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2004 (7) TMI 645 - HC - CustomsRetrospective Amendments to Exim Policy - Prevent abuse or misuse of the scheme - Rough, Uncut, and Semi-Polished Diamonds - Gold, Silver, Including Plain Jewellery - Foodgrains Sourced from Central Pool Maintained by FCI - Exports Under Free Shipping Bills - Agricultural Products from Import Entitlement - HELD THAT - The court examined the challenge to the retroactive operation of Notes 3, 6, and 7 in the notification dated 21/24th April 2004 and the public notice dated 28.1.2004. The court found that the government had shown overwhelming public interest justifying the changes in policy with retrospective effect. As regards exports of diamonds being in Thrust Section in para 3.10 (d) of the Exim Policy, it is pertinent to note that what is excluded in only rough diamonds and not polished diamonds. It is necessary to note that while issuing the remedial notifications and the public notice, the Government was dealing with the international trade at large and not merely with the petitioners and, therefore, the contention that the petitioners have not imported rough diamonds, but have exported after procuring the same from local suppliers cannot have any bearing on the justification for exclusion of rough, uncut and semi-polished diamonds from the special scheme. The Government cannot be expected to go to the local suppliers to find out how they got the rough diamonds. In view of the notification and circular, it is clear that what is prohibited is only agricultural and dairy products as raw materials, components, intermediates, consumables and parts and such notification/circular do not prohibit duty free import of capital goods and office equipment under clause (vi) now renumbered as (vii) in para 3.7.2.1 of the Exim Policy. However, since the food grains are sourced from the central pool of FCI, it is for the FCI to take up the matter with the Central Government and the DGFT if they are desirous of claiming any duty free import of capital goods and office equipment for the FCI on the strength of the exports of food grains made between 1.4.2003 to 27.1.2004 from out of the central pool maintained by the FCI. Since it is a statutory Corporation under the FCI Act, it is open to the said Corporation to seek its remedies from the Central Government, if at all it is desirous of seeking any such benefits available to it under the Special Scheme. We are not satisfied that the Government has shown any overwhelming public interest which would justify exclusion of the items exported under free shipping bills from the benefits of the Special Scheme. We have already held earlier that the Government was justified in giving clarification of the expression the incremental growth in exports so as to cover the incremental growth of more than 25% in FOB value of exports both of the status holder and of the existing exporters who had made exports in the year 2002-03 and we have already held that the Government was justified in excluding certain exports as provided in Notes 1 and 2 to the notification dated 28.1.2004. We have further held that the Government was justified in excluding export of rough, uncut and semi polished diamonds and exports of foodgrains sourced from the central pool maintained by the FCI from the benefits of the Special Scheme even if such exports were made between 1.4.2003 and 27.1.2004. Once these clarifications made and remedial measures inserted by the Government through notifications dated 28.1.2004 and 21/24.4.2004 and the DGFT s public notice dated 28.1.2004 have been upheld, we do not think that the other substantive rights available under the Special Scheme for status holders can be allowed to be whittled down by exclusion of items exported under free shipping bills. The Government has not placed any material to show that when any items are exported under what the Government calls free shipping bills , the FOB value of exports is not indicated in such bills. Of course, the fact whether any exports have actually taken place and whether the shipping bills reflect the correct FOB value of exports could be a matter of scrutiny or verification, but in the guise of procedural safeguards, the Central Government or the DGFT cannot take away the substantive rights available to the exporters/status holder under a particular scheme. Only those procedural safeguards which are relevant for verification of genuineness of the exports and for determining FOB value of the goods and which are in conformity with the substantive provisions of the Special Scheme as amended by the impugned notifications dated 28.1.2004 and 21/24.4.2004 can be applied to the exports made during the period between 1.4.2003 and 31.3.2004, but items exported under Free Shipping Bills per se cannot be treated as ineligible exports for the purposes of the Incentive Scheme under consideration. Challenge to Note 7 excluding import of agricultural products is concerned, the petitioners have challenged the same only on the ground of alleged retrospectivity. As already held earlier the impugned amendments are either clarificatory (Notes 1, 2 and 5) or having retroactive operation (Notes 3 and 6) because by virtue of Note 4 they all affect exports already made between 1.4.2003 and 27.1.2004. As far as restrictions on imports under the Special Scheme are concerned, they are yet to be made and, therefore, insertion of Note 7 is with prospective effect. Moreover, the Customs Notification dated 1.4.2003 discussed earlier in para 37.3 hereinabove had already prohibited imports of agricultural products. In this view of the matter also, the challenge to Note 7 must fail. Thus, this petition is only partly allowed in so far as Note 6 to para 3.7.2.1 of the Exim Policy as inserted by the Government notifications dated 21/24th April 2004 and the DGFT s public notice dated 28.1.2004 exclude the following exports from the benefits of the duty free import entitlement for the export status holders as contained in para 3.7.2.1 of the Exim Policy 2002-07 - (i) Items exported under free shipping bills. (ii) Gold, silver in any form including plain jewellery thereof, in so far as the import of capital goods and office equipment for the factory of the associate/supporting manufacturer/job worker of the petitioner Company is concerned. Conclusion The petition was partly allowed, with the court holding that the exclusion of items exported under free shipping bills and the exclusion of gold, silver, and plain jewellery (to the extent it affected the import of capital goods and office equipment) were unjustified. The rest of the prayers made by the petitioners were rejected, and the rule was made absolute only to the limited extent indicated. There was no order as to costs.
Issues Involved:
1. Challenge to Amendments in EXIM Policy and Public Notice. 2. Retrospective Application of Amendments. 3. Doctrine of Promissory Estoppel and Legitimate Expectation. 4. Exclusion of Specific Export Products from Incentive Scheme. 5. Authority of DGFT to Issue Public Notices. Summary: 1. Challenge to Amendments in EXIM Policy and Public Notice: The petitioner challenged the amendments to paragraph 3.7.2.1 of the EXIM Policy by notifications dated 28.1.2004 and 21.4.2004, and the public notice dated 28.1.2004 amending paragraph 3.2.6 of the Handbook of Procedure. The amendments pertained to Duty Free Import Entitlement for Export Status Holders and were made applicable to exports from 1.4.2003. 2. Retrospective Application of Amendments: The petitioner argued that Note 4 of the notification, which applied the guidelines to exports from 1.4.2003, gave retrospective effect to the amendments. The court held that while Notes 1 and 2 were clarificatory, Notes 3 and 6 were amendments. The court found that the amendments were justified in public interest to prevent misuse of the scheme and were not retrospective but retroactive. 3. Doctrine of Promissory Estoppel and Legitimate Expectation: The petitioner invoked the doctrine of promissory estoppel, arguing that they had exported goods based on the promises in the EXIM Policy as amended up to 31.3.2003. The court held that the doctrine of promissory estoppel does not apply when the government acts in public interest to prevent misuse of a scheme. The court emphasized that public interest is a superior equity that can override individual interests. 4. Exclusion of Specific Export Products from Incentive Scheme: The court examined the exclusion of specific products like rough diamonds, gold, silver, and food grains from the incentive scheme. The exclusion of rough diamonds and food grains was upheld as justified in public interest. However, the exclusion of items exported under free shipping bills and gold, silver, including plain jewelry, was found to be unjustified to the extent that it excluded the import of capital goods and office equipment for the factory of the associate/supporting manufacturer/job worker. 5. Authority of DGFT to Issue Public Notices: The petitioner argued that the DGFT had no authority to amend the policy. The court held that the DGFT's public notice dated 28.1.2004 was valid as it was issued in line with the government's notifications and the provisions of the Foreign Trade (Development & Regulation) Act, 1992. Conclusion: The petition was partly allowed. The court held that the exclusion of items exported under free shipping bills and gold, silver, including plain jewelry, from the benefits of the duty-free import entitlement for export status holders was unjustified to the extent specified. The rest of the prayers were rejected, and the rule was made absolute to the limited extent indicated.
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