TMI Blog2023 (11) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... 29th January 2020, retracting the MEIS benefits for the FIBC sector from 07th March 2019. Although the initial grievances highlighted in the petition spanned a broader spectrum, during the hearing, the Petitioner narrowed their challenge to two specific reliefs: (i) The controversial notification should have a prospective, not retrospective, effect and (ii) immediate approval of the claims made by the Petitioner s member units under the MEIS scheme for the disputed period. Given these revisions, our analysis is confined to addressing these specific contentions and reliefs. Retrospective Effect of Impugned Notification - HELD THAT:- The Kanak Exports ruling [ 2015 (11) TMI 80 - SUPREME COURT] , though anchored in the context of an earlier iteration of Section 5 of the FTDR Act, 1992, still holds relevance. A close examination reveals that the 2010 Amendment has not altered the statute's stance on retrospective provisions. Furthermore, the Respondents have not indicated any provision that would counter this interpretation - Further, disentangling the Respondents case law references, the decisions in S.B. International [[ 1996 (1) TMI 125 - SUPREME COURT] , P.T.R Exports [ 1996 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for the period from 07th March, 2019 till the date of the impugned notification was notified exporters would have already factored in and priced exports in line with MEIS benefits. Now, given that it is held that impugned notification could not have been given effect retrospectively, it follows that the benefit should be disbursed to all bona fide applicants, who have applied in terms of the orders of this Court subject to fulfilment of other applicable conditions. The Petitioner has restricted the reliefs to seeking the prospective application of the impugned notification and the processing of claims submitted for MEIS benefits. Considering the same, the following directions are issued: (i) The impugned notification dated 29th January, 2020, insofar as it withdraws the MEIS benefit on FIBC bags classified under HS-ITC 6305 3200, shall apply prospectively. (ii) Respondents shall forthwith process the applications for the MEIS benefit on FIBC bags classified under HS-ITC 63053200, submitted in terms of the interim order of this Court dated 22nd February, 2022 in respect of the exports made during the period from 07th March, 2019 till the date of the issuance of the impugned notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3000 people per manufacturing unit, and an equally large number in ancillary and downstream industries. Statistically, India represents more than 20% of the global trade in FIBC. The FIBC sector is a major export earner for India, contributing nearly USD 1 billion in trade annually. 3.3. By way of notification dated 01st April, 2015 [Public Notice No. 2/2015-2020.] , DGFT had notified tables relating to MEIS schedule of countries with ITC-HS code wise listing of product along with reward rates under Appendix 3B thereof, which provided for 2% benefit for FIBC bags for the period from 01st April, 2015 to 29th October, 2015. Thereafter, DGFT notified an amendment to the Table-2 of Appendix 3B vide notification dated 24th November, 2017, [Public Notice No. 42/2015-2020.] relating to ITC-HS Code 2017 for the period from 01st November, 2017 to 30th June, 2018, enhancing the MEIS benefit for FIBC bags under Serial No. 4311, ITC-HS Code 63053200, from 2% to 4%. The benefits were continued beyond the said period by way of notification dated 11th May, 2018 [Public Notice No. 07/2015-2020.] . 3.4. Leveraging the benefits provided under the MEIS, the Petitioner s member units proactively expan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorities highlighting the plight and concerns of FIBC sector. 3.8. On 07th December, 2019, DGFT introduced amendments to the MEIS rates, offering an additional 2% benefit for exports. However, these adjustments did not encompass the FIBC sector. This oversight led the Petitioner to approach the DGFT again in December 2019. The concern was that the FIBC sector had neither received the standard 2% MEIS benefit nor the extra 2% benefit extended to the textile sector, from 01st August, 2019. Amidst these developments and in anticipation of a positive response from the DGFT and other authorities, the impugned notification was issued on 29th January, 2020. This notification amended Table-2, Appendix 3B, discontinuing the MEIS benefits for items within Chapters 61, 62, and 63 of ITC-HS 2017 (covering the apparel and made-ups sectors) for exports made with effect from 07th March 2019. In response to this adverse notification, the Petitioner made numerous representations to the DGFT, advocating for grant of MEIS benefit starting from 01st August, 2019. They also appealed to other relevant authorities for the reinstatement of the said benefit, but to no avail. 3.9. The abrupt termination o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry, 2022. Subsequently, on 01st February, 2022, the Department of Commerce, Ministry of Commerce and Industry released a notification which extended the application submission deadline, as specified in the 16th September, 2021 notification concerning MEIS, until 28th February, 2022. Yet, the Petitioner's member units faced challenges in registering their claims on the DGFT portal. Addressing this issue, on 22nd February 2022, the Court granted interim relief allowing the member units to file their applications in hard-copy form, following the procedure in place before the impugned notification. The Union of India, specifically through the Ministry of Commerce and Industry s Department of Commerce, was enjoined as a party as Respondent No. 2. Additionally, the counsel representing DGFT informed the Court that the impugned notification stemmed from an earlier directive dated 14th January 2020 issued by the Ministry of Textiles. Consequently, the Ministry of Textiles was arrayed as Respondent No. 3 to the proceedings. RESPONDENTS SUBMISSIONS 5. The submissions advanced by counsel for DGFT, are summarised as under: 5.1. MEIS was introduced under the Foreign Trade Policy [hereinafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 Notification. Thus, the removal of MEIS for items under Chapter 61, 62 and 63 is not arbitrary and coercive. Furthermore, providing MEIS on exports from 07th March, 2019 is not feasible, since exports which are already made cannot be incentivized now. 5.6. The RoSCTL scheme stands notified by the Ministry of Textiles and DGFT is only the implementing agency. The withdrawal of the MEIS was not sudden. All exporters were aware of the new scheme RoSCTL which was in operation since 07th March, 2019. FIBC bags used for packing, falling under Chapter 63 were removed from 07th March, 2019 onwards because the same item was present in the list of RoSCTL. Therefore, Petitioner is not eligible for benefits for the same item/ product under MEIS as per the notification dated 14th January, 2020, issued by the Ministry of Textiles. Although the FIBC bags were notified in the schedules of rates for RoSCTL, with the rate Nil , however, it is not clear why no steps were taken by the Petitioner to have a rate determined for their product under RoSCTL. The Petitioner should have made a representation to the Ministry of Textiles for a rate under RoSCTL, given the product was listed eligible under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the withdrawal of the same was prevalent in the news, media and trade discussions for a considerable period of time. Ultimately, in compliance of WTO obligations, the Government decided to withdraw the MEIS scheme. The withdrawal was approved by the Central Board of Indirect Taxes and Customs, Department of Revenue, Ministry of Finance, vide Office Memorandum dated 30th December, 2019, for items under Chapters 61 to 63, effective on exports made from 07th March, 2019. Further, the DGFT through Office Memorandum dated 31st December, 2019 requested the Ministry of Textile to issue the notification urgently enabling the additional ad-hoc incentive under RoSCTL Scheme so that the notice for withdrawing MEIS benefit from 07th March, 2019 can be notified by DGFT. 6.2. On 07th March, 2019, the Cabinet approved the scheme for RoSCTL to provide a rebate to embedded State and Central taxes/ levies, to provide support and enhance competition in exports. The RoSCTL scheme replaced the Rebate on State Levies Scheme [hereinafter RoSL ]. Benefits under MEIS (for Chapter 61, 62 and 63) were discontinued w.e.f. 07th March, 2019 because all embedded taxes and levies are covered under RoSCTL. All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applications as of 01st August 2019. Despite subsequent representations, the contested notification was issued on 29th January 2020, retracting the MEIS benefits for the FIBC sector from 07th March 2019. Although the initial grievances highlighted in the petition spanned a broader spectrum, during the hearing, the Petitioner narrowed their challenge to two specific reliefs: (i) The controversial notification should have a prospective, not retrospective, effect and (ii) immediate approval of the claims made by the Petitioner s member units under the MEIS scheme for the disputed period. Given these revisions, our analysis is confined to addressing these specific contentions and reliefs. (A) Retrospective Effect of Impugned Notification 9. Retrospective withdrawals of benefits and incentives by their nature, risk inflicting irreversible harm, in this case the Petitioner s member units. While prospective amendments or alterations are within the Central Government's purview and typically beyond reproach, retrospective changes that could devastate an entire sector raise serious concerns. Such actions risk breaching the fundamental tenets of natural justice, equity, and fair play, pot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issuance of the impugned notification to retrospectively withdraw MEIS Benefits is premised on powers granted by the FTP, namely paragraph 1.02, as under: 1.02 Amendment to FTP Central Government, in exercise of powers conferred by Section 5 of FT (D R) Act, 1992, as amended from time to time, reserves the right to make any amendment to the FTP, by means of notification, in public interest. 12. We find that paragraph 1.02 of the FTP 2015-20 recognizes the Central Government s discretion to amend the FTP in the public interest. However, it does not suggest that these amendments can retrospectively reshape prior understandings or actions. In such a scenario, the FTP certainly does not authorize the DGFT to rescind substantive benefits retrospectively. 13. The Kanak Exports ruling, though anchored in the context of an earlier iteration of Section 5 of the FTDR Act, 1992, still holds relevance. A close examination reveals that the 2010 Amendment has not altered the statute's stance on retrospective provisions. Furthermore, the Respondents have not indicated any provision that would counter this interpretation. Further, disentangling the Respondents case law references, the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly argue that the simultaneous availability of both MEIS and RoSCTL schemes would result in an undue double benefit for the Petitioner. This argument, however, lacks substance. The RoSCTL rate for FIBC bags was stipulated as Nil , rendering the Petitioner s member units incapable of claiming benefits under either the MEIS or the RoSCTL scheme. It is also imprudent for the Respondents to suggest that the Petitioner ought to have lobbied for an RoSCTL rate instead. Moreover, we are informed from the Petitioner s submissions that recognizing this oversight, they have proactively raised the issue with the competent authorities, including both the Ministry of Finance and Ministry of Textile. 18. The MEIS, falling under Chapter-3 Exports from India Schemes of the FTP 2015-20, serves as an incentive, while the RoSCTL merely rebates state and central embedded taxes and levies. They operate under separate governance: DGFT for MEIS and the Ministry of Textile for RoSCTL, emphasizing their distinct purposes and mechanisms. Therefore, equating the two schemes is erroneous. RoSCTL, in its very nature, cannot compensate for claims associated with exports executed or committed before the releas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BC sector, which was already excluded from the RoSCTL benefit. (C) Blocking of DGFT s Portal for Submission of Claims 21. By way of the notification dated 01st February, 2022, the deadline for submissions of claims under the MEIS scheme was extended to 28th February, 2022. However, the Petitioner s member units were unable to submit their application for claims pertaining to the period for which the claims stood allowed i.e., 01st July, 2018 to 31st March, 2019; 01st April, 2019 to 31st March, 2020, and; 01st April to 31st December, 2020 on account of closure of the portal for members of the FIBC sector from 01st August, 2019. By way of interim relief granted by this Court on 22nd February, 2022, the member units of the Petitioner were permitted to file their claims and the same have been taken on record by the DGFT. In our opinion, for exports having already been carried out for the period from 07th March, 2019 till the date of the impugned notification was notified exporters would have already factored in and priced exports in line with MEIS benefits. Now, given that we have held that impugned notification could not have been given effect retrospectively, it follows that the bene ..... X X X X Extracts X X X X X X X X Extracts X X X X
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