2014 (12) TMI 359 - HC - Customs

Benefit available under Focus Product Scheme in respect of Technical Textiles - Denial of claim of incentive under FPS - grievance of the petitioners is compounded as the impugned circular excludes the products exported by them from the definition of technical textiles with retrospective effect - whether the Director General of Foreign Trade (hereafter DGFT ) could issue the impugned circular to recall a benefit provided to the petitioners under the Foreign Trade Policy, with retrospective effect - Held that - In terms of Section 5, the Central Government is empowered to formulate and announce the Foreign Trade Policy and/or also in the like manner amend that policy. A bare reading of the provisions of Section 5 of the Act indicates that a policy cannot be made with retrospective effect. The expression formulate and announce used in Section 5 clearly means that the power is to be exercised prospectively. The power exercised by the Central Government is a power delegated by the Legislation. It is well settled that in absence of an express provision enabling a delegate to make delegated Legislation with retrospective effect, no such power can be inferred. Section 5 of the Act does not empower the Central Government to frame policy with retrospective effect. Thus, the schemes framed under the Foreign Trade Policy cannot be altered or amended with retrospective effect. Benefit granted to the petitioners under the FPS has already been availed by them in terms of the Foreign Trade Policy as in vogue at the material time. Thus, the effect of the impugned circular is to recall a vested right; this, in my view, would also violate Article 300A of the Constitution of India. Neither the central government, nor DGFT would have the power to amend the Foreign Trade Policy or withdraw any export benefit with retrospective effect. The impugned circular inasmuch as it seeks to restrict the list of eligible items under entry 33 of Table 4 of Appendix 37D of the Handbook-I with retrospective effect is set aside. Accordingly, the impugned letters of demand are also set aside. - Decided in favour of assessee.

Issues Involved:
1. Validity of policy circular No.42 (RE-2010)/2009-14 dated 21.10.2011 issued by the Directorate General of Foreign Trade (DGFT).
2. Retrospective effect of the policy circular.
3. Authority of DGFT to amend the Foreign Trade Policy.
4. Interpretation of "Technical Textiles" under the Foreign Trade Policy.
5. Recovery of benefits already availed by the petitioners.

Detailed Analysis:

1. Validity of Policy Circular No.42 (RE-2010)/2009-14:
The petitioners challenged the policy circular dated 21.10.2011 issued by DGFT, which curtailed the benefit available under the Focus Product Scheme (FPS) for "Technical Textiles" to only 33 items, effective retrospectively from 01.04.2011. The petitioners argued that this circular excluded their exported products from the definition of technical textiles, thus rendering them ineligible for FPS benefits.

2. Retrospective Effect of the Policy Circular:
The circular was issued with retrospective effect, which sought to recover benefits already availed by the petitioners. The court held that the Foreign Trade Policy, framed under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992, cannot be made with retrospective effect. The Supreme Court in Union of India v. Asian Food Industries stated that a policy cannot take away a vested or accrued right retrospectively. Therefore, the retrospective application of the circular was deemed invalid.

3. Authority of DGFT to Amend the Foreign Trade Policy:
The court examined whether DGFT had the authority to amend the Foreign Trade Policy with retrospective effect. Section 6 of the Act empowers DGFT to advise the Central Government and implement the policy, but not to amend it. The court concluded that DGFT's role is limited to specifying procedures and clarifying doubts, not making substantive policy changes. The power to amend the policy lies solely with the Central Government, and such amendments must be prospective.

4. Interpretation of "Technical Textiles":
The court analyzed the interpretation of "Technical Textiles" under the Foreign Trade Policy. The petitioners' exported products, polyester printed and dyed fabrics, fell under the ITC (HS) Code 5407, which was included in the definition of technical textiles in Appendix 37D. The court found no ambiguity in this classification and rejected the respondent's argument that "woven fabrics of synthetic filament yarn" should not be synonymous with "technical textiles." The use of 'Em dash' indicated that "woven fabrics of synthetic filament yarn" explained or defined "technical textiles."

5. Recovery of Benefits Already Availed:
The court addressed the issue of recovering benefits already availed by the petitioners. Since the benefits were granted under the Foreign Trade Policy as it stood at the time of export, the retrospective withdrawal of these benefits was deemed invalid. The court held that recalling a vested right would violate Article 300A of the Constitution of India, which protects against deprivation of property without authority of law.

Conclusion:
The court set aside the impugned circular and the letters of demand issued to the petitioners, ruling that neither the Central Government nor DGFT has the power to amend the Foreign Trade Policy or withdraw export benefits with retrospective effect. The writ petitions were allowed, and the pending applications were disposed of with no order as to costs.

← Previous Next →