2020 (2) TMI 704 - SC - Customs

Purchase from 100% EOU and export - 100% EOU are not entitled for export incentives and exemption - Vishesh Krishi Upaj Yojna - Validity of Circular dated 21st January, 2009 - challenge on the ground that it is contrary to the Foreign Trade Policy 2004-2009 - Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 - HELD THAT - Section 5 of the Act empowers the Central Government to formulate and announce by notification in the official gazette the Foreign Trade Policy and may also, in the like manner, amend that policy from time to time. The Circular dated 21st January, 2009 does not modify or amend the Scheme notified for the year 2006- 07. It only clarifies that 100% export-oriented units which are not entitled to seek exemption cannot avail benefit indirectly through the purchasers from them. It is modification or amendment of the Scheme which is required to be carried out by publication in the official gazette but not the clarifications to remove ambiguity in the existing Scheme - In terms of Clause 3.8.5 of the Scheme, the Government has reserved the right to specify from time to time the export products which shall not be eligible for calculation of entitlement. Since the Government has reserved right in public interest in terms of the Scheme notified under the Act, therefore, the Circular dated 21st January, 2009 cannot be said to be illegal in any manner. There are no merit in the argument that exports made through an Export Oriented Unit would be entitled to incentives. The purpose of the Scheme is that 100% Export Oriented Units or units situated in Special Economic Zone are not to be granted incentives. The purpose and object of the Scheme notified cannot be defeated by granting incentives to units which exports though 100% Export Oriented Units - there are no merit in the argument that the Scheme excludes the benefit of exports by units in DTA in a Scheme pertaining to FMS notified along with Yojna in April 2006 for the reason that FMS has an explicit clause whereas the DTA was not excluded from claiming exemption under clause 3.8.2.2 related to Yojna. The export-oriented units cannot use the appellant for export under the Scheme and to claim benefit of export when it is not permissible for them directly - Appeal dismissed.

Issues Involved:
1. Challenge to the High Court's dismissal of the writ petition.
2. Validity of the Circular dated 21st January 2009.
3. Interpretation of the Foreign Trade Policy 2004-2009 and the amendments for the year 2006-2007.
4. Entitlement to incentives under the Vishesh Krishi Upaj Yojna for exports made by Export Oriented Units (EOUs) and Special Economic Zones (SEZs).
5. Applicability of the doctrine of promissory estoppel in economic policy decisions.

Detailed Analysis:

1. Challenge to the High Court's Dismissal of the Writ Petition:
The appellant challenged the High Court of Rajasthan's order dismissing their writ petition, which contested a Circular dated 21st January 2009. The appellant argued that the Circular was contrary to the Foreign Trade Policy (FTP) 2004-2009 and the amendments made for the year 2006-2007. The Supreme Court upheld the High Court's decision, finding no merit in the appellant's arguments.

2. Validity of the Circular Dated 21st January 2009:
The appellant contended that the Circular issued by the Government was contrary to the Scheme notified on 7th April 2006 and argued that the Scheme, having statutory force, could not be amended or modified by an Executive Circular. The Supreme Court held that the Circular did not modify or amend the Scheme but merely clarified that 100% export-oriented units, which were not entitled to exemptions, could not avail benefits indirectly through purchasers from them. The Court stated that clarifications to remove ambiguity in the existing Scheme did not require publication in the official gazette.

3. Interpretation of the Foreign Trade Policy 2004-2009 and Amendments for the Year 2006-2007:
The appellant argued that the Scheme excluded benefits for exports by Domestic Tariff Area (DTA) units under the Focus Market Scheme (FMS) but did not explicitly exclude them under the Vishesh Krishi Upaj Yojna (Yojna). The Supreme Court found that the purpose of the Scheme was to exclude 100% Export Oriented Units (EOUs) and SEZ units from incentives, and this exclusion could not be circumvented by using intermediaries like the appellant. The Court emphasized that the Scheme's purpose and object could not be defeated by granting incentives to units exporting through 100% EOUs.

4. Entitlement to Incentives under the Vishesh Krishi Upaj Yojna for Exports Made by EOUs and SEZs:
The appellant, engaged in manufacturing/trading and exporting Guar Gum products, claimed benefits under the Scheme for exports made by purchasing from a 100% export-oriented unit. The Supreme Court held that since 100% EOUs were explicitly excluded from the benefits under the Scheme, purchasers from such units were also not entitled to the benefits. The Court stated that what could not be done directly could not be done indirectly, and the Circular clarified this exclusion to remove any ambiguity.

5. Applicability of the Doctrine of Promissory Estoppel in Economic Policy Decisions:
The respondents referred to the judgment in Director General of Foreign Trade & Anr. v. Kanak Exports & Anr., where it was held that the Government has the right to amend, modify, or rescind a scheme, and such decisions in economic matters should be viewed with greater latitude. The Supreme Court reiterated that the Government could withdraw incentives or concessions at any time, especially when done in public interest, and such policy decisions were not subject to judicial interference. The Court found that the Circular dated 21st January 2009 was in line with this principle and did not violate any legal provisions.

Conclusion:
The Supreme Court dismissed all the appeals, upholding the validity of the Circular dated 21st January 2009 and confirming that 100% export-oriented units and their purchasers were not entitled to incentives under the Vishesh Krishi Upaj Yojna. The Court found no merit in the appellant's arguments and affirmed the High Court's decision.

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