Advance Authorisation entitlement and bank guarantee conditions under trade policy cannot override a status holder exemption.

Advance Authorisation entitlement was linked to the FOB/FOR value of exports in the immediately preceding licensing year, so the applicant's entitlement was correctly computed with reference to its 2010-11 exports and limited to Rs. 38,83,52,050. The Handbook of Procedures could not override the Foreign Trade Policy, and a status holder's policy-level exemption from furnishing bank guarantees prevailed over a handbook requirement for authorisation granted beyond entitlement. The bank guarantee condition was therefore inapplicable to the applicant, and the impugned communication was set aside only to that extent.

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Issues: (i) Whether the petitioner's entitlement to Advance Authorisation had to be computed with reference to the exports of the immediately preceding licensing year and was correctly limited to Rs. 38,83,52,050/-; (ii) Whether a status holder could be required to furnish a bank guarantee for authorisation granted in excess of entitlement under the Advance Authorisation scheme.

Issue (i): Whether the petitioner's entitlement to Advance Authorisation had to be computed with reference to the exports of the immediately preceding licensing year and was correctly limited to Rs. 38,83,52,050/-.

Analysis: The entitlement under paragraph 4.7.1 of the Handbook of Procedures is linked to the FOB and/or FOR value of the preceding year's exports. Since the application was made on 14.03.2012, the relevant preceding year was 2010-11. The petitioner itself had declared exports of Rs. 7,76,70,410/- for that year, and five times that figure yielded Rs. 38,83,52,050/-. No application for amendment of the authorisation was shown to have been made, and no basis existed for treating the higher figure as the correct entitlement.

Conclusion: The limitation of the petitioner's entitlement to Rs. 38,83,52,050/- was upheld.

Issue (ii): Whether a status holder could be required to furnish a bank guarantee for authorisation granted in excess of entitlement under the Advance Authorisation scheme.

Analysis: Paragraph 3.10.4(v) of the Foreign Trade Policy grants status holders exemption from furnishing bank guarantees in schemes under the policy. Although paragraph 4.7.3 of the Handbook of Procedures requires a bank guarantee for authorisation in excess of entitlement, that requirement is subordinate to the policy and cannot override it. The Handbook of Procedures must aid and advance the Foreign Trade Policy, and any inconsistency must be resolved in favour of the policy. The condition requiring a status holder to furnish a bank guarantee for duty-free inputs was therefore contrary to the policy.

Conclusion: The bank guarantee condition was held inapplicable to the petitioner.

Final Conclusion: The petitioner succeeded only on the challenge to the bank guarantee requirement, while the determination of entitlement value was sustained; the impugned communication was set aside only to the extent it insisted on endorsement of the bank guarantee condition.

Ratio Decidendi: A procedural handbook issued to implement a trade policy cannot impose a condition that is inconsistent with an express policy-level exemption granted to status holders.

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