2019 (4) TMI 450 - HC - Customs

Court dismisses petition challenging DEPB credit rate retroactive application

The court dismissed the petition challenging the order dated 27th February, 2001, regarding the retrospective credit under the DEPB scheme. It held that ... Credit of duty on its exported product - DEPB Scheme - Implementation of Exim Policy 1997-2002 - retrospective effect from 1st April, 1997 to the credit rate at 15% fixed w.e.f. 1st April, 2000 under the Duty Exemption Pass Book Scheme - Whether the petitioners are entitled to credit of duty on its exported product under the DEPB scheme at 15% with retrospective effect from 1st April, 1997, though the same was issued only on 1st April, 2000? Held that:- It was only w.e.f. 5th July, 1997 that a Public No. 22/97 was issued in exercise of powers under paragraph 4.11 of the Exim Policy inter alia providing the rate of credit at 7% of the FOB value of export under the DEPB scheme to be utilized in discharge of duty on imports. Thereafter, on the representation made by the Council to which petitioners belong the credit rate of 7% under the DEPB scheme for petitioners' final product were enhanced to 8% w.e.f. 31st March, 1999 for finally to 15% w.e.f. 31st March, 2000 on the FOB value of exported final product. It is not disputed that the Public Notice dated 31st March, 2000 fixing the rate of credit at 15% under the DEPB scheme is not made specifically retrospective. It is also not the petitioner's case that the enhancement of the credit rate under the DEPB scheme with effect from 1st April, 2000 was in view of a clarification with regard to the correct interpretation of the Exim Policy or the Handbook of the Director General of Foreign Trade - A plain reading of the provision in para 7.50 of the Handbook being relied upon by the petitioners would reveal that it applies only where the credit rate is not notified. In this case, the credit rate under the DEPB scheme was first notified on 5th July, 1997 and thereafter enhanced on 31st March, 1999, and later on 31st March, 2000. Thus, it would have no application to the present facts. The reliance upon the retrospective benefit of credit rate under the DEPB scheme in case of Marine Products is without placing on record the Public Notice by which the same was given. In any case, from the Trade Notice dated 26th February, 1999 annexed at Exhibit' P' to the petition, it appears to be a case where the description of the product in the Input-Output norms was itself changed / amended. This would lead to a change in the rate of credit of duty and the erstwhile para 7.50 of the Policy introduced w.e.f. 21st May, 1997 was in the Handbook at that time. However, the same does not find a place at the time when the Public Notice was issued on 31st March, 2000 (commencing from 1st April, 2000) as it stood substituted by the new provision. The impugned order dated 27th February, 2001 cannot be found fault with - petition dismissed. Issues Involved:1. Entitlement to retrospective credit under the DEPB scheme.2. Validity of the impugned order dated 27th February, 2001.3. Interpretation of paragraph 7.50 of the Handbook of Procedures.4. Competence of the delegate to make legislation with retrospective effect.5. Policy decision and judicial interference.Detailed Analysis:1. Entitlement to Retrospective Credit under the DEPB Scheme:The petitioners sought retrospective application of the 15% credit rate under the Duty Exemption Pass Book (DEPB) scheme from 1st April, 1997, although it was fixed on 1st April, 2000. The objective of the DEPB scheme is to neutralize the incidence of customs duty on the import content of exported products to enhance competitiveness. Initially, no rate was provided for the petitioners' final product when the Export Import (Exim) Policy 1997-2002 was notified. The rate was later fixed at 7% on 5th July, 1997, revised to 8% on 31st March, 1999, and finally to 15% on 31st March, 2000. The petitioners argued that the rate should apply retrospectively from 1st April, 1997, citing instances where retrospective effect was granted for marine products.2. Validity of the Impugned Order Dated 27th February, 2001:The impugned order rejected the petitioners' request for retrospective application of the 15% credit rate. The respondents argued that the rate fixed on 31st March, 2000, was effective from that date and could not be applied retrospectively. The court upheld this view, noting that the policy did not provide for retrospective effect for the DEPB rates notified from 1st April, 2000, as per paragraph 7.50 (as substituted) of the Handbook.3. Interpretation of Paragraph 7.50 of the Handbook of Procedures:Paragraph 7.50 allowed exporters to export products for which credit rates were not notified, provided the products were covered under Standard Input Output Norms. If credit rates were later notified, exporters could apply for DEPB within 90 days of export or 60 days of notification. The court found that this provision applied only where no credit rate was initially notified. Since the petitioners' product had a notified rate from 5th July, 1997, paragraph 7.50 did not apply.4. Competence of the Delegate to Make Legislation with Retrospective Effect:The court emphasized that delegated legislation, such as the DEPB scheme, cannot be applied retrospectively unless expressly provided. The Delhi High Court's decision in Malik Tanning Industries Vs. Union of India was cited, stating that the power to frame policy with retrospective effect cannot be inferred without express provision. Section 5 of the Foreign Trade (Development, Regulation) Act, 1992, does not empower the Central Government to frame policy retrospectively, and such powers cannot be delegated to the Director General of Foreign Trade (DGFT).5. Policy Decision and Judicial Interference:The court recognized that the fixation of DEPB rates and their effective dates involve numerous factors and expertise, making it a policy decision. As per the Supreme Court's decision in Balco Employees Union Vs. Union of India, courts should not interfere in policy matters. Therefore, the impugned order dated 27th February, 2001, was upheld, and the petition was dismissed.Conclusion:The petition challenging the order dated 27th February, 2001, was dismissed. The court found no reason to grant retrospective effect to the 15% DEPB credit rate from 1st April, 1997, as the policy did not provide for it, and the competence to make retrospective legislation was beyond the delegate's authority. Judicial interference in policy decisions was deemed inappropriate.