TMI Blog2004 (7) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... second respondent herein] amending paragraph 3.2.6 of the Hand Book of Procedure. The amendments/corrections to the EXIM POLICY and the public notice pertain to Duty Free Import Entitlement for Export Status Holders. In particular, the petitioner has challenged the aforesaid notifications and the public notice in so far as the amendments/corrections are expressly made applicable to the exports made from 1.4.2003 i.e. prior to the date of the notifications and the public notice. 2.0 The relevant provisions falling for consideration are as under :- 2.1 Under the Exim Policy 2002-07 as introduced on 1.4.2002, the Central Government announced Special Strategic Package for Status Holders [hereinafter referred to as the Special Scheme or the Incentive Scheme ]. The term status holder is defined by paragraph 9.53 of the Exim Policy as under :- 9.53 Status Holder means an exporter recognized as Export House/Trading House by DGFT/Development Commissioner as Star Trading House/Super Star Trading House by the Director General of Foreign Trade. As per the Special Scheme , the status holders are eligible for certain special facilities. For the purposes of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a group and the group to which it belongs has individually less than 25 percent 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 reserves the right in public interest, to specify the export products, which shall not be eligible for calculation of incremental growth/entitlement. Similarly, the government may also notify the list of goods, which shall not be allowed for imports under the scheme. Note 4 - These guidelines will be applicable to the exports made on or after 1.4.2003. Note 5 - The entitlement will be in terms of duty credit. 2.3 By the impugned public notice dated 28.1.2004 (Annexure C ), amendments have been made to the Hand Book of Procedure, particularly to paragraphs 3.2.5 and 3.2.6 of the Special Scheme for duty free import entitlement for the status holders. While most of those amendments are procedural, the following amendment is significant for the purposes of the present petition:- 2. In terms of para 3.2.5 of Handbook of Procedures (Volume I), the following items would not be taken into account for computation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01.2004, exports of certain products for calculation of entitlement as well as imports of certain products were excluded from the purview of the Duty Free Entitlement Certificate for Status Holders. The said provision is hereby inserted in the Exim Policy by correcting Notification No.28 dated 28.01.2004 as under : In Chapter-3, in paragraph 3.7.2.1, after sub-paragraph (vii), the following note is inserted after No.5 namely :- 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 a. Rough, uncut and semi polished diamonds b. Gold, Silver in any form including plain jewellery thereof c. Food grains sourced from Central pool maintained by FCI d. Items exported under free shipping bills Note 7 -The following items would not be allowed for imports under Duty Free Credit Entitlement Certificate for Status Holders : Agricultural products, which fall under Chapters 1-24 of ITC (HS) Classification of Export and Import items . This issues in Public interest. (L MANSIGH) Director General of Foreign Trade Another correction notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... international market. Since the provisions totally HC-NIC Page 7 of 60 Created On Wed Nov 04 12:28:11 IST 2015 negate the object and purpose to promote exports, the same are arbitrary and unreasonable and violative of Articles 14 and 19(1)(g) of the Constitution conferring the fundamental right to carry on the business of exporting. 3.4 While challenges levelled against notes 1 to 3 and 6 to 7 will be enumerated while discussing them, it is necessary to set out the most important challenge which is to Note 4 of the notification. Note 4 providing that these guidelines will be applicable to the exports made on or after 1.4.2003 is challenged on the ground that the same gives retrospective effect to the impugned notification. Section 5 of the Foreign Trade (Development Regulation) Act, 1992 does not confer any power on the Central Government to make amendments to the Exim Policy with retroactive and retrospective effect. The Central Government is a mere delegate of the legislature and in absence of any power conferred by the legislature, the power to amend the Exim Policy cannot be exercised retroactively or retrospectively. Notes 1 to 3 and 6 to 7 added by the impugned noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The petitioner accordingly made the representation which came to be rejected by the order dated 19.3.2004. 5. On behalf of the respondents, affidavit in reply dated 22.3.2004 is filed by the Joint Director General of Foreign Trade. Written submissions are also filed. The major defences are - 5.1 The impugned notifications and the public notice are in the nature of clarification of the Duty Free Credit Entitlement Scheme notified by the Central Government under the Exim Policy as amended upto 31.3.2003. When the clarification is made in the Scheme, it always relates back to the date of issuance of the original scheme and, therefore, it cannot be said that any retrospective effect has been given by amending the policy. The scheme was announced on 31.3.2003. The benefit of the scheme is made available with effect from 1.4.2004. The export entitlements are to be calculated for the current financial year i.e. the whole of the financial year 2003-04 and the clarification has been made on 28.1.2004 prior to the year coming to an end. In the past also, the export and import policy had been amended making amendments therein relating to the current financial year. The amendments to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such growth. To contain this kind of misuse, one of the major recommendations of the Department of Revenue was to put necessary restriction in the scheme by way of clarification by not allowing third party exports from being counted for the purpose of calculating the incremental growth in exports subject to certain conditions. The impugned notifications and public notice have been issued with a view to clarify the aspect as to how incremental growth in export should be reckoned. From Note 1 which was inserted after sub-paragraph (vii) of paragraph 3.7.2.1 in Chapter 3, it is clear beyond doubt that third party exports are not totally excluded from the scheme. The third party exports are to be excluded for reckoning the incremental growth in exports, if the supplies made or export performance effected by a non-status holder (merchant exporter/manufacturer exports with any export performance in 2003-2004) to a status holder, if the applicant as well as the non-status holder are having less than 25% incremental growth for their respective previous years direct export turnover. This clearly indicates that by clarification certain types of exports which are merely paper exports and whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioners made in the representation was rejected on the grounds set out in the speaking order dated 19.3.2004. 5.6 As regards promissory estoppel and legitimate expectation, the respondents have stated as under in the reply affidavit :- The Import and Export Policy can be amended or rescinded by the Central Government at any time and by issuance of Exim Policy, no promise is held out by the Central Government. The petitioners, therefore, cannot invoke the doctrine of promissory estoppel against the respondents. Without prejudice to the contention that in this case the doctrine of promissory estoppel does not apply, it is submitted that to invoke the doctrine of promissory estoppel, the petitioners are required to satisfy certain requirements and they have to specifically prove that on the basis of the promise held out by the Government, they have altered their position. In the present case, the petitioners are in the business of exports and are holding Golden Superstar Trading House Certificate. The export business is the routine business of the petitioners. The petitioners have not given any details in respect of the so-called export growth achieved by the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and the Exim Policy. Hence, the amendments are violative of Article 14 of the Constitution. 7.3 Exclusion of various items through the trade notice issued by the DGFT is illegal and without authority of law as the DGFT cannot amend the policy for which the Central Government is the only competent authority. The Central Government not having issued any notification in this behalf till 31.3.2004, the DGFT had no authority to exclude any items from the special scheme. The public notice is, therefore, contrary to and in violation of Section 5(3) of the Foreign Trade (Development Regulation) Act, 1992. 7.4 The Government notifications dated 21/24.4.2004 seek to give further retrospective effect to Notes 6 and 7 added in para 3.7.2.1 to the exports made between 1.4.2003 and 31.3.2004. Such a retrospective effect cannot be given even by delegated legislation. 7.5 In any view of the matter, relying on the provisions of the special scheme which was applicable to the exports made from 1.4.2003 to 31.3.2004, the petitioner had put in extra efforts for the growth of exports both direct exports as well as third party exports for various categories of export goods and vested righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. It is submitted that the amendments made in January, 2004 for the purpose of giving incentives from 1.4.2004 may be in relation to the exports made between April 2003 and March 2004. That does not amount to giving retrospective effect, but means only retroactive operation of the clarifications or the amendments. 8.3 Section 5 of the Foreign Trade (Development Regulation) Act and para 1.1 of the EXIM POLICY preserve the right of the Government to amend the policy in public interest. A statutory power to amend the policy, after noticing the misuse of the policy for purposes for which it was never intended, can never 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 will not take any action whatsoever. That apart, the doctrine of legitimate expectation can never curtail a statutory provision, far less can it be pressed into service to assail an action taken entirely to sub-serve the public interest. 8.4 As per the settled legal position, the writ Court would not sit in appeal over the wisdom of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Article 14 while dealing with laws relating to economic activities in RK Garg vs Union of India, (1981) 4 SCC 675. We pointed out in that case that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc. We observed that the legislature should be allowed some play in the joints because it has to deal with complex problems which do not admit of solution through any doctrinaire or strait-jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. We quoted with approval the following admonition given by Frankfurter, J. in Morey v. Doud, 343 US 457 = 1 L Ed.2d 1485 (1957) :- 'In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t must be respected and courts cannot lightly interfere with the same unless such policy is contrary to the provisions of the Constitution or any law or if such policy is wholly arbitrary. 10. In exercise of the powers conferred by Section 5 of the Foreign Trade (Development Regulation) Act, 1992, the Central Government has notified the Export and Import Policy for the period 2002-2007. Para 1.1 of the Policy states that the Central government reserves the right in public interest to make any amendments to the 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. Para 1.4 of the Policy lays down the principal objectives of the policy as under :- 1.4 The principal objectives of this Policy are : [i] To facilitate sustained growth in exports to attain a share of atleast 1% of global merchandise trade. [ii] To stimulate sustained economic growth by providing access to essential raw materials, intermediates, components, consumables and capital goods required for augmenting production and providing services. [iii] [iv] ... ... ... ... Para 2.4 of the Policy pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of 10% of the incremental growth in exports during the current financial year. This entitlement would be subject to actual user condition which can be passed on to associate manufacturers. 12. Paragraph 3.7.2.1 (the relevant portion of which is already quoted in para 2.1 of this judgment) enumerates the special facilities for which the status holders are eligible, which are again quoted hereinbelow for the sake of convenience :- 3.7.2.1 The status holders shall be eligible for the following new/special facilities :- [i] to [v] ... ... ... ... ... [vi] Duty free import entitlement for status holders having incremental growth of more than 25% in FOB value of exports (in free foreign exchange) subject to a minimum export turnover of ₹ 25 crore (in free foreign exchange). The duty free entitlement shall be 10% of the incremental growth in exports. Such entitlement can be used for import of capital goods, office equipment and inputs for their own factory or the factory of the associate/supporting manufacturer/job worker. The entitlement/goods shall not be transferable. (emphasis supplied) [This clause was initially numbered as (vi) in the EXIM POLICY ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name of both the exporter/manufacturer and exporter(s). General Provisions Regarding Imports and Exports 2.34 Third party exports, as defined in paragraph 9.55 shall be allowed under the Policy. 14.2 Para 5 of the impugned notification dated 28.1.2004 sets out the reasons for making clarifications:- The Scheme was announced as part of the initiatives taken in the Exim Policy announced on 31st March 2003 with the specific objective of accelerating the incremental growth in exports and to facilitate India emerging as a major base for sourcing different products and services for the rest of the world. It was recognized that status holders would continue playing a significant and increasing role for boosting exports particularly from the small-scale sector, as most of the small scale units would not be in a position to directly access the international market. In view of this, duty free import entitlement @ 10% of the incremental growth in value of exports was allowed, subject to the condition of eligibility on actual user condition, which could be passed on to supporting/associate manufacturers/job worker for ultimate production. Since the Scheme was intended to be a spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the supplier is a status holder or is an existing supplier-exporter of goods. The clarifications made by the impugned notification in so far as they provide that the incremental growth of 25% in FOB value of exports is the criterion applicable both to the status holders as well as to the existing supplier-exporters will have to be treated as clarificatory if the basic object of the incentive scheme is looked at. The object of the scheme was to boost exports in actual terms and not merely to encourage the existing exporters to pool their exports for the purpose of merely giving appearance of the incremental growth of exports. 14.4 At this stage, we may record the clarification made by Mr Raju Ramchandran, learned Addl. Solicitor General that the manufacturers like small scale industries which had not made any exports before the current year (i.e. 2003-04) and who have made such exports for the first time in 2003-04 through a status holder like the petitioner are not required to fulfill the condition of 25% incremental growth in exports for the simple reason that such manufacturers had never made any exports earlier. Of course, the condition of 25% incremental growth of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the scheme. We, therefore, hold that Notes 1 and 2 inserted by the notification dated 28.1.2004 merely amplify what was implicit in the original scheme. As per the settled legal principle as enunciated in the aforesaid decisions in State of MP vs. Nandlal Jaiswal, 1986 (4) SCC 566, it is not for this Court to sit in appeal over the wisdom of the Government in such economic matters and such clarificatory amendments cannot, therefore, be treated as arbitrary or unreasonable restrictions on the petitioner's right to carry on business. In fact, the amendments are to the incentive scheme and they do not impose any restrictions on the petitioner's right to carry on the business of exporting goods. 16. But, as already indicated earlier, the thrust of the petitioner's challenge to application of the clarifications/amendments 1.4.2003 and 28.1.2004 is on the ground that the impugned notification and public notice take away the vested rights of the petitioner. The petitioner has given the charts in Annexure 1 and 3 to their rejoinder affidavit which give the following picture :- It is submitted on the basis of the above figures that it is not for the first tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation dated 28.1.2004 which is quite in consonance with the object of the Act, Exim Policy and the Incentive Scheme rather than the interpretation canvassed by the petitioner. Hence, there is no substance in the challenge to Notes 1 and 2 read with Note 4. Notes 3 and 6 read with Note 4 19. However, Notes 3 and 6 added by notifications dated 21.4.2004 and 23.4.2004 read with public notice dated 28.1.2004 in so far as they exclude certain export products from the Incentive Scheme cannot be said to be mere clarifications. It may be that the Government may have good reasons to justify exclusion of such export products (the justification to be examined hereafter), but nonetheless exclusion of those products is in the nature of amendment of the Incentive Scheme. The question, therefore, is whether even after taking out exports covered by Notes 1 and 2, the petitioner had acquired any vested rights in duty free import entitlement on the exports between 1.4.2003 and 27.1.2004 of the category of goods covered by Notes 3 and 6. 20. Looking to the language of the Special Scheme as contained in the Exim Policy amended upto 31.3.2003, it does appear that 10% duty free credit entitlem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roactive or Retrospective ? 22. One way of dealing with the controversy is to note the distinction between vested rights and existing rights and to hold that even if the petitioner had any existing right to get Duty Fee Import Entitlement with effect from 1.4.2004 on the basis of the exports already made between 1.4.2003 and 27.1.2004, the petitioner had no vested right, because the Duty Free Import Entitlement was not yet actually granted when the amendments were made on 28.1.2004 nor had it been completely and definitely settled in the petitioner. Reference is to be made to the definition of Vested Rights in Black's Law Dictionary. In Trimbak Damadhar vs. Assaram Hiraman, AIR 1966 SC 1758 (para 9), the Apex Court had held as under :- It is relevant to distinguish between an existing right and a vested right. Where a statute operates in future, it cannot be said to be retrospective merely because within the sweep of its operation, all existing rights are included. 23. Since it is contended on behalf of the respondents that a retroactive delegated legislation does not have to face any challenge that a retrospective delegated legislation has to encounter, it is nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... logued in the Principles of Statutory Interpretation by Justice GP Singh [9th Ed. (2004) Chapter 6 Page 440], it should suffice to refer to the decision of the Apex Court in Dilip vs. Mohd. Azizul Haq, 2000(3) SCC 607 = AIR 2000 SC 1976 laying down that the problem retrospectivity concerning enactments depends on events occurring over a period. If the enactment comes into force during a period, it only operates on those events occurring then. We must bear in mind that the presumption against retrospective legislation does not necessarily apply to an enactment merely because a part of the requisites for its action is drawn from time antecedent to its passing. The fact that as from a future date tax is charged on a source of income which has been arranged or provided for before the date of the imposition of the tax does not mean that a tax is retrospectively imposed as held in Commissioners of Customs and Excise v. Thorn Electrical Industries Ltd., (1975) 1 WLR 1661. Principles enunciated by House of Lords 24. The principles of far reaching importance enunciated by the House of Lords through Lord Mustill in L'Office Cherifien (Supra) now need to be quoted in their entiret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions in a manner which is unfair to those concerned in them, unless a contrary intention appears. It is not simply a question of classifying an enactment as retrospective or not retrospective. Rather it may well be a matter of degree the greater the unfairness, the more it is to be expected that Parliament will make it clear if that is intended. (emphasis supplied) Thereafter the House of Lords went on to enunciate the following principles in L'Office Cherifien (Supra) :- 'Precisely how the single question of fairness will be answered in respect of a particular statute will depend on the interaction of several factors, each of them capable of varying from case to case. Thus, the degree to which the statute has retrospective effect is not a constant. Nor is the value of the rights which the statute affects, or the extent to which that value is diminished or extinguished by the retrospective effect of the statute. Again, the unfairness of adversely affecting the rights, and hence the degree of unlikelihood that this is what Parliament intended, will vary from case to case. So also will the clarity of the language used by Parliament, and the light shed on it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f past transactions carried on upon the faith of the then existing law. Article 20(1) of the Constitution also provides against making of a ex-post facto law making an act an offence which was not so when committed or imposing more severe punishment than was imposed at the time of commission of the offence, otherwise the fundamental principle of the legal system will be violated. The Courts have, however, applied the principle against retrospectivity more strongly against penal statutes than statues in the realm of trade and commerce. 25.2 Since the entire debate turns on two questions whether any vested rights had accrued in favour of the petitioner and whether such vested rights can be taken away, it is necessary to examine the expression vested rights . In Black's Law Dictionary, the expression vested rights is defined as under :- Vested rights. In constitutional law, rightswhich have so completely and definitely accrued to or settled in a person that they are not subject to be defeated or canceled by the act of any other private person, and which it is right and equitable that the government should recognize and protect, as being lawful in themselves, and sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iving retroactive effect to the tax avoidance provisions of Section 18 of the Finance Act, 1936 in the following terms:- The fact that the section has to some extent a retroactive effect appears to us of no importance when it is realised that the legislation is a move in a long and fiercely contested battle with individuals who well understand the vigour of the contest. 25.4 As stated in Bennion's, Interpretation of Statutes - Retrospective operation; delegated powers (page 450) - Since the principles regarding retrospectivity are based on public policy, it follows that they apply equally to delegated legislation. However, the legislative intention needs to be gathered by considering both the enabling Act and the delegated instrument. If retrospectivity is beyond the power conferred by the Act, the doctrine of ultra-vires comes into play. (emphasis supplied) 25.5 It is, thus, clear both in principle and on authority that the PRINCIPLES REGARDING RETROSPECTIVITY ARE BASED ON PUBLIC POLICY and, therefore, the tests laid down by the House of Lords in L'Office Cherifien (1994) 1 All ER 20 speaking through Lord Mustill are very much in consonance with the settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to show such overriding public interest that the further question is required to be considered whether, after breach/ non-fulfilment of the promise by the Government, the promisee can resume his position. If answer is in the negative, the Court would grant appropriate relief in favour of the promisee. (d) Court is more strict when the statute inflicts penalty or imposes new liabilities rather than when a remedial statute affects existing rights in order to protect the public interest [State of Bombay vs. Vishnu Ramchandra, AIR 1961 SC 307 (310) and In Remon (1921) 1 KB 49]. III It is in the case of delegated legislation giving RETROSPECTIVE effect i.e. TAKING AWAY VESTED RIGHTS and, therefore, falling in the first category (enumerated in para 23) that - (i) the Government has firstly to satisfy the test that the parent legislation has expressly or by necessary intendment empowered or permitted the Government to make delegated legislation with retrospective effect; (ii) secondly the Government has to satisfy the tests (a) and (b) as indicated above. (iii) In absence of overwhelming and overriding public interest, the Court must strike down the delegated legislation as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/24th April 2004 are illegal and arbitrary because Notes 6 and 7 are given retrospective effect from 1st April 2003. 30. While it is usual for any Legislation to provide for appointment of a Director General or a Chief Executive Officer to carry out the provisions of the Act, Section 6 of the FTDR Act does not stop there, but proceeds to state that the Director General shall advise the Central Government in the formulation of the export and import policy and shall be responsible for carrying out that policy. The Parliament, therefore, recognized the complex nature of the activity of developing and regulating foreign trade. The very nature of this activity of looking after development and regulation of foreign trade would require the Central Government and the Director General of Foreign Trade to deal with several unforeseen, unexpected situations and circumstances which neither the Parliament nor the Central Government nor even the Director General of Foreign Trade could have anticipated, contemplated or visualized while framing a particular policy. Hence, by adding Note 3 to para 3.7.2.1 of the Exim Policy on 28.1.2004, the Government made its intention very clear that exports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l - After Motilal Padampat 32. Before proceeding to examine whether the amendments made by Notes 3, 6 and 7 with retroactive effect are unfair and if yes, are so UNFAIR that this Court should interfere with them, we would deal with some of the decisions cited by the learned counsel for the parties so that the tests to be applied for undertaking the above exercise as set out in Part II of para 26 become clear:- 32.1 The learned Addl. Solicitor General placed strong reliance on Kasinka Trading vs. Union of India, (1995) 1 SCC 274, wherein the doctrine of promissory estoppel was invoked in the following set of facts:- Under Section 25(1) of the Customs Act, 1962, the Government of India issued notification dated 15.3.1979 in public interest granting exemption from whole of the customs duty on import of PVC resin. The notification itself provided that it shall remain in force upto 31.3.1981. But before expiry of the said stipulated period, another notification dated 16.10.1980 was issued in public interest withdrawing the exemption and confining the exemption from customs duty as is in excess of 40% ad valorem. The appellant-petitioner before the Apex Court contended th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 vs. Union of India, AIR 1976 J K 41 :- The Courts will only bind the Government by its promises to prevent manifest injustice or fraud and will not make the Government a slave of its policy for all times to come when the Government acts in its governmental, public or sovereign capacity. 32.2 The above decision was followed by the Apex Court in Shrijee Sales Corporation vs. Union of India, (1997) 3 SCC 398, where also the same notifications were considered. In that case also, the appellants-petitioners had alleged that they would not have imported the PVC resin without the exemption as that would have been unviable and uneconomical and further that many persons took full advantage of the exemption. The Court held that the facts of the economic situation explained in the judgment of Kasinka were not controverted 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which prompted the Government of India to issue exemption notification dated 10.9.1982 remained unaltered and no new supervening circumstances had justified reversal of the said policy and, in fact, such a reversal to encourage foreign manufacturers at the cost of Indian manufacturers is per se contrary to public interest and a drain on foreign exchange. It was in the above set of circumstances that the Apex Court distinguished the decisions in Kasinka Trading HC-NIC Page 43 of 60 Created On Wed Nov 04 12:28:11 IST 2015 and Shrijee Sales Corporation without differing from the principle laid down therein that public interest is a superior equity which can override the individual equity and, therefore, the principle would be applicable even in cases where a period has been indicated for which period the notification or the policy was to remain in force. In Dai-ichi Karkaria, the Government failed to justify the rationality or reasonableness of impugned notification. The Apex Court did not lay down a different principle. 32.4 An analysis of the above cases, therefore, clearly indicates that if at all the fundamental principles regarding applicability of the principle of promisso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they dealt with notifications which were issued after the concerned petitioners had already obtained the benefits. The length of period after which those benefits were sought to be taken away was also a crucial factor which weighed with the Courts in striking down the offending executive action or the legislation and rightly so, because vested rights, as defined in Black's Law Dictionary are those which have so completely and definitely settled in a person that he could not be arbitrarily deprived of them without injustice. Impugned amendments to the Incentive Scheme made midstream can never be compared to those cases. Moreover, in none of those cases, the Court was persuaded to take the view that the public interest outweighed individual interest. Just to fortify the above analysis, we would prefer to deal with five out of the aforesaid decisions cited on behalf of the petitioner. 33.1 In State of MP vs. GS Dall and Flour Mills, 1992 Supp (1) SCC 150, the State of MP framed an executive scheme for the grant of subsidy/interest free loan to new industries set up in Madhya Pradesh. The scheme excluded traditional industries like dall mills from the benefit of the scheme. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to recover the excess price paid on 3.11.1976. The Apex Court held that the rice had been sold under a procurement order and if the petitioner supplied goods under that order and if a portion of the price paid by the FCI is taken away, the appellants will be prejudicially affected. The rice-millers had actually received payment for the rice sold. If the rice was delivered without any valid procurement order, the sellers were even otherwise entitled to be paid at the market rate in terms of Section 70 of the Contract Act. The retrospective notification dated 24.2.1977 reducing the price had tried to take a portion of the money the rice-millers had already lawfully obtained. Therefore, the Apex Court interfered. In the instant case, the petitioner was not given any import entitlement on the date of the impugned notification i.e. on 28.1.2004. The incentive scheme is to come into force from 1.4.2004 on the basis of the exports made between 1.4.2003 and 31.3.2004. Hence, the facts in the instant case are entirely different. 33.3 In State of Gujarat vs. Raman Lal Keshav Lal Soni, AIR 1984 SC 161, the Court was concerned with the retrospective amendments to the Gujarat Panchayat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he context of a hypothetical argument do not refer to any vested right, but at the most an existing right as discussed in para 22 hereinabove. 33.6 Thus in all the above cases the Government had either not pleaded, or failed to discharge the burden of showing, overwhelming public interest which could justify the change in Government policy with retrospective effect. Examining Challenge to retroactive operation of Notes 3, 6 and 7 on merits. 34. Applying the aforesaid tests, now we take up Notes 3, 6 and 7 in the notification dated 21/24th April 2004 and the public notice dated 28.1.2004 which read as under :- Note 3 - Government reserves the right in public interest, to specify the export products, which shall not be eligible for calculation of incremental growth/entitlement. Similarly, the government may also notify the list of goods, which shall not be allowed for imports under the scheme. 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 a. Rough, uncut and semi polished diamonds b. Gold, Silver in any form including plain jewellery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C Scheme is proved beyond doubt by the fact that firm stopped exporting the rough diamonds the moment the Notification was issued in January 2004 and have not exported any rough diamonds during January-March 2004. The major items of exports are such that the petitioners cannot use their entitlement under the scheme without violating the basic conditions leading to huge loss of revenue which would have otherwise come into the public exchequer. (emphasis supplied) 35.3 Applying the test whether the respondents have shown overriding public interest in excluding diamonds exported from 1.4.2003 to 27.1.2004 from the benefit of the special scheme, we are of the view that since rough diamonds could be imported without payment of duty and the material available to the Government in the form of intelligence report revealed that there was round tripping of diamonds (rough diamonds imported without any payment of duty and thereafter successive stages through which the diamonds were processed for enhancing the export turn HC-NIC Page 50 of 60 Created On Wed Nov 04 12:28:11 IST 2015 over), the Government was justified in excluding the exports of rough, uncut and semi-polished diamonds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecious and semi-previous stones in accordance with the procedure specified for the purpose. In view of this, the petitioners will have no necessity to utilize their entitlement for import of rough or semi-polished diamonds for use either in their own units or in the units of associate manufacturers for the production of cut and polished diamonds or for studded jewellery. Obviously, they cannot import, synthetic yarn for utilization in these units because there is no way such units can manufacture anything other than polished diamonds or jewellery. Paras 4.4 and 4.4.3 of the Exim Policy read as under :- 4.4 Exporters of gem and jewellery are eligible to import their inputs by obtaining Replenishment (REP) Licences from the licensing authorities in accordance with the procedure specified in this behalf. 4.4.3 Exporters of gold/silver/platinum jewellery and articles thereof may import their essential inputs such as gold, silver, platinum, mountings, findings, rough gems, precious and semi-precious stones, synthetic stones and unprocessed pearls etc. in accordance with the procedure specified in this behalf. 36.3 In view of the justification given by the Government, it d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revalent international price. 37.2 The Government's reply in their written submissions is as under :- The other major exports claimed by the petitioner is in the agro sector amounting to ₹ 1126.99 crores. Apart from the fact that the export of these products is subsidized and do not require any processing, it may be pointed out that this entitlement cannot be used for import of any agro or dairy products because of the restriction vide Customs notification No.53/2003 dated 1.4.2003 and circular No.25/2003 dated 1.4.2003. As such, there is no case for any retrospective application in the restrictions imposed on agro and dairy products. The DGFT's notification and public notice dated 28.1.2004 only reflect what had already been decided through the customs notifications at the time of introduction of the scheme. Even if this restriction was not there in the customs notification, the petitioners cannot use their entitlement in this sector as no processing is involved. The same argument holds well in the case of clinkers and iron ore also. 37.3 While the justification given by the Government that the export of the foodgrains is already subsidized may not by itse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under clause (vi) [now renumbered as (vii)] in para 3.7.2.1 of the Exim Policy. However, since the foodgrains are sourced from the central pool of FCI, it is for the FCI to take up the matter with the Central Government and the DGFT if they are desirous of claiming any duty free import of capital goods and office equipment for the FCI on the strength of the exports of foodgrains made between 1.4.2003 to 27.1.2004 from out of the central pool maintained by the FCI. Since it is a statutory Corporation under the FCI Act, it is open to the said Corporation to seek its remedies from the Central Government, if at all it is desirous of seeking any such benefits available to it under the Special Scheme. 38. Lastly, coming to exclusion of items exported under free shipping bills-, 38.1 The petitioners have stated as under :- (i) There is nothing such as Free Shipping Bills. The Customs Act prescribes the following as Shipping Bills :- (a) Shipping bill for duty free goods. (b) Shipping bill for duty free goods ex-bond. (c) Shipping bill for exports under drawback. (d) Shipping bill for exports under DEPB. (e) Shipping bill for exports under DEEC (Advance License) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of Export (Form) Regulations, 1991 and Rule 2 thereof reads as under :- 2. Shipping Bill.- A shipping bill to be presented by an exporter of goods shall be in the form specified in Annexure I, Annexure II, Annexure II or Annexure IV (See Forms 93, 94, 95, and 96 in Part 5), as the case may be, appended to these regulations. Form 93 is a shipping bill for export of goods under claim for duty drawback. Form 94 is the form for shipping bill for export of dutiable goods and Form 95 is the form for shipping bill for export of duty free goods. Form 96 is the form for shipping bill for export of duty free goods ex-bond. Each of these Forms is to be submitted in triplicate and one of the copies bears the title Export Promotion Copy . Each of these Forms also contains a column Value FOB of the goods being exported and a declaration that the particulars given in the Form are true and correct. The aforesaid Forms read in conjunction with the definition of third party exports make it clear that the procedural safeguard that the exports made by a status holder on behalf of any party like manufacturer will have to be supported by contemporaneous evidence like the shipping bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contained in Section 2(41) and Section 14 of the Customs Act, 1962. After referring to the aforesaid Sections, the Apex Court held that even though on export of goods no duty is payable under any Act, for determining the export value of the goods, the provisions of Section 2(41) and Section 14 are very much applicable and, therefore, even if no duty is leviable, the mode for determining the true value of the goods sought to be exported provided under Section 14 is required to be followed. The Court further observed that for finding out whether the export value is truly stated in the shipping bill, it can be referred to for determining the true export value of the goods sought to be exported. Even the duty free import entitlement under the Special Scheme is to be worked out at the rate of 10% of the incremental growth in exports (subject to minimum export turn over of ₹ 25 Crores) and such incremental growth has to be at more than 25% in FOB value of exports. The Government has not placed any material to show that when any items are exported under what the Government calls free shipping bills , the FOB value of exports is not indicated in such bills. Of course, the fact wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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