Retrospective withdrawal of export incentive held impermissible, with MEIS claims for the disputed period directed to be processed.

The Delhi HC held that a notification withdrawing MEIS benefits for FIBC bags could not operate retrospectively from 07.03.2019 because Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 did not authorise retrospective withdrawal of a substantive export incentive without clear statutory sanction. The Court found the selective withdrawal arbitrary and contrary to Article 14, so the notification could take effect only prospectively. As retrospective withdrawal was invalid, exporters who had made shipments during the disputed period remained entitled to have their MEIS claims processed under the scheme as it stood when exports were made, and the pending applications filed under interim directions were ordered to be dealt with in accordance with law.

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Issues: (i) Whether the notification withdrawing MEIS benefit for FIBC bags could operate retrospectively from 07.03.2019; (ii) whether the applications for MEIS benefit for exports made during the disputed period were required to be processed.

Issue (i): Whether the notification withdrawing MEIS benefit for FIBC bags could operate retrospectively from 07.03.2019.

Analysis: The power under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 permits amendment of the Foreign Trade Policy, but does not authorise retrospective withdrawal of an export incentive in the absence of clear statutory sanction. The policy provision enabling amendment in public interest was held to be prospective in operation. Retrospective withdrawal of a substantive export benefit, especially after exporters had already acted on the existing scheme, was found to be arbitrary and unsupported by the governing legal framework. The Court also held that the selective withdrawal of the benefit for FIBC bags lacked justification and offended Article 14 of the Constitution of India.

Conclusion: The retrospective operation of the impugned notification was not sustained; the withdrawal of MEIS benefit for FIBC bags was required to operate only prospectively.

Issue (ii): Whether the applications for MEIS benefit for exports made during the disputed period were required to be processed.

Analysis: Since the retrospective withdrawal could not be given effect, exporters who had already made exports during the disputed period remained entitled to have their claims considered in accordance with the scheme as it stood when the exports were made. The blocking of the portal could not defeat bona fide claims already permitted to be filed pursuant to the interim order. Accordingly, the claims submitted in terms of the Court's interim directions were liable to be processed, subject to fulfilment of the applicable conditions.

Conclusion: The respondents were directed to process the MEIS applications for the relevant export period.

Final Conclusion: The challenge succeeded to the extent that the impugned withdrawal could not be enforced retrospectively against FIBC exports, and the pending MEIS claims for the disputed period were ordered to be dealt with in accordance with law.

Ratio Decidendi: A policy amendment withdrawing an export incentive cannot be applied retrospectively unless the parent statute clearly authorises such operation; a selective retrospective withdrawal of a benefit without justification is arbitrary and unconstitutional.

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