2022 (11) TMI 1076 - HC - Customs

100% EOU - Seeking direction to Respondent to issue the SHIS (Status Holder Incentive Scrip) in accordance with the FTP (Foreign Trade Policy) - Benefit of EPCG Scheme not availed - Petitioner submitted that the impugned order passed by the Respondent without application of mind and totally in contravention of the law particularly the FTP - opportunity of hearing also not provided to petitioner - violation of principles of natural justice - HELD THAT - Section 5 of the Act makes it clear that the power to amend the policy is always vested with the Central Government. Under Section 6 of the Act the Central Government may by order published in the Official Gazette direct that any power exercisable by it under this Act other than the power under Section 3, 5, 15, 16 and 19 of the Act. Therefore Section 6 makes it clear that power to amend the policy is with Government as per Section 5 of the Act. The policy referred is formulated by the Central Government wherein Plastics sector also included to claim certain benefits. Paragraph 2.3 of the FTP 2004-09 as well as the paragraph 2.3 of the FTP 2009-14 contemplate that questions and/or doubts in respect of the interpretation of any provision of the Foreign Trade Policy would be referred to DGFT whose decision would be final and binding in respect of such questions. Therefore in the absence of any amendment in the Foreign Trade Policy the main point will arise whether the DGFT by Circular can rewrite the policy or amend the policy. When the policy provides for incentive for entire Plastics sector whether that can be restricted to the particular Serial Number. As per Section 5 of the FTDR Act 1992 which makes very clear that to amend the policy is always with the Central Government. Such a power has not been granted to the DGFT as per Section 6 of the Act. Considering the powers of DGFP it is only given power to clarify the doubts raised as to the interpretation of Policy taking such powers he cannot amend the very Policy itself. Though much reliance has been placed to the notification issued by the DGFP was upheld by the Calcutta High Court and Kerala High Court the case of UNION OF INDIA VERSUS E.I. DUPOINT INDIA PVT. LTD. AND ANR. 2020 (1) TMI 598 - DELHI HIGH COURT is not applicable to the facts of the present case where it was held that If the framers of the FTP intended to subject the entitlement or the eligibility to benefits under the SFIS by the objective thereof the framers ought to have expressly done so. This having not been done by the framers of the policy cannot be done by its interpreter. The interpreter of the law cannot be wiser than the framer thereof. Similarly it is also submitted that the Central Government has notified Authentication (Orders and other Instruments) Rules 2002 wherein the rule only with regard to the authentication of orders and all other instruments made in the name of the President. Therefore the Respondent cannot take advantage of the Authentication Rules to contend that amending the very policy itself is authenticated by the Central Government. As the product is not disputed and export is also not disputed when the foreign policy clearly covers the Plastics the Petitioner is certainly entitled to incentives as per policy. In such a view of the matter the impugned order is set aside. Petition allowed.

Summary

Issues Involved:
1. Eligibility of 100% Export Oriented Units (EOUs) for Status Holder Incentive Scrip (SHIS) under the Foreign Trade Policy (FTP).
2. Interpretation of the term "Plastics" under the FTP and its applicability to the petitioner's products.
3. Validity of DGFT's clarification restricting SHIS benefits to specific ITC HS codes for plastics.
4. Authority of DGFT to amend or interpret the FTP.

Detailed Analysis:

1. Eligibility of 100% Export Oriented Units (EOUs) for SHIS:

The petitioner, a 100% Export Oriented Unit (EOU), challenged the respondent's rejection of their SHIS application. The petitioner argued that the FTP expressly permits 100% EOUs to avail SHIS benefits, and the rejection was made without reference to any provision in the FTP, violating principles of natural justice. The court noted that the respondent initially rejected the application solely on the ground that the petitioner is a 100% EOU, which was not a valid reason under the FTP.

2. Interpretation of the term "Plastics" under the FTP:

The petitioner exported Thermoplastic High Pressure Hoses, which fall under ITC HS Code 39173100. The respondent argued that only products under ITC HS codes 3901 to 3914 are eligible for SHIS benefits as per DGFT's clarification. The petitioner contended that the FTP does not restrict the SHIS benefits to plastics under these specific codes and that their products fall under the broader "Plastics" category mentioned in the FTP. The court examined Para 3.16.4 of the FTP, which includes "Plastics" as an eligible sector for SHIS benefits, without specifying any particular ITC HS codes.

3. Validity of DGFT's clarification restricting SHIS benefits to specific ITC HS codes for plastics:

The respondent relied on a DGFT clarification letter dated 28.03.2012, which stated that only plastics under ITC HS codes 3901 to 3914 are eligible for SHIS benefits. The petitioner argued that this clarification was beyond DGFT's authority and contradicted the FTP. The court found that the DGFT's clarification effectively amended the FTP, which is beyond its power. The court cited previous judgments, including M/s. Yum Restaurants (I) Pvt. Ltd. vs. Union of India and E.I. Dupont India Pvt. Ltd. vs. Union of India, to support the view that DGFT cannot introduce new conditions under the guise of interpretation.

4. Authority of DGFT to amend or interpret the FTP:

The court emphasized that under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992, the power to amend the FTP lies solely with the Central Government, not the DGFT. Section 6 allows the Central Government to delegate certain powers to the DGFT, but not the power to amend the policy. The court concluded that the DGFT's clarification letter was invalid as it attempted to amend the FTP without proper authority.

Conclusion:

The court set aside the impugned order rejecting the petitioner's SHIS application. It directed the respondent to issue the SHIS to the petitioner as per the FTP, recognizing that the petitioner's products fall under the eligible "Plastics" sector and that the DGFT's restrictive clarification was beyond its authority. The writ petition was allowed, and the petitioner was entitled to the incentives as per the original FTP provisions.