2007 (4) TMI 8 - SC - Customs

Foreign Trade Policy Alleged that the EOU s were misusing the DTA Facility by making finishing products from indigenous marble and exporting the said finished products rather than making finished products rather than making finished products Authority disposed the appeal according to prior decision

Summary

Issues Involved:
1. Validity of Policy Circular dated 30-8-05 and Notification No. 24 dated 31-8-05.
2. Whether DTA sales by 100% EOUs form an integral part of the EOU Scheme.
3. Impact of the impugned Circular/Notification on the EOU Scheme and public interest.
4. Alleged discrimination between 100% EOUs and SIL Units.
5. Applicability of the doctrine of promissory estoppel.

Detailed Analysis:

1. Validity of Policy Circular dated 30-8-05 and Notification No. 24 dated 31-8-05:
The central question addressed was the validity of the Policy Circular dated 30-8-05 and Notification No. 24 dated 31-8-05, which amended paras 6.8(a) and 6.8(h) of the Foreign Trade Policy (FTP) 2004-2009. The Supreme Court upheld the validity of these amendments, stating that they were in line with public interest and reasonable restrictions.

2. Whether DTA sales by 100% EOUs form an integral part of the EOU Scheme:
The Court concluded that DTA sales by 100% EOUs were exceptions and not integral to the EOU Scheme. Under para 6.1 of FTP 2004-2009, EOUs undertook to export their entire production except permissible sales in DTA, which were incidental and not essential. The Court noted that the EOU Scheme was designed to boost exports, and DTA sales were merely an incidental facility.

3. Impact of the impugned Circular/Notification on the EOU Scheme and public interest:
The impugned amendments were aimed at preventing the misuse of the EOU Scheme, where EOUs were found to be selling high-quality imported marble in the DTA while exporting products made from lower-quality domestic marble. The Court emphasized that the amendments were necessary to prevent the circumvention of the Restricted Import Policy of marble and to protect the domestic mining industry, which generates employment.

4. Alleged discrimination between 100% EOUs and SIL Units:
The Court addressed the contention that the impugned Circular/Notification discriminated against 100% EOUs in favor of SIL Units. The Court found that the amendments were justified as they aimed to curb the misuse of the EOU Scheme and ensure that imported raw materials were used for export production. The increase in import limits for SIL Units was seen as a measure to balance the overall import policy.

5. Applicability of the doctrine of promissory estoppel:
The Court referred to the doctrine of promissory estoppel, as discussed in the case of Bannari Amman Sugars Ltd. v. Commercial Tax Officer and Others, stating that the State can impose reasonable restrictions in public interest. The Court held that the impugned amendments met the test of public interest and reasonableness, and thus, the doctrine of promissory estoppel did not apply in this case.

Conclusion:
The Supreme Court upheld the validity of the Policy Circular dated 30-8-05 and Notification No. 24 dated 31-8-05, finding that DTA sales by 100% EOUs were not an integral part of the EOU Scheme. The amendments were deemed necessary to prevent misuse of the EOU Scheme and protect the domestic mining industry. The Court dismissed the challenge by 100% EOUs, affirming that the changes were in public interest and reasonable.