EPCG export obligation must follow the FTP duty-saved formula, not a depreciated value clarification.

The Foreign Trade Policy 2009-14 fixed EPCG export obligation at six times the duty saved on capital goods, while paragraph 6.18(d) allowed an EOU to exit and avail the prevailing EPCG scheme. Reading the FTP with the Handbook of Procedures, a unit shifting from EOU to DTA could seek EPCG authorisation, but the export obligation had to be computed under the policy then in force. The DGFT could interpret and implement the policy, but could not override it through Policy Circular No. 84 by adopting depreciated value as the basis. The clarification and consequential amendment were therefore invalid, and EPCG obligation had to be worked out on the duty saved basis.

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Issues: Whether, under the Foreign Trade Policy 2009-14 and the Handbook of Procedures, the export obligation for an EOU unit shifting to the EPCG scheme had to be computed as a multiple of duty saved on capital goods or as a multiple of the depreciated value of the capital goods, and whether the impugned clarification founded on Policy Circular No. 84 dated 30.04.2009 could override the policy.

Analysis: The Foreign Trade (Development and Regulation) Act, 1992 authorises the Central Government to formulate and amend the export-import policy, while the DGFT is confined to implementation and interpretation within the bounds of that policy. Paragraph 5.1 of FTP 2009-14 fixed EPCG export obligation at six times the duty saved on capital goods, and paragraph 6.18(d) permitted an EOU to exit and avail the prevailing EPCG scheme. Read with paragraph 5.4 of the Handbook of Procedures, a unit converting from EOU to DTA could seek EPCG authorisation, but the quantum of export obligation remained governed by the FTP then in force. The clarification in Policy Circular No. 84, insofar as it imposed export obligation on the basis of depreciated value, was inconsistent with FTP 2009-14 and could not prevail over it.

Conclusion: The impugned clarification and the consequential amendment enhancing export obligation were invalid, and the petitioner was entitled to have its EPCG authorisation considered on the basis of export obligation computed as six times the duty saved on capital goods.

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