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TMI Blog2011 (7) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... oop V. Mohta, JJ. Shri V. Shreedharan with Prakash Shah i/b M/s. PDS Legal Counsel, for the Petitioner. Shri A.S. Rao with S.D. Bhosale and Ms. Naveena Kumari, Counsel, for the Respondent. JUDGMENT [Judgment per : D.Y. Chandrachud, J. (Oral)]. - The Petitioner engages in the export of menthol based products and is a status holder within the meaning of the Foreign Trade Policy. The Petitioner exports Aromatic Chemicals. On the basis of the export of Aromatic Chemicals, the Petitioner was granted a Duty Free Credit Entitlement (DFCE) Certificate by the Zonal Joint Director General of Foreign Trade, Mumbai. The Certificate entailed that the Petitioner could avail of a duty free credit entitlement and that the imports would be subject to an actual user condition. The Certificate was issued subject to the provisions of paragraph 3.2.5 of the Handbook of Procedures for 2002-2007. Among the conditions imposed on the Petitioner in the condition-sheet was that the import should have nexus with the product goods exported in the proportion indicated therein. The Petitioner is entitled under the DFCE Certificate to import chemical and allied products to the extent of 57.68 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn Trade Policy for 2002-2007 to which the dispute relates. Para 3.7.2.1 of the Foreign Trade Policy brought into force with effect from April 2003, a special strategic package for status holders. Clause (vi) of the aforesaid Scheme entails a Duty Free Import Entitlement for status holders with an incremental growth of more than 25% in the FOB value of exports subject to a minimum export turnover as stipulated therein in Free Foreign Exchange. Clause (vi) made the following provision :- (vi) Duty free import entitlement for status holders having incremental growth of more than 25% in FOB value of exports (in free foreign exchange) subject to a minimum export turnover of ₹ 25 crore (in free foreign exchange). The duty free entitlement shall be 10% of the incremental growth in exports. Such entitlement can be used for import of capital goods, office equipment and inputs for their own factory or the factory of the associate/supporting manufacturer/]ob worker The entitlement/goods shall not be transferable. 6. The Scheme was announced as part of a series of initiatives in the EXIM Policy notified on 31 March 2003 with the object of accelerating the incremental growth of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The scheme will be applicable to status holders who were also status holders as on 31-3-2003 and who had achieved minimum export turnover of 25 crores in the year 2003-04. I. .. II. Goods allowed to be imported under this scheme shall have a nexus with the products exported and a declaration in this regard shall be made by the applicant in Appendix 17D. III. .. IV. .. V. .. VI. .. (emphasis supplied) 9. On 4 June 2005, a further amendment was made to the Handbook of Procedures as a result of which the words nexus with the product exported were replaced by the words nexus with the product group exported . Consequently, as a result of the modification, the goods which are imported are required to have a nexus with the product group in which the exported goods fall. For instance, in the case of the Petitioner, the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure provide a composite Scheme and it is a well settled principle of law, that the intention as laid down in the policy and the procedure must be given effect to; and (iii) The incentive which was granted in Clause 3.7.2.1 was a new initiative which was introduced with effect from 1 April 2004. After the introduction of the incentive, representations were received by Government seeking clarification on various issues relating to the implementation of the Scheme and Government was seized of the problem relating to the misuse of the Scheme. Consequently, the Handbook of Procedures was amended by a Notification dated 28 January 2004, simultaneously with the amendment of the policy so as to clarify that the goods which are allowed to be imported under the Scheme should have a nexus with the product exported. This was made in implementing the basic object underlying the grant of an export incentive and in furtherance of the actual user condition. Hence, the clarification falls within the purview of para 2.4 of the Foreign Trade Policy. 12. Section 5 of the Foreign Trade (Development and Regulation) Act, 1992, empowers the Central Government to formulate from time to time and announce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... policy and set down its essential conditions. Every issue which may arise in the implementation of the policy in future may not be present to the mind of the framers when the policy is notified. The Director General as the implementing authority under Section 6(2) is entitled both statutorily and by the terms of Para 2.4 of the policy to take suitable steps for ironing out the creases and for issuing implementational directions. Statutorily such a role for the Director General is recognized by Section 6(2) which makes him responsible for carrying out that policy. The policy, in accordance with the provisions of Section 6(2), confers that power on the Director General in paragraph 2.4. While the Director General may issue directions in matters of procedure or for the proper implementation of the policy and other details incidental to the proper functioning of the policy, he cannot amend the policy This is because the power to amend is expressly conferred upon the Central Government alone. But that is not to say that whatever is not to be found in the policy cannot be provided for by the Director General in the Handbook of Procedures. So long as the provision which is made in the Ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... status holders in para 3.7.2.1 of the Revised Edition of April 2003. The object of the policy was to facilitate the acceleration of the incremental growth in exports. Clause (vi) of para 3.7.2.1, as it was notified, prescribed a duty free entitlement of 10% of the incremental growth in exports. Clause (vi) contemplated that the entitlement could be used for the import of capital goods, office equipment and inputs, for their own factory or the factory of the associate/supporting manufacturer/job worker . The entitlement and goods imported were not transferable. An actual user condition was imposed in Clause (vi) of para 3.7.2.1. On 28 January 2004, para 3.7.2.1 came to be amended by a notification under Section 5 of the Act. The reason for the amendment was that a large number of representations were received by the authorities from Trade Associations as well as individual exporters seeking clarification in regard to the implementation of the Scheme. At the same time Government was concerned with the need to make the policy truly adaptive to the object of facilitating an acceleration of exports. Government was seized with the issue of the diversion of benefits and of attempts to en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ires the policy, the challenge must fail for the same reason. 17. Counsel appearing on behalf of the Petitioner submitted that the Deputy Commissioner of Customs, while raising his queries upon the filing of a Bill of Entry for home consumption, must restrict himself to the observance of the conditions which are stipulated in the policy read with the Handbook of Procedures. In this regard, we are of the view that the Deputy Commissioner of Customs would be justified in ascertaining whether the condition of nexus as stipulated in the DFCE Certificate and in paragraph 3.2.6A of the Handbook of Procedures has been fulfilled. For the aforesaid reasons, we have declined to accede to the challenge to the validity of paragraph 3.2.6 A of the Handbook of Procedure and to the legality of the restriction imposed in the DFCE Certificate that the goods imported must have a nexus with the product group of the exported product. The Fourth Respondent shall now take necessary steps in accordance with law, in pursuance of the observations contained in the judgment. 18. The Petition is accordingly disposed of in the aforesaid terms. There shall be no order as to costs. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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