EPCG export obligation must be fixed on licence-date exchange rate, not revalued at export-date rate.

Under the EPCG scheme, export obligation fixed in US dollars is to be computed with the exchange rate prevailing on the date the licence is issued, because that rate is used only to convert the CIF value into foreign currency when the obligation is set. The obligation is then to be discharged in freely convertible currency, so it cannot later be reworked by applying the exchange rate on the date of export. A subsequent policy circular could not be applied retrospectively to exports already completed or substantially performed. The attempt to recompute the obligation on the export-date rate was therefore inconsistent with the scheme.

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Issues: Whether export obligation under the EPCG scheme was to be computed by applying the exchange rate prevailing on the date of issue of the licence or by using the exchange rate prevailing on the date of export, and whether the subsequent policy circular could be applied to the appellant's completed exports.

Analysis: The licence and the amended endorsement stated the export obligation in US dollars, not in rupee terms. The scheme and the Handbook of Procedure required the export obligation to be discharged in freely convertible currency. The exchange rate prevailing on the date of issue of the licence was relevant only for converting the CIF value into US dollars when the obligation was fixed; it did not permit reworking the obligation at a later export-date rate. The later policy circular could not be applied retrospectively to an obligation already fixed and largely performed, and the object of the scheme was earning foreign exchange, not giving benefit of rupee depreciation to the exporter. The appellant's method of recomputing the obligation on the date of export was therefore inconsistent with the scheme.

Conclusion: The exchange rate on the date of issue of the licence governed the fixation of export obligation, the appellant could not claim revaluation on the date of export, and the challenge failed.

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