Export promotion scheme misuse notifications upheld but retrospective application rejected by Supreme Court

The SC upheld the validity of notifications issued to prevent misuse of the export promotion scheme after authorities discovered rampant abuse by status holders in gem and jewellery exports. The court found that a January 28, 2004 notification was clarificatory in nature and valid, but declared the DGFT's public notice of the same date ultra vires for exceeding procedural powers. Subsequent notifications dated April 21 and 23, 2004 were held to be prospective only, not retrospective, as delegated legislation cannot operate retrospectively without express statutory power. The court rejected the doctrine of promissory estoppel claims, ruling that exporters who misused the scheme acquired no vested rights. The decision favored revenue authorities in preventing scheme abuse while limiting retrospective application of corrective measures.

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Issues Involved:
1. Validity of Notifications and Public Notices amending the EXIM Policy.
2. Jurisdiction of DGFT in issuing Public Notices.
3. Retrospective effect of Notifications and Public Notices.
4. Doctrine of Promissory Estoppel.
5. Vested rights of exporters under the EXIM Policy.

Detailed Analysis:

1. Validity of Notifications and Public Notices Amending the EXIM Policy:
The EXIM Policy 2002-2007 was amended by Notification No. 28 dated January 28, 2004, and Public Notice No. 40 of the same date. The amendments included Notes 1 to 5 to para 3.7.2.1 of the Policy. The primary contention was whether these amendments were clarificatory or constituted substantive changes. The court concluded that the amendments were clarificatory, aimed at preventing misuse of the scheme by exporters who were inflating their export performance through dubious means. The amendments were justified as they aligned with the original intent of the Policy to boost genuine export growth.

2. Jurisdiction of DGFT in Issuing Public Notices:
Public Notice No. 40 dated January 28, 2004, issued by the DGFT, sought to exclude certain export products from the incentive scheme. The court held that DGFT did not have the jurisdiction to amend the EXIM Policy, which is a statutory policy formulated under Section 5 of the Act. The power to amend the Policy rests solely with the Central Government. Consequently, the Public Notice was deemed ultra vires.

3. Retrospective Effect of Notifications and Public Notices:
The Notifications dated April 21 and 23, 2004, which sought to exclude certain products from the duty-free entitlement scheme, were challenged on the ground of retrospectivity. The court held that while the Government has the power to amend the Policy, such amendments cannot have retrospective effect unless explicitly provided by the statute. The court found that Section 5 of the Act did not confer any such power to make retrospective amendments. Therefore, the Notifications could not apply retrospectively to exports made before their issuance.

4. Doctrine of Promissory Estoppel:
Exporters argued that they had a legitimate expectation based on the original EXIM Policy and had altered their position accordingly. The court, however, held that the doctrine of promissory estoppel could not be invoked to prevent the Government from amending the Policy in public interest, especially to prevent misuse and fraud. The court emphasized that economic policies are subject to change, and the Government must be allowed to rectify policies to address public interest concerns.

5. Vested Rights of Exporters Under the EXIM Policy:
Exporters claimed that they had acquired vested rights to the benefits under the original Policy upon achieving the stipulated export targets. The court distinguished between existing rights and vested rights, holding that no vested right had accrued to the exporters as the benefits were contingent on compliance with the Policy as amended. The court noted that the amendments were necessary to prevent misuse and ensure that the benefits were granted only for genuine incremental growth in exports.

Conclusion:
The Supreme Court upheld the validity of the Notification dated January 28, 2004, as clarificatory. It declared the Public Notice dated January 28, 2004, issued by the DGFT, as ultra vires. The court held that the Notifications dated April 21 and 23, 2004, could not be applied retrospectively. The doctrine of promissory estoppel did not prevent the Government from amending the Policy in public interest. The court concluded that no vested rights had accrued to the exporters under the original Policy, as the amendments were necessary to prevent misuse and ensure genuine export growth.

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