Nexus requirement under DFCE scheme upheld as a valid implementational condition, not an ultra vires policy amendment.

The Foreign Trade Policy, the Handbook of Procedures and the exemption notification under the Customs Act operate as a composite incentive scheme. The DGFT may prescribe procedural and implementational details under the Policy, but cannot amend it; here, the nexus requirement in paragraph 3.2.6A was treated as a supplementary measure enforcing the actual user condition already contained in the Policy and preventing misuse of the scheme. The corresponding restriction in the DFCE Certificate and the exemption notification were held to further the scheme rather than operate independently. The nexus condition was therefore upheld as valid and not ultra vires.

---

---

Issues: Whether paragraph 3.2.6A of the Handbook of Procedures and the corresponding restriction in the DFCE Certificate, requiring imported goods to have a nexus with the product group exported, were ultra vires the Foreign Trade Policy and the exemption notification issued under the Customs Act, 1962.

Analysis: The Foreign Trade Policy, the Handbook of Procedures and the exemption notification operate as a composite scheme. The Director General of Foreign Trade is empowered to lay down procedure and implementational details under paragraph 2.4 of the Policy, but cannot amend the Policy itself. Here, the nexus requirement was introduced to give effect to the actual user condition already embedded in the Policy and to prevent misuse of the incentive scheme. The condition was treated as a supplementary implementational measure and not as an amendment of the Policy. The exemption notification under Section 25 of the Customs Act, 1962 was also held to operate in furtherance of the DFCE scheme and not independently of it.

Conclusion: The nexus condition in paragraph 3.2.6A of the Handbook of Procedures and the corresponding restriction in the DFCE Certificate were upheld as valid and not ultra vires.

---