Retrospective policy restriction on electricity distribution cannot be imposed through a mere clarification circular.

A circular could not be treated as a mere clarification where the earlier policy prohibited only transmission of electricity and did not include distribution. Because transmission and distribution are distinct concepts under the Electricity Act, 2003 and are separately understood in trade and industry practice, bringing distribution within the prohibited field introduced a new substantive restriction. Such a change could operate only prospectively through amendment of the policy, not retrospectively. The retrospective prohibition was also said to prejudice applicants who had already disclosed their intended use and obtained licences. The circular was therefore described as ultra vires and constitutionally impermissible to the extent of its retrospective effect.

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Issues: Whether the impugned circular dated 4 January 2019 merely clarified the Foreign Trade Policy or introduced a new substantive restriction on the use of capital goods for distribution of electricity, and whether such circular could operate retrospectively.

Analysis: The relevant policy provision, as it stood earlier, prohibited only transmission of electricity and did not refer to distribution. The circular for the first time brought distribution within the prohibited field. The expressions "transmission" and "distribution" have distinct meanings in the Electricity Act, 2003, where they are separately defined and dealt with under different parts of the statute. In fiscal and commercial matters, terms are to be understood in their trade sense and in the context of the relevant industry. On that basis, the circular could not be treated as a mere clarification. It imposed a new restriction, and if such a restriction was to be introduced, it could only be done prospectively by amending the policy. Retrospective operation would also prejudice those who had disclosed their intended use and had already obtained licences accordingly.

Conclusion: The circular was held to be invalid to the extent it retrospectively prohibited distribution of electricity and was declared ultra vires and constitutionally impermissible.

Ratio Decidendi: A circular cannot, under the guise of clarification, retrospectively introduce a new substantive restriction into a policy where the underlying statute and trade understanding treat the relevant activities as distinct.

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