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Issues: Whether the policy circular and notification amending the Foreign Trade Policy 2004-2009, and thereby restricting DTA sales by 100% EOUs, were valid and whether such DTA sales formed an integral part of the EOU scheme.
Analysis: The scheme under para 6.1 required 100% EOUs to export their entire production, subject only to permissible DTA sales. The Court treated DTA sales as an incidental exception rather than an essential component of the scheme. It held that the Central Government, acting under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992, could alter the policy in public interest to close a loophole that permitted diversion of imported rough marble into the domestic market and substitution of imported inputs by domestic inputs. The restriction was found to be reasonable and justified by public interest, especially in view of the restricted nature of marble and the need to prevent misuse of the EOU benefit.
Conclusion: The challenge to the circular and notification failed, and the restriction on DTA sales by 100% EOUs was upheld as valid.
Ratio Decidendi: DTA sales under the EOU scheme are only an incidental facility and may be curtailed or withdrawn by the Central Government in public interest under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992, if their operation enables circumvention of the policy.
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