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TMI Blog2023 (11) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... ter "MEIS"] in respect of Flexible Intermediate Bulk Container [hereinafter "FIBC"] bags, with effect from 07th March, 2019. 2. The Petitioner argues that the impugned notification is both arbitrary and unlawful, primarily because of its retrospective application. The decision has resulted in significant financial setbacks for the Petitioner's member-units and has adversely impacted the export potential of FIBC bags. In light of these concerns, the Petitioner seeks directions against the Respondents to ensure that the impugned notification is applied prospectively. Consequently, benefits under the MEIS scheme should be extended for the disputed period - from 07th March, 2019 till the date of the issuance of the impugned notification. BACKGROUND AND PETITIONER'S SUBMISSIONS 3. Mr. Pramod Kumar, learned counsel for Petitioner, narrates the factual background and raises several contentions summarised as follows: 3.1 Petitioner-company is a nodal association in India dealing with manufacturers of FIBC, and leading bulk packaging companies in India engaged in manufacturing and exporting FIBC across the globe. The FIBC bags, commonly known as "Jumbo Bags"/ "Big Bags", are made up of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive from 01st August, 2019. The Petitioner had already submitted a representation opposing the DGFT's proposal. DGFT never officially announced the withdrawal of MEIS. As a consequence, manufacturer-exporters continued to price their export products while incorporating the MEIS benefit, ensuring they retained a competitive edge in the global market. 3.6. Petitioner submitted a representation on 18th March 2019 to the Secretary, Department of Commerce, Government of India. This representation sought to address concerns of potential unrest among FIBC manufacturers and exporters due to the abrupt withdrawal of the MEIS subsidy. Such a sudden change undermined their competitive advantage in the global market, negatively impacting exports from India without any justified rationale. 3.7. In absence of any positive response, the Petitioner sent a representation dated 30th October, 2019 to the Plastic Export Promotion Council [hereinafter "Plexcouncil"], the nodal agency for Plastic Exports in India, sponsored by the Ministry of Commerce of Industry, Government of India - seeking its urgent intervention in the matter in the wake of blocking of the application process for MEIS benefit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es v. Union of India 2014 SCC OnLine Del 6963., and of the Bombay High Court in Noble Resources and Trading India Pvt. Ltd. v. Union of India 2011 SCC OnLine Bom 1341. 3.10. Subsequently, Public Notification No. 26/25-2020 was issued on 16th September 2021. This notification set 31st December 2021 as the final date for submitting MEIS applications for exports conducted during the following periods: 01st July 2018 to 31st March 2019, 01st April, 2019 to 31st March 2020, and 01st April to 31st December 2020. However, the DGFT's portal had barred submissions for the FIBC sector since 01st August 2019, and remained inaccessible despite numerous representations. Consequently, the Petitioner's member units were unable to lodge their MEIS applications for already completed exports. In light of these challenges, the Petitioner, on 14th October 2021, reached out to Plexcouncil, seeking their mediation to facilitate FIBC exporters in registering their claims on the DGFT portal. 3.11. While the retrospective withdrawal of the MEIS benefit results in significant direct financial setbacks, the added inability of the Petitioner's member units to apply for the MEIS benefit for previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o amend the policy during the currency of the policy has statutory recognition. 5.3. Further, when the Government is satisfied that change in the policy is necessary in the public interest, it would be entitled to revise the policy and lay down new policy as specified in Paragraph 1.02 of the FTP 2015-2020. Thus, the Central Government reserves the right to make any amendment to the FTP, by means of a notification, in public interest. 5.4. By way of notification dated 14th January, 2020, [Notification No. 58/2015-2020.] Ministry of Textiles notified that MEIS for items under Chapter 61, 62 and 63 stand withdrawn with effect from 07th March, 2019 [hereinafter "Ministry of Textiles' January 2020 Notification"]. It was also notified that MEIS claims already paid to exporters will be suitably adjusted against the benefits under the scheme of "Rebate of State and Central Taxes and Levies" [hereinafter "RoSCTL"] to be issued henceforth and recoveries would be made wherever due. Thus, in light of the said notification, the impugned notification was issued which also provided the procedure to avail benefits in the form of scrips under the RoSCTL scheme. 5.5. FIBC bags used for packing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not accept the claim for MEIS of the Petitioner's member units. The extension of timeline for filing applications till 28th February, 2022 extended vide notification dated 01st February, 2022 is not relevant for the Petitioner because its member-units are not eligible for benefits under MEIS for exports from 07th March, 2019. For exports made prior to 07th March, 2019, the Petitioner can apply and avail MEIS for their item. 5.9. The MEIS scheme in-question, formulated by the Government, is in the nature of a concession/ incentive - the grant of which is privilege and is decided after taking into account various factors including availability of funds. Thus, the Government has the right to grant, withdraw, modify such incentives and concessions, as necessary, to adhere to fiscal discipline in utilisation of funds for any incentive scheme, including MEIS. In this regard, reliance is also placed on a catena of judgments rendered by the Hon'ble Supreme Court in Directorate General of Foreign Trade & Anr. v. Kanak Exports & Anr. [(2016) 2 SCC 226]., S.B. International Ltd. v. Asst. Director General of Foreign Trade & Ors. AIR 1996 SC 2921., and P.T.R. Exports (Madras) Pvt. Ltd. v. U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to up to 1% of the FoB value. This decision was formally announced on 14th January 2020. 6.4 The Ministry of Textiles' January 2020 Notification explicitly stated that any benefits granted to exporters under MEIS would be adjusted appropriately against RoSCTL, with recoveries being made where necessary. Following this, the procedure to avail benefits in scrip form under the RoSCTL scheme was outlined in the contested notification. 6.5 It is essential to note that decisions concerning MEIS fall outside the jurisdiction of the Ministry of Textiles. The MEIS scheme is overseen by the DGFT. In fact, both the MEIS and RoSCTL schemes were implemented by the DGFT. Given this, there is a strong case for removing the Ministry of Textiles from the list of involved parties. ANALYSIS, FINDINGS AND DIRECTIONS 7. Member units of the Petitioner, exporters in the FIBC sector, relied heavily on the benefits offered by the MEIS scheme which was initiated to offset infrastructural inefficiencies and related export costs of products manufactured in India, and played a significant role in augmenting nation's global market presence in the FIBC sector. 8. While the MEIS was in operation from 1st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if a benefit is rescinded in the broader public interest, it does not necessarily legitimize a retrospective withdrawal without clear legislative backing. Diving deeper into the statutory framework, it was unequivocally stated that Section 5 of the FTDR Act, 1992, lacks any provision that permits the Central Government to promulgate rules with a retrospective effect. Consequently, the scope to "amend" any policy under Section 5 does not imply a carte blanche authority to make retrospective changes. This judgment is not an isolated stand; it derives its strength from the foundational legal principle that secondary or delegated legislation, by default, is prospective. Retrospective application is an exception and can only be permitted if explicitly provided by the parent statute. Supporting this line of thought, the Supreme Court, in Asian Food Industries, reiterated that prohibitive measures encapsulated in any statutory order under the FTDR Act, 1992, read with relevant provisions of the policy decision under Section 3(2) of the FTDR Act, 1992, should inherently be prospective. Additionally, reinforcing this stance, in Malik Tanning, adjudicated by a Single Judge of this Court, rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ims for the valid period, is arbitrary and indefensible, both in principle and law. (B) Respondents' Assertions of Prior Publicity and RoSCTL Scheme 15 At this juncture, we must emphasize that while the Respondents assert the Petitioner's awareness of the MEIS withdrawal, they have not elucidated when or how the Petitioner's member units were apprised of the impending MEIS cessation as on 07th March 2019, or any time before the impugned notification which was issued much later on 29th January, 2020. The introduction of MEIS benefits was not a mere act of state generosity or a mere incentive. Its primary objective was to counterbalance infrastructural inefficiencies and the affiliated expenses associated with Indian exports. Pertinently, the MEIS benefit was discontinued retrospectively by a period of almost one year. Throughout this interlude, the Petitioner's member units engaged in extensive export contracts, having incorporated the expected MEIS benefit into their export cost structures. 16. Respondents' argument, emphasizing the widespread publicity of the MEIS scheme's discontinuation prior to the actual notification, is incongruous with the Supreme Court's determination in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s come across as tangential and irrelevant. The Office Memorandum dated 18th July 2019 from the Department of Revenue, Ministry of Finance, referencing the withdrawal of MEIS under Chapters 61, 62, and 63, stipulated that the MEIS benefit be rescinded effective 01st August 2019. However, the DGFT, exercising its discretion, opted to retrospectively repeal the MEIS benefit from 07th March 2019, as evident from the impugned notification dated 29th January 2020. This policy decision-ostensibly influenced by the RoSCTL scheme's introduction-was, in an ironic twist, not extended to the FIBC sector. In this vein, Ministry of Textiles' similar assertion-that exporters would unjustly benefit twice from both MEIS and RoSCTL, thus necessitating a retrospective withdrawal of MEIS benefits for the FIBC sector-stands on shaky ground. The Ministry of Textiles, intriguingly, has not elucidated the rationale behind excluding these goods from the RoSCTL scheme benefits. 20. Notably, given that the entire MEIS scheme faced scrutiny at the WTO - singling out FIBCs from export incentives retrospectively, while retaining benefits for other products, especially those under Chapters 61 to 63, exhibits a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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