TaxTMI 
TaxTMI 
2023 (12) TMI 1158
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....ng the Respondents, their officers, subordinates, servants and agents, from taking any steps or proceedings in pursuance of or in furtherance of amended Paragraph 5.10(c) of the revised Handbook of Procedures under revised FTP 201520 and Policy Circular Notice No. 22/2015-20 dated 29.03.2019 issued by the Respondent No. 3 in respect of EPCG authorisations issued prior tο 05.12.2017; (b) YOUR LORDSHIPS may be pleased to issue writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India, ordering and directing the Respondents, their subordinate servants and agents to permit the members of the Petitioners to fulfil their Export Obligation in accordance with the relevant FTP under which EPCG Authorizations has been issued to them, by counting full realized value of the Shipping Bill in case of Third-party exports; (c) YOUR LORDSHIPS may be pleased to issue writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India, ordering and directing the Respondents, their subordinate servants an....
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....cheme allows the import of capital goods for pre-production, production, and post-production at zero/three percent customs duty. Import under the EPCG Scheme is subject to an export obligation equivalent to 6/8 times of duty saved on capital goods to be fulfilled in 6/8 years reckoned from the date of issue of Authorization. 3.4) In terms of Paragraph 2.42 of the original FTP 2015-20, third party exports are also allowed under FTP. The extracts of Paragraph 2.42 of the original FTP 2015-20 are reproduced below for ready reference: "2.42 Third Party Exports Third party exports (except Deemed Export) as defined in Chapter 9 shall be allowed under FTP. In such cases, export documents such as shipping bills shall indicate name of both manufacturing exporter/manufacturer and third-party exporter(s). Bank Realization Certificate (BRC), export order and invoice should be in the name of third-party exporter." 3.5) Paragraph 9.60 of the original FTP 2015-20 defines "Third-party exports" as under: ""9.60 "Third-party exports" means exports made by an exporter or manufacturer on behalf of another exporter(s). In such cases, export documents such as sh....
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.....04 of FTP, the following conditions shall also be applicable for fulfilment of export obligation: **** (c) In case the Authorization Holder wants to export through a third party, export documents viz, shipping bills / Bill of exports etc. shall indicate name of both authorization bolder and supporting manufacturer, if any, along with EPCG authorization member. BRC, GR declaration, export order and invoice should be in the name of third party exporter. The goods exported through third party should be manufactured by the EPCG Authorization Holder or the supporting manufacturer where the capital goods imported under the authorization have been installed. Proceeds realized through normal banking channel from third party exporter's account to the authorization holder's account on account of such exports only shall be counted towards fulfilment of export obligation." 3.10) The effect of revision was that, prior to 05.12.2017, the full realized value of the Shipping Bill was to be taken into consideration for fulfilment of Export Obligation. However, post the amendment i.e. w.e.f. 05.12.2017, only the actual payment received by the Authorization holder from t....
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....guise of amendment in the Handbook of Procedures. 4.1) It was submitted that under the guise of amendment in Paragraph 5.10(c) in the revised HBP 2015-20 read with the Policy Circular dated 29.03.2019, the respondent Nos. 2 and 3 have indirectly amended the FTP. 4.2) It was submitted that respondent No. 2 and 3 have taken away the benefit which was available to the petitioners under the FTP 2009-14 and original FTP 2015-20. 4.3) It was further submitted that the amendment in paragraph 5.10(c) in the revised HBP 2015-20 read with the Policy Circular dated 29.03.2019 changes the meaning of Export Obligation and also the manner in which Export Obligation is to be computed. 4.4) Learned advocate Mr. Shah further submitted that any change to the meaning of Export Obligation or the manner in which Export Obligation is to be computed can be done only by way of amendment in FTP. 4.5) It was submitted that in terms of Section 5 of the FTDR Act, the Central Government alone has the power to amend the FTP. Further, in terms of para 1.03 of the FTP, the power of Respondent No. 2 is restricted only to lay down the procedure which is to be followed by an exporter or importer. 4....
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....of Procedures 2015-20 applicable even to the EPCG Authorizations issued prior to 05.12.2017. 4.11) It was submitted that the petitioners have applied for and granted authorization under the EPCG Scheme under FTP 2009-14 and original FTP 2015-20 (as applicable prior to 05.12.2017) under the pretext that full realized value of the Shipping Bill will be taken into consideration for fulfillment of Export Obligation. 4.12) It was submitted that making the amendment made in Paragraph 5.10(c) of the revised Handbook of Procedures 2015-20 applicable to the EPCG Authorizations issued prior to 05.12.2017 is in violation of the principles of legitimate expectation and promissory estoppel. 4.13) Learned advocate Mr. Shah submitted that the petitioners were governed by the FTP in vogue during the time EPCG Authorizations were issued to the petitioners though the Courts have time and again held that the grant of license depends upon the FTP prevailing as on the date of issue of license. 4.14) The attention of the Court was invited to Paragraph 1.05(a) of the revised ETP 2015-20 which provides that any License / Authorisation/ Certificate/ Scrip/instrument bestowing financial or fisca....
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....y the DGFT was within the law and it has the power to amend and clarify the process of working of the sections and rules of the Act and Rules. 5.1) It was submitted that the respondent authority has not exercised its power beyond the FTDR Act and the same is in furtherance to the original section and the condition is merely to develop and enhance genuine transactions of the exporters. 5.2) Learned advocate Mr. Divyeshwar submitted that on plain reading of the condition to 5.10 (c) it is clear that there is no benefit curtailed or restricted and if at all, more transparency was added by way of condition to it to curb fake and fictitious transactions and to promote real exporter in all manner. 5.3) It was submitted that para 5.10(c) in the revised Hand Book Of Procedures 2015-20 with effect from 5-12-2017 as clarified by the policy circular notice no. 22/2015-20 dated 29-3-2019, is within the domain of the respondent and it does not create any hindrance nor it is obstructive in the business of the export. 5.4) It was submitted that the adding of condition is just a procedural aspect and cannot be said to be in any manner outside the power of the authority. In support of h....
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....ed and courts are normally not equipped to question the correctness of a policy decision. But then this does not mean that the courts have to abdicate their right to scrutinize whether the policy in question is formulated keeping in mind all the relevant facts and the said policy can be held to be beyond the pale of discrimination or unreasonableness, bearing in mind the material on record." 5.9) Reliance was also placed on decision in case of Arun Kumar Agrawal v. Union of India reported in (2013) 7 SCC 1], wherein it is held as under: "41.... This Court sitting in the jurisdiction cannot sit in judgment over the commercial or business decision taken by parties to the agreement, after evaluating and assessing its monetary and financial implications, unless the decision is in clear violation of any statutory provisions or perverse or taken for extraneous considerations or improper motives. States and its instrumentalities can enter into various contracts which may involve complex economic factors. State or the State undertaking being a party to a contract, have to make various decisions which they deem just and proper. There is always an element of risk in such decision....
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....d on the sanction of law or custom or an established procedure followed in regular and natural sequence. Again it is distinguishable from a genuine expectation. Such expectation should be justifiably legitimate and protectable. Every such legitimate expectation does not by itself fructify into a right and therefore it does not amount to a right in the conventional sense." 5.12) Relying upon the decision in case of Food Corporation of India v. Kamdhenu Cattle Feed Industries (Judgment dated 3.11.1992 in Civil Appeal No. 4731 of 1992.), it was submitted that this Court considered whether by submitting a tender in response to the notice issued by the Food Corporation of India for the sale of stocks of damaged food grains, the respondent had acquired a right to have its tender accepted and the appellant was not entitled to reject the same. It was submitted that the Hon'ble Apex Court while approving the view expressed by the High Court that rejection of the highest tender of the writ petitioner-respondent was legally correct, observed as under: "The mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right....
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....onditions for fulfillment of Export Obligation are provided in paragraph no. 5.10 of the Handbook of Procedures 2015-20 as notified by Public Notice No. 01/2015-2020 dated 01 April 2015 and clause no. (c) of paragraph 5.10 provides for export through a third party by an Authorisation holder and all the documents should be in the name of third party exporter. 8. It appears that on the introduction of Goods and Service Tax Act from 01.07.2017, FTP 2015-20 was revised by Notification No. 41/2015-2020 dated 05.12.2017 and the revised edition of Handbook of Procedures was also notified by the Public Notice No. 43/2015-2020 dated 05 December 2017, so as to align FTP-2015-20 with GST Act and there was a major amendment made in condition for fulfillment of export obligation provided under paragraph no. 5.10(c) of the revised Handbook of Procedures 2015-20 whereby was further amended that "Proceeds realized through normal banking channel from third party exporter's account to the authorization holder's account on account of such exports only shall be counted towards fulfillment of export obligation." 9. Therefore, in view of such amendment in paragraph no. 5.10(c) of Handbook ....
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....he condition prescribed in the EPCG Authorisation, which is taken from the specimen of conditions produced by the petitioners at page no. 29 of the memo of the petition is as under : "11(a) In the event of third party exports, name of the third party exporter, name of EPCG Authorization holder and supporting manufacturer, if any, number and date of EPCG Authorization shall also be indicated in the Shipping Bills. BRC, GR declaration, export order and invoice shall be in the name of third party exporter. The goods exported through third party shall be manufactured by the EPCG Authorisation holder or the supporting manufacturer where the capital goods imported under the authorisation have been installed [Para 5.10(c) of HBP 2015-2020)]. In such cases, the authorisation holder shall submit the additional documents prescribed in Para 5.10(d) of Handbook of Procedures, 20152020 at the time of final redemption. 12. There was no stipulation in the aforesaid condition with regard to actual payment realised through normal banking channel from third party exporter's account to Authorisation holder's account as such condition was not prescribed prior to 05.12.2017. Such condition ....
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..... We have already pointed out that according to Section 6 of the FTDR Act, the Respondent No. 2 or the officer subordinate to him cannot usurp the power under Sections 3, 5, 15, 16 and 19 of the FTDR Act. According to Section 3, it is for the Central Government which may, by Order published in the Official Gazette, make provision for the development and regulation of foreign trade by facilitating imports and increasing exports. The Central Government may also, by Order published in the Official Gazette, make provision for prohibiting, restricting or otherwise regulating, in all cases or in specified classes of cases and subject to such exceptions, if any, as may be made by or under the Order, the import or export of goods or services or technology. According to subsection (3) of section 3 all goods to which any Order under subsection (2) of the said section applies should be deemed to be goods the import or export of which has been prohibited under section 11 of the Customs Act, 1962 and all the provisions of that Act shall have effect accordingly. According to section 5, it is for the Central Government which may, from time to time, formulate and announce, by notification....
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....d under the Act itself. 38.3 In the case of STATE OF KERALA AND OTHERS VS. M/S TRAVANCORE CHEMICALS & MANUFACTURING CO. & ANR. reported in AIR 1999 SC 230, a question arose whether the provision contained in Section 59A of Kerala General Sales Tax Act,. 1963 was ultra vires the provisions of Article 14 of the Constitution of India. According to the provisions contained in Section 59A, if any question arises as to the right of tax leviable under the said Act on the sale or purchase of any goods, such question should be referred to the Government for decision and the decision of the Government thereon shall, notwithstanding any other provision of the said Act, be final. In the above context, the Supreme Court made the following observations:- "13. Plain reading of Section 59A shows that if any question relating to the rate of tax leviable under the Act on any goods is referred to the Govt. then its decision thereon, notwithstanding any other provision in this Act is final. This section does not indicate as to who can make a reference to the Govt. There is no obligation on the Government to hear any dealer before it decides as to the rate of tax leviable on the sales....
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.... the Hand Book of Procedures and in particular Appendix-14II contained therein nowhere aims to lay down any policy but prescribes the procedure to be followed for reimbursement of CST. It is undoubtedly true that para. 2 of this Appendix restricts the CST reimbursement on purchases made by an EOU from a DTA unit. However, this restriction in our opinion would run counter to the terms of FTP itself and ultra vires the powers of the Director General of Foreign Trade. The title of the Appendix itself provides that it is a procedure to be followed for reimbursement of Central Sales Tax. Para.1 further clarifies that the procedure given in the said annexure shall be applicable for reimbursement of CST. There is little doubt therefore, that Appendix 14II aimed to lay down the procedure for claiming the benefit. In any case, such procedure could not have restricted the benefit by excluding the purchases from certain source which exclusion did not flow from the Foreign Trade policy itself. 22. Perhaps a contention could have been raised by the respondents that the Foreign Trade Policy itself envisaged such a restriction since only when the goods are manufactured in a DTA area, it ....
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....nsible for any misrepresentation or misstatement of facts which resulted into such erroneous reimbursement being granted and which came to the notice later on. That being the position, it was not possible for the respondents to make recoveries after unduly long period of time which in the present case happens to be more than seven years, that too, without any explanation for such delayed action." 3) In case of Ashok Kumar Jain v. Union of India reported in 2010(253) E.L.T. 767(Bom), wherein Bombay High Court held as under: "6. The import and export policy for AM 88-91 is published in two Volumes. Volume 1 contains Import and Export Promotion Policy and Volume 2 contained policy in respect of items under Export licensing. The first volume contains 343 paragraphs divided into 23 chapters and 12 Appendices. Chapter I titled as "Introduction and definitions" inter alia contains definitions of certain words. Paragraph 6(8) defines capital goods to mean any plant, machinery, equipments or accessories required by an investor for the production of goods or for rendering services, including those require for replenishment or extension. Chapters XI to XXIII of AM 8....
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....er to us the product literature of T.V broadcast and Studio equipment (Modern BETACAM SP 2000 PRO manufactured by Sony) which was imported under the REP licence. It describes the product and purposes for which it is used. The TV Broadcast and Studio Equipment in question is used for the purpose of recording and playing the cinematographic films contents of which are recorded on video audio tapes. Films are recorded on cassettes with the help of the equipment in question. The equipment in question which is used for production of films recorded on cassettes would therefore fall within the definition of capital goods. 9. Paragraph no. 177(2) of AM 1988-91 provides that within the value of flexibility allowed, the REP Licence can be utilised for import of capital goods without the recommendation of the sponsoring authority and without indigenous clearance subject to a condition that the total value of the import shall not exceed Rs. 10 lakhs and the capital goods imported do not fall in Appendix I (Part A) or Appendix 8 or is not an office machine as defined in paragraph 11.8. It is not the case of revenue that the TV broadcast and studio equipment in question falls in Appendi....
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....procedures to be prescribed by an authority in implementing the policy must be in consonance with the policy. If the procedural norms are in conflict with the policy, then the policy will prevail and the procedural norms to the extent they are in conflict with the policy, are liable to be quashed and set aside." 5) In case of Director General of Foreign Trade v. Kanak Exports reported in 2015(326) E.L.T. 26(SC), wherein the Hon'ble Apex Court held as under: "101) We may state, at the outset, that the incentive scheme in question, as promulgated by the Government, is in the nature of concession or incentive which is a privilege of the Central Government. It is for the Government to take the decision to grant such a privilege or not. It is also trite law that such exemptions, concessions or incentives can be withdrawn any time. All these are matters which are in the domain of policy decisions of the Government. When there is withdrawal of such incentive and it is also shown that the same was done in public interest, the Court would not tinker with these policy decisions. This is so laid down by catena of judgments of this Court and is now treated as established and ....
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....sion or revocation of an exemption notification in the public interest is an exercise of the statutory power of the State under the law itself as is obvious not merely from the language of Section 25 of the act, but also from the General Clauses Act under which the authority which has the power to issue a notification has the undoubted power to rescind or modify the notification in the like manner. The Court also examined the case of the appellant-petitioners that relying upon the notification dated March 15, 1979, they had acted and the Government could not be permitted to go back on its assurance otherwise they would be put to huge loss. The Court dealt with this contention in the following words: "The Courts have to balance equities between the parties and indeed the Courts would bind the Government by its promise to prevent manifest injustice or fraud". The Court also quoted with approval the following observations from Malhotra & Sons v. Union of India AIR 1976 J&K 41: "The Courts will only bind the Government by its promises to prevent manifest injustice or fraud and will not make the Government a slave of its policy for all times to come when the G....
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....We may, in the first instance, make this legal position clear that a 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. This legal position is rightly discussed by the Bombay High Court in the impugned judgment in the following words: "We are unable to accept the submissions of learned Additional Solicitor General. The word "amend" does not give power to make amendment retrospectively if it is used in relation to the power to make a piece of delegated legislation. The connotation of the word "amend" when it is used for the exercise of power by a legislature cannot be pressed to construe the word "amend" in relation to the power to make dele....
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.... amend when a specific power to amend is given. If the power to regulate does not include the power to amend retrospectively such a power cannot be read into Section 3 of the Act. Section 21 of the General Clauses Act on which reliance is placed by learned Additional Solicitor General is also of no assistance to sustain the retrospective operation of the notification. Section 21 of the General Clauses Act embodies a rule of construction, nature and extent of application of which must inevitably be governed by the relevant provisions of the statute which confers power to issue the notification. The said power must be exercised within the limits prescribed by the provisions conferring the said power. (See Gopichand v. Delhi Administration, AIR 1959 SC 609, Lachmi Narayan and Ors. v. Union of India and Ors. (1976) 2 SCC 953 and State of Kerala and Ors. v. K.G. Madhavan Pillai and Ors. (1988) 4 SCC 669. The ratio in H.C. Suman's case also cannot be applied because in that case it was found that Section 88 of the Delhi Cooperative Societies Act, 1972 contained the power to exempt and if the provisions of Section 12 of the said Act were to be exempted the provisions....
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.... right accrued in their favour. It was also argued that in the policy, which provides special incentives to status holder, the term "incremental growth in export" was not defined/clarified at the time when the policy was issued. By the impugned notification, the blanks/gaps were filled and the term incremental growth in export was defined and it was clarified as to how the incremental growth in export is to be actually worked out. This was also done before the question of actual working out of the incremental growth in exports arose and hence, no retrospective effect. 128) We have already discussed these aspects in detail. To recapitulate, it is held by us that Section 5 of the Act does not empower the Government to make amendments with retrospective effect, thereby taking away the rights which have already accrued in favour of the exporters under the Scheme. No doubt, the Government has, otherwise, power to amend, modify or withdraw a particular Scheme which gives benefits to a particular category of persons under the said Scheme. At the same time, if some vested right has accrued in favour of the beneficiaries who achieved the target stipulated in the Scheme and thereby ....
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....aph no. 5.10(c) of the revised Handbook of Procedure 2015-20 applicable even to EPCG Authorisation issued prior to 5.12.2017 which is contrary to the powers conferred upon the respondent no. 3 because amendment in paragraph no. 5.10(c) of the revised HBP-2015-20 read with policy circular dated 29.03.2019 changes the meaning of export obligation and also the manner in which the export obligation is to be computed and such change to the meaning of export obligation or the manner in which export obligation is to be computed can be done only by way of amendment in FTP. Therefore, we are of the opinion that in facts of the case, under the guise of amendment in HBP with policy circular dated 29.03.2019, respondents nos.2 and 3 have tried to make changes in FTP so far as the application of such amendment in para 5.10 (c) of the HPB to the EPCG Authorisation issued prior to 05.12.2017- the date of amendment which is the exclusive domain of the Central Government. 17. The amendment in para 5.10(c) from 05.12.2017 can be made applicable to the EPCG Authorisation issued from the said date only and the date of issuance EPCG Authorisation under FTP cannot be ignored under guise of policy dec....