2015 Supreme(SC) 1039

SUPREME COURT OF INDIA
A.K. SIKRI, ROHINTON FALI NARIMAN, JJ.
DIRECTOR GENERAL OF FOREIGN TRADE AND ANOTHER - APPELLANTS
VERSUS
M/S. KANAK EXPORTS AND ANOTHER - RESPONDENTS
CIVIL APPEAL NOS. 554, 658, 1587 & 1589 OF 2006, TRANSFER CASE (CIVIL) NOS. 32, 33 & 36 OF 2007, TRANSFER CASE (CIVIL) NOS. 1 & 3 OF 2008, WRIT PETITION (CIVIL) NO. 27 OF 2008, TRANSFER CASE (CIVIL) NO. 49 OF 2009, WRIT PETITION (CIVIL) NO. 343 OF 2009, WRIT PETITION (CIVIL) NO. 246 OF 2010, TRANSFER CASE (CIVIL) NO. OF 2015 (ARISING OUT OF TRANSFER PETITION (CIVIL) NO. 568 OF 2014)
Decided on : 27-10-2015

IMPORTANT POINTS
Powers u/s 3 and 5, Foreign Trade (Development and Regulation) Act, 1992 conferred on Central Government only. Cannot be delegated to or exercised by DGFT or any officer subordinate to him.
Amendments vide Notification dated January 28, 2004 and Notification No. 38 dated April 21, 2004 are bona fide and valid being in public interest.
Grant or withdrawal of concessions or incentives fall in domain of policy decision of Government. Their withdrawal in public interest will not invoke promissory estoppel.
DGFT could not impose the fee by Public notice.
Accrued rights cannot be taken away retrospectively.
Policy decision, even if valid, cannot be made to operate retrospectively.
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.

Headnote:(a) Foreign Trade (Development and Regulation) Act, 1992 – Sections 3 and 5 – Confer certain powers on Central Government only – These powers cannot be delegated to or exercised by DGFT or any officer subordinate to him. (Para 8)

       (b) EXIM Policy of 2002-2007 – Para 1.1 r/w section 5, Foreign Trade (Development and Regulation) Act, 1992 – Amendments vide Notification dated January 28, 2004; Public Notice no. 40 of even date and Notification No. 38 dated April 21, 2004 – Para 3.7.2.1 – Challenge to the amendments on ground of withdrawing benefits already granted – Respondent Union of India showing misuse of the benefits by exporters – Held, amendments valid, bona fide and in public interest. (Para 75)

       (1986) 4 SCC 566; (2000) 10 SCC 619; (2002) 2 SCC 333; (1981) 4 SCC 93 – Referred

       (c) EXIM Policy of 2002-2007 – Para 3.7.2.1 – Amendment vide Notification no. 28 dated January 28, 2004 – Insertion of Notes 1 to 5 to Para 3.7.2.1 – Note 1 (ii) – Validity – Clarificatory or otherwise – Export by SEZ/EOU//EHTP/STP through status holders – Such units already getting benefit of the exports made by them in the form of facilities for import without payment of duty – Note 1(ii) excluding exports through status holders for calculating value of exports for availing benefits under the scheme, despite export through status holders being permissible – Permission to make exports through status holder is one thing – Taking into account these exports by the status holders for the purpose of calculating the value of exports for availing the benefits of the entitlement given under the scheme is altogether different thing – Non-exclusion of such exports would result in double benefits for same export – Note 1(ii) held clarificatory. (Para 83,

       (d) EXIM Policy of 2002-2007 – Para 3.7.2.1 – Amendment vide Notification no. 28 dated January 28, 2004 – Insertion of Notes 1 to 5 to Para 3.7.2.1 – Note 1 (ii), (v), (vi) and (vii) – Validity – Note 1(v) – Clarificatory or otherwise – States that the supply made by one status-holder to another status-holder will not be counted – Required to ensure that two status-holders belonging to the same group may not start pooling and try to take undue advantage – Note 1(v) held clarificatory. (Para 84)

       (e) EXIM Policy of 2002-2007 – Para 3.7.2.1 – Amendment vide Notification no. 28 dated January 28, 2004 – Insertion of Notes 1 to 5 to Para 3.7.2.1 – Note 1 (ii), (v), (vi) and (vii) – Validity –Note 1(vii) – Clarificatory or otherwise – Requirement of minimum 25% incremental growth by status holder and non status holder over previous year if supply or export performance of non status holder is to be taken into account of status holder – In consonance with purpose of the Scheme – Note 1(vii) held clarificatory – Notification no. 28 dated January 28, 2004 upheld as valid. (Para 85)

       (f) Foreign Trade (Development and Regulation) Act, 1992 – Section 5 and 6 – Under section 6 Central Government may appoint a DGFT and delegate its powers to him – However, in terms of sections 3, 5, 15, 16 and 19 power to announce and amend the policy and make rules remains with the Central Government and cannot be delegated. (Para 90, 91)

       (g) EXIM Policy of 2002-2007 – Para 1, 2.4, – Public Notice no. 40 dated 28 January 2004 issued by DGFT – Seeking to exclude export performance related to class of goods – EXIM policy issued in exercise of powers u/s 5 of Foreign Trade (Development and Regulation) Act, 1992 has statutory flavour – Can be amended only by Central Government – DGFT, by excluding four classes by Public Notice no. 40 dated 28 January 2004, amending the EXIM policy – DGFT empowered to formulate or amend only procedural conditions – Amendment of the Policy beyond jurisdiction of DGFT – Public notice dated 28 January 2004 held ultra vires. (Para 90, 94, 96)

       (h) EXIM Policy 2002-2007 – Notification dated April 21, 2004, r/w Notification dated April 23, 2004 – Insertion of Notes 6 to para 3.7.2.1 of the EXIM Policy – Seeking to exclude the export performance related to class of goods covered by para 2 of the Public Notice dated January 28, 2004 – Whether prospective or relatable to date of Public Notice dated January 28, 2004 – Grant or withdrawal of concessions or incentives fall in domain of policy decision of Government – In case of withdrawal in public interest, promissory estoppel with not come in the way. (Para 101)

       (1995) 1 SCC 274; (1999) 3 SCC 398 – Relied upon

       AIR 1976 J&K 41 – Cited with approval

       (i) Interpretation of statute – Fiscal statute – Policy decision in complex economic matters – Necessarily empiric – Based on trial and error – Cannot be tested on any rigid prior considerations or applying any straight-jacket formula. (Para 104)

       (2000) 2 SCC 333 – Relied upon

       (j) Foreign Trade (Development and Regulation) Act, 1992 – Section 3 and 5 – Delegated or subordinate legislation – Can only be prospective unless rule making authority has been vested with power to make rules with retrospective effect – Instantly Section 5 giving power to make and amend rules not conferring any such power specifically to make rules with retrospective effect – Power to amend does not by itself give power to do so retrospectively – Power to regulate retrospectively can also not be read into section 3 – General Clauses Act, 1897 – Section 21. (Para 108)

       AIR 1959 SC 609; (1976) 2 SCC 953; (1988) 4 SCC 669 – Relied upon

       (2006) 13 SCC 542; (2013) 15 SCC 1; (1968) 3 SCR 623; (2015) 1 SCC 1; (1962) Supp. 1 SCR 700; (1985) 3 SCC 590; (2012) 13 SCC 340 – Referred

       (k) EXIM policy 2002-2007 – Giving benefits to exporters achieving more than 25% growth over previous year – Exporters claiming to have achieved the targets and thereby accrual of vested right which could not be withdrawn by amendment – Records showing said incremental growth only on paper through fraudulent means – No vested rights accruing to the exporters. (Para 111, 113, 114)

       (l) EXIM Policy – Public Notice No. 18 dated July 24, 2003 r/w section 5 – Imposition of fee – Could be done only in terms of section 5 for which only Central Government is competent – DGFT could not impose the fee by Public notice – Set aside. (Para 115)

       (m) EXIM Policy 2004-2009 – Para 3.7.8 and 3.7.3 – 'Target Plus Scheme' – Notification No. 48/2005 dated February 20, 2006 and Notification No. 8/2006 dated June 12, 2006 – Entitlement of duty credit – Original para 3.7.3 providing for 5% incentive on incremental growth above 20% and below 25%; 10% on incremental growth of 25% or above, but below 100%; and 15% on incremental growth of 100% and above – Para 3.7.8 amended to uniform 5% on minimum percentage incremental growth of 20% – Amendment retrospective taking away accrued rights – Section 5 of the Act under which the EXIM policy is framed not conferring any power of retrospective amendment – TPS in the nature of a reward Scheme different from earlier Schemes seeking to neutralize the duty paid by the exporter – Scheme itself preserving right to change eligibility criteria and rate of entitlement effective from the beginning of the year, in public interest – Amendment to avoid misuse of benefits – Union of Indian not establishing misuse of the provisions – Exporters achieving stipulated targets – Right to benefits as originally postulated accruing to them – Cannot be taken away retrospectively. (Para 129, 131, 132)

       (1980) 4 SCC 597; (1981) 4 SCC 93; (1983) 3 SCC 33; (1997) 6 SCC 626 – Referred

       (n) EXIM Policy 2004-2009 – Para 3.7.5 – 'Target Plus Scheme' – Notification No. 48 (RE 2005)/ 2004-2009 dated February 20, 2006 – Addition of four items to the list – Without any cogent explanation – May be valid as policy decision – But cannot be made operative retrospectively. (Para 133)

       Facts of the case:

       Export Import (EXIM) Policy 2002-2007 was framed by the Central Government which came into force with effect from April 01, 2003. In furtherance of the same, a Special Scheme containing the provisions thereof was incorporated therein which gave certain kind of incentives to the exporters of some specified items. However, some amendments were made thereto vide Notification No. 28 dated January 28, 2004. On the same day, Public Notice No. 40(RE-2003)/2002-2007 was also issued, which was followed by Notification No. 38 dated April 21, 2004 and Notification No. 40 dated April 23, 2004.

       Vide Notification No. 28 dated January 28, 2004, the Central Government sought to amend certain provisions of the EXIM Policy by inserting Notes 1 to 5. Vide Public Notice dated January 28, 2004, the Government announced exclusion of export performance in relation to four classes of goods mentioned in para 2 thereof from computation of the entitlement under the Scheme and, at the same time, sought to disallow the import of agricultural products falling under Chapters I to XXIV of ITC (HS) under the said scheme. Thereafter, Notification No. 38 dated April 21, 2004 was published on the same lines on which Public Notice dated January 28, 2004 was issued. There was an innocuous amendment to Notification No. 38 dated April 21, 2004 wherein in addition to the Director General of Foreign Trade (for short, 'DGFT') as an Officer to enforce these Notifications, ex-officio Additional Secretary to the Government of India was also added.

       The exporters of these goods, naturally, felt aggrieved thereby. All such exporters who were affected thereby filed writ petitions in various High Courts.

       The Bombay High Court in Writ Petition No. 2397 of 2004, decided on July 04, 2005, has given partial relief to the exporters/ writ petitioners. The Gujarat High Court has substantially affirmed the validity of these Notifications while giving relief on one particular aspect.

       Finding of the Court:

       Public notice dated 28 January 2004 held ultra vires.

       Result:

       Appeals and transfer cases disposed of.