Clarificatory policy circular upheld, but it could not reopen settled benefits or support recovery notices.

Suppression of a material fact did not justify rejection of the writ, because the omitted application and undertaking were not central to the legality of the circular-based recovery action. The policy circular was treated as a clarificatory measure explaining that services not originating from India fell outside the Served From India Scheme, and it was not struck down as ultra vires. However, the circular was confined to finalising uncompleted claims and could not be used to reopen settled benefits. Recovery notices issued on that basis were therefore without authority and were quashed.

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Issues: (i) Whether the writ petition was liable to be dismissed for suppression of material facts and lack of candour. (ii) Whether the policy circular was ultra vires Article 14, Article 19(1)(g), section 5 of the FTDR Act and paragraph 3.6.4 of the Foreign Trade Policy 2004-2009. (iii) Whether the circular could be applied retrospectively to reopen settled or closed claims. (iv) Whether the demand notice and reminder issued to recover duty benefits were valid in law.

Issue (i): Whether the writ petition was liable to be dismissed for suppression of material facts and lack of candour.

Analysis: Suppression of a material fact can disqualify a litigant from discretionary writ relief only if the withheld fact would have materially affected the merits of the case. The omitted application and undertaking were relevant to the petitioner's entitlement, but they did not go to the central question whether the policy circular and consequential recovery action were lawful. The challenged notices were issued only because of the circular, and the writ was directed against that later action.

Conclusion: The writ petition was not liable to be dismissed on the ground of suppression or unclean hands.

Issue (ii): Whether the policy circular was ultra vires Article 14, Article 19(1)(g), section 5 of the FTDR Act and paragraph 3.6.4 of the Foreign Trade Policy 2004-2009.

Analysis: The power to amend the Foreign Trade Policy vests in the Central Government, while the DGFT may issue interpretative clarifications. The circular was treated as clarificatory because it explained that services not originating from India were outside the intended scope of the Served From India Scheme. Since the circular only explained the policy and did not itself alter the scheme's basic content, it was not struck down as unconstitutional or as an impermissible amendment.

Conclusion: The circular was not held ultra vires.

Issue (iii): Whether the circular could be applied retrospectively to reopen settled or closed claims.

Analysis: Although clarificatory measures may ordinarily operate retrospectively, the wording of the circular confined its application to finalizing claims. That language indicated that it was meant to govern claims not yet finalized, not to reopen benefits already granted and settled. The later administrative decision directing recovery of earlier granted benefits was inconsistent with that limitation.

Conclusion: The circular could not be used to reopen settled or closed claims.

Issue (iv): Whether the demand notice and reminder issued to recover duty benefits were valid in law.

Analysis: The demand notice derived its authority from the circular. Since the circular did not authorize reopening finalized claims, the third respondent lacked jurisdiction to issue recovery demands against benefits already settled in favour of the petitioner. Any recovery could be pursued only if independently permitted by law.

Conclusion: The demand notice and reminder were invalid in law and were set aside.

Final Conclusion: The circular was upheld as a clarificatory instrument, but its operation was confined to unfinalized claims. Recovery of already settled benefits was impermissible, and the consequential recovery notices were quashed, leaving only the petitioner's challenge to those notices successful.

Ratio Decidendi: A clarificatory policy circular may explain an existing scheme, but it cannot be used to reopen settled or finalized benefits unless the circular clearly authorizes such retrospective recovery.

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