TaxTMI 
TaxTMI 
2017 (2) TMI 711
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.... 2006 (for short, "the Rule"). They are engaged in the business of sorting, segregating and grading worn and used clothing. Their LOA has been renewed from time to time and lastly it was renewed in December, 2013 and subsequently revised in May, 2014. As per the Rule 18 (4) (C), their LOA was renewed by the Board of Approval (for short, "BOA") as they were existing units. They were allowed to import worn clothing and after sorting, segregating and grading, they export clothing which is export-worthy and they earn their foreign exchange from those exports as required under Rule 53. Whatever is not export-worthy is being completely mutilated and cleared in Domestic Tariff Area (for short, "DTA") on payment of applicable duties and after examination by the Customs. As per Foreign Trade Policy (for short, "FTP"), mutilated used cloth is classified in Open General License (for Short, "OGL") category. As per the terms of their LOA, the petitioners are under only one obligation that is to be positive in Net Foreign Exchange Earnings (for short, "NFEE") and this is to be monitored cumulatively at the end of block period of 5 years. Defaulters are subjected to penal action under Foreign Tra....
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....ners accepted the terms and conditions subject to outcome of this petition that they had filed and which is being disposed of. 3. The petitioners have challenged the policy dated 17.9.2013 in its entirety and letter dated 13.1.2014 issued by the Ministry of Commerce and Industry. Policy dated 17.9.2013 imposes conditions of physical exports out of India to the extent of 40% at the end of second year, 80% at the end of fourth year, 100% at the end of fifth year and thereafter 100% every year. The letter dated 30th January, 2014, issued by the respondents deletes the provisions of 15% of un-mutilated worn clothing which was provided in policy dated 17.9.2013, unilaterally and arbitrarily. The petitioners have sought in their SCA that defects of Notification dated 19.5.2010 can only be prospective and not retrospective. Therefore, the petitioners should be allowed to sell in DTA their past accrued entitlement of un-mutilated clothing up to 15% of the imports made till 18.5.2010. 4. Learned senior advocate, Mr. Percy Kavina, has put in appearance on behalf of the petitioners while learned advocate, Mr.Devang Vays and Mr.Parth Bhatt have appeared for the respondents. 5. Mr.Kavi....
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....le etc. in SEZ, which are governed by the provisions of SEZ Act / Rules including worn clothing units. But the respondents have formulated the policy dated 17.9.2013, (impugned order) imposing various restrictions on worn clothing units only, this is discriminatory. It will be necessary to point out here that Government has issued similar notification regarding plastic industry in SEZ, however, which was challenged by other writ petitions pending before coordinate Bench. I have been informed that the said writ petitions have been allowed and the notification issued by SEZ has been quashed and set aside. However, the petitions in hand can be independently disposed of without making any further reference to such decision. 6. As soon as, the un-mutilated worn clothing being export surplus and export rejects were disallowed with effect from 19.5.2010, the petitioners made representation for releasing their past accrued entitlement and in response to that, respondent No.3 vide his letter dated 26.12.2013 / 1.1.2014, informed the Petitioners- Association that the matter is being taken up with the Ministry of Commerce and Industry. Therefore, there is no question of any limitation as S....
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....antial damage to the local domestic manufacturers of the readymade garments and further that the worn clothing imported in India is unhygienic and is an health hazard. In support of these submissions, learned counsel has relied upon a decision of the Apex Court in the case of Kasinka Trading and Another V/s. Union of India and Another reported in (1995) 1 SCC 274, and has argued that the Courts are not vested with the powers to inference with the fiscal policy where the Government acts in public interest. 9. The petitioners in their affidavit in rejoinder in September, 2014, has submitted that the withdrawal of this 15% vide letter dated 30th January, 2014, was unilateral and illegal. Further, prescribing the minimum level of the export out of the country in the phased manner at the end of 2nd year, 4th year, 5th year and 100% thereafter is inconsistent with the Act and Rules. According to Rule 53, they are required to remain positive in NFEE and provisions of the Act/ Rules only allow the respondents to monitor their NFEE only at the end of block of 5 years cumulatively. Although Government has power to amend the policy as per the powers vested under Section 5 of the FTDR but w....
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....he question of time barring does not arise. Thus, the petitioners are entitled for the past accrued entitlement at the rate of 15% of CIF value of imports for the period from 1.4.2009 to 19.5.2010 and also for unutilized DTA entitlement as on 19.5.2010, DTA entitlement quantity of un-mutilated worn clothing to be calculated as per the valuation norms as prevalent on 19.5.2010. 11. Learned counsel for the petitioners challenged the validity of the policy dated 17.9.2013 on the ground that it is against the provisions of SEZ Act / Rules. Power to impose condition in the Letter of Permission or Letter of Approval (Fort short, "LOP" or "LOA") is provided in Section 15(8)(B) read with Section 2(w) and Section 55 of the Act. 12. The Government under Section 15(8) (b) of the Act may prescribe the terms and conditions. The word "prescribed" has been defined in Rule 2(w) and means by way of framing Rules only. That the imposition of conditions without amending rule as laid down in Section 2 (w) read with Section 15(8)(b) of SEZ Act is against the law. The Authority has to follow the mandate of Section 2(w) read with Section 15(8)(b). That is also mandatory condition that every rule ma....
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....n Section 2(m) of the Act and further as per Rule 53 (deemed exports) are also considered "export" for discharge of export obligation. Under Section 2(m)(i) "export means taking goods, or providing services, out of India, from a Special Economic Zone, by land, sea or air or by any other mode, whether physical or otherwise". Imposition of extra conditions in policy dated 17.9.2013 for achieving the minimum upward level in physical export out of India to extent of 40% at the end of second year, 80% at the end of fourth year and 100% at the end of 5th year and thereafter, 100% every year, is inconsistent with the provisions of Section 2(m) of the SEZ Act and Rule 53 of SEZ Rules and since Central Government has not prescribed such conditions, the same cannot be imposed indirectly, as no new conditions can be imposed under the existing units and no new terms and conditions can be prescribed by the BOA for the existing units. 15. Learned counsel for the petitioners has further argued that even after expiration of the period of 5 years, the LOA has to be extended for another period of 5 years at a time and therefore, the breaking in period of LOA is not permissible in any manner by wa....
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....a in slab basis is absolutely dehors the Act and Rules. Notification / Policy cannot enlarge or amend the scope of substantive provisions of the parent Act. It can be done only by amending the statute if the legislature is competent to take subject matter. That even the imposition of new condition is required to be amended by the legislature itself and therefore, the policy of the Government cannot amend the Act itself and therefore, the conditions cannot be imposed by way of policy as it is against the law. That the administrative instructions are issued without following procedure prescribed against the provisions of SEZ Act and SEZ rules. It has been argued in the present case, that Notification / policy are administrative instructions only and it cannot be enforced without due process of law and it has no force of law. The BOA has no power to impose such condition directly without framing adequate rules. The BOA can impose only those conditions which are prescribed in the Act and or the Rules and in absence of that, the Board does not have any independent right to frame new conditions which are in contravention with the provisions of the Act and the Rules. In support of these a....
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....an earn substantial foreign exchange for the country which will otherwise be paid to the overseas labourers. 22. Learned counsel for the respondents laid emphasis on judgment passed in Kasinka Trading and Another V/s. Union of India and other (supra). This judgment requires to be gone into. It will be relevant that in this judgment Supreme Court has laid down that Courts have to balance the equities between the parties and indeed the Courts would bind the Government by its promise "to prevent manifest injustice or fraud". 23. In para Nos. 22 and 23, it has been laid down as under: 22. The argument on behalf of the appellants, vehemently pressed by Mr.Ashok Desai and Mr.Harish Salve, their learned Senior Advocates, is to the effect that since the Notification No.66 of 1979 had itself indicated that it shall be operative till 31.3.1981, the Government could not withdraw the same before the expiry of that date. It was argued that the appellants had placed orders for the import of PVC resin relying upon the exemption notification on the understanding that it was to remain operative till 31.3.1981 and had made arrangements for importing the goods accordingly and they could not ....
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....r sovereign capacity." The burden of customs duty etc. is passed on to the consumer and therefore the question of the appellants being put to a huge loss is not understandable. No injustice has been done much less fraud practiced by the Government in withdrawing the exemption. 23. The appellants appear to be under the impression that even if, in the altered market conditions and continuance of the exemption may not have been justified yet Government was bound to continue it to give extra profit to them. That certainly was not the object with which the notification had been issued. The withdrawal of exemption "in public interest" is a matter of policy and the courts would not bind the Government to its policy decisions for all times to come, irrespective of the satisfaction of the Government that a change in the policy was necessary in the "public interest". The Courts, do not interfere with the fiscal policy where the Government acts in "public interest" and neither any fraud or lack of bona fides is alleged much less established. The Government has to be left free to determine the priorities in the matter of utilization of finances and to act in the public interest while iss....
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....he Government. Had the respondents allowed past accrued entitlement of 15% at the relevant time, the petitioners would have cleared the same at the valuation norms prevalent prior to withdrawal of this 15% vide notification dated 19.5.2010. 28. In the the case Union of India Others V/s. Asian Food Industries (supra) relied upon by learned senior counsel is fully applicable to the facts of this case as notification can only have prospective effect and by reason of policy, vested or accrued right cannot be taken away. Such right cannot, therefore, be taken away by amendment thereof. 29. Learned senior counsel for the petitioners, Mr.Kavina, pressed into service number of other judgments. In the case of MRF Ltd. Kottayam V/s. Assistant Commissioner (Assessment), Sales Tax & Ors., on the point of promissory estoppal, it has been held that Board of Revenue cannot overwrite statutory notification issued by the Government. Further, it has been held that the provisions of the Act or Notifications are always prospective in operation unless the express language rendered it otherwise making it effective with retrospective effect. Similarly, in case P.Sadagopan and others V/s. Food Corpo....