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TMI Blog2007 (4) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... part of EOU Scheme? 5.For the sake of convenience we reproduce hereinbelow the facts as reproduced in the case of Union of India & Others v. M/s. Abhishek Exports [Civil Appeal No. ……….. of 2007 arising out of S.L.P. (C) No............ (CC9879 of 2006)]. 6.The concept of EOU was introduced in 1980 in the EXIM Policy. The EOU Scheme was framed in order to boost the Indian exports. Under the said Scheme, EOU could be located at any place. In 1992, statutory recognition was given to EXIM Policy vide Section 5 of the Foreign Trade (Development and Regulation) Act, 1992. In 1991, EOU was permitted to sell rejects upto 5% and goods in the DTA after obtaining permission from the Export Commissioner. In 1997, under EXIM Policy 1997-2002, EOU was permitted to sell rejects as well as goods upto 50% of the FOB Value of exports subject to payment of duty and fulfillment of minimum Net Foreign Exchange Earnings (NFE). Over and above this limit, EOU could sell finished products which were freely importable against payment of full duty. 7.On 24-3-2000 M/s. Abhishek Exports was granted the Letter of Permission (LOP) by the Development Commissioner, NOIDA, to manufacture an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efrigeration unit/compacting/micronisation/pulverization/granulation/conversion of mono-hydrate form of chemical to anhydrous form or vice-versa and such other items as may be notified from time to time. Sales made to a unit in SEZ shall also be taken into account for the purpose of arriving at FOB value of export by EOU provided payment for such sales are made from EEFC Account. Sale to DTA would also be subject to mandatory requirement of registration of pharmaceutical products (including bulk drugs). (b) For services, including software units, sale in the DTA in any mode, including on line data communication shall also be permissible upto 50% of FOB value of exports and/or 50% of foreign exchange earned, where payment of such services is received in foreign exchange. (d) Unless specifically prohibited in the LOP, rejects may be sold in the Domestic Tariff Area (DTA) on payment of duties as applicable to sale under paragraph 6.8(a) on prior intimation to the Customs authorities. Such sales shall be counted against DTA sale entitlement. Sale of rejects upto 5% of FOB value of exports shall not be subject to achievement of NFE. (e) Scrap/ waste/ remnants arising out of produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired to maintain positive NFE. 13.On 31-8-05 the impugned notification was issued amending para 6.8(a) and para 6.8(h) of FTP 2004-2009. By the impugned notification the EOUs were prevented from making DTA sales of the finished marble from imported rough marble, with immediate effect. It is this notification which is the subject-matter of challenge. 14.According to M/s. Abhishek Exports, an investment of Rs. 300 lakhs had been made; that, it had taken a loan from State Bank of Bikaner & Jaipur to the tune of Rs. 2.30 lakhs on the basis of the Policy of Government of India and that by making the above investments it had changed its position substantially. According to M/s. Abhishek Exports, on account of the impugned notification, the quantity of marble sold by it in the DTA stood reduced. According to M/s. Abhishek Exports such an amendment to the FTP 2004-2009 by the impugned notification was devoid of any element of public interest. According to M/s. Abhishek Exports, the impugned notification was against the basic feature of the EOU Scheme. 15.The Notification was challenged before the Rajasthan High Court. Vide Order dated 29-9-06 the writ petition filed by M/s. Abhishek E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rking capital and funds, which otherwise would have been disposed of in the local market. According to M/s. Abhishek Exports, the unamended Policy had provided an insulation/hedge against the fall in the export business in the international market. According to M/s. Abhishek Exports, an EOU could sell the marble tiles in the domestic market in the slump season so that production and business activity of an EOU was not adversely affected. According to M/s. Abhishek Exports on account of impugned Circular/Notification an idle capacity during the slump season would accrue. Further, under the unamended Policy, in case of loss, an EOU could make good the loss by DTA sales and, therefore, such sales constituted an essential feature of the EOU Scheme. According to M/s. Abhishek Exports, DTA sales were essential to run the plant at maximum capacity, to minimize the cost of production in the competitive export market, to deal with export surplus and to provide for disposal of export products on cancellation of export orders. According to M/s. Abhishek Exports, the impugned circular/notification has been published with the view to protect the SIL Units at the cost of 100% EOUs. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this stage we may point out that learned Solicitor General of India stated before us that the impugned policy decision is taken on certain material (including complaints/representations received) which he is prepared to disclose to the concerned EOUs. Accordingly, we direct DGFT to supply the material in its possession to the affected EOUs., who have filed the writ petitions, on or before 15-1-2007. The said petitioners (EOUs.) who have filed writ petitions in the High Court shall thereafter make representations to the DGFT within 10 days on and from the receipt of the material (including complaints) from DGFT. Thereafter, DGFT will decide the matter in accordance with law. We make it clear that it will be open to DGFT to equitably work out the matter, if possible. One point, however, needs to be mentioned. It is stated on behalf of M/s. Hindustan Granites that they have accumulated wastes which they are entitled to sell in DTA under the unamended policy. It is contended on behalf of M/s. Hindustan Granites that they have fulfilled the benchmark of Net Foreign Exchange Earnings and, therefore, they were entitled to sell the accumulated wastes in the domestic market (DTA) under para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... import consignment with exports. According to M/s. Abhishek Exports, for last seven years the Implementing Authority has not objected to the manufacture of finished goods from indigenous marble and that the said Authority has never objected to such finished goods being exported as breach or misuse of the Policy. According to M/s. Abhishek Exports, the Director General had erred in holding that the impugned amendment was to protect the domestic marble industry. According to M/s. Abhishek Exports, on account of change in Policy the EOUs which were previously buying rough marble from the domestic market to make finished products and exporting the same would not be now able to do so. That, under the amended Policy the EOUs are now required to export finished products made from imported marble. According to M/s. Abhishek Exports, on account of change in Policy qua SIL Units permitting them imports of marble to the order of 1.30 lakhs MT as compared 68,000 MT would effect the domestic mining industry. According to M/s. Abhishek Exports, the Director General had erred in holding that there was diversion of the imported rough marble in DTA which defeated the very purpose of putting marble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the concept of Net Foreign Exchange Earning is very important. On account of the price differential, under the impugned practice, there is substitution of imported inputs by domestic inputs. The rational behind allowing imports of rough marble blocks by 100% EOUs was that the raw material would be used for export production and that it will not be diverted in DTA defeating the very purpose of putting marble in the restricted category. The object behind the EOU Scheme is consumption of imported raw material for manufacture of finished products which are to be exported. If that facility leads to substitution of imported inputs by domestically procured inputs then the facility has to be discontinued. This discontinuation has been done by the impugned circular/notification. Fourthly, as stated above, marble is an item under restricted category. It is put in the restricted category since it is not treated as only revenue-generating resource. It is put in the restricted category because the mining industry depends on that resource. It generates employment. Mining generates employment. Marble is an input required in the mining industry. As a result of impugned substitution, the Indian mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... national priority and good trade policies then it cannot be said that the restrictions imposed in economic interest are unreasonable even though they operate harshly [See : paras '22'and '23']. 24.In the case of Union of India & ors. v. M/s. Asian Food Industries - (2006) 12 Scale 105, on which reliance is placed by Counsel for M/s. Abhishek Exports, the Division Bench of this Court has held that Foreign Trade Policy under Foreign Trade (Development and Regulation) Act, 1992 along with the Hand Book of Procedure constituted a composite Scheme. We do not dispute with this proposition. Hand Book of Procedure merely implements the policy. It does not prevent the Central Government from changing the policy. Vide paras '29' and '30' of the said judgment it has been held specifically that the Central Government can, in exercise of its powers under Section 5 of the 1992 Act, prohibit exports. In that case, this Court was concerned with the question of banning of exports. It is not so in this case. In the matter before us there was an incidental. Facility given to 100% EOUs to hedge the losses which may arise on account of changes in foreign exchange rates which facility is removed. In o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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