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DIRECTOR GENERAL OF FOREIGN TRADE AND ANOTHER Versus M/s. KANAK EXPORTS AND ANOTHER

2015 (11) TMI 80 - SUPREME COURT OF INDIA

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 the introduction of the scheme, it was found that there was unprecedented sharp rise in the export in Gem and Jewellery articles .....

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office equipment mentioned in paragraph 3.8 of EXIM Policy against DFCE to service providers. - misuse of the scheme had also come to the notice of DRI and other intelligence officials who had gathered the necessary information and collected supported documents. Based on the intelligence gathered, a note on the misuse of Duty From Credit Entitlement (DFCE) and Target Plus Scheme was prepared which is annexed with the counter affidavit. - The Government has, thus, demonstrated that based on .....

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on - 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 turnover units operating under SEZ/EOU/EHTP/STP would get the certain incentives and the status holders also manage to extract th .....

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f 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 dated January 28, 2004 was published in the Gazette of India in accordance with the requirement of law. The question, however, is a .....

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GFT 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 by DGFT, so far it excludes the aforesaid four items, is ultra vires. - What was sought to be achieved by the said Public Noti .....

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ospective, unless rule making authority has been vested with power under a statute to make rules with retrospective effect. In the present case, Section 5 of the Act does not give any such power specifically to the Central Government to make rules retrospective - No doubt, this Section confer powers upon the Central Government to ‘amend’ the policy which has been framed under the aforesaid provisions. However, that by itself would not mean that such a provision empowers the Government to do so r .....

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ion 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 periscopic viewing thereof establishes the same. Thus, the impugned decision reflected in the notifications dated April 21 and 23, 200 .....

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s 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, 2006 and Notification No. 8/2006 dated June 12, 2006 cannot be applied retrospectively and they would be effective only from the .....

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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,Adv., Mr. K. R. Sasiprabhu,Adv., Mr. Somiran Sharma, Adv., Mr. Vishnu Sharma, Adv., Mr. Biju P. Raman, Adv., Mr. Rohan Shah, Adv .....

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(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 came into force with effect from April 01, 2003. The main purpose and objective of this Policy was to boost the exports. In furthera .....

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on 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 exporters under the EXIM Policy were taken away. Vide Public Notice dated January 28, 2004, the Government announced exclusion of expor .....

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ved 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 High Courts, particulars whereof shall be taken note of hereinafter at the appropriate stage. 3) The Bombay High Court in Writ Petit .....

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and Civil Appeal 554 of 2006 respectively. That apart, the Single Judge of the Gujarat High Court in one of the cases dismissed the writ petition and the LPA was filed by the said petitioner before the Division Bench of the High Court. Since the issue involved in these appeals is the same, which is raised in the LPA in the Gujarat High Court and still pending in the writ petitions filed in various High Courts, transfer petitions were filed by the Union of India seeking transfer of all those case .....

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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 force of economic activity. Technology, investment and production are becoming increasingly interdependent upon each other and for .....

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ss 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 law repealing the existing law. The Act intends to achieve these objectives. 6) In order to achieve the aforesaid objectives, pow .....

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n 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 out that Policy. However, sub-section (3) of Section 6 empowers the Central Government to give the aforesaid functions of the DGF .....

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committing contravention of provisions of the Act, Rules, Orders and EXIM Policy. Appeal lies to DGFT if the Adjudicating Authority, who passes the order, is an Officer subordinate to DGFT. In those cases, where the Adjudicating Officer is DGFT himself, appeal lies to the Central Government. Under Sections 16, revisionary powers are conferred upon the Central Government. These powers of appeal and revision also cannot be delegated by virtue of Section 6(3) of the Act. Section 19 again confers po .....

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icy 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 the EXIM Policy 2002-2007, such a right was specifically reserved stating that however, the Central Government reserves the right i .....

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ommencement 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 otherwise stipulated. Para 1.4 enshrines the objectives which led to formulation of such a Policy and reads as under: 1.4 The pr .....

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ngth while generating new employment opportunities, and to encourage the attainment of internationally accepted standards of quality. (iv) To provide consumers with good quality goods and services at internationally competitive prices while at the same time creating a level playing field for the domestic producers. 12) Keeping in mind the aforesaid principal objectives, para 2.1 made it clear that exports and imports shall be free, except in cases where they are regulated by the provisions of th .....

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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 para 9.55, we reproduce herein the said para as well: Third-party exports means exports made by an exporter or manufacturer on behal .....

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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 undertaken to achieve the objective of the Policy. Apart from various other measures stipulated therein, with which we are not concer .....

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ners 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 Exporters, Service Providers, Export Oriented Units (EOU's) / Units Located in Special Economic Zones (SEZ's) / Agri Exp .....

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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 having ISO 9000 (series)/ WHOGMP/ HACCP/SEI CMM level-II and above status granted by agencies listed in Appendix-28A, shall be en .....

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pany 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: (i) Licence/certificate/permissions and Customs clearances for both imports and exports on self-declaration basis; (ii) Fixation .....

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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 exporters who gets the Status Certificate are known as Status Holders . The term Status Holder is defined in para 9.53 and reads .....

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. 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 of these sectors by specific sectoral strategy. 18) It is already noted above in para 3.7.1 that various kinds of categories are e .....

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p 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 holder, as specifically provided in para 6.10 and we reproduce hereunder: Export through Status Holder 6.10 An EOU/EHTP/STP unit ma .....

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d 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 Sales and Supplies which these SEZ Units ma undertake. These SEZ Units are also entitled to export through status holder in term .....

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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, Scientific or Research and Development (R&D) institution, university or other educational institution or hospital; or (iii) a .....

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nstruments 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 manufactured by him or intends to export such goods. 9.33 Merchant Exporter means a person engaged in trading activity and exporting or int .....

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o 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 ample scope for boosting the exports. Six such sectors mentioned in para 3.10 include Gem and Jewellery Sector as well; (c) it was he .....

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ving recognition as status holders, who could get such Status Certificate if they come within the purview of the definition of Status Holder contained in para 9.55. 24) The importance that was given to these status holders was highlighted by the then Commerce Minister while announcing special strategic package for status holders. Relevant extract of the said speech contained in para 19 thereof is noted as under: 19. The status holders have been a pillar of strength in increasing exports. There i .....

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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 exports. It is proposed to give a duty free entitlement to them for import of capital goods, spares, office equipments and consumables .....

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ain 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 conditions were to be satisfied: (a) the exporter had to be Status Holder ; (b) achieving incremental growth of more than 25% in FOB val .....

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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 came into force with effect from April 01, 2003. The relevant provisions of the EXIM Policy, as amended upto March 31, 2003, and r .....

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terminus with the Tenth Five Year Plan (2002-2007). However, the Central Government reserves the right in public interest to make any amendments to this Policy in exercise of the powers conferred by Section 5 of the Act. Such amendment shall be made by means of a Notification published in the Gazette of India. 1.2 Any Notifications made or Public Notices issued or anything done under the previous Export/ Import policies, and in force immediately before the commencement of this Policy shall, inso .....

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lation, 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 comply with the provisions of Foreign Trade (Development & Regulation) Act 1992, the Rules and Orders made thereunder, the prov .....

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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 be referred to the Director General of Foreign Trade whose decision thereon shall be final and binding. If any question or doubt .....

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or the purpose of implementing the provisions of the Act the Rules and the Orders made thereunder and this Policy. Such procedures shall be included in the Handbook (Vol.1), Handbook (Vol.2), Schedule of DEPB Rate and in ITC (HS) and published by means of a public notice. Such procedures may, in like manner, be amended from time to time. The Handbook (Vol.1) is a supplement to the EXIM Policy and contains relevant procedures and other details. The procedure of availing benefits under various sch .....

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ces. (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 specified by the licensing authority which may include: (a) the quantity, description and value of the goods; (b) Actual User conditio .....

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ssion 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) (Revised Edition - March 2003) which was to come into effect with effect from April 01, 2003. Para 3.2.5 of the same provided that: .....

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h 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 capital goods, office equipments and inputs provided the same is freely importable under ITC (HS). Such goods shall be non-transf .....

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t certificate shall be valid for a period of 12 months. The status holder shall within one month of the expiry of the validity of the duty free entitlement certificate, submit a statement of imports made under the certificate as per Appendix 17E to the jurisdictional Regional Licensing Authority. 28) After taking stock of the main provisions of the EXIM Policy which concern us in these proceedings, we now advert to the nature of amendments made by Notification dated January 28, 2004 as well as P .....

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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 turnover of units operating under SEZ/ EOU/EHTP/STP Schemes or products manufactured by them and exported through DTA units; (iii) deeme .....

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plicant 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 shall not, directly or indirectly, be transferred to any other exporters. Note 3 - Government reserved the right in public interest, .....

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para 3.8 pertaining to the duty free credit entitlement for service providers was amended to read as under: Service provider (other than hotels) shall be entitled to duty free import equivalent to 10% of the average foreign exchange earned by them in preceding three licensing years. However, hotels (one star and above), heritage hotels, stand-alone restaurants approved by Department of Tourism, Govt. of India and other service providers in tourism sector registered with Department of Tourism, Go .....

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d 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 aforesaid Notification No.28 on the same date, certain amendments were made in the Handbook of Procedures (Volume-I). This Public Notic .....

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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 declaration in this regard shall be made by the applicant in Appendix 17D. III. The licensing authority shall at the time of issuance of t .....

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te 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 application only and shall not be considered at a later stage. VI. The duty free credit entitlement certificate shall be valid for a .....

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s (Volume 1), the following items would not be taken into account for computation of entitlement and export performance under Duty Free Credit Entitlement Scheme for Status Holders: a) Rough, uncut and semi polished diamonds. b) Gold, silver in any form including plain jewellery thereof. c) Good grains sourced from central pool maintained by FCI. d) Items exported under free shipping bills. 3. In terms of para 3.2.5 of Handbook of Procedures (Volume 1) the following items would not be allowed fo .....

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sshipment; 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 units; DFCE would be of no use to Export Oriented Units (EOU) as they are already entitled to import duty free. And since a firm .....

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, 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 another status holder; The benefits of DFCE Scheme were not applicable to all the status holders but only to those status holders meet .....

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ith any export performance in 2003-04) to a status holder if the applicant as well as the non status holder have less than 25 per cent incremental growth over their respective previous years direct export turnover. criteria required to take benefit under the scheme. Claiming other firms export would mean that the country's export turnover would remain constant while applicant firms' turnover will sky rocket. This would not lead to the stated objective of accelerating the rate of incremen .....

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l 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 increasing their exports, both the firm and the country would have gained in terms of export turnover, however, the firms chose to focus .....

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orts 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 petitioners were exporting rough diamonds merely to take the benefits of DFCE Scheme is proved beyond doubt by the fact that firm st .....

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to India to be exported again and again. The entire operation can be profitably financed through the proceeds under the Scheme. With the exports taking place within two days of the imports, 60 tonnes of gold could be re-circulated 80-90 times in a year. That means with a little working capital, the country can lose ₹ 1500 for every ₹ 100 invested by an unscrupulous exporter. Such exports will show an increase in India's exports, but this will be unsustainable increase and is ult .....

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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 the goods may be easily inflated as there was no customs valuation, Government excluded these from the DFCE scheme. 33) M/s Adani .....

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nd 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 counting entitlement under the Duty Free Entitlement Certificate for Status Holders: e) Rough, uncut and semi polished diamonds f) Go .....

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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 following exports from the benefit of the duty free import entitlement for the export status holders as contained in Para 3.7.2.1 o .....

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l 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 Petition (Civil) No...CC 6638 of 2005. 37) On April 07, 2005 in exercise of the powers conferred under paragraph 2.4 of the Export & .....

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o. 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 Bombay upheld the validity of Notification No. 28(RE-2003)/2002-2007 dated January 28, 2004. However, it set aside the Public Notic .....

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on 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. 26123 of 2005. 41) Aggrieved by the order of the Bombay High Court dated July 04, 2005 in Writ Petition No.2397 of 2004, the ap .....

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n © No. 1331 of 2006 and in the meantime stayed the operation of the impugned order in Civil Appeal arising out of S.L.P.© No.1331 of 2006. 43) On February 17, 2006, the Union of India and DGFT aggrieved by the judgment and order of the High Court of Gujarat at Ahmedabad in Special Civil Application No.1676 of 2004 dated July 23, 2004 filed the Special Leave Petition. 44) The High Court of Gujarat, in the lead case Adani Exports Limited & Anr. v. Union of India & Anr. Special C .....

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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 respective decisions. 45) JUDGMENT OF THE GUJARAT HIGH COURT In the Special Civil Application filed by Adani Exports Limited in .....

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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. (ii) These Notes, particularly Notes 1 to 3, 6 and 7, added by the impugned Notifications were not mere guidelines or clarifica .....

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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 from going back on their promises and assurances. (v) Insofar as Public Notice dated January 28, 2004 is concerned, paragraphs 2 .....

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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 implementation of the Scheme. At the same time, the Government had also received information that many exporters were trying to misuse .....

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oticing 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 that the writ Court would not sit in appeal over the wisdom of the Government in such economic matters and the Government must hav .....

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tated 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 Courts have to deal howwith the challenge to a policy decision of the Government in economic matters: 34...We had occasion to consider .....

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rough any doctrinaire or strait-jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. We quoted with approval the following admonition give by Frankfurter, J. in Morey v. Dond [354 US 457]: In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial de .....

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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 and it is based on experimentation or what one may call trial and error method and, therefore, its validity cannot be tested on any .....

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s, 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 Area Rate cases [20 L Ed (2d) 312], is entitled to make pragmatic adjustments which may be called for by particular circumstances .....

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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 affected their interest and these exclusions are: (i) Export turnover of units operating under SEZ/EDU/THRP/ STPI Schemes or pro .....

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atus holders. On the other hand, basic intention of the Scheme was to encourage the exports of products manufactured by small-scale industry sector, who do not have access to international market because of lack of required international marketing experience and the optimum resources to have presence in the international market arena. Therefore, the Scheme was not intended to encourage a status holder/export house to pool the exports made by existing exporters, i.e. who have exported in previous .....

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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 goods. The clarifications made by the impugned Notification, insofar as they provide that the incremental growth of 25% in FOB v .....

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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 the impugned Notification and Public Notice had the effect of taking away the vested right of the writ petitioner, which was repel .....

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olicy relates to Exports Oriented Units (EDUs), Electronics Hardware Technology Parks (EHTPs) and Software Technology Parks (STPs). As provided in paras 6.1 and 6.8 of the Exim policy, these units undertake to export their entire production of goods and services, except permissible sales in the Domestic Tariff Area as per the Exim Policy. Para 6.2(b) of the Exim Policy provides that an EDU/EHTP/STP unit may import without payment of duty all types of goods, including capital goods, as defined in .....

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d by the Special Scheme under consideration. 18. Secondly, the misuse of the scheme by mere paper growth in exports is not to be countenanced. Hence, it is but natural that the notification dated 28.1.2004 would apply to the exports made from 1.4.2003 onwards. In so far as this Court holds that the Notes 1 and 2 read with Note 4 introduced by the notification dated 28.1.2004 are merely clarificatory, the exports made by the petitioner between 1.4.2003 and 27.1.2003 (sic) would certainly be cover .....

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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 merely by stating that rough diamonds or food items were to be excluded. 54) Since Notification dated April 21, 2004 read with No .....

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re 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 took the issue of Promissory Estoppel and discussed numerous case law on the subject and concluded that since it was a case of chan .....

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erest and, therefore, bad in law. These are exclusion of following exports from the benefits of duty-free import entitlement for the export status holders: (i) Items exported under free shipping bills. (ii) Gold, silver in any form including plain jewellery thereof, in so far as the import of capital goods and office equipment for the factory of the associate/supporting manufacturer/job worker of the petitioner Company is concerned. The Special Civil Application was allowed to the aforesaid exte .....

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ort 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 that after the scheme was initiated, on the basis of intelligence gathered the Central Government learnt that the scheme was being m .....

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t 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 the Notification provides that incremental growth of exports by an exporter shall not, directly or indirectly, be transferred to an .....

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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 growth and not incremental growth within the meaning of the scheme. Notification dated 28th January 2004 does not make any third par .....

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y other exporters for the purpose of showing incremental growth in the export. The clarification issued by the impugned Notification in so far as it provides that supplies made by one status holder to another status holder or export performance made by one status holder on behalf of another status holder shall not be eligible for entitlement is in consonance with the basic object of the scheme. The export turnover of the units operating under STZ/EOU/EHTP schemes was also excluded as these units .....

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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 amendment to the scheme. In the process, the High Court rejected the contention of the writ petitioners that the said Notification was un .....

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f 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 purpose which was evident from para 2.1.4 of the EXIM Policy. On the other hand, para 3.2.6 inserted by Public Notice dated Janu .....

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d (vii) which were added vide Notifications dated April 21 and 23, 2004, the High Court took the view that they were not merely clarificatory in nature. It was pointed out that vide these Notifications, four items were sought to be excluded from the purview of the scheme and, therefore, could not be treated as merely clarificatory. The High Court, thus, while affirming the validity of these Notifications, came to the conclusion that it can be only prospective in nature. Contention of the Union t .....

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egislature 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 submission that retrospective effect could be given to the Notification was also repelled. In the opinion of the High Court, Section 2 .....

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ombay 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 that the Division Bench struck down the Notifications dated 21st/ 23rd April, 2004 as far as the free shipping bills and gold, s .....

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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 the issues remain the same which were canvassed before the High Courts. Even the position taken by the parties on either side is pr .....

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hether Notifications were issued in public interest? 59) The main objective of the scheme was to achieve the share of 1% of global trade and accelerated growth in exports. For this purpose, the scheme intended to concentrate on the growth of certain kinds of products treating the same as thrust sectors . In para 3.10, six such sectors are mentioned as thrust sectors, viz., Electronic hardware, Textile including garments, Auto components/ancillary, Gem and jewellery, Agriculture and service secto .....

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lery 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, Central Board of Excise and Customs addressed a letter to the then DGFT stating as follows: It has been reliably learnt that some stat .....

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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 of calculating the incremental growth in exports. Similarly, in case of corporate houses having more than one exporting companies .....

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h artificial growth may be to define the term incremental growth in exports used in para 3.7.2.1(vi) of the EXIM Policy. 61) The said letter dated 14.10.2003 was forwarded to the Office of the Commissioner of Customs, Export Promotions to various Commissioners of Customs and the Commissioner of Customs, Mumbai on 05.11.2003 responded that: The Customs House at Mumbai has noticed exports of sugar by State Trading Corporation of India Ltd. showing account of Adani Export Ltd., Private Merchant Exp .....

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s 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, then the flaw in the scheme is to be removed. The flaw is that third party exports are being permitted under the Foreign Trade as .....

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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 the FOB Value and get incremental growth and the additional benefit of 10% under DFCEC. 62) In a meeting held with the Officials .....

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s 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 of goods by Customs authorities, the value of goods as determined by Customs authority should be taken for determining increment .....

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ack/DEPB on foods manufactured using such duty free inputs and their subsequent export. - The possibility of excluding gems and jewellery exports may also be examined as the duty incidence on gold (less than 2%) silver (5%), rough diamond (0%), rough gemstones (0%), broken or semi-finished cut and polished diamonds (0%), cut and polished diamonds (15%) is low. In addition to low duty, several other incentives such as replenishment licence of 1% FOB Value of export for duty free import vide notif .....

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cordance 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 potential to manipulate the value of goods and do the circular trading of goods by doing over-invoicing and under-invoicing. The re .....

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ed 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 examined in consultation with DGFT/MOC. DGFT have confirmed that the objective of DFCEC Scheme for Services Providers is to permit im .....

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ts, import of only those equipments would be permissible under DFCEC Scheme, which are professional equipments required by the Service Provider for the purpose of rendering service & earning free foreign exchange. It is reiterated that import of capital goods which are other than professional equipment or office equipment shall not be allowed under DFCEC Scheme for Service Providers. In order to remove doubts, the words capital goods used in condition (3) of 54/2003-Cus dated 1.4.2003 has al .....

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titlement 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/associate manufacturers in case of third party export. (c) For group companies, it was suggested that the export of different compa .....

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cided 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 made in the meeting held with the Officers of the DGFT and the Customs as stated herein above. 67) On December 23, 2003, the Off .....

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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 (Drawback), Ministry of Finance, Department of Revenue indicating that: The status holders as well as status holder corporate groups .....

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Government(.) It appears that in the face of the current policy provisions, the benefits allowed to third party exports cannot be legally denied(.) Hence it is proposed that Ministry may consider prevailing upon the Ministry of Commerce/DGFT to amend the EXIM Policy provisions, so as to incorporate Para 3.7.2.1 (g) that for the purpose of calculating the incremental growth of 25% in exports in 2003-04, vis-a-vis 2002-03 the exports made on behalf of third parties will not be counted(.) It is fu .....

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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 examination(.) 69) Based on these Reports an exercise was initiated for carrying out amendments in the Handbook of Procedure (Volume-I) .....

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e 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 Procedures (Volume-1). 72) Meetings were held with the (Drawback) Directorates on January 09, 2004 and January 21, 2004 culminating into .....

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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 a growth rate from 300% to 3800% when during the same period i.e. 2003-2004, the national growth of export was merely 18%. It is .....

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old 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, their exports have grown by nearly 1135% and over 80% of their exports came from diamonds and supply taken from other status holder .....

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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 were signed between the petitioners and other exporters. II-Export of rough diamonds Export of rough diamonds by M/s. Adani Exports .....

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licitly withdrawn. In the present case also the respondent herein M/s Adani Exports Limited had stopped exporting the rough diamonds the moment the Notification was issued in January, 2004 and according to Gems and Jewellery export promotion council, Party has not exported rough diamonds during Jan/March 2004. III-Export of gold coins, Jewellery-Circular trading and Exports to related companies Most notorious misuse of the scheme was carried out by few firms who exported Gold medallion and studd .....

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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 craftsmanship, they added extra gold to get the value addition. However, in this process strangely enough per unit price of the .....

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mercial 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 consumers abroad. The value of such exports in the past three years may exceed ₹ 15,000 crores. Government has detailed repo .....

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t and polished diamonds to this entity. This indicates that the suppliers, exporters and importers were linked and hence the possibility of manipulating value addition. According to one estimate the same set of diamonds were rotating and these never entered the Indian domestic territory or to the end consumers abroad. 74) It is also stated in the counter affidavit that the misuse of the scheme had also come to the notice of DRI and other intelligence officials who had gathered the necessary info .....

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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 intelligence gathered by the government. If needed copies of supporting documents may be produced. Since the Scheme was based on growt .....

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arties 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 stopped the moment DFCE benefits were disallowed. Few firms who exported Gold medallion and studded jewellery indulged in the most no .....

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t 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, stored inside a bond and re-exported with artificial value addition. Few large firms led by M/s. Adani Exports Ltd. exported these p .....

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RS Background of Policy changes Intent of the Government has been to accelerate India s exports and towards this intent DFCE scheme was launched. The scheme envisaged rewarding genuine export growth with the specific objective of accelerating the incremental growth in exports and to facilitate India emerging as a major base for different source of products and services for the rest of the world. The reward was supposed to motivate and spur exporters in increasing their export turnover. However, .....

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isuse 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 paper. Ostensibly such status holders indicated themselves as third party exporters helping the other party in obtaining export or .....

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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 criteria. It is anybody guess that if the status holders were not meeting the growth criteria they would not have got any benefi .....

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fit). 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 the wit petitioners to show that the exports by them were genuine and there was no misuse, we have no hesitation in accepting the .....

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ent 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 The status holders shall be eligible for the following new/ special facilities: (i) Licence/certificate/permissions and Customs cl .....

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han 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. 78) Vide Notification dated January 28, 2004, 5 Notes .....

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ed 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 exporter/ Manufacturer with any export performance in 2003-2004) to a status holder if the applicant as well as the non status hold .....

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ir respective judgments have dealt with this issue. 80) So far as the Bombay High Court is concerned, after specifically posing the question as to whether Notification dated January 28, 2004 has the effect of introducing a new condition or term or it is merely in the nature of clarification to the existing policy. The High Court referred to the basic objective of the scheme as contained in Commerce and Industry Minister s speech on introducing new EXIM Policy 2002-2007. It reads as under: We rec .....

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erefore, 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 ₹ 25 crores. They would be entitled to a duty free entitlement of 10% of the incremental growth in exports during the curr .....

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tatus 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 was hardly ₹ 27 crores which took a big leap and quantum jump in the year 2003-2004 when the exports of this petitioner cat .....

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ed 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 marketing expertise and optimum resources to have presence in the international marketing arena. The scheme was not intended to e .....

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rating 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 benefit from export capabilities of STZ/EOU/EHTP etc. This would be only paper growth and amount to abuse of scheme. Reliance pla .....

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he 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 even thereafter the third party exports are permitted. What was legal earlier is not made illegal at all. For instance, exports of .....

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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: 6.10 As EOU/EHTP/STP unit may export goods manufactured/software developed by it through a merchant export/status holder recogniz .....

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from 1.4.2003 onwards. In so far as this court holds that the Notes 1 and 2 read with Note 4 introduced by the notification dated 28.1.2004 are merely clarificatory, the exports made by the petitioners between 1.4.2003 and 27.1.2003 would certainly be covered by the said notes. Two views are possible about the expression incremental growth in exports by 25% and the Government adopted the interpretation as reflected in the notification dated 28.1.2004 which is quite in consonance with the object .....

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nts 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 confer double benefit under para 3.7.2.1. This question by the writ petitioners by referring to paras 6.10, 7.1 and 7.8 of the EXIM P .....

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der 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 altogether different thing. The counsel for the petitioners could not refute or deny that such SEZ/EOU//EHTP/STP are getting the benefit o .....

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he 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 (ii) was merely clarificatory in nature. 84) Sub-note (v) to Note 1 stipulates that if the supply were made by one status holder t .....

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te (v) to Note 1 was in consonance with the basic objective of the scheme as originally envisaged. Having regard to the nature of this sub-note (v) and when we keep in mind the fact that the two status-holders if they carry out the exports and made the target as per the Scheme were entitled to the benefit of the Scheme, we agree with the High Courts that even insertion of these clauses is clarificatory in nature inasmuch as it only states that the supply made by one status-holder to another stat .....

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n 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 the benefit. Obviously, if it has not been able to achieve 25% incremental growth, such export house cannot take the advantage by .....

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formance 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 by the Central Government and, therefore, it is only the Central Government which has the power to make amendments to the EXIM P .....

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uing the Public Notice was to check unscrupulous exporters including the writ petitioners for inflating their export turnover by adopting dubious methods. He emphasized the rational for inclusion of four items by this Public Notice which has already been taken note of. His endeavour was to demonstrate that issuance of the Public Notice in question became paramount to cluck unscrupulous methodology adopted by certain exporters with the objective to wrongfully acquire the benefits of the Schemes t .....

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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 the Official Gazette, the foreign trade policy and may also, in like manner, amend that policy: Provided that the Central Governme .....

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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 Director-General or such other officer subordinate to the Director General, as may be specified in the Order. 90) From the aforesaid, .....

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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 also responsible for carrying out the said Policy. Sub-section (3) of Section 6 provides that Central Government may delegate its .....

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ch 31, 2003 which have bearing on the issue at hand. These are: Para 1.1 of the Export and Import Policy provided that: In exercise of the powers conferred under Section 5 of The Foreign Trade (Development and Regulation Act), 1992 (No.22 of 1992), the Central Government hereby notifies the Export and Import Policy for the period 2002-2007. This Policy shall come into force with effect from April 01, 2002 and shall remain in force upto March 31, 2007 and will be co-terminus with the Tenth Five Y .....

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, 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 stipulated . Para 2.4 of the Import and Export Policy dealing with the Procedure provides that: The Director General of Foreign Trad .....

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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 in exercise of the powers under Para 2.4 of the Import and Export Policy in the Handbook Procedure, by way of a Public Notice th .....

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d 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 published in the Gazette of India under Part 1 Section 1 of the Gazette of India and as such, as both the Notifications as well as the .....

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y. 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 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 .....

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vernment 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, 2004, read with Notification dated April 28, 2004, seeking to exclude the export performance related to class of goods covered by .....

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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) However, at the same time, as already been pointed out above, this Notification is not clarificatory in nature unlike Notification d .....

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e reasons and in public interest which is the paramount consideration and over rights all private considerations. Therefore, it is argued, the question of retrospectivity of Policy by the impugned Notification does not arise at all. Mr. Adhyaru also argued that there was an implied power vested with the Central Government to amend the Policy retrospectively. 101) We may state, at the outset, that the incentive scheme in question, as promulgated by the Government, is in the nature of concession o .....

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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 Section 25(1) of the Customs Act, 1962 in public interest granting exemption from whole of the customs duty on import of PVC resi .....

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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 sale prices of the indigenous and the imported material and to make the commodity available to the consumer at a uniform price, keep .....

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he 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 susceptible of being revoked or modified or subjected to other conditions. The supersession or revocation of an exemption notification i .....

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nment could not be permitted to go back on its assurance otherwise they would be put to huge loss. The Court dealt with this contention in the following words: The Courts have to balance equities between the parties and indeed the Courts would bind the Government by its promise to prevent manifest injustice or fraud . The Court also quoted with approval the following observations from Malhotra & Sons v. Union of India AIR 1976 J&K 41: The Courts will only bind the Government by its promi .....

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uld 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 the question whether the fact that the notification dated 15.03.1979 mentioned the period during which it was to remain in force .....

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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 greater latitude than laws touching civil rights such as freedom of speech, religion etc., that the legislature should be allowed som .....

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of the exporters is that by achieving the target contained in the Scheme in respect of incremental exports, these exporters had right accrued in their favour to claim the benefits provided for achieving this target. It was submitted in this behalf that the Scheme came into force w.e.f. April 01, 2003 and from April 01, 2003 to March 31, 2004 i.e. during these 12 months, the status holders were entitled to make the exports and once the targets as set out in the clause 3.2.7.1 (vi) were achieved, .....

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tems 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 with retrospective effect in exercise of power of delegated legislation: (i) Union of India & Ors. v. Asian Food Industries (2 .....

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. 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 and acceptability within the constitutional parameters. A subordinate legislation can be given retrospective effect if a power in .....

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gated 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 Bhagwandas & Anr. (1968) 3 SCR 623 13. Counsel for the respondent also submitted that Section 29(2) as amended was intended to have r .....

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The amending clause does not seek to explain any pre-existing legislation which was ambiguous or defective. The power of the High Court to entertain a petition for exercising revisional jurisdiction was before the amendment derived from Section 115 Code of Civil Procedure, and the legislature has by the Amending Act attempted to explain the meaning of that provision. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. .....

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tended 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 that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have b .....

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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 disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unl .....

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v. Mohanlal Bhagwandas & Anr. (1968) 3 SCR 623, while considering the nature of amendment to Section 29(2) of the Bombay Rents, Hotel and Lodging House Rates Control Act as amended by Gujarat Act 18 of 1965, observed as follows: The amending clause does not seek to explain any pre-existing legislation which was ambiguous or defective. The power of the High Court to entertain a petition for exercising revisional jurisdiction was before the amendment derived from s. 115, Code of Civil Procedu .....

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t 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 his favour on the date when the lease expired. It is only after the period specified in the notice is over and the tenancy has i .....

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tatute 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 it was not, that Act I understand to be retrospective. That is not this case. The question here is whether a certain provision as .....

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ection 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 the effect that no fine or sum of money in the nature of a fine shall be payable for or in respect of such licence or consent. It .....

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A similar question had been raised for the decision of this Court in Jivabhai Purshottam v. Chhagan Karson- Civil Appeal No 153 of 1958 decided on 27-3-1961 in regard to the retrospective operation of Section 34(2)(a) of the said amending Act 33 of 1952 and this Court has approved of the decision of the Full Bench of the Bombay High Court on that point in Durlabbhai Fakirbhai v. Jhaverbhai Bhikabhai (1956) 58 BLR 85. It was held in Durlabbhai case that the relevant provision of the amending Act .....

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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 drawn to the fact that subsequent to the decision of the High Court, the State Legislature has enacted the Andhra Pradesh Tenancy La .....

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rification. 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 India v. N.R. Parmar(2012) 13 SCC 340 35. Having examined the matter thus far, it is necessary to refer to the Ministry of Financ .....

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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 via-a-vis the promotees is reckoned from the year in which they are actually recruited. DRs cannot claim seniority of the year i .....

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aid 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 considered view reliance on the Letter dated 11-5-2004, for the determination of the present controversy, is liable to outright reje .....

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iable 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 clarification given by DoP&T in r/o OM dated 3-7-1986. Sir, I am directed to refer to the Board s letter of even number dated 11-5-200 .....

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rect 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, well before the OM dated 3-3-2008 was issued. As such, it was pointed out, that the same would not affect the merits of controversy .....

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strument. As such, a clarification always relates back to the date of the instrument which is sought to be clarified. 106) In nutshell, it was submitted that once there is a vested right and not merely existing right, taking away that right amounts to giving retrospective effect to the Notification which was impermissible. In the same breath, it was argued that it cannot be treated as retroactive operation of the Notification. 107) Learned senior counsel appearing for the Revenue, on the other h .....

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d 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 specifically to the Central Government to make rules retrospective. No doubt, this Section confer powers upon the Central Governme .....

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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 next question is whether clause (5) of Article 148 permits the enactment of rules having retrospective operation. It is settled .....

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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 intended that the rules should have the same range of operation as an Act of Parliament or of the State Legislature. The intent was re .....

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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 regulate under Section 3 of the Act is equally misconceived. Section 5 gives express power to formulate the policy and to amend i .....

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dies 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 Ors. v. Union of India and Ors. (1976) 2 SCC 953 and State of Kerala and Ors. v. K.G. Madhavan Pillai and Ors. (1988) 4 SCC 669. .....

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lauses 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 follows that no sooner the status holder achieves 25% incremental growth, the status holder would be entitled to the benefits under .....

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these exporters/writ petitioners acquired any such right? Let us sharpen this question before we answer the same by formulating it in the following words: Whether, in the cases of these exporters, the exports shown by them can be treated as actual exports entitling them to avail the benefit of the Scheme? 110) This issue would be inter-twined with other related issue, namely, whether the notification has retroactive operation or it is retrospective in nature. Both these aspects are to be dealt .....

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hat 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 notification, the blanks/gaps were filled and the term incremental growth in export was defined and it was clarified as to how the .....

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ugh 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 that there were exports of rough diamonds even though India is not a rough diamond producing country. These exports stopped the mome .....

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lations: 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 Supplies from status holders not meeting the minimum turnover and growth criteria Adani Exports Limited, Ahmedabad Exports (crores) .....

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ations 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 discussed in much details earlier and need not be repeated. We would like to recapitulate the following stark features/practices .....

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dvantage 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 diamonds the moment the Notification was issued in January, 2004 and according to Gems and Jewellery Export Promotion Council, Party .....

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ed ₹ 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 counterparts in Dubai and Sharjah. Since the jewellery attracted 5% import duty at Dubai, the consignments which were declared as jewel .....

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n 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 approach with practical sense leads us to conclude that these writ petitioners/exporters had actually achieved the targets set d .....

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pugned 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/exporters who, without making actual exports, play with the provisions of the Scheme and try to take undue advantage thereof. To t .....

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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 the appeals of the exporters against the said judgment except to the extent indicated in para 114 above while the appeals of the .....

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is allowed and LPA No. 290 of 2007, entitled Union of India & Ors. v. M/s. Welspun India Limited , pending in the High Court of Gujarat at Ahmedabad is transferred to this Court. Since the challenge laid in the case is identical with that involved in the rest of the batch matters, summoning of the records of the case is dispensed with and the matter is heard on the basis of the record already available before the Court. 118) In these cases, challenge is to the constitutional validity of par .....

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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 3.7 of the said EXIM Policy and reads as under: 3.7 TARGET PLUS SCHEME 3.7.1 Objective The objective of the scheme is to acceler .....

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ara 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 licensing year over the previous licensing year, as under: Percentage incremental growth Duty Credit Entitlement (as a % of the incr .....

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or benefit either under the Target Plus Scheme or under the Vishesh Krishi Upaj Yojana, but not both in respect of the same exported product/s. Provided that in calculating the entitlement under Para 3.7.3 the total eligible exports shall be taken into account for computing the percentage incremental growth but the duty credit entitlement shall be arrived at on the eligible exports reduced by the amount on which the benefit is claimed under para 3.8.2. (4) All exports including exports under fre .....

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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 chooses to apply based on the export of one or more of its individual Star Export House companies, the entitlement would be calcul .....

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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 under Para 2.35 of the Foreign Trade Policy or exports made through transshipment. (b) Export turnover of units operating under S .....

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owed 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 listed in Chapter 1 to 24 of ITC (HS) Classification of Export and Import items except the following shall be allowed: (i) Garli .....

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9 of ITC (HS) Classification of Export and Import Items. (v) All Oil Seeds under Chapter 12 of ITC (HS) Classification of Export and Import Items. Further, Natural Rubber as per Chapter 40 of ITC (HS) Classification of Export and Import items shall also not be allowed for import under the Scheme. Import of all edible oils classified under Chapter 15, shall be allowed under the scheme only through STC and MMTC. 3.7.7 Cenvat/Drawback Additional customs duty/excise duty paid in cash or through deb .....

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ification 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 privileges which were to be enjoyed by these star export houses. Said para 3.5 is as under: 3.5 STAR EXPORT HOUSES 3.5.1 Star Expo .....

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hree 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 exporting handloom/handicrafts/hand knotted or silk carpets, exporters exporting to countries in Latin America/CIS/sub-Saharan A .....

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the limited company for the purpose of recognition only if the limited company has a majority share holding in the subsidiary company. 4. In case the recognition is claimed based upon the current year s export performance, same shall be considered only in case the exporter has export performance during any one of the preceding three years as well. 3.5.2.1 Privileges A Star Export House shall be eligible for the following facilities: (i) Licence/certificate/permissions and Customs clearances for .....

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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 shall be valid for a period of twenty four months from the date of issue, with a clear stipulation that revalidation of duty cre .....

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tified 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 application 17D. The exporters in these cases claim that relying on the aforesaid Scheme, they ensured that they achieved incremental .....

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as 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, of all types and in all forms. (j) Crude/Petroleum Oil & Crude/Petroleum based Products covered under ITC HS codes 2709 to .....

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RE 2006)/2004-2009 dated June 12, 2006. It also pertained to the exports effected during April 01, 2005 to March 31, 2006. By this Notification, para 3.7.3 was substituted by the following para: The entitlement under this scheme would be contingent on the minimum percentage incremental growth of 20% in FOB value of exports in the current licensing year over the previous licensing year, and the rate of entitlement shall be 5% of the incremental growth. 126) Original para 3.7.3, which is in respec .....

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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 incremental growth. 127) These Notifications are challenged on the ground that these export houses had achieved the desired target by mak .....

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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 the Act does not empower the Government to make amendments with retrospective effect, thereby taking away the rights which have al .....

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endment retrospectively. In the present case, we find that Section 5 of the Act does not give any specific power to the Central Government to make the Rules with retrospective effect. The Central Government is authorised to make Rules/Schemes under the said provision as a delegatee, which means that the EXIM Policy/Scheme framed under the said provision is by way of delegated legislation. There has to be specific power to make the amendments with retrospective effect, which are lacking in the in .....

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on 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, adopted some of the features of the earlier Schemes in the EXIM Policy 2002-2007 and introduced the concept of Multi-Entitlement Ra .....

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ho 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, comments are made about the misuse of earlier Scheme in the EXIM Policy 2002-2007 and the evidence that surfaced during the said .....

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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/incremental growth, as stipulated in the TPS, which made them eligible to get the rewards under the said Scheme. These exporters, therefo .....

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ng the same to 5% would clearly amount to taking away their vested right with the issuing of the Notification and making them effective retrospectively. 133) Likewise, no cogent explanation is coming forward for adding four items by amending para 3.7.5 vide Notification No. 48 (RE 2005)/ 2004-2009 dated February 20, 2006. The only argument advanced at the time of hearing was that the Government felt that benefit of TPS should not be extended to the exporters of these items. That may be a policy .....

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