from April 01, 2003. The relevant provisions of the EXIM Policy, as amended upto March 31, 2003, and relevant for the purpose of the present case, are paras 1.1, 1.2, 1.3, 2.2, 2.3, 2.4, 2.6, 2.8, 2.9 and 2.10 and the same are reproduced below: 1.1 In exercise of the powers conferred under Section 5 of the Foreign Trade (Development Regulation) Act, 1992 (No. 22 of 1992) the Central Government hereby notifies the Export and Import Policy for the period 2002-2007. This Policy shall come into force with effect from 1st April 2002 and shall remain in force upto 31st March 2007 and will be co-terminus with the Tenth Five Year Plan (2002-2007). However, the Central Government reserves the right in public interest to make any amendments to this Policy in exercise of the powers conferred by Section 5 of the Act. Such amendment shall be made by means of a Notification published in the Gazette of India. 1.2 Any Notifications made or Public Notices issued or anything done under the previous Export/ Import policies, and in force immediately before the commencement of this Policy shall, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecify the procedure to be followed by an exporter or importer or by any licensing or any other competent authority for the purpose of implementing the provisions of the Act the Rules and the Orders made thereunder and this Policy. Such procedures shall be included in the Handbook (Vol.1), Handbook (Vol.2), Schedule of DEPB Rate and in ITC (HS) and published by means of a public notice. Such procedures may, in like manner, be amended from time to time. The Handbook (Vol.1) is a supplement to the EXIM Policy and contains relevant procedures and other details. The procedure of availing benefits under various schemes of the Policy are given in the Handbook (Vol.1). xx xx xx 2.6 DGFT may, through a notification, adopt and enforce any measure necessary for: (i) Protection of public morals. (ii) Protection of human, animal or plant life or health. (iii) Protection of patents, trademarks and copyrights and the prevention of deceptive practices. (iv) Prevention of prison labour. (v) Prevention of national treasures of artistic, historic or archaeological value. (vi) Conservation of exhaustible natural resources. (vii) Protection of trade of fissionable material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uts 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 holders or his supporting manufacturer/job worker provided the name and address of the supporting manufacturer/job worker 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 entitlement certificate shall be valid for a period of 12 months. The status holder shall within one month of the expiry of the validity of the duty free entitlement certificate, submit a statement of imports made under the certificate as per Appendix 17E to the jurisdictional Regional Licensing Authority. 28) After taking stock of the main provisions of the EXIM Policy which concern us in these proceedings, we now advert to the nature of amendments made by Notification dated January 28, 2004 as well as Public Notice of even date, followed by Notification No. 38 dated April 21, 2004. 29) Vide Notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , (v), (vi) and (vii) of Note 1. 30) Sub-paragraph (3) of the para 3.8 pertaining to the duty free credit entitlement for service providers was amended to read as under: Service provider (other than hotels) shall be entitled to duty free import equivalent to 10% of the average foreign exchange earned by them in preceding three licensing years. However, hotels (one star and above), heritage hotels, stand-alone restaurants approved by Department of Tourism, Govt. of India and other service providers in tourism sector registered with Department of Tourism, Govt. of India, and shall be entitled for duty free imports equivalent to 5% of the average foreign exchange earned by them in free imports equivalent to 5% of the average foreign exchange earned by them in preceding three licensing years. For one two star hotels and stand-alone restaurants, the foreign exchange earned through international credit cards only shall be taken into account for the entitlement under the scheme. The duty free entitlement shall be used for import of any capital good including spares, office equipment(s) professional equipment(s), office furniture(s) consumables. However, agriculture, diary p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... months from the date of issue. The status holder shall within one month of the last imports made under this certificate or within one month of expiry of the certificate whichever is earlier, submit a statement of imports/utilization made under the certificate as per Appendix 17E, to the jurisdictional Regional Licensing Authority who has issued the certificate with a copy to the jurisdictional excise authorities. It also provided that: In terms of para 3.2.5 of Handbook of Procedures (Volume 1), the following items would not be taken into account for computation of entitlement and export performance under Duty Free Credit Entitlement Scheme for Status Holders: a) Rough, uncut and semi polished diamonds. b) Gold, silver in any form including plain jewellery thereof. c) Good grains sourced from central pool maintained by FCI. d) Items exported under free shipping bills. 3. In terms of para 3.2.5 of Handbook of Procedures (Volume 1) the following items would not be allowed for imports under Duty Free Entitlement Certificate for Status Holders: a) Agricultural products, which fall under Chapters 1-24 of ITC (HS) classification of Export and Import item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gible for entitlement under the scheme. More than 1300 crores of the exports of M/s Adani Exports were accounted by the supplies taken from the status holders who supplied to the petitioners because they were not meeting the minimum turnover and/or growth (vii) Supplies made or export performance effected by a non-status holder (Merchant exporter/Manufactur er with any export performance in 2003-04) to a status holder if the applicant as well as the non status holder have less than 25 per cent incremental growth over their respective previous years direct export turnover. criteria required to take benefit under the scheme. Claiming other firms export would mean that the country's export turnover would remain constant while applicant firms' turnover will sky rocket. This would not lead to the stated objective of accelerating the rate of incremental growth of country's exports. (viii) The exports made by an applicant within a group and the group to which it belongs has individually less than 25 per cent incremental growth of export. M/s Relianc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gold, silver in any form including plain jewellery thereof 10% DFCE benefits allowed the exporters to experiment in commodities like gold wherein India does not have comparative advantage. Gold coins and jewellery was exported by M/s. Adani Exports and M/s Rajesh Exports largely to ports like Dubai where it was melted and brought back to India to be exported again and again. The entire operation can be profitably financed through the proceeds under the Scheme. With the exports taking place within two days of the imports, 60 tonnes of gold could be re-circulated 80-90 times in a year. That means with a little working capital, the country can lose ₹ 1500 for every ₹ 100 invested by an unscrupulous exporter. Such exports will show an increase in India's exports, but this will be unsustainable increase and is ultimately a drain on country's finances. c Food grains sourced from central pool maintained by FCI Food grains sourced from the open market were allowed for benefit under the Scheme. FCI is under Government control where pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olume-I) and is subject matter of controversy. 35) On July 23, 2004, the High Court of Gujarat partly allowed Special Civil Application No. 1676 of 2004 holding that so far as Note 6 to Para 3.7.2.1 of the EXIM Policy as inserted by the Government notifications dated April 21 and 24, 2004 and the D.G.F.T. s public notice dated 28.01.2004 exclude the following exports from the benefit of the duty free import entitlement for the export status holders as contained in Para 3.7.2.1 of the EXIM Policy 2002-2007:- (i) Items exported under free shipping bills. (ii) Gold, Silver in any form including plain jewellery thereof, insofar as the import of capital goods and office equipment for the factory of the associate/supporting manufacturer/ job worker of the petitioner Company is concerned. The High Court also clarified that the exports effected by a non status holder (without any export performance in the year previous to 2003-04) are eligible for the benefits under the Special Scheme irrespective of the fact that such exporters did not have any incremental growth in exports, for obvious reason that they had made no exports in the previous years, in the first place. 36) Agg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42) On January 13, 2006 Special Leave Petition No. 26123 of 2005 filed by M/s. Kanak Exports and Special Leave Petition (Civil) No.1331 of 2006 filed by the appellants/Union of India and DGFT challenging the order of the Bombay High Court dated July 04, 2005 in W.P. No. 2397 of 2004 came up for hearing before this Court. This Court upon hearing the parties granted leave in the Special Leave Petition No. 1331 of 2006 and in the meantime stayed the operation of the impugned order in Civil Appeal arising out of S.L.P. No.1331 of 2006. 43) On February 17, 2006, the Union of India and DGFT aggrieved by the judgment and order of the High Court of Gujarat at Ahmedabad in Special Civil Application No.1676 of 2004 dated July 23, 2004 filed the Special Leave Petition. 44) The High Court of Gujarat, in the lead case Adani Exports Limited Anr. v. Union of India Anr. Special Civil Application No. 1676 of 2004, had rendered its judgment on July 23, 2004, which was available with the High Court of Bombay when it gave its decision on July 04, 2005. Insofar as the Gujarat High Court is concerned, it partly allowed the petition quashing Public Notice dated January 28, 2004 and Note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entitled to the benefit conferred therein, namely, 10% duty free imports of the specified items. The petitioner had, therefore, altered its position and the respondents were estopped from going back on their promises and assurances. (v) Insofar as Public Notice dated January 28, 2004 is concerned, paragraphs 2 and 3, whereby certain items of goods which were exported were excluded from the purview of the special scheme, were challenged on the ground that they were ultra vires the powers of the DGFT as it amounted to usurping the power of the Central Government. (vi) Insofar as Notification dated January 28, 2004 read with Notifications dated April 21 and 23, 2004 is concerned, challenge laid thereon was on the ground that they could not be made effective retrospectively. 46) The stand of the Union of India/respondents was that Notification dated January 28, 2004 was only clarificatory in nature. Detailed justification for laying down these clarifications were given stating that large number of representations were received from Trade Associations/Export Promotion Councils as well as individual exporters seeking clarification on various points relating to the implementa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n laws touching civil rights such as freedom of speech, religion, etc. We observed that the legislature should be allowed some play in the joints because it has to deal with complex problems which do not admit of solution through any doctrinaire or strait-jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. We quoted with approval the following admonition give by Frankfurter, J. in Morey v. Dond [354 US 457]: In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had adversely affected their interest and these exclusions are: (i) Export turnover of units operating under SEZ/EDU/THRP/ STPI Schemes or products manufactured by them and exported through DTA units. (ii) Supplies made by one status holder to another status holder. (iii) Export performance made by one status holder on behalf of other status holder. 50) In the light of the above, the Court first discussed the propriety or validity of the Notification dated January 28, 2004 and pointed out that this Notification does not make third party exports illegal or entirely ineligible for getting incentive under the said Incentive Scheme for status holders. On the other hand, basic intention of the Scheme was to encourage the exports of products manufactured by small-scale industry sector, who do not have access to international market because of lack of required international marketing experience and the optimum resources to have presence in the international market arena. Therefore, the Scheme was not intended to encourage a status holder/export house to pool the exports made by existing exporters, i.e. who have exported in previous years as well, for the purpose of showing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready availed for the export of such goods. Chapter 6 of the Exim Policy relates to Exports Oriented Units (EDUs), Electronics Hardware Technology Parks (EHTPs) and Software Technology Parks (STPs). As provided in paras 6.1 and 6.8 of the Exim policy, these units undertake to export their entire production of goods and services, except permissible sales in the Domestic Tariff Area as per the Exim Policy. Para 6.2(b) of the Exim Policy provides that an EDU/EHTP/STP unit may import without payment of duty all types of goods, including capital goods, as defined in the Policy, required by it for its activities as mentioned in para 6.1... Para 6.10 reads as under: 6.10 An EDU/EHTP/STP unit may export goods manufactured/software developed by it through a merchant exporter/status holder recognized under this Policy or any other EDU/EHTP/STP/SEZ unit. The amendments do not impinge upon the right of any party to export its goods in accordance with the Exim Policy. The clarification only excludes exports which were never intended in the first place to be covered by the Special Scheme under consideration. 18. Secondly, the misuse of the scheme by mere paper growth in exports i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in economic policy with future effect or retroactive effect only to prevent manifest injustice or fraud , such public interest would override individual interest even if the promisee cannot resume his position. On this basis, the argument based on the principle of Promissory Estoppel was rejected. 56) At the same time, exclusion of two items vide Note 6 in Notifications dated April 21 and 23, 2004 and Public Notice dated January 28, 2004 was found to be neither clarificatory nor in public interest and, therefore, bad in law. These are exclusion of following exports from the benefits of duty-free import entitlement for the export status holders: (i) Items exported under free shipping bills. (ii) Gold, silver in any form including plain jewellery thereof, in so far as the import of capital goods and office equipment for the factory of the associate/supporting manufacturer/job worker of the petitioner Company is concerned. The Special Civil Application was allowed to the aforesaid extent directing that the aforesaid items cannot be excluded while computing the duty free import entitlement. 57) JUDGMENT OF THE BOMBAY HIGH COURT The Bombay High Court, in its impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creased by 22% whereas as compared to the petitioners export of about ₹ 27 crores in 2002-2003, it catapulted to more than ₹ 1000 crores. The national export growth rate was only 22% while the petitioners exports grew at more than 3800%. It is obvious that this growth is merely a paper growth and not incremental growth within the meaning of the scheme. Notification dated 28th January 2004 does not make any third party export illegal or entirely ineligible for getting incentives under the Exim Policy. However, the basic intention of the amended scheme was to encourage the export of products manufactured by small scale units who do not have access to the international market because of lack of required international marketing expertise and optimum resources to have presence in the international marketing arena. The scheme was not intended to encourage the status holder/export house to pool the exports made by other exporters for the purpose of showing incremental growth in the export. The clarification issued by the impugned Notification in so far as it provides that supplies made by one status holder to another status holder or export performance made by one status hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarificatory and it amounted to amendment of the policy which was statutory in nature, this form of delegated or subordinate legislation could be only prospective and not retrospective unless the rule making authority has been vested with the power under the Statute to make rules with retrospective effect. (iii) Insofar as Notes (vi) and (vii) which were added vide Notifications dated April 21 and 23, 2004, the High Court took the view that they were not merely clarificatory in nature. It was pointed out that vide these Notifications, four items were sought to be excluded from the purview of the scheme and, therefore, could not be treated as merely clarificatory. The High Court, thus, while affirming the validity of these Notifications, came to the conclusion that it can be only prospective in nature. Contention of the Union that the word amend used in Section 5 read with Section 3 confers upon the Central Government to regulate, incorporates in its entrustment of the power to make subordinate legislation retrospectively, was turned down by the High Court. The High Court took the view that the word amend does not give power to make amendment retrospectively if it is use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OUR ANALYSIS AND CONCLUSIONS 58) The factual matrix, coupled with the arguments advanced before us by both sides, makes it clear that the issues remain the same which were canvassed before the High Courts. Even the position taken by the parties on either side is predicated on identical legal edifice. Before adverting to the analytical discussion and deciding the validity of impugned Notifications and public notice, keeping in mind the legal principles, we would like to first discuss the background in which they came to be issued. We feel that argument of the Union that these were issued in public interest has to be considered first as that would provide the raison d etre behind such a move on the part of the Government. Therefore, the first question is: Whether Notifications were issued in public interest? 59) The main objective of the scheme was to achieve the share of 1% of global trade and accelerated growth in exports. For this purpose, the scheme intended to concentrate on the growth of certain kinds of products treating the same as thrust sectors . In para 3.10, six such sectors are mentioned as thrust sectors, viz., Electronic hardware, Textile including g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tually achieve incremental growth of 25% or more in FOB value of exports during the financial year 2003-04 vis-a-vis to financial year 2002-03. One way to disallow DFCEC Scheme benefit to such artificial growth may be to define the term incremental growth in exports used in para 3.7.2.1(vi) of the EXIM Policy. 61) The said letter dated 14.10.2003 was forwarded to the Office of the Commissioner of Customs, Export Promotions to various Commissioners of Customs and the Commissioner of Customs, Mumbai on 05.11.2003 responded that: The Customs House at Mumbai has noticed exports of sugar by State Trading Corporation of India Ltd. showing account of Adani Export Ltd., Private Merchant Exporter. The invoice is that of State Trading Corporation of India Ltd. Mate Receipt shows receipts of goods from State Trading Corporation of India Ltd. As also the Bill of Lading shows the shipper as State Trading Corporation of India Ltd. However, the bank certificate of export and realization has been filed by Adani Exports Ltd. In which the exporter is shown as Adani Exports Ltd. Adani House, Navrangpura, Ahmedabad A/c State Trading Corporation of India Ltd. Photocopies of the set of documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uation of goods by Customs authorities, the value of goods as determined by Customs authority should be taken for determining incremental export instead of value declared by exporter. - Value of exports made in terms of fulfillment of any export obligation under any export promotion scheme such as EPCG, Advance License etc. Further to plug the loopholes, there is need to incorporate the following safeguards in the scheme. - It is essential to incorporate a provision in the scheme providing that the status holder availing the benefit of above said scheme and importing raw material shall not avail export incentive by way of drawback/DEPB on foods manufactured using such duty free inputs and their subsequent export. - The possibility of excluding gems and jewellery exports may also be examined as the duty incidence on gold (less than 2%) silver (5%), rough diamond (0%), rough gemstones (0%), broken or semi-finished cut and polished diamonds (0%), cut and polished diamonds (15%) is low. In addition to low duty, several other incentives such as replenishment licence of 1% FOB Value of export for duty free import vide notification No.41/99-Customs, dated 28-4-2003 are also av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as DFCEC Scheme is concerned, under the category of professional equipments, import of only those equipments would be permissible under DFCEC Scheme, which are professional equipments required by the Service Provider for the purpose of rendering service earning free foreign exchange. It is reiterated that import of capital goods which are other than professional equipment or office equipment shall not be allowed under DFCEC Scheme for Service Providers. In order to remove doubts, the words capital goods used in condition (3) of 54/2003-Cus dated 1.4.2003 has also been corrected to read as Professional equipment by issue of corrigendum. Suitable Public Notice for Trade and Standing Order for the guidance of customs field may be issued. 64) In furtherance to the communications between the Department of Revenue and the Customs, a meeting was held in the Office of the DGFT on October 21, 2003 which was attended by ADG(SB), JS(SSR), JDG(MCJ), OSD(RKT) and DDGTM in the Chamber of DGFT under the Chairmanship of DGFT and with regard to the Duty Free Credit Entitlement Scheme a tentative decision was taken on the following lines to safeguard, avoid any fraud or misuse of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corporate groups are showing artificial incremental growth of 25% in Exports(.) Even a Govt. of India undertaking, such as S.T.C. Limited have also sold their exports to another status holder(.) It is felt that the incentive scheme under DFCEC for 25% incremental growth in Exports during 2003-04 vis-a-vis 2002-03 has spurred this artificial clubbing of exports (.) However, the DGFTS clarificatory policy circular of 16/2002 dated 2.12.2002 envisages that allowing third party export is a conscious decision of the Government(.) It appears that in the face of the current policy provisions, the benefits allowed to third party exports cannot be legally denied(.) Hence it is proposed that Ministry may consider prevailing upon the Ministry of Commerce/DGFT to amend the EXIM Policy provisions, so as to incorporate Para 3.7.2.1 (g) that for the purpose of calculating the incremental growth of 25% in exports in 2003-04, vis-a-vis 2002-03 the exports made on behalf of third parties will not be counted(.) It is further submitted that in order to show 25% incremental growth in the exports during the current financial year 2003-04 vis-a-vis exports made in 2002-03, unscrupulous elements ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to have nexus for import under the certificate vis-a-vis the exports made etc. 73) In the counter affidavit filed by the Union of India, details of the modus operandi used by these exporters are given on the basis of which it is projected that these exporters indulged in inflating their exports by achieving a growth rate from 300% to 3800% when during the same period i.e. 2003-2004, the national growth of export was merely 18%. It is demonstrated by tabulating figures as follows: S.No. Firm Turnover crores 2002-03 Turnover crores 2003-04 % Growth 1 Adani Exports Limited, Ahmedabad 377 4657 1135 2 Rajesh Exports, Bangalore 112 2372 2017 3 Kanak Exports, Mumbai 27 1070 3816 4 Survanshi Exports, Hyderabad 1007 5495 335 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioners and other exporters. II-Export of rough diamonds Export of rough diamonds by M/s. Adani Exports Ltd. Even through India is not a rough diamond producing country. These exports stopped the moment DFCE benefits were disallowed. Export of such rough diamonds earlier never been part of the normal commercial operations and has taken place just to take advantage of the Scheme. According to Gems and Jewellery export promotion council, India is not a rough exporting country. Rough diamonds which are unsustainable for cutting in India are re-exported. Such exports stopped the moment benefit was explicitly withdrawn. In the present case also the respondent herein M/s Adani Exports Limited had stopped exporting the rough diamonds the moment the Notification was issued in January, 2004 and according to Gems and Jewellery export promotion council, Party has not exported rough diamonds during Jan/March 2004. III-Export of gold coins, Jewellery-Circular trading and Exports to related companies Most notorious misuse of the scheme was carried out by few firms who exported Gold medallion and studded jewellery. Key firms included M/s. Kanak Exports, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Singapore as the related party and associate entity. M/s. Adani Exports exported cut and polished diamonds to this entity. This indicates that the suppliers, exporters and importers were linked and hence the possibility of manipulating value addition. According to one estimate the same set of diamonds were rotating and these never entered the Indian domestic territory or to the end consumers abroad. 74) It is also stated in the counter affidavit that the misuse of the scheme had also come to the notice of DRI and other intelligence officials who had gathered the necessary information and collected supported documents. Based on the intelligence gathered, a note on the misuse of Duty From Credit Entitlement (DFCE) and Target Plus Scheme was prepared which is annexed with the counter affidavit. At the time of arguments, Mr. Adhyaru, learned senior counsel extensively read and profusely relied upon this note with his passionate plea that all these writ petitioners have indulged in sharp practices in trying to take undue advantage of the scheme and, therefore, they should not be held entitled to the benefit of the scheme. It was also submitted that this material would clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . exported these products to buyers related to them. According to one estimate the same set of diamonds were rotating and these never entered the Indian domestic territory or to the end consumers abroad. The value of such exports in the year 2003-04 and 2004-05 may exceed ₹ 15,000 crores. This report contains observations of DRI, which describes the modus operandi and the firms involved in graphic details. DETAILS OF THE MISUSE OF DUTY FREE CREDIT ENTITLEMENT (DFCE) TARGET PLUS SCHEME BY THE PETITIONERS Background of Policy changes Intent of the Government has been to accelerate India s exports and towards this intent DFCE scheme was launched. The scheme envisaged rewarding genuine export growth with the specific objective of accelerating the incremental growth in exports and to facilitate India emerging as a major base for different source of products and services for the rest of the world. The reward was supposed to motivate and spur exporters in increasing their export turnover. However, the scheme could not have envisaged at the time of its launch that certain exporters would employ non-commercial and unlawful tactics in a manner that would be injurious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grew at astronomical rate whereas country s export growth was just average. The Government has, thus, demonstrated that based on the aforesaid exercise undertaken, Notification dated January 28, 2004 as well as Public Notice of the even date were issued. 75) Notwithstanding strenuous efforts made by learned counsel for the wit petitioners to show that the exports by them were genuine and there was no misuse, we have no hesitation in accepting the plea of the Union that the purport behind Notifications was bona fide which was actuated with the conditions of public interest in mind. We answer the question in the affirmative. 76) Let us now discuss the validity of the Notification dated January 28, 2004. The issue that arises for determination is as to: Whether Notification No.28 dated January 28, 2004 vide which Notes 1 to 5 to para 3.7.2.1 were inserted in the EXIM Policy 2002-2007 was only clarificatory in nature or it amounted to amendment of the provisions of para 3.7.2.1 of the EXIM Policy? 77) In order to discuss this question in proper perspective, it would be necessary to take note of those portions of the provisions contained in the original Scheme which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s years direct export turnover; (viii) the exports made by an applicant within a group and the group to which it belongs has individually less than 25 per cent incremental growth of export. 79) There was no serious challenge to sub-notes (i), (iii), (iv) and (viii). Before we discuss the effect and impact of the aforesaid sub-notes of Note 1, let us find out as to how the Bombay High Court and Gujarat High Court in their respective judgments have dealt with this issue. 80) So far as the Bombay High Court is concerned, after specifically posing the question as to whether Notification dated January 28, 2004 has the effect of introducing a new condition or term or it is merely in the nature of clarification to the existing policy. The High Court referred to the basic objective of the scheme as contained in Commerce and Industry Minister s speech on introducing new EXIM Policy 2002-2007. It reads as under: We recognize that the status holders will continue to play a significant and increasing role in boosting exports, particularly from the small scale sector, as most of the small scale units will not be in a position to directly access the international markets. Moreover, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, the basic intention of the amended scheme was to encourage the export of products manufactured by small scale units who do not have access to the international market because of lack of required international marketing expertise and optimum resources to have presence in the international marketing arena. The scheme was not intended to encourage the status holder/export house to pool the exports made by other exporters for the purpose of showing incremental growth in the export. The clarification issued by the impugned Notification in so far as it provides that supplies made by one status holder to another status holder or export performance made by one status holder on behalf of another status holder shall not be eligible for entitlement is in consonance with the basic object of the scheme. The export turnover of the units operating under STZ/EOU/EHTP schemes was also excluded as these units are getting all facilities for import without payment of duty on various types of goods including capital goods required by them for their activities. The intention of the makers of the scheme was not to confer double benefit under para 3.7.2.1. Further an exporter is required to export hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst place to be covered by the Special Scheme under consideration. 18. Secondly, the misuse of the scheme by mere paper growth in exports is not to be countenanced. Hence, it is but natural that the notification dated 28.1.2004 would apply to the exports made from 1.4.2003 onwards. In so far as this court holds that the Notes 1 and 2 read with Note 4 introduced by the notification dated 28.1.2004 are merely clarificatory, the exports made by the petitioners between 1.4.2003 and 27.1.2003 would certainly be covered by the said notes. Two views are possible about the expression incremental growth in exports by 25% and the Government adopted the interpretation as reflected in the notification dated 28.1.2004 which is quite in consonance with the object of the Act, EXIM policy and the incentive scheme rather than the interpretation canvassed by the petitioner. Hence, there is no substance in the challenge to a Notes 1 and 2 read with note 4. 83) Sub-note (ii) of Note 1 now provides that export turnover of units pertaining to SEZ/EOU/EHTP/STP or products manufactured by them and exported through DTA units are not to be included and taken into account for the purpose of calculat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the High Court that such a sub-note (ii) was merely clarificatory in nature. 84) Sub-note (v) to Note 1 stipulates that if the supply were made by one status holder to another status holder, these shall also be excluded while calculating the value of exports. Likewise, sub-note (vi) of Note 1 excludes the export performance made by one status holder on behalf of other status holder. High Courts have treated it as clarificatory on the ground that the Scheme was not intended to encourage the status holders/export house to pool the exports made by other exporters for the purpose of showing incremental growth in the exports and, therefore, the addition of sub-note (v) to Note 1 was in consonance with the basic objective of the scheme as originally envisaged. Having regard to the nature of this sub-note (v) and when we keep in mind the fact that the two status-holders if they carry out the exports and made the target as per the Scheme were entitled to the benefit of the Scheme, we agree with the High Courts that even insertion of these clauses is clarificatory in nature inasmuch as it only states that the supply made by one status-holder to another status-holder will not be counte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Union of India, on the other hand, submitted that the paramount consideration in issuing the Public Notice was to check unscrupulous exporters including the writ petitioners for inflating their export turnover by adopting dubious methods. He emphasized the rational for inclusion of four items by this Public Notice which has already been taken note of. His endeavour was to demonstrate that issuance of the Public Notice in question became paramount to cluck unscrupulous methodology adopted by certain exporters with the objective to wrongfully acquire the benefits of the Schemes that could not be countenanced and had to be checked. We are not delving with those alleged malpractices and hold back the same at this juncture. They will be spelled out while discussing the validity of the Notification dated April 21, 2004 as the subject matter thereof is same. Here, we are concerned with the powers of DGFT to issue such a Public Notice. 89) In order to answer this question, we have to first determine as to whether this Public Notice dated January 28, 2004 is only an amendment to Handbook of Procedure or it tinkers with the EXIM Policy. To answer this question, we may first go int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment may delegate its power exercisable under the Act. However, powers under Sections 3, 5, 15, 16 and 19 are specifically excluded which means these powers cannot be delegated. Thus, power to announce the Policy and to amend the same remains with the Central Government. Likewise, power to make rules under Section 19 which vests with the Central Government, cannot be delegated. 92) Keeping in mind the aforesaid legal position, we reproduce certain portion of the EXIM Policy announced vide Notification No.1 dated March 31, 2003 which have bearing on the issue at hand. These are: Para 1.1 of the Export and Import Policy provided that: In exercise of the powers conferred under Section 5 of The Foreign Trade (Development and Regulation Act), 1992 (No.22 of 1992), the Central Government hereby notifies the Export and Import Policy for the period 2002-2007. This Policy shall come into force with effect from April 01, 2002 and shall remain in force upto March 31, 2007 and will be co-terminus with the Tenth Five Year Plan (2002-2007). However, the Central Government reserves the right in public interest to make any amendments to this Policy in exercise of the powers conferred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Gazette of India. On that basis, justification is sought to be given that the Notification No.28(RE-2003)/2002-2007 dated January 28, 2004, Notification No.38/(RE-2003) 2002-2007 dated April 21, 2004 were published in the Gazette of India under Part 2 and 3(II), while Public Notice No.40 dated January 28, 2004 was published in the Gazette of India under Part 1 Section 1 of the Gazette of India and as such, as both the Notifications as well as the Public Notices are officially gazetted in the Gazette of India. Thus, there is no distinction between the two as the same carry the same impact and effect. 94) From the aforesaid explanation, we take it that the Public Notice dated January 28, 2004 was published in the Gazette of India in accordance with the requirement of law. The question, however, is as to whether by this Public Notice, DGFT was only carrying out the EXIM Policy or this Public Notice amounted to change in the said EXIM Policy. It is crystal clear that the Public Notice alters the provisions of EXIM Policy. It would, therefore, amount to amending the EXIM Policy, whether clarificatory or otherwise. There may be a valid justification and rational for exclusion of fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Notification is not retrospective but retroactive in nature. In the alternative, it is submitted that even it is treated as retrospective, the Government has right to do so under the given circumstances inasmuch as grant of concession or incentive is the privilege of the Central Government which can always be withdrawn and in the present case, it is withdrawn for justifiable reasons and in public interest which is the paramount consideration and over rights all private considerations. Therefore, it is argued, the question of retrospectivity of Policy by the impugned Notification does not arise at all. Mr. Adhyaru also argued that there was an implied power vested with the Central Government to amend the Policy retrospectively. 101) We may state, at the outset, that the incentive scheme in question, as promulgated by the Government, is in the nature of concession or incentive which is a privilege of the Central Government. It is for the Government to take the decision to grant such a privilege or not. It is also trite law that such exemptions, concessions or incentives can be withdrawn any time. All these are matters which are in the domain of policy decisions of the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of Section 25(1) of the Customs Act. The power to exempt includes the power to modify or withdraw the same. Such an exemption by its very nature is susceptible of being revoked or modified or subjected to other conditions. The supersession or revocation of an exemption notification in the public interest is an exercise of the statutory power of the State under the law itself as is obvious not merely from the language of Section 25 of the act, but also from the General Clauses Act under which the authority which has the power to issue a notification has the undoubted power to rescind or modify the notification in the like manner. The Court also examined the case of the appellant-petitioners that relying upon the notification dated March 15, 1979, they had acted and the Government could not be permitted to go back on its assurance otherwise they would be put to huge loss. The Court dealt with this contention in the following words: The Courts have to balance equities between the parties and indeed the Courts would bind the Government by its promise to prevent manifest injustice or fraud . The Court also quoted with approval the following observations from Malhotra So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quire to be allowed to the legislature. The question, however, is as to whether it can be done retrospectively, thereby taking away some right that had accrued in favour of another person? 105) The case of the exporters is that by achieving the target contained in the Scheme in respect of incremental exports, these exporters had right accrued in their favour to claim the benefits provided for achieving this target. It was submitted in this behalf that the Scheme came into force w.e.f. April 01, 2003 and from April 01, 2003 to March 31, 2004 i.e. during these 12 months, the status holders were entitled to make the exports and once the targets as set out in the clause 3.2.7.1 (vi) were achieved, the exporters became entitled to get duty free import to the extent of 10% of the incremental growth in exports. According to them, the moment a particular exporter fulfilled the target of incremental growth of more than 25% of FOB value in exports with minimum export value turnover of 25 crore, said exporter got right to have duty free entitlement equivalent to 10% of incremental growth in exports. The only condition was that this entitlement was to be used w.e.f. April 01, 2004 for impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gwandas Anr. (1968) 3 SCR 623 13. Counsel for the respondent also submitted that Section 29(2) as amended was intended to have retrospective operation, because the Amending Act was in the nature of explanatory legislation. There is nothing in the language of Section 29(2) as amended, which may indicate that it was intended to be retrospective in operation. Section 29(2) as amended in terms confers jurisdiction upon the High Court to call for the record of a case for the purpose of satisfying itself that the decision in appeal was according to law, which the High Court did not possess before the date of the Amending Act. The amending clause does not seek to explain any pre-existing legislation which was ambiguous or defective. The power of the High Court to entertain a petition for exercising revisional jurisdiction was before the amendment derived from Section 115 Code of Civil Procedure, and the legislature has by the Amending Act attempted to explain the meaning of that provision. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. Section 29(2) before it was enacted, was precise in its implicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstitution Bench of this Court in Keshavlal Jethalal Shah v. Mohanlal Bhagwandas Anr. (1968) 3 SCR 623, while considering the nature of amendment to Section 29(2) of the Bombay Rents, Hotel and Lodging House Rates Control Act as amended by Gujarat Act 18 of 1965, observed as follows: The amending clause does not seek to explain any pre-existing legislation which was ambiguous or defective. The power of the High Court to entertain a petition for exercising revisional jurisdiction was before the amendment derived from s. 115, Code of Civil Procedure, and the legislature has by the amending Act attempted to explain the meaning of that provision. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. (v) Trimbak Damodhar Rajpurkar v. Assaram Hiraman Patil Others (1962) Supp. 1 SCR 700 8. Besides, it is necessary to bear in mind that the right of the appellant to eject the respondents would arise only on the termination of the tenancy, and in the present case it would have been available to him on March 31, 1953 if the statutory provision had not in the meanwhile extended the life of the tena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said section applied to all leases whether executed before or after the commencement of the Act; and, according to Buckley, L.J., this construction did not make the Act retrospective in operation; it merely affected in future existing rights under all leases whether executed before or after the date of the Act. The position in regard to the operation of Section 5(1) of the amending Act with which we are concerned appears to us to be substantially similar. 10. A similar question had been raised for the decision of this Court in Jivabhai Purshottam v. Chhagan Karson- Civil Appeal No 153 of 1958 decided on 27-3-1961 in regard to the retrospective operation of Section 34(2)(a) of the said amending Act 33 of 1952 and this Court has approved of the decision of the Full Bench of the Bombay High Court on that point in Durlabbhai Fakirbhai v. Jhaverbhai Bhikabhai (1956) 58 BLR 85. It was held in Durlabbhai case that the relevant provision of the amending Act would apply to all proceedings where the period of notice had expired after the amending Act had come into force and that the effect of the amending Act was no more than this that it imposed a new and additional limitation on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the mater is given as under: Point/query raised Clarification Whether direct recruit Inspectors should be given seniority of the year in which selection process initiated or vacancy occurred or otherwise. 'It is clarified by DoP T that direct recruits' seniority via-a-vis the promotees is reckoned from the year in which they are actually recruited. DRs cannot claim seniority of the year in which the vacancies had arisen. The question of grant of seniority to DRs of the period when they were not even in service does not arise.' 3. The representations may please be disposed of accordingly. Yours faithfully, sd/- Under-Secretary to the Government of India 36. A perusal of the Letter dated 11-5-2004 reveals that it adopts a position in clear conflict with the one expressed in the OMs dated 7-2-1986 and 3-7-1986, as well as, in the OMs dated 20-12-1999 and 2-2-2000. In the aforesaid Letter dated 11-5-2004 it was sought to be clarified , that the seniority of direct recruits vis-a-vis promotees, would be determined with reference to the year in which the direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the instant submission. It is not possible for us to accept the aforesaid contention advanced at the hands of the learned counsel. If the OM dated 3-3-2008 was in the nature of an amendment, there may well have been merit in the submission. The OM dated 3-3-2008 is in the nature of a clarification . Essentially, a clarification does not introduce anything new, to the already existing position. A clarification, only explains the true purport of an existing instrument. As such, a clarification always relates back to the date of the instrument which is sought to be clarified. 106) In nutshell, it was submitted that once there is a vested right and not merely existing right, taking away that right amounts to giving retrospective effect to the Notification which was impermissible. In the same breath, it was argued that it cannot be treated as retroactive operation of the Notification. 107) Learned senior counsel appearing for the Revenue, on the other hand, argued that no such right got crystallized in favour of the exporters as entitlement for export was to take effect from April 01, 2004. It was submitted that at the most with achieving of the export targets, they became eli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Legislature enacted a law on the subject-matter of Article 309. The rules framed under the proviso to Article 309 were transient in character and were to do duty only until legislation was enacted. As interim substitutes for such legislation it was clearly intended that the rules should have the same range of operation as an Act of Parliament or of the State Legislature. The intent was reinforced by the declaration in the proviso to Article 309 that any rules so made shall have effect subject to the provisions of any such Act . Those features are absent in clause (5) of Article 148. There is nothing in the language of that clause to indicate that the rules framed therein were intended to serve until parliamentary legislation was enacted. All that the clause says is that the rules framed would be subject to the provisions of the Constitution and of any law made by Parliament. We are satisfied that clause (5) of Article 148 confers power on the President to frame rules operating prospectively only. Clearly then, the Rules of 1974 cannot have retrospective operation, and therefore sub-rule (2) of Rule 1, which declares that they will be deemed to have come into force on July 27, 1956 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same. 109) So far so good. The effect of the aforesaid discussion would be that if the Status Holders had achieved 25% incremental growth in exports, they acquired the right to receive the benefit under the Scheme, which could not be taken away. The pertinent and crucial question is as to whether these exporters/writ petitioners acquired any such right? Let us sharpen this question before we answer the same by formulating it in the following words: Whether, in the cases of these exporters, the exports shown by them can be treated as actual exports entitling them to avail the benefit of the Scheme? 110) This issue would be inter-twined with other related issue, namely, whether the notification has retroactive operation or it is retrospective in nature. Both these aspects are to be dealt with simultaneously in order to provide suitable and right answer to the question posed. The case of the exporters, as noticed above, is that since they had already fulfilled the requirement of incremental growth in exports which they were require to fulfill between April 01, 2003 to March 31, 2004, a vested right accrued in their favour to get the special incentive in terms of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and Plain jewellery in total exports Rajesh Exports, Bangalore 112 2372 2017 100 Kanak Exports, Mumbai 27 1070 3816 100 For M/s Adani Exports, over 80% of export turnover came for diamonds and Supplies from status holders not meeting the minimum turnover and growth criteria Adani Exports Limited, Ahmedabad Exports (crores) Total exports for the year 2003-04 of which 4657 1 Rough, and re-exported polished diamonds 2475 2 Supplies taken from status holders not meeting the minimum turnover and growth criteria 1316 Share of the above 2 categories in the total exports 81.4% Export surge of 1135% for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me was carried out by few firms who exported Gold medallion and studded jewellery. Key firms included M/s. Kanak Exports, M/s. Rajesh Exports Ltd. and M/s. Adani Exports Ltd. (vi) Many of these exporters exported to their own counterparts in Dubai and Sharjah. Since the jewellery attracted 5% import duty at Dubai, the consignments which were declared as jewellery in India were declared as scrap in Dubai to avoid the import duty. (vii) As it was difficult for them to achieve the value addition prescribed by the Policy through craftsmanship, they added extra gold to get the value addition. However, in this process strangely enough per unit price of the gold exported was less than per unit price of gold imported. (viii) Few exporters including petitioners have purchased exports of other firms to inflate their turnover. Contracts have been signed between the petitioners and other exporters that petitioner will provide marketing and other services and act as third party exporter. According to reports status-holders were purchasing exports made by other parties at a premium with a view to show incremental growth of 25% or more in exports without having actually achieved such gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rit Petition (Civil) No. 27 of 2008 Transfer Case (Civil) No. 32 of 2007 Transfer Case (Civil) No. 33 of 2007 Transfer Case (Civil) No. of 2015 (arising out of Transfer Petition (Civil) No. 568 of 2014) 117) For the reasons mentioned in Transfer Petition (Civil) No. 568 of 2014, the same is allowed and LPA No. 290 of 2007, entitled Union of India Ors. v. M/s. Welspun India Limited , pending in the High Court of Gujarat at Ahmedabad is transferred to this Court. Since the challenge laid in the case is identical with that involved in the rest of the batch matters, summoning of the records of the case is dispensed with and the matter is heard on the basis of the record already available before the Court. 118) In these cases, challenge is to the constitutional validity of para 3.7.8 of the EXIM Policy 2004-2009 as well as Notification No. 48/2005 dated February 20, 2006 and Notification No. 8/2006 dated June 12, 2006 by which certain amendments in the aforesaid EXIM Policy were made. Though it involves a different Scheme, known as Target Plus Scheme , since the provisions and amendments are again primarily challenged on the ground that these amendm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lus 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 account for computation of eligible exports under the scheme where a minimum of 10% value addition has been achieved. 3.7.4 Applicant Companies Companies which are Star Export Houses as well as part of a Group company shall have an option to either apply as an individual company or as a Group based on the growth in the Group s turnover as a whole. (For the purpose of this scheme the definition of Group Company as given in Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (HS) Classification of Export and Import items. (ii) Coconut, Areca Nut, Oranges, Lemon, Fresh Grapes, Apple and Pears and all other fruits with a Duty of more than 30% under Chapter 8 of ITC (HS) Classification of Export and Import items. (iii) All spices with a Duty of more than 30# under Chapter 9 of ITC (HS) Classification of Export and Import items (except Cloves). (iv) Tea, Coffee and Pepper as per Chapter 9 of ITC (HS) Classification of Export and Import Items. (v) All Oil Seeds under Chapter 12 of ITC (HS) Classification of Export and Import Items. Further, Natural Rubber as per Chapter 40 of ITC (HS) Classification of Export and Import items shall also not be allowed for import under the Scheme. Import of all edible oils classified under Chapter 15, shall be allowed under the scheme only through STC and MMTC. 3.7.7 Cenvat/Drawback Additional customs duty/excise duty paid in cash or through debit under Target Plus shall be adjusted as CENVAT Credit or Duty Drawback as per rules framed by the Department of Revenue. 3.7.8 Special Provision Government reserves the right in public interest, to specify from time to time the category of exports a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of recognition. 3. Exports made by a subsidiary of a limited company shall be counted towards export performance of the limited company for the purpose of recognition only if the limited company has a majority share holding in the subsidiary company. 4. In case the recognition is claimed based upon the current year s export performance, same shall be considered only in case the exporter has export performance during any one of the preceding three years as well. 3.5.2.1 Privileges A Star Export House shall be eligible for the following facilities: (i) Licence/certificate/permissions and Customs clearances for both imports and exports on self-declaration basis; (ii) Fixation of Input-Output norms on priority within 60 days; (iii) Exemption from compulsory negotiation of documents through banks. The remittance, however, would continue to be received through banking channels; (iv) 100% retention of foreign exchange in EEFC account; (v) Enhancement in normal repatriation period from 180 days to 360 days; (vi) Entitlement for consideration under the Target Plus Scheme; and (vii) Exemption from furnishing of Bank Guarantee in Schemes under this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e/Petroleum Oil Crude/Petroleum based Products covered under ITC HS codes 2709 to 2715, of all types and in all forms. 124) It may be recollected that in para 3.7.5, certain items are specified which are not to be taken into account for calculation of exports performance or for computation of entitlement under the TPS. The effect of the aforesaid amendment was to exclude the aforementioned four items as well insofar as calculation of export performance or computation of entitlement under the TPS is concerned. 125) Another amendment to the TPS was made vide Notification No. 8(RE 2006)/2004-2009 dated June 12, 2006. It also pertained to the exports effected during April 01, 2005 to March 31, 2006. By this Notification, para 3.7.3 was substituted by the following para: The entitlement under this scheme would be contingent on the minimum percentage incremental growth of 20% in FOB value of exports in the current licensing year over the previous licensing year, and the rate of entitlement shall be 5% of the incremental growth. 126) Original para 3.7.3, which is in respect of entitlement under the TPS mentioned that the said entitlement would be contingent on the minim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amendment retrospectively. In the present case, we find that Section 5 of the Act does not give any specific power to the Central Government to make the Rules with retrospective effect. The Central Government is authorised to make Rules/Schemes under the said provision as a delegatee, which means that the EXIM Policy/Scheme framed under the said provision is by way of delegated legislation. There has to be specific power to make the amendments with retrospective effect, which are lacking in the instant case. Moreover, even if there is such a power, it cannot take away vested rights which have accrued in favour of particular persons/exporters. We have already enlisted number of judgments of this Court taking such a view. A few such cases laying down the aforesaid principle are: (i) Regional Transport Officer, Chittoor Ors. v. Associated Transport Madras (P) Ltd. Ors. (1980) 4 SCC 597 (ii) Accountant General Anr. v. S. Doraiswamy Ors. (1981) 4 SCC 93 (iii) A.A. Calton v. Director of Education Anr. (1983) 3 SCC 33 (iv) Chairman, Railway Board Ors. v. C.R. Rangadhamaiah Ors. (1997) 6 SCC 626 129) Keeping in view the aforesaid legal positi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccelerate quantum growth in exports and when those star export houses achieved the quantum growth in exports, as stated in para 3.7.3, they would naturally become entitled to a particular percentage of duty credit entitlement depending upon the quantum of growth achieved. These exporters, thus, got vested right to avail the duty credit entitlement and achieve higher rate, i.e. 10% or 15%, as the case may be. Reducing the same to 5% would clearly amount to taking away their vested right with the issuing of the Notification and making them effective retrospectively. 133) Likewise, no cogent explanation is coming forward for adding four items by amending para 3.7.5 vide Notification No. 48 (RE 2005)/ 2004-2009 dated February 20, 2006. The only argument advanced at the time of hearing was that the Government felt that benefit of TPS should not be extended to the exporters of these items. That may be a policy decision and the Government is empowered to take such a decision. It may be noted that in para 3.7.5 of TPS, as was originally provided, certain items of exports were specifically mentioned, which were not to be taken into account for calculation of export performance or for com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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