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INTOLCAST PVT. LTD AND 1 Versus UNION OF INDIA AND 1

2016 (10) TMI 753 - GUJARAT HIGH COURT

Exports of valves for industrial uses - Recovery of benefit Focus Product Scheme (FPS) - Denial of benefit of Merchandise Exports from India Scheme (MEIS) under the new policy - legislative intention - Validity of trade notice issued by DGFT - Held that:- The scheme(FPS) came to an end on 31.03.2015. Long after that, DGFT issued the impugned clarificatory circular, in which, it is provided that the intention all along had been to grant the incentives to bicycle parts only. The other items, which .....

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ers to issue a circular / clarificatrion - However, a clarification cannot run counter to the plain interpretation of the provision and in guise of clarification, an entry cannot be amended. The power to amend an entry would be with the Government of India. - Quite apart from the nature of the impugned trade notice, in any case, the respondents could not have stalled processing of the petitioners' applications for export benefits flowing from the MEIS which would stand on entirely different .....

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ir applications for export benefits under MEIS in accordance with the provisions made therein. - Decided in favor of petitioners. - SPECIAL CIVIL APPLICATION NO. 11262 of 2016 With SPECIAL CIVIL APPLICATION NO. 11263 of 2016 With SPECIAL CIVIL APPLICATION NO. 11264 of 2016 With SPECIAL CIVIL APPLICATION NO. 14808 of 2016 - Dated:- 13-10-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ. FOR THE PETITIONER : MR PARESH M DAVE with MR ADITYA S TRIPATHI, ADVOCATE FOR THE RESPONDENT : MR DEVANG VYAS, .....

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n exercise of powers under Section 5 of the Foreign Trade Development Regulation Act ['the Act' for short], the Government of India had framed Foreign Trade Policy 2009-14. Under such policy, the Government of India framed a Focus Product Scheme ['FPS' for short] which envisaged granting of duty credit scrip equivalent to 2% of the FOB value of exports of notified products mentioned in Appendix-37-D which were made from 27.08.2009 onwards. Relevant portion of this scheme reads as .....

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e) for exports made from 27.08.2009 onwards, unless a specific date of export/period is specified by public notice/notification. 3. Appendix 37-D contained a list of notified products for the purpose of FPS. Entry 242 thereof reads as under: Sr. No FPS Product Code ITC (HS) Code Description Rate Percentage Bonus Benefit 242 242 8481 Items of a kind used on bicycles: Taps, Cocks, Valves and Similar Appliances for pipes, boiler shells, tanks, vats or the like including pressure-reducing valves and .....

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ainless steel and manufactured through ferrous investment and precision casting process. Thus, clearly the fact that these valves were not bicycle tube valves was disclosed by the petitioners at the outset. It is undisputed that the authorities granted the benefit of the said scheme on all exports made by the petitioners of such valves and parts of the valves. At page 84, the petitioners have produced a list of, in all, 28 such applications made by the petitioners and granted by the respondents. .....

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t of goods/products, which are produced/manufactured in India, especially those having high export intensity, employment potential and thereby enhancing India's export competitiveness. 3.04 Entitlement under MEIS Exports of notified goods/products with ITC(HS) code, to notified markets as listed in Appendix 3B, shall be rewarded under MEIS, Appendix 3B also lists the rate(s) of rewards on various notified products [ITC (HS) codewise]. The basis of calculation of reward would be on realised F .....

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s, Valves and Similar Appliances for pipes, boiler shells, tanks, vats or the like including pressurereducing valves and thermostatically controlled valves 7. On 14.12.2015, the DGFT issued the impugned trade notice which reads as under: The product description appearing under ITCHS 8481 mentioned at Sr.No. 269 of Appendix 37-D, Table-1, of Foreign Trade Policy 2009-14 notified vide public notice No. 52 dated 25.02.2014 is as under: 'Items of a kind used on bicycles: Taps, Cocks, Valves and .....

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lier public notices having same description and even to those items which are not used in bicycles. 3. It is hereby clarified that intention from the beginning had been to grant incentive to bicycle parts only under this serial No. 269 under FPS and this intention has been clearly indicated. Other items, which are not parts of bicycle, appearing in the above mentioned description are not eligible for FPS benefit under FTP 2009-14. The Focus Product Scheme has sunset on 31.03.2015, therefore, the .....

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ht. 8. Pursuant to such trade notice, the respondents initiated two actions against the petitioners. First was to seek recovery of the benefits already released. One such recovery notice dated 30.05.2016 is produced at page 117 of the petition. Under such notice, the respondents, referring to the said trade notice dated 14.12.2015, asked the petitioners to repay within 15 days the duty credit along with interest which was granted under the said heading, failing which, the authorities would initi .....

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h background, the petitioners have challenged the said trade notice as well as the action of the respondents in blocking the petitioners' applications for export incentives under the MEIS scheme. 10. Appearing for the petitioners, learned counsel Mr. Dave raised following contentions: (i) The clarification made in the impugned trade notice cannot apply with retrospective effect and to cases which were closed long back; (ii) Through the trade notice, in the guise of clarification, the authori .....

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it this description and this mismatch was, later on, corrected in the MEIS where the entry was retained as it is, but the title 'Items of a kind used on bicycles' was deleted. (iv) Counsel submitted that the true intention can be gathered from the reference to the Customers Tariff Entry 8481 which referred to taps, cocks, valves etc and had no connection with the items used in bicycles; (v) Counsel lastly contended that even otherwise, it would be wholly impermissible to allow the respon .....

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upport of his contentions, counsel relied on following decisions: • In case of Malik Tanning Industries vs. Union of India reported in 2015 (320) E.L.T 508 (Del.) • In case of Suchitra Components Ltd. vs. Commissioner of Central Excise, Guntur reported in 2007 (208) E.L.T 321 (S.C) 11. On the other hand, Shri Raval for the department opposed the petition contending that in terms of the foreign trade policy itself the DGFT has the power to issue clarificatory circulars. The circular mer .....

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the like including pressure reducing valves and thermostatically controlled valves. The petitioners and other similarly situated exporters had exported valves and parts not used for bicycles but for other industrial uses by making correct declaration. They had applied for the benefit under the scheme. Such applications were processed and benefits were granted. The scheme came to an end on 31.03.2015. Long after that, DGFT issued the impugned clarificatory circular, in which, it is provided that .....

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immediately arise, what would be utility of mentioning several other parts in the said entry. In other words, if the impugned circular is seen as merely a clarificatory circular, several parts mentioned in the entry would be rendered otiose. In fact, virtually, the entire entry would be rendered meaningless. 14. We are conscious that this entry contained a heading Items of a kind used on bicycles . However, the main body of the entry contained predominantly parts which were not possible of bein .....

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unnecessary stress on the heading of the entry itself, we would destroy the very essence of the entry and render the entire incentive nugatory. If the intention of the policy makers was to confine the benefits of the export incentives to parts that can be used in bicycles, the description of various items in the said entry which can never be used on bicycles ought not to find place there. There was thus a clear mismatch between the heading and the main entry itself. 15. Strictly speaking, thoug .....

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of the entry was an error, at least, in the new export policy, this mismatch would be corrected by deleting or suitably amending entry and retaining the title. What in actual terms has been done in the new MEIS is to delete the title and retain verbatim the entry itself. This is an additional indication to refute the assertion of the DGFT in the impugned trade notice that the intention behind framing of the said Entry 242 was to confine the export benefits only on the items used on bicycles. 16. .....

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Nevertheless, when the contents of the entry itself are sufficiently clear, have a wide import and apply to range of products and parts which have no relation to bicycles or its part, the interpretation sought to be given by DGFT in the clarificatory circular cannot be accepted. 18. We are not doubting the power of the DGFT to issue such a circular. The Foreign Trade Policy 2009-14 itself contained an interpretation Clause 2.3 which recognized that if any question or doubt in respect of interpre .....

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bring about greater consistency and predictability. However, a clarification cannot run counter to the plain interpretation of the provision and in guise of clarification, an entry cannot be amended. The power to amend an entry would be with the Government of India. 19. In case of Malik Tanning Industries (supra) the High Court held that the DGFT would no have power to issue circulars with retrospective effect. In the said judgement also, the distinction between a clarificatory circular and one .....

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added provision, of the rights already available to the License holder/subsequent transferee, of the DFIA. It is well settled that the power to legislate retrospectively is not inherent, and has to be specifically conferred by statute no such power seems to emanate, either from Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 or from Para 1.2 of the FTP. The following decisions, on which reliance has been placed in the writ petition, also underscored this settled legal posi .....

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