Deemed export benefits for mega power projects cannot be denied by adding a new exclusion through interpretation.

The Calcutta HC held that the DGFT could interpret the Foreign Trade Policy and resolve doubts, but could not amend the policy or add a restriction not found in its text. It further held that cement and steel supplied for mega power projects qualified for deemed export benefits under the Foreign Trade Policy 2009-14 before the June 2012 amendment, because the exclusion was inserted only prospectively and could not be applied retrospectively. The Court also found the denial orders unsustainable because they disclosed no reasons or basis. The denial of deemed export benefit was therefore set aside, and no refund of Terminal Excise Duty benefit was payable on the disputed supplies.

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Issues: (i) Whether the Director General of Foreign Trade had jurisdiction to interpret the Foreign Trade Policy, though not to amend it; (ii) Whether cement and steel supplied for mega power projects were eligible for deemed export benefits under the Foreign Trade Policy 2009-14 prior to the June 2012 amendment; (iii) Whether the impugned decisions could stand when they disclosed no reason or basis.

Issue (i): Whether the Director General of Foreign Trade had jurisdiction to interpret the Foreign Trade Policy, though not to amend it.

Analysis: The statutory scheme vested the power to formulate and amend the Foreign Trade Policy in the Central Government, while the Director General of Foreign Trade was entrusted with carrying out the policy and resolving interpretative doubts. The policy itself made the DGFT's interpretative decision final and binding. That limited power, however, did not extend to rewriting the policy or introducing a restriction not found in its text. The later amendment to the policy showed that only the Central Government could effect such a change.

Conclusion: The DGFT had jurisdiction to interpret the policy, but had no power to amend it or to add a restriction by interpretation.

Issue (ii): Whether cement and steel supplied for mega power projects were eligible for deemed export benefits under the Foreign Trade Policy 2009-14 prior to the June 2012 amendment.

Analysis: Paragraph 8.4.4(iv) extended deemed export benefits to goods required for setting up mega power projects satisfying the conditions in Serial No. 400 of Notification No. 21/2002-Customs. The projects in question satisfied the notification criteria, and the policy did not, before June 2012, exclude cement and steel from the benefit. The exclusion of those items was inserted only by the June 2012 amendment, which operated prospectively. The relevant certificates issued by the project authorities also supported the claim that the goods were required for the projects.

Conclusion: Cement and steel were eligible for deemed export benefits prior to the June 2012 amendment, and the exclusion could not be applied retrospectively.

Issue (iii): Whether the impugned decisions could stand when they disclosed no reason or basis.

Analysis: The decisions under challenge did not record the reasons on which the denial of benefit was founded. A statutory order must be supported by the reasons stated in it or by the grounds apparent from the record, and those reasons cannot be supplemented later. Since no sustainable basis was disclosed, the decisions could not be upheld.

Conclusion: The impugned decisions were unsustainable for want of reasons.

Final Conclusion: The denial of deemed export benefit was set aside, and the petitioner was held not liable to refund the Terminal Excise Duty benefit obtained on the disputed supplies.

Ratio Decidendi: A policy-implementing authority may interpret the policy but cannot add a new exclusion by construction, and a subsequent amendment excluding a benefit operates only prospectively unless the text clearly provides otherwise.

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