Misuse of the Special scheme to promote export - some benefits which had already accrued to exporters under the EXIM Policy were taken away. - Validity and Scope of Notification No. 48/2005 dated February 20, 2006 and Notification No. 8/2006 dated June 12, 2006 - Retrospective or prospective - Whether Notifications were issued in public interest - Held that:- As a matter of fact, immediately after the introduction of the scheme, it was found that there was unprecedented sharp rise in the export in Gem and Jewellery articles. It raised certain suspicion in the mind of the authorities as to whether these were genuine exports. The matter was investigated and on the basis of intelligence gathered by the Central Government, it was learnt that there was rampant misuse of the scheme by certain status holders. - With regard to the import of capital goods under the Duty Free Credit Entitlement Scheme the matter was deliberated upon and it was decided not to allow all capital goods other than the professional equipment and office equipment mentioned in paragraph 3.8 of EXIM Policy against DFCE to service providers. - misuse of the scheme had also come to the notice of DRI and other intelligence officials who had gathered the necessary information and collected supported documents. Based on the intelligence gathered, a note on the misuse of Duty From Credit Entitlement (DFCE) and Target Plus Scheme was prepared which is annexed with the counter affidavit.

The Government has, thus, demonstrated that based on the aforesaid exercise undertaken, Notification dated January 28, 2004 as well as Public Notice of the even date were issued. - strenuous efforts made by learned counsel for the wit petitioners to show that the exports by them were genuine and there was no misuse, we have no hesitation in accepting the plea of the Union that the purport behind Notifications was bona fide which was actuated with the conditions of public interest in mind. - Decided in favor of revenue.

Validity of notification - Held that:- Exactly the same benefit which is sought to be given to the status holders for achieving incremental growth as provided in the scheme was already conferred upon. Obviously, purpose of the scheme was not to give double benefit for same exports. In fact, if that is allowed, it would be a clear case of misuse of the scheme inasmuch as for the same export turnover units operating under SEZ/EOU/EHTP/STP would get the certain incentives and the status holders also manage to extract the same benefits exploiting the scheme by exporting the goods manufactured by these STZ/EOU etc. On considering the issue in this hue, we agree with the opinion of the High Court that such a sub-note (ii) was merely clarificatory in nature.

Each such status holder has to independently attain the growth target stipulated in the scheme to avail the benefit. Obviously, if it has not been able to achieve 25% incremental growth, such export house cannot take the advantage by including exports of a non status holders to show that it has achieved 25% incremental growth.- the Notification dated January 28, 2004 was clarificatory in nature and its validity stands upheld. - Decided in favor of revenue.

Validity of Public Notice dated 28-1-2004 - Jurisdiction of DGFT - to exclude the export performance related to class of goods - Held that:- Public Notice dated January 28, 2004 was published in the Gazette of India in accordance with the requirement of law. The question, however, is as to whether by this Public Notice, DGFT was only carrying out the EXIM Policy or this Public Notice amounted to change in the said EXIM Policy. It is crystal clear that the Public Notice alters the provisions of EXIM Policy. It would, therefore, amount to amending the EXIM Policy, whether clarificatory or otherwise. There may be a valid justification and rational for exclusion of four items contained therein, as pleaded by the Union. However, it had to be done in accordance with law. When the DGFT had no power in this behalf, he could not have excluded such items from the purview of EXIM Policy by means of Public Notice. The power of DGFT is only to be exercised for procedural purposes and both the High Courts have rightly remarked that para 3.2.6 inserted by public notice goes beyond the procedural conditions. - public notice dated January 28, 2004 issued by DGFT, so far it excludes the aforesaid four items, is ultra vires.

What was sought to be achieved by the said Public Notice, was formalised by the Central Government by issuing Notifications dated April 21 and 23, 2004 in exercise of powers conferred on the Central Government by Section 5 of the Act and the same four items were excluded.

Validity of subsequent Notification to exclude the export performance related to class of goods covered by para 2 of the Public Notice dated April 28, 2004 - retrospective or prospective - Held that:- delegated or subordinate legislation can only be prospective and not retrospective, unless rule making authority has been vested with power under a statute to make rules with retrospective effect. In the present case, Section 5 of the Act does not give any such power specifically to the Central Government to make rules retrospective - No doubt, this Section confer powers upon the Central Government to ‘amend’ the policy which has been framed under the aforesaid provisions. However, that by itself would not mean that such a provision empowers the Government to do so retrospective. - if the Status Holders had achieved 25% incremental growth in exports, they acquired the right to receive the benefit under the Scheme, which could not be taken away.

Doctrine of Promissory Estoppel - Held that:- So far so good. The effect of the aforesaid discussion would be that if the Status Holders had achieved 25% incremental growth in exports, they acquired the right to receive the benefit under the Scheme, which could not be taken away. The pertinent and crucial question is as to whether these exporters/writ petitioners acquired any such right?

A sagacious approach with practical sense leads us to conclude that these writ petitioners/exporters had actually achieved the targets set down in the original Scheme and thereby acquired any “vested right”. It was pernicious and blatant misuse of the provisions of the Scheme and periscopic viewing thereof establishes the same. Thus, the impugned decision reflected in the notifications dated April 21 and 23, 2004, did not take away any vested right of these exporters and amendments were necessitated by over-whelming public interest/ considerations to prevent the misuse of the Scheme.

Even when impugned Notification issued under Section 5 could not be retrospective in nature, such retrospectivity have not deprived the writ petitioners/exporters of their right inasmuch as no right had accrued in favour of such persons under the Scheme. This Court, or for that matter the High Court in exercise of its writ jurisdiction, cannot come to the aid of such petitioners/exporters who, without making actual exports, play with the provisions of the Scheme and try to take undue advantage thereof. To this extent, direction of the Bombay High Court granting these exporters benefit of the Scheme for the past period is set aside.

Notification No. 48/2005 dated February 20, 2006 and Notification No. 8/2006 dated June 12, 2006 cannot be applied retrospectively and they would be effective only from the dates they were issued. 

See:- M/s GMR Energy Ltd. Versus Commissioner of Customs, Bangalore - 2015 (11) TMI 81 - SUPREME COURT