Administrative circular cannot add a substantive import condition beyond the Foreign Trade Policy and exemption notification.

The Target Plus Scheme allowed duty credit for imports of freely importable inputs for the importer's own use or that of supporting manufacturers, and the Handbook required only a broad nexus between the imported goods and the exported product group. The Court held that the Foreign Trade Policy and the corresponding customs exemption notification did not impose any requirement of physical incorporation of the imported input in the export product. The 8 May 2007 circular therefore introduced a substantive restriction not found in the governing policy or notification, was ultra vires, and could not amend them by administrative instruction; the circular and consequential assessment were set aside.

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Issues: Whether the circular dated 8 May 2007, requiring imported inputs under the Target Plus Scheme to be inputs used in the very export product for which the benefit is claimed, was ultra vires the Foreign Trade Policy and the customs exemption notification.

Analysis: The Target Plus Scheme under Chapter 3 of the Foreign Trade Policy permitted duty credit to be used for import of any freely importable inputs for the importer's own use or that of supporting manufacturers. Paragraph 3.2.5 of the Handbook of Procedures required only a broad nexus between the imported goods and the product group of the exported goods. The relevant customs notification was pari materia with the policy. On the plain language of paragraph 3.7.6, no condition of physical incorporation of the imported input in the exported product was imposed. Such a condition existed in other provisions of the policy where intended, but not here. The circular therefore introduced a substantive restriction not found in the policy or notification and could not amend the policy by administrative instruction.

Conclusion: The circular dated 8 May 2007 was ultra vires paragraph 3.7.6 of the Foreign Trade Policy and Notification No. 32/2005-Customs dated 8 April 2005, and was liable to be quashed.

Final Conclusion: The writ petition succeeded, the impugned circular and consequential assessment were set aside, and the matter was directed to be reconsidered in accordance with law.

Ratio Decidendi: An administrative circular cannot impose a substantive condition on import entitlement under an export incentive scheme when that condition is not borne out by the governing policy or exemption notification.

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