2016 (1) TMI 1333 - HC - Indian Laws

Court protects exporters' vested rights; Government cannot alter scheme retrospectively

LGW Industries Limited Versus Union Of India & Ors.

The court held that the Central Government lacked authority to retrospectively alter the Incremental Exports Incentivisation Scheme under the Foreign ... Rightful dues of the petitioner under the incentive scheme - Held that:- The second respondent has considered the matter and by the order impugned dated October 1, 2015 has declined the incentive to the extent due under the original notification of December 28, 2012. The concerned authority has found that the petitioner is entitled to the maximum of about ₹ 99,000/- under the incentive scheme in view of the subsequent notification of September 25, 2013. In the light of the discussion above and particularly since the authority under Section 5 of the said Act does not permit a benefit already vested to be withdrawn from the hands of the beneficiary, WP is allowed by setting aside the order impugned dated October 1,2015 and by requesting the second respondent to reconsider the matter and pay the rightful dues of the petitioner under the incentive scheme in accordance with the notification of December 28, 2012 but without taking into account the first clause of the subsequent notification of September 25, 2013 to the extent that such clause detracts from the quantum of the incentive that an exporter is entitled to under the original notification. Appropriate steps should be taken by second respondent to ensure that the rightful dues of the petitioner are made available to the petitioner within six weeks from date. It will also be open to the petitioner to seek appropriate interest for the period of delay. Issues: Ex post facto alteration of incentive scheme affecting exporter's claim, authority to alter policy with retrospective effect under Foreign Trade Act, consideration of vested rights of exporter, judicial precedent on subsequent notifications affecting vested rights.Analysis:1. Ex post facto alteration of incentive scheme: The petitioner complained about the ex post facto alteration of the Incremental Exports Incentivisation Scheme. The scheme initially provided a duty credit scrip at the rate of 2% on the incremental growth achieved in exports in a specific period. However, subsequent alterations limited the benefit to a certain growth percentage or value, affecting the petitioner's claim for a duty credit scrip valued over Rs. 1 crore. The petitioner argued that it was unreasonable and arbitrary for the Central Government to introduce changes retrospectively, especially after the petitioner had organized its export business based on the original scheme declared by the Government.2. Authority under Foreign Trade Act: The petitioner contended that the Central Government lacked the authority under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992, to alter a disclosed policy with retrospective effect. The petitioner emphasized that the application for the incentive was made before the subsequent notification, and the rights vested in the exporter should not be affected by such changes. Reference was made to a Delhi High Court judgment supporting the view that subsequent notifications cannot impact vested rights of exporters.3. Consideration of vested rights: The Court considered the vested rights of the petitioner under the original notification of December 28, 2012. Despite a previous order allowing the authority to decide the petitioner's application without retrospective effect, the subsequent order declined the incentive based on the altered scheme. The Court held that benefits already vested cannot be withdrawn from the beneficiary, emphasizing the importance of honoring the exporter's rightful dues under the original notification.4. Judicial precedent on subsequent notifications: The Court referred to an unreported judgment of the Delhi High Court where a similar view was taken regarding the impact of subsequent notifications on vested rights of exporters. The Court emphasized the need to uphold the exporter's entitlement to incentives as per the original scheme, excluding clauses introduced in subsequent notifications that reduce the quantum of benefits available to exporters. The Court directed the concerned authority to reconsider the matter and ensure the rightful dues of the petitioner are paid promptly, allowing the petitioner to seek appropriate interest for any delays.In conclusion, the judgment highlighted the importance of protecting vested rights of exporters under incentive schemes and emphasized the need for authorities to adhere to original notifications without retrospectively altering policies to the detriment of beneficiaries.