Export incentive entitlement cannot be cut for concluded contracts where pricing was fixed under the earlier policy

A subsequent reduction in export incentive entitlement cannot be applied to a pre-existing concluded export contract where the exporter fixed pricing and altered its position on the basis of the then-prevailing policy. The amended Exim Policy was therefore held inapplicable to contracts concluded before 15 April 1998, even though the physical exports occurred later. Paragraph 1.5 of the policy, including protection for exports covered by a prior irrevocable letter of credit, supported the application of the earlier entitlement. The relevant exports accordingly remained eligible for DEPB benefit at 23%.

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Issues: Whether the amended Exim Policy and reduced DEPB entitlement applied to export contracts concluded before the amendment, although the physical exports were made thereafter.

Analysis: The supply order was concluded before the policy change and the exporter had fixed pricing on the basis of the then-prevailing DEPB benefit. The policy incentive was part of the commercial basis on which the contract was entered into and the exporter altered its position accordingly. The later amendment could not be applied to completed contracts merely because shipment took place after the amendment. Paragraph 1.5 of the Exim Policy protected exports covered by a prior irrevocable letter of credit and supported the exporter's claim that the earlier entitlement should govern.

Conclusion: The amended policy did not apply to contracts concluded before 15 April 1998, and the exporter was entitled to DEPB benefit at 23% for the relevant exports.

Ratio Decidendi: A subsequent reduction in export incentive entitlement cannot be applied to a pre-existing concluded contract where the exporter has acted on the basis of the then-prevailing policy and altered its position accordingly.

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