Transitional protection for exports under an irrevocable letter of credit prevented retrospective application of a sugar export ban.

An export restriction on sugar introduced by notification could not be applied to a shipment covered by an irrevocable letter of credit opened before the restriction took effect. The Foreign Trade Policy preserved exports that were freely permitted when such a letter of credit was established, and the later notification amendment could not retrospectively defeat that transitional protection. Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 allows the Central Government to amend export policy by official notification, but that power did not authorise retroactive curtailment of a pre-existing protected shipment. Export was therefore required to be permitted within the validity period of the letter of credit.

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Issues: Whether the prohibition on export of sugar introduced by the notification dated 4th July 2006 could be applied to a consignment covered by an irrevocable letter of credit opened before that notification, and whether the amended notification could defeat the transitional protection under the Foreign Trade Policy.

Analysis: Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 empowers the Central Government to formulate and amend the export and import policy only by notification in the Official Gazette. The Foreign Trade Policy itself preserves exports or imports that were freely permitted when an irrevocable letter of credit was established before the date of restriction, unless otherwise stipulated. On the facts, the letter of credit was opened before the impugned notification, and therefore the restriction could not be applied to the covered shipment. The later amendment to the notification could not expand the restriction retrospectively so as to affect exports already protected by the earlier letter of credit.

Conclusion: The prohibition did not apply to the petitioner's shipment covered by the pre-existing irrevocable letter of credit, and export was required to be permitted within the validity period of that letter of credit.

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