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JSW Steel Limited, Shri Rajiv Bakshi, Welspun Tradings Limited, Shri Suresh Darak, Shri Sourav Das, UPL Limited, Everest Flavours Limited Versus Union of India, The Director General of Foreign Trade, The Additional Director General of Foreign Trade, Foreign Trade Development Officer

2016 (1) TMI 957 - BOMBAY HIGH COURT

Validity of Complete and overall cap on the duty credit scrip - Incremental Export Incentivisation Scheme (“IEIS”) - misuse of the scheme - Held that:- We find it difficult to accept the proposition that where there was no cap or limit in the 2012 Notification or in any of its surrounding or contemporaneous documents such as public speeches, policy documents, changes in the Handbook of Procedures and so on, such a restriction could be said to have been brought in by the 2013 Notification. We are .....

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l exports, those incentives must be restricted to a paltry ₹ 20 lakhs. - There is no such restriction to be found in the 2012 Notification or in the 2013 Notification. We certainly cannot read it into 2013 Notification.

None can claim any benefit or incentive as an absolute right. However, a definite policy is enunciated in the present case. That policy extends an incentive for a demonstrated increase in exports. Its purpose is also clear, viz., to encourage more exports. The po .....

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re, that restricts the incentives in their entirety would therefore be arbitrary, violating the policy’s objective and the mandate of Article 14 of the Constitution of India.

All four Petitions succeed in part. We hold that the 2013 Notification places no cap or restriction on the value of the IEIS scrip. The Authorities concerned will consider the Petitioners’ applications on merits bearing in mind our findings and this order, and without any regard to the impugned Clarification of 2 .....

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eni Chatterji, Senior Advocate, with Mrs. S.V. Bharucha JUDGMENT ( Per G. S. Patel, J. ) 1. In all four Writ Petitions, a common issue is raised as regards Notification No. 27(RE-12)/2009-2014 dated 28th December 2012, a subsequent Notification No. 44(RE-2013)/2009-2014 dated 25th September 2013, and a so-called Clarification dated 23rd September 2014 dated 23rd September 2014. Although the facts in each of these four Writ Petitions filed under Article 226 of the Constitution of India are somewh .....

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o give a fillip to exports, the Government introduced an Incremental Export Incentivisation Scheme ( IEIS ) by Notification No. 27(RE- 12)/2009-2014 dated 28th December 2012 Exhibit B , pp. 49-54 to WP No. 2122 of 2015 ( the 2012 Notification ). This Notification inserted paragraph 3.14.4 in the Foreign Trade Policy ( FTP ) 2009-2014. This Notification, while prescribing a number of restrictions, all of which the Petitioners accept, including a limitation as to the eligibility period or time, al .....

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alifying restrictions. 5. Subsequently, by Notification No. 44(RE-2013)/2009-2014 dated 25th September 2013, Exhibit F , p. 61 to WP No. 2122 of 2015 ( the 2013 Notification ), according to the Petitioners, two paragraphs were added to the 2012 Notification. The first of these said that the benefit of the IEIS would be 25% growth or incremental growth of ₹ 10 crores, whichever was less. The second paragraph of the 2013 Notification, however, said in terms that claims in excess of this valu .....

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e duty credit scrip irrespective of the actual incremental growth in exports for the period in question. 6. Having heard learned Advocates on both sides at some length and having considered, with their assistance, the material on record, including the two Notifications in question as also the Clarification, we are not persuaded that the interpretation of the Respondents is correct. It does not seem to us to be plausible to suggest that by the 2014 Clarification a cap or limit could have been int .....

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ment in 2012 decided to introduce the Incremental Exports Incentivisation Scheme. On 26th December 2012, it released a Press Note to this effect. Exhibit A , p. 48 to WP No. 2212 of 2015 It is stated that the Union Minister for Commerce, Industries and Textile had announced a decision to grant incentive on incremental exports. This was period specific: the incentive would be available in respect of incremental exports made for the quarter January to March 2013 relative to the corresponding previ .....

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eved by the IEC holder) during the period 01.01.2013 to 31.3.2013 compared to the period from 01.01.2012 to 31.3.2012 on the FOB value of exports. Incremental growth shall be in respect of each exporter (IEC holder) without any scope for combining the exports for Group Company. (c) Incentive will be admissible only if the IEC holder has achieved growth in the financial year 2012-2013 vis a vis financial year 2011-2012. Quantum of benefit will be calculated on the incremental growth achieved subj .....

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exports made through transshipment. (ii) Export from SEZ/EOU/EHTP/STPI/BTP/F TWZ (iii) Deemed Exports. (iv) Service Exports (v) Third Party exports (vi) Diamond, Gold, Silver, Platinum, other precious metal in any form including plain an studded jewellery and other precious and semi-precious stones. (vii) Ores and concentrates of all types and in all formations. (viii) cereals of all types. (ix) Sugar of all types and all forms. (x) Crude/ petroleum oil and crude / primary and base products of .....

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sions of para3.17.10(b) of FTP shall not be admissible. This benefit will be over and above any benefit being claimed by the exporter under any of the Chapter 3 Schemes, therefore, provisions of para 3.17.8 of FTP 2009-14 will not be invoked for such benefit. Utilisation of Scrip (f) The duty credit scrip will be freely transferable. Such scrips shall also be eligible for domestic sourcing as per para 3.17.5 of FTP 2009-14. 8. The Scheme also sets out Eligibility Criteria in sub-clause (d). This .....

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ub-clause (e) contained a special provision which said that the Scheme was region-specific and only covered exports to USA, Europe and Asian countries. Sub-clause (f ) said that the duty credit scrip was freely transferable and was eligible for domestic sourcing. 9. The Petitioners do not question or challenge any of these restrictions in clauses (d) and (e) of paragraph 3.14.4 introduced by the 2012 Notification as being arbitrary and unreasonable. What the Petitioners emphasize is clauses (a) .....

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hieved growth in the FY 2012-2013 vis-à-vis FY 2011-2012. As Mr. Nankani points out, this was evidently mean to eliminate anybody trying to take undue advantage of a sudden, one-off or seasonal growth in exports. The intention was to provide a boost or an incentive to those who were steadily increasing their export business. 10. It is important to note that clause (b) contains no cap and clause (c) says that the quantum of benefit was to be calculated on the increased growth achieved subj .....

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a prescribed time period, i.e., within twelve months from the date of the export, or within six months from the date of realization, or within three months from the date of providing or release of shipping bills, whichever was later. By a later Public Notice No. 13/2009-14 (RE-2013) dated 17th May 2013, Exhibit D , pp. 56-59 to WP No. 2122/2015 the necessary Form ANF 3F with a detailed worksheet for calculation was notified. This form set out a working tabulation to compute the entitlement at t .....

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re than 25% or where the total incremental exports was ₹ 10 crores or more. In Writ Petition No. 2122 of 2015, the Petitioners made an application on 3rd February 2014. Exhibit H , pp. 66-72 to WP No. 2122/2015 In this, it showed that it had been consistently increasing its exports and, in fact, had no domestic sales. It also demonstrated an export performance percentage growth of 200% for the relevant period. We may only note here that there were certain deficiencies that were noted in th .....

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. The following sub-paragraphs (i) and (ii) are added below paragraph 3.14.4.(c) as under: (i) Benefit of Incremental Export Incentivisation Scheme for the last quarter of 2012-13 will be limited to 25% growth or Incremental growth of ₹ 10 crores in value, whichever is less. (ii) Claims in excess of this value will be subjected to greater scrutiny by Regional Authority. 14. Mr. Nankani s submission is that he has no quarrel with this Notification as it stands, because on the face of it it .....

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t to greater scrutiny by the Regional Authority. This, according to Mr. Nankani, is completely sound, because where a large incremental export is claimed and a very large credit is claimed on that basis, it is of course necessary for the Revenue to exercise greater caution and care. But the same degree of care, caution and scrutiny may not necessarily be required for each and every single application. Those that are more modest in their claims might require a far less finegrained an examination .....

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This amendment to the Handbook in terms specified the documents likely to be called for by the Regional Authority while carrying on the greater scrutiny contemplated in sub-clause (ii) of the 2013 Notification. These documents included calling for evidence for manufacture/purchase of export goods, i.e., excise returns, sales tax returns or other evidence; checking exports of company from whom goods have been purchased; calling for other evidence to justify export growth; etc. Even the Handbook .....

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2015 The Petitioners set out their submissions in this regard and requested that the application at the rate of 2% on the entire incremental growth be considered. The Assistant DGFT replied by his letter dated 11th February 2015. Exhibit R , p. 90 to WP No. 2122/2015 This is one of the documents impugned in Writ Petition No. 2122 of 2015. The Assistant DGFT stated that the value claimed of the IEIS scrip was limited to 25% growth in exports or incremental growth of ₹ 10 crores in value whi .....

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ng sub-paragraphs (i) and (ii) were added below paragraph 3.14.4 of FTP as under: (i) Benefit of Incremental Export Incentivisation Scheme for the last quarter of 2012-13 will be limited to 25% growth or Incremental growth of ₹ 10 crores in value, whichever is less. (ii) Claims in excess of this value will be subjected to greater scrutiny by Regional Authority (b) Vide Notification No. 43 dated 25.09.2013 the following sub-paragraphs were added below paragraph 3.14.5(c) of FTP as under: (i .....

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s the upper limit of grant of benefit. The second sub-para in both the notifications only directs RAs to exercise caution while dealing with cases of incremental growth of exports under the scheme. It does not entitle any Applicant to higher levels of benefits under the scheme. 4. Accordingly RAs may compute entitlement under the scheme as under: IEIS for the last quarter of 2012-13: Benefit of Incremental Export Incentivisation Scheme for the last quarter of 2012-13 will be limited to 25% growt .....

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5 Exhibit U , p. 97 to WP No. 2122/2015 in which the Assistant DGFT reiterated the stand that the IEIS scrip was limited to ₹ 20 lakhs and that the 2012 Notification read with the 2013 Notification did not by itself confer any additional benefits. 20. Mr. Nankani s submissions, supported by learned Counsel for the Petitioners in the other Writ Petitions, are straightforward. They say that the 2012 Notification contained no such restriction as is now sought to be imposed. There were indeed .....

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ch 2012. Indeed, they also accept that where there is exceptionally high incremental export for the period under consideration, additional scrutiny may indeed be required. But neither the 2012 Notification nor the 2013 Notification in any way restrict or cap the total entitlement of ₹ 20 lakhs. Mr. Nankani s submission is that if such a cap was intended, then, clause (ii) of the 2013 Notification was unnecessary: (ii) Claims in excess of this value will be subjected to greater scrutiny by .....

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mean, Mr. Nankani submits, that a temporary, seasonal or oneoff increase in exports, something that is merely an aberration and does not display or evidence a consistent growth in export business and turnover, should not be held eligible for such an incentive. For genuine exporters who do qualify and show an incremental growth in export, this incentive, he says, is rendered illusory if it is capped at ₹ 20 lakhs when, on a plain calculation of 2% of the incremental growth the value could b .....

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Notification is not under challenge at all. All that the Petitioners challenge is the Clarification. The Respondents are not relying on the Clarification. The plain meaning of the 2013 Notification is that it imposes a cap and this cap is necessary to prevent unintended benefits. He emphasizes that the 2013 Notification expressly states that it comes into force with immediate effect and, further, that it applies to the relevant period only, i.e., the last quarter of 2012-2013. This is not, ther .....

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ap or limit on the total value of the IEIS scrip. 24. Relying on the Supreme Court decision in M/s New India Sugar Works v State of Uttar Pradesh & Ors., (1981) 2 SCC 293 which in turn cited with approval the earlier decision of the Supreme Court in Trimbak Damodar Raipurkar v Assaram Hiraman Patil & Ors., AIR 1966 SC 1758 : 1962 Supp (1) SCR 700 Mr. Rana submitted that there is a difference between an existing right and a vested right. Where a statute operates in future, it is not retro .....

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ssion is slightly different: all that he says is that this kind of clarification or amendment is not one that can reasonably be said to apply only in praesenti or in futuro, irrespective of the wording of the 2013 Notification. Of necessity, it relates back to the 2012 Notification and seeks to impose a limit on it where none existed. Matters might have been different, he says, and we agree, if there was material to show that previous applications were allowed without limit, and the 2013 Notific .....

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s speech, the Union Minister spoke of an incentive at the rate of 2% on incremental growth. He mentioned certain exclusions but did not specify any cap. 27. Mr. Shah for the Petitioners in Writ Petition No. 10437 of 2015 drew our attention to the new Policy that has been announced, by which this Incentive Scheme has been extended. A fresh Circular is issued. This is in terms of the 2012 Notification but without the so-called cap or limit said by the Respondents to have been specified by the 2013 .....

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ition that where there was no cap or limit in the 2012 Notification or in any of its surrounding or contemporaneous documents such as public speeches, policy documents, changes in the Handbook of Procedures and so on, such a restriction could be said to have been brought in by the 2013 Notification. We are mindful of the purpose and intent of the 2013 Notification. It is entirely salutary. None should receive unintended benefit from the 2012 Notification. Certain checks and measures are undoubte .....

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ead it into 2013 Notification. To do so would be to render, as Mr. Nankani says, clause (ii) entirely redundant. If the cap was ₹ 20 lakhs, no exporter, no matter what is his incremental exports for the period in question, would ever submit an application or make a claim in excess of ₹ 20 lakhs. There would then be no question of greater scrutiny by the Regional Authority. That clause would be entirely meaningless. Evidently, therefore, what clause (ii) says is that while claims up t .....

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e more exports. The policy s terms must, therefore, receive an interpretation as would advance its stated purpose, viz., to promote and encourage exports. That this is also one of the avowed objects of the Foreign Trade (Development and Regulation) Act, 1992 is also not doubted. Where the policy did not itself place any such cap - and plainly it did not, for we find no words of limitation in it, other than those in the eligibility criteria, and these are accepted - any interpretation of the 2013 .....

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se of a policy interpretation by those in charge of its implementation by which, ostensibily to prevent undue benefit to some, undue and unjustified hurdles and obstacles are created disabling bona fide beneficiaries from availing of the policy s incentives and benefits. It is this aspect, highlighted throughout, that persuades us to agree with the Petitioners-Exporters. 31. The other important and equally salutary principle of interpretation is that in a beneficient piece of legislation or a po .....

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, we must also adopt a purposive approach to its interpretation and construction. Mr. Rana s submissions do not tell us how a cap or limit or specifying the maximum benefit would advance the purpose of the incentive scheme. All that these submissions tell us is that there was a concern that none should receive undue or unintended benefit. There can be no cavilling with that. But it surely cannot be suggested that any incentive above ₹ 20 lakhs is axiomatically and ipso facto an unintended .....

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