2010 (8) TMI 384 - HC - Customs

Target Plus Scheme FTP Change in FTP locus standi Held that - Petitioner No.1 is a registered Society having as its members export houses and star trading houses all of whom are affected by the impugned Notification. Petitioner No.1 is entitled to represent the collective interest of its members. Recognizing the locus standi of Petitioner No.1 will avoid multifarious litigation by each of the members of the Petitioner No.1 seeking identical relief. Ultra virus clarification - Given the objective of providing an incentive to exporters, para 3.7.6 of the FTP can reasonably be interpreted to require an exporter to show that the goods imported should have a broad nexus with reference to any product group of the exported goods within the overall value of the entitlement certificate. The word nexus obviously refers to a larger group of similar goods and not the very exported goods itself. Consequently the impugned circulars and notice that purported to clarify the term broad nexus, i.e. the impugned circular dated 8th May 2007, the Public Notice dated 21st June 2007 and the further circular dated 19th December 2007, travelled beyond what was envisaged by para 3.7.6 of the FTP and severely restricted the benefit thereunder. It was a significant change that could be brought about only through a notification under Section 5 FTDR Act. The said circulars and public notice were, therefore, ultra vires para 3.7.6 of the FTP.

Issues Involved:
1. Constitutionality of para 3.2.5 of the Handbook of Procedure (HBP) and the Public Notice dated 21st June 2007.
2. Validity of the Circular dated 8th May 2007 issued by the Department of Revenue.
3. Legality of the changes made to the Foreign Trade Policy (FTP) through circulars and notifications.
4. Maintainability of the writ petition.
5. Retrospective application of policy changes.

Issue-wise Detailed Analysis:

1. Constitutionality of para 3.2.5 of the Handbook of Procedure (HBP) and the Public Notice dated 21st June 2007:
The petitioners challenged para 3.2.5 of the HBP and the Public Notice dated 21st June 2007, asserting they were ultra vires Articles 14, 19(1)(g), and 300A of the Constitution of India and Section 5 of the FTDR Act, 1992. The court found that these changes sought to restrict the import of goods under the Target Plus Scheme (TPS) to only those that constituted an 'input' in the exported product, which was not envisaged by para 3.7.6 of the FTP. The court held that such significant changes could only be made through a notification under Section 5 of the FTDR Act, thus declaring the amendments ultra vires and quashing them.

2. Validity of the Circular dated 8th May 2007 issued by the Department of Revenue:
The circular dated 8th May 2007 required exporters to demonstrate that the items sought to be imported were "inputs" in the manufacture of the exported items. The court found that this circular unduly restricted the meaning of the word 'inputs' to only those used in the manufacture of the goods exported, which was beyond the scope of para 3.7.6 of the FTP. The court ruled that such a change could not be made through a circular and quashed it.

3. Legality of the changes made to the Foreign Trade Policy (FTP) through circulars and notifications:
The court examined whether changes to the duty credit entitlements under the FTP could be brought about through circulars and notifications. It concluded that significant changes to the FTP must be made by a notification under Section 5 of the FTDR Act and not through circulars or forms. The court cited the Supreme Court's decision in Atul Commodities Pvt. Ltd. to support its conclusion that the DGFT did not have the power to amend the FTP through circulars.

4. Maintainability of the writ petition:
The respondents challenged the maintainability of the writ petition, arguing that the petitioners lacked locus standi. The court rejected this preliminary objection, stating that Petitioner No.1, being a registered society representing export houses and star trading houses, had the right to represent the collective interest of its members. The court found that recognizing the locus standi of Petitioner No.1 would avoid multifarious litigation.

5. Retrospective application of policy changes:
The court found that the changes made by the circular dated 8th May 2007 and the Public Notice dated 21st June 2007 were retrospective in nature and took away accrued benefits from the exporters. The court held that such retrospective changes were unreasonable and could not be justified. The court emphasized that the exports and imports had been planned based on the existing FTP, and any subsequent changes should not adversely affect the exporters.

Conclusion:
The court allowed the writ petition to the extent that it quashed the impugned circular dated 8th May 2007, the Public Notice dated 21st June 2007, the further circular dated 19th December 2007, and the amended para 3.2.5 of the HBP. The duty entitlement of the members of the Petitioner Society was to be computed based on the original provisions of the FTP, and the corresponding duty credit was to be given to them within twelve weeks.

← Previous Next →