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2015 (11) TMI 80 - SUPREME COURT OF INDIA

2015 (11) TMI 80 - SUPREME COURT OF INDIA - 2015 (326) E.L.T. 26 (SC), 2016 (2) SCC 226, 2015 (12) JT 135, 2015 (12) SCALE 123 - Misuse of the Special scheme to promote export - some benefits which had already accrued to exporters under the EXIM Policy were taken away. - Validity and Scope of Notifications - Power to DGFT to amend the policy - Notifications are Retrospective or prospective - Whether Notifications were issued in public interest - Held that:- As a matter of fact, immediately after .....

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heme the matter was deliberated upon and it was decided not to allow all capital goods other 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 P .....

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de 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 conferred upon. Obviously, purpose of the scheme was not to give double benefit for same exports. In fact, if that is allowed, it would be a clear case of misuse of the scheme inasmuch as for the same export .....

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ly, if it has not been able to achieve 25% incremental growth, such export house cannot take the advantage by including exports of a non status holders to show that it has achieved 25% incremental growth.- the Notification dated January 28, 2004 was clarificatory in nature and its validity stands upheld. - Decided in favor of revenue. - Validity of Public Notice dated 28-1-2004 - Jurisdiction of DGFT - to exclude the export performance related to class of goods - Held that:- Public Notice da .....

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exclusion of four items contained therein, as pleaded by the Union. However, it had to be done in accordance with law. When the DGFT had no power in this behalf, he could not have excluded such items from the purview of EXIM Policy by means of Public Notice. The power of DGFT is only to be exercised for procedural purposes and both the High Courts have rightly remarked that para 3.2.6 inserted by public notice goes beyond the procedural conditions. - public notice dated January 28, 2004 issued b .....

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l 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 frame .....

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, 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? - A sagacious approach with practical sense leads us to conclude that these writ petitioners/exporters had actually achieved the targets set down in the original Scheme and thereby acquired any “vested right”. It was pernicious and blatant misuse of the provisions of the Scheme and peris .....

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no right had accrued in favour of such persons under the Scheme. This Court, or for that matter the High Court in exercise of its writ jurisdiction, cannot come to the aid of such petitioners/exporters who, without making actual exports, play with the provisions of the Scheme and try to take undue advantage thereof. To this extent, direction of the Bombay High Court granting these exporters benefit of the Scheme for the past period is set aside. - Notification No. 48/2005 dated February 20, .....

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OF 2009, WRIT PETITION (CIVIL) NO. 343 OF 2009, WRIT PETITION (CIVIL) NO. 246 OF 2010, (ARISING OUT OF TRANSFER PETITION (CIVIL) NO. 568 OF 2014) A.K. SIKRI AND ROHINTON FALI NARIMAN, JJ. For The Parties : Mr. Annam D. N. Rao,Adv., Mr. Tarun Gulati, Adv., Mr. Sparsh Bhargava, Adv., Mr. Kishore Kunal, Adv., 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 .....

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al 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 Regulation) Act, 1992 (hereinafter referred to as the Act ), which cam .....

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nder the provisions of Para 2.4 of the said Policy, which was followed by Notification No. 38 dated April 21, 2004 and Notification No. 40 dated April 23, 2004. 2) Vide Notification No. 28 dated January 28, 2004, the Central Government sought to amend certain provisions of the EXIM Policy by inserting Notes 1 to 5, which was unpalatable to the exporters of the goods mentioned therein as, according to them, under the guise of the said Notes, some benefits which had already accrued to these export .....

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on the same lines on which Public Notice dated January 28, 2004 was issued. The exporters of these goods, naturally, felt aggrieved thereby. There was an innocuous amendment to Notification No. 38 dated April 21, 2004 wherein in addition to the Director General of Foreign Trade (for short, DGFT ) as an Officer to enforce these Notifications, ex-officio Additional Secretary to the Government of India was also added. All such exporters who were affected thereby filed writ petitions in various Hig .....

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oners 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 wr .....

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otifications have amended the provisions of that Policy. That would give an indication as to what kind of grievance is raised by these exporters in challenging the validity of these Notifications. 5) The Act was passed to provide for the development and regulation of foreign trade by facilitating imports into, and augmenting exports from India and for matters connected therewith or incidental thereto. The Statement of Objects and Reasons of this Act stipulates that foreign trade is the driving f .....

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ade policy were made by the Government of India. The goals of the new trade policy are to increase productivity and competitiveness and to achieve a strong export performance. The Exports and Import Policy is a vital part of trade policy. The basic law governing foreign trade must serve as an instrument to create an environment that will provide a strong impetus to exports, facilitate imports and render export activity more profitable. It has, therefore, been considered necessary to enact a new .....

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from time to time, formulate and announce, by notification in the Official Gazette, the export and import policy and may also, in the like manner, amend that policy. 7) In order to carry out the purposes of this Act, DGFT is to be appointed by the Central Government as per the provisions of Section 6 of the Act. In addition to carrying out the purposes of this Act, DGFT is also supposed to advise the Central Government in formulation of the EXIM Policy. He is also made responsible for carrying .....

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d 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 Governmen .....

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me to time. The Policy with which we are concerned is the EXIM Policy for the period 2002-2007, which was substituted by EXIM Policy 2004-2009. 10) EXIM Policy of 2002-2007 was announced and came into force from April 01, 2002. Amendment to this Policy was notified on March 31, 2003 and the revised edition of the Policy was to come into force from April 01, 2003. Even though the Central Government is generally entitled and empowered to carry out amendments in this Policy from time to time, in th .....

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ications made or public notices issued or anything done under the provisions of EXIM Policy and in force immediately before the commencement of the said Policy shall continue to be in force, insofar as those notifications, etc. are not in consistent with the provisions of the instant Policy. It was also clarified that licences/certificates/permissions issued under the earlier Policy would continue to be followed for the purpose for which such licences/certificates/permissions were issued, unless .....

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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 .....

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lated 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 amend this procedure from time to time. 13) Another provision of this Policy which needs to be noticed is para 2.34 that pertains to third party exports and reads as under: 2.34 Third party exports, as defined in paragraph 9.55 shall be allowed under the Policy. 14) Since the third party exports are to be allowed, as defined in par .....

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rson, applying for (i) a licence/ certificate/permission to import/export, [except items listed as restricted items in ITC (HS)] or (ii) any other benefit or concession under this policy shall be required to furnish Registration-cum- Membership Certificate (RCMC) granted by the competent authority in accordance with the procedure specified in the Handbook (Vol.I) unless specifically exempted under the Policy. 16) Chapter III of the EXIM Policy deals with Promotional Measures which are to be unde .....

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uring the validity period of the Policy, i.e. April 01, 2002 to March 31, 2007, unless otherwise specified. Since all the petitioners who filed the writ petitions have this Status Certificate, on the strength of which they are claiming the special facilities, and in their perspective the impugned notifications adversely affect the availment of these facilities, we reproduce verbatim concerned paras of the Policy touching upon this aspect: Status Certificate 3.7.1 Merchant As Well as Manufacturer .....

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es) 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 knotted carpets, silk carpets/ exporters holding golden status/exporters exporting to countries in Latin America and CIS/ sub Saharan Africa as listed in Appendix-17C, units .....

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ognition. 3. The exports made by a subsidiary of a limited company shall be counted towards export performance of the limited company for the purpose of recognition. For this purpose, the company shall have the majority share holding in the subsidiary company. We now advert to the most crucial provision which entitles these Status Holders to the following benefits: Special Strategic Package for Status Holders 3.7.2.1 The status holders shall be eligible for the following new/special facilities: .....

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status holders having incremental growth of more than 25% in FOB value of exports (in free foreign exchange) subject to a minimum export turnover of ₹ 25 crore (in free foreign exchange). The duty free entitlement 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 .....

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in 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 including garments c) Auto components/ancillary d) Gem & Jewellery e) Agriculture f) Service sector Department of Commerce shall take concerted efforts to promote exports o .....

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ing to export their entire production of goods and services, except permissible sales in the DTA, as per the Policy, may be set up under the Export Oriented Unit (EOU) Scheme, Electronic Hardware Technology Park (EHTP) Scheme or Software Technology Park (STP) Scheme for manufacture of goods, including repair, re-making, reconditioning, re-engineering, and rendering of services. No trading units shall, however, be permitted. 19) Such EOUs/EHTPs/STPs are permitted to export goods through status ho .....

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ollowing words: Eligibility 7.1 (a) Special Economic Zone (SEZ) is a specifically delineated duty free enclave and shall be deemed to be foreign territory for the purposes of trade operations and duties and tariffs. (b) Goods and services going into the SEZ area from DTA shall be treated as exports and goods coming from the SEZ area into DTA shall be treated as if these are being imported. (c) SEZ units may be set up for manufacture of goods and rendering of services. 21) Para 7.8 deals with DTA .....

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older 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 laboratory, .....

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for initial lining, refrigeration equipment, power generating sets, machine tools, catalysts for initial charge, equipment and instruments for testing, research and development, quality and pollution control. Capital goods may be for use in manufacturing, mining, agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture and viticulture as well as for use in the services sector. 9.31 Manufacturer Exporter means a person who export goods manufactur .....

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except in relation to cases where they were specifically regulated by the provisions of this Policy or under any law. In order to facilitate the growth of these exports, following measures were specifically provided in the EXIM Policy: (a) third party exports; (b) stipulating thrust sector, viz. mentioning those products which were having potential in achieving the target of 1% of global trade and accelerated growth in exports. It was, therefore, perceived that in these sectors there is an ampl .....

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on 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 con .....

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orts, 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, it will be our endeavor to facilitate India emerging as a major base for outsourcing products and services for the rest of the world. They are also critical to our strategy for accelerating the rate of incremental growth of exports. Therefore, we intend to give a premium to the status holders who achieve high growth rate in their expor .....

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o associate manufacturers. 25) In fact, as a part of the EXIM Policy, with amendment coming into effect from April 01, 2003, certain incentives known as Special Strategic Package for status holders was incorporated in para 3.7.2.1. We are concerned with sub-para (vi) thereof, which granted duty free entitlement of 10% of the incremental growth in exports. This para is reproduced above. A reading of the said para would demonstrate that in order to have the aforesaid entitlement, following conditi .....

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ntended to be a specific incentive for fast growing status holders, the benefits were to be available only after April 01, 204 on the basis of the export performance during the period April 01, 2003 to March 31, 2004. 26) On the very same day, i.e. on March 31, 2003, in exercise of the powers conferred by Section 5 of the Act, read with para 1.1 of the EXIM Policy 2002-2007, the Central Government amended and notified the EXIM Policy 2002-2007 (revised edition: March 2003). The revised edition c .....

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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 anyt .....

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. 1.3 In case an export or import that is permitted freely under this policy is subsequently subjected to any restriction or regulation, such export or import will ordinarily be permitted notwithstanding such restriction or regulation, unless otherwise stipulated, provided that the shipment of the export of import is made within the original validity of the irrevocable letter of credit established before the date of imposition of such restriction. xx xx xx 2.2 Every exporter or importer shall co .....

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rt or export of rough diamonds shall be permitted unless the shipment parcel is accompanied by Kiberley Process (KP) Certificate required under the procedure specified by the Gem & Jewellery Export Promotion Council (GJEPC). 2.3 If any question or doubt arises in respect of the interpretation of any provision contained in this Policy, or regarding the classification of any item in the ITC (HS) or Handbook (Vol.I) or Handbook (Vol.2), or Schedule of DEPB Rate the said question of doubt shall .....

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of cases, specify 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 suppl .....

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) Prevention of national treasures of artistic, historic or archaeological value. (vi) Conservation of exhaustible natural resources. (vii) Protection of trade of fissionable material or material from which they are derived; and (viii) Prevention of traffic in arms, ammunition and implements of war. xx xx xx 2.8 Every licence/certificate/permission shall be valid for the period of validity specified in the licence/certificate/permission and shall contain such terms and conditions as may be speci .....

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e Rules made thereunder. 2.10 If a licence/certificate/permission holder violates any condition of the licence/certificate/ permission or fails to fulfill the export obligation, he shall be liable for action in accordance with the Act, the Rules and Orders made thereunder, the Policy and any other law for the time being in force. 27) On March 31, 2003, in exercise of the powers conferred under paragraph 2.4 of the EXIM Policy, 2002-207, the DGFT notified the Handbook of Procedures (Volume-I) (Re .....

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icate 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 ₹ 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 .....

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ificate. 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 co .....

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. As noted above, this para provides certain incentives and contains seven sub-paragraphs. After sub-paragraph (vii), five notes were inserted by way of amendment. Though some provisions of Note I are the bone of contention, we reproduce here all these Notes for better understanding: Note 1 - For the purpose of calculating the value of exports, the following exports shall not be taken into account, namely: (i) re-export of imported goods or exports made through transshipment; (ii) export turnove .....

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cted by a non-status holder (Merchant exporter/ Manufacturer 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; and (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. Note 2 - The incremental growth of exports by an exporter sha .....

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edit. To point out here itself, challenge was laid to sub-note (ii), (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 .....

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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 products motor cars sports utility vehicles and all purpose vehicles would not be allowed to be imported against this entitlement. 31) Vide Public Notice bearing No. 40 dated January 28, 2004, which was issued along with the afores .....

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ores in the year 2003-04: I. For direct as well as third party exports, the Export documents viz. Export Order, Invoice, GR Form, Bank Realization Certificate should be in the name of applicant only. However, for the third party exports, where goods have been procured from a manufacturer, the shipping bill should contain the name of the exporter as well as the supporting manufacturer. II. Goods allowed to be imported under this scheme shall have a nexus with the products exported and a declarati .....

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itlement. IV. The last date for filing of such applications shall be 31st December. V. The duty free credit entitlement certificate shall be issued with a single port of registration. For each duty free credit entitlement certificate, split certificates subject to a minimum of ₹ 5 lakh each and multiples thereof may also be issued. A fee of ₹ 1000/- each shall be paid for each split certificate. However, a request for issuance of split certificate(s) shall be made at the time of appl .....

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cate 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 unde .....

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01.2004 are as under: S. No. Exclusion Rational for exclusion Note 1 (i) Re-export of imported goods or exports made through transshipment; Such goods are imported under the customs bond and re-exported with little value addition. Such exports come from country A and go to country B via India and are only pass through exports and not considered exports made in India. (ii) Export turnover of units operating under SEZ/ EOU/EHTP/STPI Schemes or products manufactured by them and exported through DTA .....

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primarily because of the difference in nature of support required by the two sectors. EOUs have been allowed zero duty facilities, besides availing industrial licensing exemptions. Since these exemptions are not available to DTA exporters, specific schemes like DFCE been formulated. (iii) Deemed exports Goods do not leave the country and are not considered physical exports. (iv) Service exports The DFCE scheme was available only for physical goods. (v) Supplies made by one status holder to anoth .....

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rnover 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 whil .....

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sing the export performance which was against the basic principle of the DFCE and hence excluded. Note 2 Note 2. - The incremental growth of exports by an exporter shall not, directly or indirectly, be transferred to any other exporters. The scheme explicitly was based on individual exporters performance. Claiming other firm's exports would mean that the country's export turnover would remain constant while applicant firm's turnover will skyrocket. If the firm had focused on increasi .....

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ng rough diamonds from India is like exporting ostrich or giraffes from India. India imports rough diamonds polished them and exports to the world. The scheme ban rough diamond while fully allowing polished diamonds. Together, the export of diamonds and supplies taken from other status holders accounted for 81.4% of the exports of M/s Adani Exports Ltd. during the year 2003-04. Of these 2475 crores were accounted for by the export of rough and re-exported polished diamonds. The fact that the pet .....

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ellery 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 uns .....

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such exports were excluded. d Items exported under free shipping bills Free (also called white) shipping bills do not mandatorily require verification of valuation by Customs authority (as per Customs Circular No.6/2002 dated 23/1/2002). Firms export under free shipping bills when they do not apply for any Government incentives subsequently. Government received intelligence reports that the export of high value items like rough diamonds were taking place under Free shipping bills where value of .....

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may be recalled that first five notes were inserted by Notification No. 28 dated January 28, 2004. By Note 6, certain products and category of products were excluded from entitlement under duty free entitlement certificate for status holders, whereas under Note 7, certain items were not allowed for imports under duty free entitlement certificate for status holders. These Notes read as under: Note 6 - The export of the following products and categories of products would not be permitted for coun .....

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port and Import items. Note 6 added in para 3.7.2.1 of the EXIM Policy was earlier inserted as part of para 3.2.6 in the Handbook of Procedures (Volume-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 fo .....

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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) Aggrieved by the judgment and order of the High Court of Gujarat in Special Civil Application No. 1676 of 2004, M/s Adani Exports on October 30, 2004 filed Special Leave Pet .....

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pendix 17D prescribing the application format for claiming the Duty Free Credit Entitlement. 38) On July 04, 2005 Writ Petition No. 2397 of 2004 filed by M/s. Kanak Exports before the High Court of Judicature at Bombay challenging the Notification No. 28(RE-2003)/2002-2007 dated January 28, 2004, Public Notice No. 40(RE-2003)/2002-2007, Notification No. 38(RE-2003)2002-2007, came up for hearing before a Division Bench of High Court and upon hearing the parties, the High Court of Judicature at Bo .....

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ent of Duty Free Imports. 39) On October 21, 2005, this Court issued notice on the Special Leave Petition as well as on application for condonation of delay in the Special Leave Petition © (CC NO.6638 of 2005) filed by M/s. Adani Export Ltd. 40) On December 13, 2005, aggrieved by the order of Bombay High Court dated July 04, 2005 in W.P. No.2397 of 2004 upholding the validity of the Notification No.28 of 2004 dated January 28, 2004, M/s. Kanak Exports filed Special Leave Petition (Civil) No .....

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397 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 .....

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ent Notifications dated April 21 and 23, 2004 and rejected the challenge on all other counts. The Bombay High Court substantially followed the same line of action, except differing with the Gujarat High Court to a limited extent thereby granting some more relief to these petitioners. Since these two judgments are the subject matter of these appeals, it would be apposite to scan through these judgments to find out what actually is decided by the two High Courts and the reasons in support of their .....

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aforesaid provisions was questioned on the following premise: (i) Since Note 4 provided that the guidelines would be applicable to exports made on or after April 01, 2003, Notification was challenged on the ground that it amounted to giving retrospective effect to the amendment Notification dated January 28, 2004 and there was no such power with the Central Government under Section 5 of the Act, or otherwise, to make amendments to the EXIM Policy with retrospective effect, or even retroactively .....

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which came into effect from April 01, 2003, the petitioners had exported the goods on the promise and assurance contained in sub-para (vi) of Para 3.7.2.1 of the EXIM Policy and fulfilled the conditions set out therein, thereby achieving the target of incremental exports stipulated in the said para and, thus, became 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 .....

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ed, 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 imple .....

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right of the Government to amend the Policy in public interest. It was argued that a statutory power to amend the Policy, after noticing the misuse of the Policy, for the purpose for which it was never intended, cannot be frustrated on the plea that the petitioners had a legitimate expectation that they can continue to exploit the Policy for a purpose totally different from the one for which it was intended and then expect that the Government would not take any action whatsoever. It was argued t .....

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rification or even change of the Policy. 47) After taking note of the aforesaid submissions of both the parties, the High Court stated certain legal principles referring to few judgments of this Court, which it deemed necessary to bear in mind, as they reflected the caveat sounded in those judgments. In this behalf, it quoted the following passage from the judgment of this Court in State of Madhya Pradesh & Ors. v. Nandlal Jaiswal & Ors. (1986) 4 SCC 566, which guides as to how the Court .....

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islature 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 .....

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elf-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability. What we said in that case in regard to legislation relating to economic matters must apply equally in regard to executive action in the field of economic activities, though the executive decision may not be placed on as high a pedestial as legislative judgment insofar as judicial deference is concerned. We must not forget that in complex economic matters every decision is necessarily empiric an .....

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heatre Company v. State of Chicago [57 L Ed 730]: are practical ones and may justify, if they do not require, rough accommodations, illogical, it may be, and unscientific. But even such criticism should not be hastily expressed. What is best is not discernible, the wisdom of any choice may be disputed or condemned. Mere errors of government are not subject to our judicial review. It is only its palpably arbitrary exercises which can be declared void. The Government, as was said in Permian Basin .....

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pers Karamchari Union v. Union of India & Ors. (2000) 10 SCC 619 and in BALCO Employees Union (Regd.) v. Union of India & Ors. (2002) 2 SCC 333 Thereafter, the High Court referred to the various provisions of the EXIM Policy and the amendments made by the impugned Notifications as well as Public Notice, which have already been taken note of above. 49) The High Court thereafter adverted to three exclusions under Note 1 to Para 3.7.2.1 which, according to the writ petitioner, had adversely .....

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ion 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 inte .....

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ho is the original export order holder, to the status holder for artificially enhancing the incremental growth of exports of the status holder will not further the object of the incentive scheme. Therefore, the Government stipulated through the impugned Notification dated January 28, 2004 that the condition of 25% incremental growth of exports will apply both to the petitioner/status holder as well as to the supplier, whether the supplier is a status holder or is an existing supplier/exporter of .....

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giving artificial appearance of the incremental growth of exports. 51) On the aforesaid basis, the High Court concluded that the main purpose of the Notification dated January 28, 2004 was to prevent transfer of export orders from one group company to another company belonging to the same group in order to show enhanced export performance of such another company and, therefore, it was clarificatory in nature. 52) The Court then took up for consideration the argument of the writ petitioner that t .....

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4, are excluded because the benefit of duty free import was already 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 .....

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ccordance 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 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. .....

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o substance in the challenge to Notes 1 and 2 read with Note 4. 53) On the aforesaid basis, insofar as Notification dated January 28, 2004 is concerned, its validity has been upheld. The High Court then discussed validity of Public Notice of the even date. Observing that by this Public Notice certain export products from the Incentive Scheme were sought to be excluded and it could not be treated as mere clarifications, the High Court held that DGFT had no power to exclude exports of such groups .....

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and after discussing the aforesaid legal concepts, it came to the conclusion that Notes 3, 6 and 4 were only retroactive in nature and not retrospective and since Notification dated January 28, 2004 (including Note 3 thereof) on exports made from April 01, 2003 was upheld as valid, Notifications dated April 21 and 23, 2004, flowing from the said Note 3 and adopting contents of Public Notice dated January 28, 2004, could not be faulted with on the ground of retrospectivity. 55) The Court then to .....

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ions 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/supportin .....

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in nature which was issued to stop the misuse and abuse of the scheme as the main purport of the scheme was to encourage the export of products and not to encourage the status holders/export user to pool the exports made by other exporters for the purpose of showing incremental growth in the export. Paras 19 and 20 of the High Court containing discussion on this aspect are noted below. 19. The reasons for making clarifications are contained in para 5 of the impugned Notification. It appears tha .....

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per arrangement with a view to claim benefits of duty free credit entitlement on the export of others. It also came to notice that the 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 growth. In the face of this clear abuse of the scheme the Central Government had to intervene and issue the impugned Notification to clarify the correct meaning of the scheme. Note 2 of th .....

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pears that till 2002-2003 the petitioners export performance was going down steadily. In 2002-2003 the export of the petitioners was hardly ₹ 27 crores. In the year 2002-2003 India s export increased 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 gro .....

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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 b .....

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e only paper growth and amount to abuse of the scheme. Reliance placed by the petitioners on Circular No. 16 dated 24tth December 2002 is also of no assistance as the said Circular stating that 3rd party exports are eligible for all the export promotion schemes was issued long before the special incentive scheme was announced on 31st March 2003. In our opinion, the provisions contained in the impugned Notification dated 28th January 2004 are merely clarificatory and cannot be treated as amendmen .....

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by the DGFT has been held to be without jurisdiction inasmuch as DGFT has no power to do so under Section 5 read with Section 3 of the Act. The Court held that by this Public Notice, four items were sought to be excluded from the purview of the scheme and, therefore, it amounted to amendment of the scheme which could be done by the Central Government only that too by means of Notification under Section 5 of the Notification, clarified that power of the DGFT is only to be exercised for procedural .....

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uthority 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 .....

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power to make a piece of delegated legislation. The connotation of the word amend when it is used of the exercise of power by a legislature cannot be pressed to construe the word amend in relation to the power to make delegated legislation. In taking this view, the High Court relied upon the judgment of this Court in Accountant General and Another v. S. Doraiswamy and Others (1981) 4 SCC 93. Another contention of the Union predicated on Section 21 of the General Clauses Act to buttress its submi .....

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dment retrospectively, that could not be assumed on the ground that it was necessitated in public interest. On this aspect, the Bombay High Court did not agree with the view taken by Gujarat High Court which held that Notifications dated April 21 and 24, 2004 were merely retroactive and not retrospective, by giving following reasons: The Division Bench, however, proceeded to hold that the Notifications dated 21st/24th April, 2004 are merely retroactive and not retrospective. We may hasten to add .....

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xercise of power conferred by sec. 5 of the Foreign Trade Act then whether the said amendment is retro-active or retrospective is rather immaterial. The amendment has clearly an impact on the rights which are already crystallized. We have therefore no hesitation to hold that the Notifications dated 21st and 23rd April 2004 would have prospective operation only. OUR ANALYSIS AND CONCLUSIONS 58) The factual matrix, coupled with the arguments advanced before us by both sides, makes it clear that th .....

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rst 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, v .....

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diately after the introduction of the scheme, it was found that there was unprecedented sharp rise in the export in Gem and Jewellery articles. It raised certain suspicion in the mind of the authorities as to whether these were genuine exports. The matter was investigated and on the basis of intelligence gathered by the Central Government, it was learnt that there was rampant misuse of the scheme by certain status holders. On October 13, 2003, the then Joint Secretary, Government of India, Centr .....

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y shifting exports in the name of any one status holder group company so as to artificially achieve incremental growth of 25% in exports. You would agree that the objective of DFCEC Scheme is to encourage status holders to achieve substantial growth in exports so that there is corresponding increase in the foreign exchange earnings of the country. It is, therefore, necessary to put suitable safeguards in DFCEC Scheme for Status Holders so that third party exports are not counted for the purpose .....

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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 h .....

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i Exports Ltd. Adani House, Navrangpura, Ahmedabad A/c State Trading Corporation of India Ltd. Photocopies of the set of documents is enclosed herewith. It is also to be pointed out that the DEPB benefit available on sugar is only 4% but under the incentive scheme the exporter is entitled to benefit of 4% plus additional 10%. If purchase of exports from third parties or shifting of exports from one company to the other in the group is inconsistent with the intention and objective of the scheme, .....

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in the EXIM Policy and the Customs Notifications in accordance with the objectives and intentions of the Government so that what is plainly permitted by the scheme is not regarded subsequently as misuse or abuse of the scheme. It is also brought to the notice that it is open to the exporters to export under free Shipping Bill where as per the current instructions there is no scrutiny of Shipping Bills or physical examination of the goods. This would enable the unscrupulous exporters to inflate .....

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ny and its limited company shall be taken together to determine the incremental exports. - In case of EOU/SEZ/STP/EHTP units, this facility shall not be available as such units are already eligible for duty free import of capital goods/raw materials/office equipments etc. Further the status holder which also has a DTA unit along with EOU/SEZ/STP/EHTP unit should be excluded for the purpose of determining of third party export. - Value of third party export. - In case of doubt regarding valuation .....

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atus 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 addit .....

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buyer (notification No. 56/2000-Customs dated 5-5-2000) - Scheme for providing replenishment license issued order under or in accordance with paragraph 4.4.1 of the EXIM Policy; and Gem Replenishment License issued under in accordance with paragraph 4.4.13 of the EXIM Policy -under these schemes, raw pearls, natural or cultures, and precious or semi-precious stones (other than rough diamonds), unset and uncut are allowed to be imported duty free. - In addition to above, this sector has large po .....

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examination. 63) On 19.11.2003, the Officer on Special Duty, Government of India, Ministry of Finance, Department of Revenue issued a Circular No. 98/2003 stating that: Commissioner of Customs (Export), ACC, Sahar had raised an issue whether under DFCEC Scheme, import of all capital goods including professional equipments could be allowed. This doubt has also been created on account of usage of the words capital goods in condition (3) of Customs Notification No. 54/2003. This issue has been exam .....

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ady been allowed through EPCG route. Therefore, insofar 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 .....

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R), 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 Scheme: (a) The BRC and Shipping Bill and the GR Form should bear the name of the merchant exporter and the associate/supporting manufacturer in case of third party export. (b) There should be a minimum growth of 25% in the exports of both supporting/as .....

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regard to the import of capital goods under the Duty Free Credit Entitlement Scheme the matter was deliberated upon and it was decided not to allow all capital goods other than the professional equipment and office equipment mentioned in paragraph 3.8 of EXIM Policy against DFCE to service providers. 66) On December 11, 2003, the Additional Director General, Directorate of Revenue Intelligence addressed a letter to the Joint Secretary, (Draw back), Ministry of Finance reiterating the suggestions .....

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002-2007 while issuing the duty free import entitlement certificate. (ii) White computing the incremental growth in FOB value of exports, only the value of exports, which have been made directly by the status holder as involved in the export documents and for which the export proceeds have been realized in the name of the status holders shall be taken into account. 68) Thereafter, on December 12, 2003, the Chief Commissioner of Customs, Mumbai addressed a communication to the Joint Secretary (Dr .....

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larificatory 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 g .....

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herefore be suggested to the Ministry of Commerce and DGFT that the value of the exports made under Free Shipping Bill may not be counted for the purpose of calculating 25% incremental growth in export under the DFCEC Scheme(.) Alternatively, the exporters claiming for incremental growth against free shipping Bills with the benefit of DFCEC Scheme should declare it in all such Shipping Bills, so that such exports could be put to rigors of customs scrutiny including valuation and physical examina .....

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the procedural aspects of the EXIM Policy as reflected in the Handbook of Procedures (Volume-1). 71) The individual divisions were allocated the task of amending the procedural aspects of the EXIM Policy. Inputs were received from the EPCG division headed by Addl. DGFT (MLB) which carried out changes in Chapter 5 of the Handbook of Procedures (Volume-1), PC II Division carried out changes in the Deemed export chapter and DES IV Division suggested changes in Chapter IV of the Handbook of Procedur .....

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uty free entitlement for status holders has been fine tuned to obviate any possible misuse such as mandating the insertion of the exporter and third party s name on the export documents, need 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 .....

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Kanak Exports and M/s. Rajesh Exports, their export growth exceeded a growth rate of 2000% and their entire export comprises of gold coins and plain Jewellery. The relevant turnover of these companies for the year 2002-2003 and 2003-2004 is as under: Firm Turnover 2002-03 Turnover 2003-04 % Growth Share of Gold coins and Plain jewellery in total Exports Rajesh Exports, Bangalore 112 2372 2017 100 Kanak Exports, Mumbai 27 1070 3816 100 That in case of M/s. Adani Exports, the Petitioner herein, th .....

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egories in the total exports 81.4% Export surge of 1135% for M/s. Adani Exports came in 2003-04 while for the past 6 years their exports were declining. The above said growth rate of the companies who have challenged the Notifications and the Public Notices, has been achieved on account of the following: I-Purchase of exports Purchase of the exports of other firms (who were not eligible to get the benefit of the scheme) by M/s. Adani Exports Ltd. to inflate their turnover. For this contracts wer .....

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try. 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 Ex .....

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e been declared as Studded gold jewellery/CE Bangles at the Indian port, whereas at the port of destination they were cleared as gold scrap. In few consignments belonging to M/s Adani Exports Ltd. and produced by M/s Rajesh Exports as supporting manufacturer, the export products declared as Bangles were nothing but strips of gold formed into the shape of bangle and studded with cheap imitation stone. That as it was difficult for them to achieve the value addition prescribed by the Policy through .....

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ar. That means that an unscrupulous exporter can expect to earn ₹ 1500 for every ₹ 100 invested. As these are not commercial operations and export and import takes place between related parties, the illegitimate earnings are at the expense of the country. IV-Export of cut and polished diamonds-Circular trading and Exports to related companies According to reliable information the same sets of diamonds were rotating and these never entered the Indian domestic territory or to the end c .....

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ions the name of M/s. Gudami International 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 .....

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ese 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 support the plea of the Government that the Notifications were issued to curb the misuse and were clearly in public interest. Exact summary and details of misuse as mentioned in the said note are as under: Executive Summary The following note is based on the intel .....

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s and act as third party exporter. According to the Department of Revenue, Status Holders were purchasing exports made by other parties by paying money with a view to show incremental growth of 25% or more in their own exports. Claiming other firm s exports through such mechanism would mean that the country s export turnover would remain constant while applicant firm s turnover will skyrocket. Export of rough diamonds even though India is not a rough diamond producing country. These exports stop .....

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p in Dubai to avoid the import duty. Since these companies were producing shoddy products in a 12 hour operation, it was difficult for them to achieve the value addition prescribed by the Policy through craftsmanship and hence 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. Government has secured key documents from UAE Customs. Cut and polished diamonds were imported, sto .....

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volved 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 .....

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redominantly on account of buying of exports from the parties who would otherwise not be eligible under the Scheme. To plug the misuse and also to provide clarification on the details of the Scheme, Notification 28 and Public Notice 40 were issued on 28.1.2004. I-Purchase of exports One of the major misuses reported was that many Status holders were entering into contracts with various exporters for arrangements showing themselves as third party exporters. Such contracts were executed on stamp p .....

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other parties at a premium with a view to show incremental growth of 25% or more in exports without having actually achieved such growth. 973 crores worth of exports of M/s. Adani Exports Limited came from the supplies from large exporters (status holders). Status holders are large sized exporters who export their goods directly. In this case the benefits of DFEC Scheme were not applicable to all status holders but only to those status holders who were meeting the incremental growth and turnover .....

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s of export turnover, however, the firms chose to focus on people who were already exporting (but were not entitled for this benefit). Thus, the firm s turnover in the past year 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 t .....

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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 are relevant for our purposes. Here, we are concerned with para 3.7.2.1 of the Scheme, which we reproduce again for ready reference: 3.7.2.1 T .....

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iation period from 180 days to 360 days; (vi) Duty free import entitlement for status holders having incremental growth of more than 25% in FOB value of exports (in free foreign exchange) subject to a minimum export turnover of ₹ 25 crore (in free foreign exchange). The duty free entitlement 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 .....

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STPI Schemes or products manufactured by them and exported through DTA units; (iii) deemed exports (even when payments are received in Free Foreign Exchange) and payment from EEFC account; (iv) service exports; (v) supplies made by one status holder to another status holder; (vi) export performance made by one status holder on behalf of other status holder will not be eligible for entitlement under the scheme; (vii) Supplies made or export performance effected by a non-status holder (Merchant ex .....

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ct 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 s .....

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s for the rest of the world. They are also critical to our strategy for accelerating the rate of incremental growth of export. Therefore, we intend to give a premium to the status holders who achieve high growth rate in their exports. It is proposed to give a duty free entitlement to them for import of capital goods, spares, office equipments and consumables. This will be available to status holders who achieve a growth rate of 25% or more in the current year with a minimum export performance of .....

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us exporters showing themselves as third party exporters. These contracts were executed on stamp papers ostensibly showing such status holders as third party exporters helping other parties in obtaining the orders. It was found that these were merely paper arrangement with a view to claim benefits of duty free credit entitlement on the export of others. Insofar as case of writ petitioner Kanak Exports is concerned, the High Court noticed that in the year 2002-2003, the export of this petitioner .....

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de by other exporters for the purpose of showing incremental growth. On that basis, the High Court held that the Notification dated January 28, 2004 was merely clarificatory and cannot be treated as amendment to the scheme and backed this conclusion with the following reasons: ....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 .....

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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 himself and not .....

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04 are merely clarificatory and cannot be treated as amendment to the scheme. 82) The Gujarat High Court, likewise, had come to the same conclusion in the writ petition of Adani Exports Limited. In fact, paras 17 and 18 of the judgment of the Gujarat High Court is reproduced by the Bombay High Court in its judgment which reflects the mind of the Gujarat High Court in coming to the same conclusion. These paras read as under: 17. Under the policy in force prior to the impugned notifications and ev .....

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tware 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 EOU/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: .....

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xports 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 Gov .....

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included and taken into account for the purpose of calculating the value of exports. Both the High Courts in the impugned judgments have held it to be clarificatory on the ground that such export turnover was excluded as these units, namely, those pertaining to SEZ/EOU/EHTP/STP schemes are getting all facilities for import without payment of duty on various types of goods including capital goods required by them for their activities and there was no intention in the original scheme also to conf .....

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sion. No doubt, such EOU/EHTP/STP schemes are allowed to export goods manufactured by them through a merchant exporter/status holder recognised under the EXIM Policy. Likewise, SEZ is also authorised to export its goods through a status holder. The permission to make exports through status holder is one thing. Taking into account these exports by the status holders for the purpose of calculating the value of exports for availing the benefits of the entitlement given under the scheme is altogethe .....

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the scheme was not to give double benefit for same exports. In fact, if that is allowed, it would be a clear case of misuse of the scheme inasmuch as for the same export turnover units operating under SEZ/EOU/EHTP/STP would get the certain incentives and the status holders also manage to extract the same benefits exploiting the scheme by exporting the goods manufactured by these STZ/EOU etc. On considering the issue in this hue, we agree with the opinion of the High Court that such a sub-note ( .....

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ports 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 .....

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tus holder will not be taken into account for the purpose of calculating the value of exports, if the applicant as well as the non status holder have less than 25% incremental growth over their respective previous years. This appears to be clearly clarificatory in nature inasmuch as the purpose of the Scheme was to give benefit to those who are able to achieve incremental growth of 25%. Thus, each such status holder has to independently attain the growth target stipulated in the scheme to avail .....

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on this issue is as to: Whether Public Notice dated January 28, 2004, issued by the DGFT, which sought to exclude the export performance related to class of goods, is without jurisdiction? 87) The main submission of the petitioners, which was before the High Courts as well and reiterated before us, was that Public Notice dated January 28, 2004 seeks to amend the EXIM Policy and DGFT does not have any such power inasmuch as this EXIM Policy is statutory which is issued under Section 5 of the Act .....

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ru, learned senior counsel appearing 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 c .....

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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 into the Scheme of the Act. For this purpose, Section 5 as well as Section 6 of the Act are to be taken note of in the first instance and read as under: 5. Foreign Trade Policy.-The Central Government may, from time to time, formulate and announce, by notification in t .....

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Director-General of Foreign Trade for the purposes of this Act. (2) The Director-General shall advise the Central Government in the formulation of the [foreign trade policy] and shall be responsible for carrying out that policy. (3) The Central Government may, by Order published in the Official Gazette, direct that any power exercisable by it under this Act (other than the powers under sections 3, 5, 15, 16 and 19) may also be exercised, in such cases and subject to such conditions, by the Dire .....

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he Official Gazette. It is not in dispute that EXIM Policy in question was issued by notification in exercise of powers conferred under Section 5 of the Act. This Policy, thus, is infested with statutory flavour. 91) For the purpose of carrying out the objectives of the Act which includes implementation of the Policy, Central Government is authorised to appoint DGFT as per Section 6 of the Act. Main functions of the DGFT are advising the Central Government in formulation of the Policy and he is .....

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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 .....

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or anything done under the previous Export/Import Policies, and in force immediately before the commencement of this Policy shall, insofar as they are not inconsistent with the provisions of this Policy, continue to be in force and shall be deemed to have been made, issued or done under this Policy. License/Certificate/ Permissions issued before the commencement of this Policy shall continue to be valid for the purpose for which such licence/Certificate/permission was issued unless otherwise sti .....

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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) . 93) It is explained by the learned counsel for the Union of India that a Notification issued under Section 5 of the Act or any change brought about by the DGFT .....

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. On the other hand, Notifications issued by the Ministries of Government of India (other than the Defence Ministry) are published under Part 2 Section 3 and sub-section 2 of the 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 publi .....

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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 four items contained therein, as pleaded by the Union. However, it had to be done in accordance with law. When the DGFT had no po .....

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by the Central Government by issuing Notifications dated April 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. 96) Therefore, we hold that public notice dated January 28, 2004 issued by DGFT, so far it excludes the aforesaid four items, is ultra vires. 97) Now, we advert to the issue pertaining to Notification dated April 28, 2004. The question here is as to: Whether subsequent Notification dated April 21, .....

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efore, it could do so vide Notifications dated April 21 and 23, 2004. The only question is as to whether these Notifications are bad in law on the ground that they seek to apply retrospectively. 99) We start with the premise that there was complete justification for excluding the four items insofar as grant of benefit under scheme is concerned. The Union of India has been able to demonstrate the same in full measure. This aspect has already been discussed in detail at the outset itself. 100) How .....

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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 ma .....

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is also shown that the same was done in public interest, the Court would not tinker with these policy decisions. This is so laid down by catena of judgments of this Court and is now treated as established and well grounded principle of law. In such circumstances, even the Doctrine of Promissory Estoppel cannot be ignored. 102) We may suitably refer to the judgment of this Court in Kasinka Trading v. Union of India (1995) 1 SCC 274. In that case, Government of India had issued Notification under .....

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, 1979, it had placed orders for the import of PVC resins on the understanding that the commodity was totally exempt from customs duty, the Government must be held bound by the representations contained in the notification dated March 15, 1979 and the Government was estopped on the basis of promissory estoppel to go back on its promise. The Government justified the withdrawal of exemption on the ground that the Government had issued notification dated March 15, 1979 with a view to equalizing sal .....

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y the Union of India justifying withdrawal of the exemption notification, in our opinion, are not irrelevant to the exercise of the power in public interest nor are the same shown to be insufficient to support the exercise of that power . The Court also observed that, the power to grant exemption from payment of duty flows from the provisions 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 suscept .....

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mined 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 o .....

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ase also, the appellants-petitioners had alleged that they would not have imported the PVC resin without the exemption as that would have been unviable and uneconomical and further that many persons took full advantage of the exemption. The Court held that the facts of the economic situation explained in the judgment rendered in Kasinka Trading s case were not contravened nor was it alleged that public interest did not call for supersession of the exemption notification. The Court also examined .....

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. It is well settled that in complex economic matters every decision is necessarily empiric and it is based on experimentation or what one may call trial and error method and therefore its validity cannot be tested on any rigid prior considerations or on the application of any straight-jacket formula. In Balco Employees Union (regd.) v. Union of India and Ors. (2000) 2 SCC 333, the Supreme Court held that Laws, including executive action relating to economic activities should be viewed with grea .....

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ether 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 .....

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incremental growth in exports. The only condition was that this entitlement was to be used w.e.f. April 01, 2004 for import of items specified in the said clause. On that basis, it was argued that the effect of the impugned Notification was to take away this vested right accrued away in their favour and it amount to giving retrospective operation to the said circular which was not permissible. Following judgments were cited in support of the plea that there was no such power to make provision w .....

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provisions of the policy decision in the light of sub-section (2) of Section 3 of the 1992 Act can only have a prospective effect. By reason of a policy, a vested or accrued right cannot be taken away. Such a right, therefore, cannot a fortiori be taken away by an amendment thereof. (ii) State of Rajasthan & Ors. v. Basant Agrotech (India) Ltd. (2013) 15 SCC 1 21. There is no dispute over the fact that the legislature can make a law retrospectively or prospectively subject to justifiability .....

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t and retroactive operation, if any power in this behalf is contained in the main Act. The rule-making power is a species of delegated legislation. A delegatee therefore can make rules only within the four corners thereof. 42. It is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. (iii) Keshavlal Jethalal Shah v. Mohanlal Bhagwand .....

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self 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. A .....

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n has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow s backward adjustment of it. Our belief in the nature of the law is founded on the bed rock t .....

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ght not to change the character of past transactions carried on upon the faith of the then existing law. 29. The obvious basis of the principle against retrospectivity is the principle of fairness , which must be the basis of every legal rule as was observed in the decision reported in L Office Cherifien des Phosphates v. Yamashita- Shinnihon Steamship Co. Ltd. (1994) 1 AC 486 Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disabi .....

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o few judgments containing this dicta, a little later. xx xx xx 33. A Constitution 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 t .....

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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 tenancy. It is true that the appellant gave notice to the respondents on March 11, 1952 as he was then no doubt entitled to do; but his right as a landlord to obtain possession did not accrue merely on the giving of the notice, it accrued in .....

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for ejecting tenants. 9. In this connection it is relevant to distinguish between an existing right and a vested right. Where a statute operates in future it cannot be said to be retrospective merely because within the sweep of its operation all existing rights are included. As observed by Buckley, L.J. in West v. Gwynne retrospective operation is one matter and interference with existing rights is another. If an Act provides that as at a past date the law shall be taken to have been that which .....

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trospective construction of Section 3 of the Conveyancing and Law of Property Act, 1892 (55 & 56 Vict. c. 13). In substance Section 3 provided that in all leases containing a covenant, condition or agreement against assigning, underletting, or parting with the possession, or disposing of the land or property leased without licence or consent, such covenant, condition or agreement shall, unless the lease contains an expressed provision to the contrary, be deemed to be subject to a proviso to .....

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d 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 F .....

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eclaration to the tenant of the intention of the landlord to terminate the tenancy; but it is always open to the landlord not to carry out his intention. Therefore, for the application of the restriction under sub-section 2(a) on the right of the landlord to terminate the tenancy, the crucial date is not the date of notice but the date on which the right to terminate matures; that is the date on which the tenancy stands terminated . (vi) Sakuru v. Tanaji (1985) 3 SCC 590 4. Our attention was dra .....

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in nature. The provisions of Section 93 as they stood prior to this amendment were free from any ambiguity and called for no clarification. The Legislature has also not given any indication of any intention to clarify but, on the other hand, what has been done by it is to amend the section with only prospective effect. The amended provisions of Section 93 are, therefore, of no assistance to the appellant in this case which is governed by the section as it was originally enacted. (vii) Union of .....

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dated 3-7-1986 Sir, I am directed to refer to your Letter F.No.CC/CHD/2003-04/935 dated 4-12-2003 on the above subject and to say that the matter has been examined in consultation with DoP&T and necessary clarification 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 .....

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ith 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 recruits are appointed. And further, that direct recruits cannot claim seniority with reference to the year in which the vacancies against which they are appointed had arisen. In our con .....

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-5-2004 breaches both the essential ingredients of a clarification referred to above. That apart, the Letter dated 11-5-2004 is liable to be ignored in view of two subsequent Letters of the Ministry of Finance, Department of Revenue dated 27-7-2004 and 8-9-2004. 37. The Letter dated 27-7-2004 is reproduced hereunder: New Delhi, 27-7-2004 To, The Chief Commissioner of Income Tax (CCA), Chandigarh Subject: Fixation of inter se seniority of DR and promotee Income Tax Inspectors in view of clarifica .....

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controversy on the basis of the OM dated 3-3-2008, it is necessary to examine one related submission advanced on behalf of the direct recruits. It was the contention of the learned counsel, that the OM dated 3-3-2008 being an executive order issued by the Department of Personnel and Training, would apply only prospectively. In this behalf it was pointed out, that the disputed seniority between rival parties before this Court was based on the appointment to the cadre of Income Tax Inspectors, wel .....

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s 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 cann .....

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Notification was issued on January 28, 2004. On this basis, it was argued that the Notification given only retroactive effect and not retrospective effect. 108) We may, in the first instance, make this legal position clear that a 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 s .....

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r General. The word amend does not give power to make amendment retrospectively if it is used in relation to the power to make a piece of delegated legislation. The connotation of the word amend when it is used for the exercise of power by a legislature cannot be pressed to construe the word amend in relation to the power to make delegated legislation. In this regard the following observations of the Supreme Court in Accountant General and another v. Doraiswamy (1981) 4 SCC 93 are pertinent: The .....

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09 of the Constitution could have retrospective operation. The conclusion followed from the circumstance that the power conferred under the proviso to Article 309 was intended to fill a hiatus, that is to say, until Parliament or a State 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 inten .....

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lause 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 must be held ultra vires. The reliance placed on the power to .....

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l is also of no assistance to sustain the retrospective operation of the notification. Section 21 of the General Clauses Act embodies a rule of construction, nature and extent of application of which must inevitably be governed by the relevant provisions of the statute which confers power to issue the notification. The said power must be exercised within the limits prescribed by the provisions conferring the said power. (See Gopichand v. Delhi Administration, AIR 1959 SC 609, Lachmi Narayan and .....

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ction 88 would exempt it and Section 88 would contain the power to exempt retrospectively. Similarly, Section 14 of the General Clauses Act has no application as it merely provides that where any power is conferred on the Government, then that power can be exercised from time to time as occasion requires. Under that Scheme the status holder is eligible for benefits upon achieving the incremental growth of 25% of the FOB value of exports in the current year over the previous year. It therefore fo .....

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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, .....

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terms of the scheme which, of course, was to be availed from April 01, 2004. The case of the Government, on the other hand, is that the benefit was to accrue to these exporters only from April 01, 2004 and before that it was withdrawn and, thus, no vested right accrued in their favour. It was also argued that in the policy, which provides special incentives to status holder, the term incremental growth in export was not defined/clarified at the time when the policy was issued. By the impugned n .....

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fications, provides a very tidy answer to the question posed above is that the so-called targets achieved were only on paper through fraudulent means and, therefore, it cannot be said that any vested right accrued in favour of these exporters. 112) We have referred to such material in detail while upholding the contention of the Union that Notifications were issued in public interest to ensure that their misuse is not allowed. To recapitulate, the inquiry conducted by the Government revealed tha .....

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rt duty. Following statistics given by the Government in respect of so-called exports by these exporters makes out startling revelations: Growth exceeding 2000% for two petitioners came from 100% export of gold coins and plain jewellery Firm Turnover 2002-03 Turnover 2003-04 % Growth Share of Gold coins 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 Su .....

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It is pertinent to note that except the above mentioned persons no other exporter in the country has challenged the said Notifications or the Public Notices dated January 28, 2004 and April 21, 2004 respectively. It was also brought to the notice of the DGFT that some of the exporters have procured rough diamonds from local firms and exported the same by a 5% loss as they were confident of covering up the loss by receiving the 10% DFCE incentives offered by the Government. All these aspects are .....

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Export of such rough diamonds earlier has 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. (ii) In the present case also the respondent M/s Adani Exports Limited had stopped exporting the rough dia .....

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er entered the Indian domestic territory or to the end consumers abroad. The value of such exports in the past two years may exceed ₹ 15,000 crores. Government has detailed report of the modus operandi of the firms involved. (v) 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/s. Rajesh Exports Ltd. and M/s. Adani Exports Ltd. (vi) Many of these exporters exported to their own counte .....

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xporters 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 growth. 114) In such a scenario, a sagacious .....

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-whelming public interest/ considerations to prevent the misuse of the Scheme. Therefore, we are of the opinion that even when impugned Notification issued under Section 5 could not be retrospective in nature, such retrospectivity have not deprived the writ petitioners/exporters of their right inasmuch as no right had accrued in favour of such persons under the Scheme. This Court, or for that matter the High Court in exercise of its writ jurisdiction, cannot come to the aid of such petitioners/e .....

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and it was necessary to have recourse to Section 5 of the Act to impose such a fee. Notification dated July 24, 2003 insofar as it relates to imposition of fee is, therefore, set aside. 116) Thus, appeals and transfer cases stand disposed of in terms of aforesaid answers provided by this Court to the various questions formulated. To put it precisely, the effect of the aforesaid discussion would be to uphold the decision of the Gujarat High Court, though on different grounds, thereby dismissing .....

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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 th .....

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se amendments are given retrospective effect from April 01, 2005, these matters were also analogously heard with the other batch of cases which have already been dealt with above. 119) As already noted above, the Government had announced EXIM Policy 2004-2009. In this Policy various schemes and incentives to promote exports were promulgated. One such scheme was known as Target Plus Scheme (TPS) for the aforesaid period of EXIM Policy, i.e. April 2004 to March 2009. This TPS was contained in para .....

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pegged at 20% for the current year). 3.7.2 Eligibility Criteria All Star Export Houses (including Status Holders as defined in Para 3.7.2.1 of Exim Policy 2002-07) which have achieved a minimum export turnover in free foreign exchange of ₹ 10 crores in the previous licensing year are eligible for consideration under the Target Plus Scheme. 3.7.3 Entitlement The entitlement under this scheme would be contingent on the percentage incremental growth in FOB value of exports in the current lic .....

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, 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 eli .....

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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 Chapter 9 will be applicable. Furthermore, only such companies of the Group as are Star Export Houses will be considered). If a Group company c .....

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e previous licencing year. In case the Group chooses to apply based on the overall growth in Group s turnover (i.e. the turnover of all the Star Export House companies), any one of the Star Export House companies of the Group may file an application on behalf of all the Star Export House companies of the Group. 3.7.5 The following exports shall not be taken into account for calculation of export performance or for computation of entitlement under the scheme: (a) Export of imported goods covered .....

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cluding plain and studded Jewellery. (g) Export performance made by one exporter on behalf of another exporter. 3.7.6 Imports allowed The Duty Credit may be used for import of any inputs, capital goods including spares, office equipment, professional equipment and office furniture provided the same is freely importable under ITC (HS) Classification of Export and Import items, for their own use or that of supporting manufacturers as declared in Aayat Niryaat Form . Import of agricultural Products .....

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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 .....

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t shall have the right to change the eligibility criteria and rate of entitlement under the scheme effective from the date of notification of this policy. Similarly, Government may from time to time also notify the list of goods, which shall not be allowed for import under the duty credit entitlement certificate issued under the scheme. 120) Provisions relating to star export houses were contained in para 3.5 of Chapter 1A of the said Policy, which enumerated the Status Category as well as the p .....

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egory The applicant shall be categorized depending on his total FOB/FOR export performance during the current plus the previous three years: Category Performance (Rupees in Crores) One Start Export House 15 Two Star Export House 100 Three Star Export House 500 Four Star Export House 1500 Five Star Export House 5000 Note: 1. Manufacturer exporters in Small Scale Industry/Tiny Sector/Cottage Sector, Units registered with KVICs/KVIBs, Units located in North Eastern States, Sikkim and J&K, Units .....

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r the 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 .....

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d 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 Policy. 121) Chapter 3 of the EXIM Policy mentions various promotional measures and in para 3.2.5 thereof, it contained, inter alia, procedure for availing the benefit under TPS. Among other things, it was stipulated that the last date for filing of such applications shall be 31st of December and that the duty credit certificate .....

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previous year. In terms of para 3.7.6, the Central Government issued Notification No. 32/2005 dated April 08, 2005 whereby it notified the duty credit of TPS which could be availed of in the course of import of any inputs, capital goods, including spares, office equipment, professional equipment and office furniture, provided the same is freely importable under the ITC (HS) classification of export and import items for their own use and that of supporting manufacturers, as declared in the appli .....

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covered under ITC (HS) codes 2706-2715 for the purpose of calculation of TPS and computation of its entitlement. This amendment was made effective from April 01, 2005 in respect of exports effected during April 01, 2005 to March 31, 2006. The relevant portion of the said Notification, with which we are concerned, reads as under: 6. In para 3.7.5, the following shall be inserted after sub para 3.7.5(f) (g). Ores and Concentrates, of all types and in all forms. (h) Cereals, of all types. (i) Sugar .....

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nce 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 previou .....

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and above to below 25%, duty credit entitlement provided was 5%. In case of incremental growth of 25% or above, but below 100%, the duty credit growth entitlement was to the tune of 10%. On incremental growth of 100% and above, duty credit entitlement stipulated was 15% (of 100%). However, by way of amendment, the minimum percentage incremental growth was specified as 20% in the FOB value of exports in the current year over the previous year and entitlement was made uniform @ 5% of the incremen .....

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be excluded by the aforesaid amendment. In nutshell, submission was that by giving retrospective effect to the amendment, which was in any case impermissible, even the vested right of these exporters was taken away. It can, thus, be seen that the arguments on vested right and retrospectivity are the same and the counsel who appeared in these matters advanced identical legal submissions. 128) We have already discussed these aspects in detail. To recapitulate, it is held by us that Section 5 of t .....

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hereby became eligible for grant of duty credit entitlement, that cannot be snatched from such persons/exporters by making 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 de .....

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) 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 position, we embark on the discussion relevant for the purposes of these cases, namely, pertaining to TPS. 130) TPS, which was introduced in EXIM Policy 2004-2009 on August 31, 2004, ad .....

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ch seek to neutralize the duty paid by the exporter. It intended to accelerate growth in export by rewarding star export houses who have achieved a quantum growth in exports. 131) Vide Notification No. 32/2005 dated April 08, 2005, the Central Government amended para 3.7.8 and instead of three rates of entitlement based on growth, it prescribed one single rate, i.e. 5% of the incremental growth. In replies given by the Government, no cogent or valid reason is given for this move. Interestingly, .....

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Scheme itself it had preserved the right to change the eligibility criteria and rate of entitlement effective from the beginning of the year, in public interest. Thus, the action is justified on the ground that such a power was reserved in the TPS itself and that measure was taken to avoid misuse by unscrupulous exporters. Nowhere it is stated that there was misuse by any of these parties. 132) Pertinently, it is also not denied that these petitioners/exporters had achieved the quantum/incremen .....

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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 heari .....

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