2016 (4) TMI 1284 - HC - Customs

Supreme Court upholds exporters' rights, rejects retrospective changes, directs reconsideration within four weeks.

The Supreme Court ruled in favor of the petitioners, declaring their entitlement to benefits under the December 28, 2012 notification and disregarding the ... Delegated legislation cannot be retrospective - vested right on completion of conditions for a government incentive - government may withdraw incentives prospectively but cannot retrospectively take away accrued rights - power to amend policy under Section 5 does not authorize retrospective modificationDelegated legislation cannot be retrospective - vested right on completion of conditions for a government incentive - government may withdraw incentives prospectively but cannot retrospectively take away accrued rights - Whether the subsequent notification of September 25, 2013 could, by imposing a cap, deprive the petitioners of benefits already accrued under the Incremental Exports Incentivisation Scheme introduced by the notification of December 28, 2012. - HELD THAT: - The Court applied the legal principle laid down in the Supreme Court's decision in Director General of Foreign Trade v. Kanak Exports that delegated or subordinate legislation is presumptively prospective and cannot be given retrospective effect unless the enabling statute specifically confers such power. The Court observed that paragraph 113 of Kanak Exports makes clear that Section 5 does not vest power to make rules retrospective and that modification or closure of a scheme after an exporter has performed the act entitling him to the incentive would amount to retrospective action. On that basis the Court rejected the contrary view taken in the later Delhi decision and held that the petitioners' entitlement under the December 28, 2012 notification could not be defeated by the September 25, 2013 modification which operated retrospectively to their prejudice. [Paras 14, 15]The petitioners are entitled to the benefit under the December 28, 2012 notification irrespective of the September 25, 2013 modification; the impugned order of October 5, 2015 is set aside to the extent it disallowed their claim under the December 28, 2012 notification.Reconsideration and quantification - remand for compliance with declaratory direction - The procedural consequence to be directed for implementation of the declaratory relief. - HELD THAT: - Having declared the petitioners' substantive entitlement, the Court directed the appropriate authority (DGFT) to reconsider the petitioners' claim on the basis of the earlier December 28, 2012 notification and without reference to the later modification. The reconsideration is to be undertaken afresh and an appropriate order passed within a fixed period, thereby remitting the matter for determination of entitlement and quantum in light of the Court's declaration. [Paras 15]The DGFT is directed to reconsider and decide the petitioners' claim under the December 28, 2012 notification afresh and pass an appropriate order within four weeks of receipt of this order.Final Conclusion: WP No. 289 of 2016 is allowed: the petitioners are declared entitled to benefits under the December 28, 2012 notification notwithstanding the subsequent September 25, 2013 modification; the DGFT's order of October 5, 2015 is set aside insofar as it disallowed the claim and the matter is remitted to the DGFT for reconsideration and decision within four weeks. Issues:Challenge to notification of September 25, 2013 and denial of incentive under notification of December 28, 2012; Interpretation of Incremental Exports Incentivisation Scheme; Validity of subsequent notification imposing cap on benefit; Authority to alter policy with retrospective effect; Effect of subsequent notification on vested rights of exporters.Analysis:The petitioners challenged a notification of September 25, 2013 and the denial of an incentive under a notification of December 28, 2012. The latter added an Incremental Exports Incentivisation Scheme, providing for a duty credit scrip on incremental growth achieved by exporters. The petitioners claimed entitlement based on substantial exports of raw cotton in the fourth quarter of 2012-13. The denial of their claim was allegedly due to a subsequent notification of September 25, 2013, imposing a cap on benefits, limiting growth to 25% or incremental growth of a specified value. The petitioners argued that once entitled to the incentive, it could not be discontinued or modified to their prejudice without a closure date specified in the scheme, citing lack of authority for retrospective policy changes under the Foreign Trade Act.The Union cited a contradictory judgment of January 7, 2016 from the Delhi High Court, which also referenced the Kanak Exports judgment relied upon by the petitioners. The petitioners contended that the subsequent notification altering the scheme could not affect vested rights of exporters unless specifically empowered by statute for retrospective effect. The High Court referred to a previous judgment where it was held that rights vested prior to a subsequent notification could not be affected by it.The Supreme Court's judgment in Kanak Exports emphasized that delegated legislation could not be made retrospective unless authorized by statute. It held that altering or closing a scheme after exporters had met the criteria for incentives amounted to impermissible retrospective action. The Court declared the petitioners entitled to benefits under the December 28, 2012 notification, disregarding the modifications in the September 25, 2013 notification. The impugned order disallowing the petitioners' claim was set aside, and the relevant authority was directed to reconsider the matter based on the earlier notification within four weeks.In conclusion, the Court allowed the petition, emphasizing the protection of vested rights of exporters under the original notification and rejecting the application of subsequent modifications to their detriment. The judgment clarified the legal position on retrospective application of delegated legislation and upheld the petitioners' entitlement to benefits under the original scheme.