Intra-group Duty Credit scrip transfer allowed where the policy contains no 26% shareholding threshold and cannot be expanded by interpretation.

Duty Credit scrips under the Served From India Scheme could be transferred between group companies without requiring the transferor to hold 26% or more voting rights in the transferee. The policy provisions permitting intra-group transfer and defining group company by voting rights or board control did not impose that additional threshold. As the scheme was beneficial in nature, it required liberal construction, and the interpreting authority could not introduce a new substantive restriction under the guise of interpretation. The rejection of the transfer was therefore unsustainable, and the transfer to the group company was permitted.

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Issues: Whether Duty Credit scrips earned under the Served From India Scheme could be transferred by one group company to another without insisting that the transferor company hold 26% or more voting rights in the transferee company, and whether the Director General of Foreign Trade could add such a restriction while interpreting the Foreign Trade Policy.

Analysis: The Foreign Trade Policy was framed under the Foreign Trade (Development and Regulation) Act, 1992 to promote exports through incentive schemes. Paragraph 3.12.7 permits transfer of Duty Credit scrips within group companies, while paragraph 9.28 defines a group company by reference to voting rights or board control. On a plain reading, those provisions do not impose a condition that the company transferring the scrip must itself hold 26% or more voting rights in the other company. The scheme is beneficial in nature and therefore calls for liberal construction. The Director General of Foreign Trade has power to interpret the policy, but not to amend it by introducing an additional restriction not found in the text.

Conclusion: The impugned rejection was unsustainable. The petitioner was entitled to transfer the Duty Credit scrip to its group company, and the restriction based on 26% shareholding could not be enforced.

Ratio Decidendi: Where a beneficial export incentive scheme expressly permits intra-group transfer and does not impose an additional threshold, the interpreting authority cannot read into the policy a new substantive condition under the guise of interpretation.

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