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2011 (10) TMI 313 - HC - CustomsBenefit of DEPB Schemes - Intention of government is not to encourage a specific commodity, Director General of Foreign Trade withdraw the benefit accruing under the DEPB scheme on cotton with respect to shipments made on or after 21 April 2010 - Petitioner contended Director General has no power to issue a public notice to retrospectively deprive exporter of a benefit - Such act should have been prospectively, retrospective alteration can be exercised only if it is beneficial and not detrimental to the interest of the exporter - Held That - Petitioners are entitled to succeed. The recoveries which are sought to be effected from the Petitioner on the basis of the notice in respect of shipments which took place prior to the date of the notice are accordingly quashed and set aside.
Issues Involved:
1. Validity of the public notice dated 31 March 2011 by the Director General of Foreign Trade (DGFT). 2. Legality of consequential notices of demand seeking to recover DEPB benefits. 3. Authority of DGFT to issue retrospective changes to DEPB benefits. 4. Interpretation of Foreign Trade Policy and Handbook of Procedures. Issue-wise Detailed Analysis: 1. Validity of the Public Notice Dated 31 March 2011 by DGFT: The petitioner challenged the validity of a public notice issued on 31 March 2011 by the DGFT, which stipulated that the export of cotton shall not be entitled to DEPB benefits for shipments made on or after 21 April 2010. The petitioner argued that the DGFT had no power to retrospectively withdraw benefits that had already accrued. The court noted that while the DGFT is empowered to resolve questions or doubts regarding the interpretation of the policy, the withdrawal of DEPB benefits retrospectively is beyond its jurisdiction. Therefore, the public notice could only have prospective effect from the date of issuance, i.e., 31 March 2011. 2. Legality of Consequential Notices of Demand Seeking to Recover DEPB Benefits: The petitioner also questioned the legality of consequential notices of demand seeking to recover DEPB benefits allowed in respect of the export of cotton. The court quashed these recoveries, stating that the DGFT's notice could not operate retrospectively. The recoveries sought on the basis of the notice for shipments made prior to 31 March 2011 were deemed illegal and set aside. 3. Authority of DGFT to Issue Retrospective Changes to DEPB Benefits: The court examined whether the DGFT had the authority to issue retrospective changes to DEPB benefits. It was concluded that the DGFT does not have the power to retrospectively deprive an exporter of benefits that had already accrued. The court emphasized that the exercise of powers must be consistent with the statute and that the DGFT's action was not clarificatory but substantive in nature. Consequently, the DGFT could not stipulate that DEPB benefits on the exports of cotton would be withdrawn with retrospective effect from 21 April 2010. 4. Interpretation of Foreign Trade Policy and Handbook of Procedures: The court interpreted the relevant provisions of the Foreign Trade Policy and the Handbook of Procedures. It was noted that the DGFT is empowered to resolve questions or doubts regarding the interpretation of the policy, classification of items, or the schedule of rates. However, the DGFT's action in this case was deemed a substantive modification rather than an interpretation or clarification. The court held that the DGFT's public notice dated 31 March 2011 could not have retrospective effect and would only be effective from the date of its issuance. Conclusion: The court concluded that the petitioners are entitled to succeed. The public notice issued by the DGFT on 31 March 2011, stating that the export of cotton shall not be entitled to DEPB benefits, shall have only prospective effect and is set aside to the extent it operates retrospectively from 21 April 2010. Consequently, the recoveries sought from the petitioner on the basis of this notice for shipments made prior to the date of the notice are quashed and set aside. The rule is made absolute in these terms, with no order as to costs.
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