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2011 (7) TMI 979 - HC - CustomsDEPB scheme - Revision in DEPB rates - Doctrine of promissory estoppel - held that - the main issue that the principle or doctrine of promissory estoppel cannot be invoked because the appellants could change the DEPB rates at anytime and thus there was no promise. Therefore the respondent cannot claim that the DEPB rate on the date of the contract should be applied. The aforesaid contention is not new and has been examined and dealt with by the Supreme Court in several cases. - Kasinka Trading and Another v. Union of India and Another, (1994 (10) TMI 64 - SUPREME COURT OF INDIA) - Shrijee Sales Corporation and Another v. Union of India, (1996 (12) TMI 61 - SUPREME COURT OF INDIA) The appellant (government) has not pleaded that why the difference in the DEPB rate was made and what prompted the huge and substantial reduction from 23% to bare 1%, in case the cap value of ₹ 200/- is taken into consideration. The appellants have not endeavoured to justify or explain why this was necessary and required. - The respondent should be given benefit of paragraph 15.15 of the handbook i.e. entitled to DEPB rate as prescribed on the date of export . This will mean that the respondent is entitled to DEPB rate as in the policy with effect from 15th April, 1998 @ 20% applicable to the woven jackets without any value cap. - Decided in favor of assessee (exporter).
Issues Involved:
1. Entitlement to DEPB credit rate. 2. Application of promissory estoppel. 3. Applicability of clause 1.5 of the Exim Policy. 4. Validity of the Circular dated 28th July, 1998. Detailed Analysis: 1. Entitlement to DEPB Credit Rate: The respondent exported 10,000 jackets between 26th March, 1998, and 5th June, 1998, and received payment as per the export order and irrevocable letter of credit. The DEPB scheme allows exporters to claim credit as a percentage of the FOB value of exports. Initially, the DEPB credit rate for Gents Jackets was 23% of the FOB value. However, effective 15th April, 1998, the rate was revised to 16% for knitted jackets with a value cap of Rs. 200 and 20% for woven jackets. The respondent was given DEPB credit at the revised rate for exports made after 15th April, 1998, resulting in a substantial reduction in the DEPB credit. 2. Application of Promissory Estoppel: The respondent argued promissory estoppel, claiming that the contract and irrevocable letter of credit were established before the rate change, and the drastic reduction in DEPB credit made the transaction uneconomic. The learned Single Judge applied the principle of promissory estoppel, referencing Union of India v. Cosmique International and Southern Petrochemical Industries Corporation Ltd. v. Union of India. The doctrine of promissory estoppel prevents the government from going back on its promise if it would result in injustice, unless larger public interest necessitates the change. 3. Applicability of Clause 1.5 of the Exim Policy: The respondent relied on clause 1.5 of the Exim Policy, which allows for exports/imports to be permitted despite subsequent restrictions if an irrevocable letter of credit was established before the restriction. The appellants argued that clause 1.5 does not apply to DEPB credit, as it is determined by the prevailing rates of customs duty. However, the court noted that clause 1.5 supports the principle of promissory estoppel, aiming to prevent economic loss or hardship due to policy changes. 4. Validity of the Circular dated 28th July, 1998: The Circular dated 28th July, 1998, clarified that the value cap of Rs. 200 applied to both woven and knitted garments. The court observed that this circular, although described as clarificatory, effectively imposed a new restriction on woven jackets for the first time and could not be applied retrospectively. The respondent should be entitled to the DEPB rate without the value cap as per the policy effective from 15th April, 1998. Conclusion: The appeal was dismissed, and the decision of the learned Single Judge was upheld. The respondent was entitled to DEPB credit at the rate of 20% without the value cap for woven jackets, as per the policy effective from 15th April, 1998. The directions given by the Single Judge were to be complied with within two months.
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