M/S. NOLA RAM DULICHAND DAL MILLS & ANR. versus UNION OF INDIA & ORS. on 14 February 2020

1. The challenge in the present appeal is to an order passed by theHigh Court of Rajasthan whereby the writ petition filed by the appellantDwas dismissed. In the writ petition, challenge was to a Circular dated21[st] January, 2009 on the ground that it is contrary to the Foreign TradePolicy 2004-2009[1]. Such policy is issued under Section 5 of the ForeignTrade (Development and Regulation) Act, 1992[2]. The FTP providesvarious schemes for providing incentives.

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2. The present is a case pertaining to “Vishesh Krishi Upaj Yojna[3]”for giving incentives to promote export of fruits, vegetables, flowers,minor forest produce, dairy, poultry and their value added products. Inthe Scheme notified for the year 2005-06, the following exports werenot to be taken into account for duty credit entitlement under the Scheme:F“3.8 VISHESH KRISHI UPAJ YOJANA

(SPECIAL AGRICULTURAL PRODUCE SCHEME)

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3.8.2.2. Following exports shall not be taken into account for dutycredit entitlement under the scheme:G

(a) Export of imported goods covered under Para 2.35 of theForeign Trade Policy or exports made through transshipment.

1 for short, ‘FTP’

2 for short, ‘Act’

H3 for short, ‘Yojna’

M/S. NOLA RAM DULICHAND DAL MILLS & ANR. v.UNION OF INDIA & ORS. [HEMANT GUPTA, J.]

(b) Deemed exports (even when payments are received in FreeForeign Exchange and payment is made from EEFC account).”

3. However, in the Scheme notified for the year 2006-2007 on7[th] April 2006, clauses 3.8 and 3.8.2.2 were changed. The clauses readas under:

“3.8 VISHESH KRISHI AND GRAM UDYOG YOJANA(SPECIAL AGRICULTURE AND VILLAGE INDUSTRYSCHEME)

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3.8.2.2. Following exports shall not be taken into account forduty credit entitlement under the scheme:

(a) Export of imported goods covered under Para 2.35 of theDForeign Trade Policy or exports made through transshipment.

(b) Deemed Exports.

(c) Exports made by SEZs units and EOUs units.

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3.8.5. Government reserves the right in public interest, to specifyfrom time to time the export products, which shall not be eligiblefor calculation of entitlement.”

4. The Circular dated 21[st] January, 2009 was issued so as to clarifythe scheme notified for the year 2006-07. The relevant part of the circularreads as under:

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2. However, in FTP RE-2006 (issued on 7.4.2006), exports madeby EOUs were made ineligible for benefits under VKGUYscheme [vide introducing Para 3.8.2.2 (c)]. In further, in FTPRE-2006, two new schemes, namely, Focus Market Scheme (FMS)and Focus Product Scheme (FPS) were introduced. Similarprovisions were made under para 3.92.2(b) for FMS, and underPara 3.10.2.2 (b) for FPS. Accordingly, for the period from G

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A1.4.2006 to 31.3.2007, exports made by EOUs (or through DTAunits) are not eligible for benefits under VKGUY, FMS and FPS.”

5. The appellant is said to be engaged in manufacturing/tradingand selling of Guar Gum, Guar Chri and Korma, Refined Splits and GuarGum Powder in the domestic as well as export market. The appellantBasserts that it is purchasing Guar Gum Powder from M/s. NeelkanthPolymers, which is 100% export-oriented unit. The reason to purchasefrom the said supplier are multiple and commercial in nature. In the writpetition, it is averred as under:

“12. That the petitioner firm used to purchase the Guar GumCPowder from M/s. Neelkanth Polymers supporting manufacturerunder cover of invoice which was further exported in capacity ofmerchant exporter under cover of shipping bill, commercial invoice,bill of lading through Customs Port situated either at Kandla/Mundra Port or CONCOR ICD, Jaipur etc.”

D6. The appellant-writ petitioner has sought quashing of the Circular,inter alia, on the ground that it is contrary to the Policy notified on7[th] April, 2006. Learned counsel for the appellant contended that theScheme has been notified under the Act, therefore, such Scheme has astatutory force which cannot be amended or modified by the Executiveissuing the impugned Circular. The said Circular issued by the GovernmentEbeing contrary to the Scheme is not permissible. The learned counselreferred to Sections 3 and 5 of the Act, which read as under:- “3. Powers to make provisions relating to imports andexports.-(1) The Central Government may, by Order publishedin the Official Gazette, make provision for the development andFregulation of foreign trade by facilitating imports and increasingexports.

(2) The Central Government may also, by Order published in theOfficial Gazette, make provision for prohibiting, restricting or otherwise regulating, in all cases or in specified classes of cases andGsubject to such exceptions, if any, as may be made by or underthe Order, the import or export of goods or services or technology:

Provided that the provisions of this sub-section shall beapplicable, in case of import or export of services or technology,only when the service or technology provider is availing benefits under the foreign trade policy or is dealing with specified servicesor specified technologies.

(3) All goods to which any Order under sub-section (2) appliesshall be deemed to be goods the import or export of which hasbeen prohibited under section 11 of the Customs Act, 1962 (52 of1962) and all the provisions of that Act shall have effect accordingly.

(4) Without prejudice to anything contained in any other law, rule,regulation, notification or order, no permit or licence shall benecessary for import or export of any goods, nor any goods shallbe prohibited for import or export except, as may be requiredunder this Act, or rules or orders made thereunder.

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5. Foreign Trade Policy—The Central Government may, fromtime to time, formulate and announce, by notification in the OfficialGazette, the foreign trade policy and may also, in like manneramend that policy:

Provided that the Central Government may direct that, in respectof the Special Economic Zones, the foreign trade policy shall applyto the goods, services and technology with such exceptions,modifications and adaptations, as may be specified by it bynotification in the Official Gazette.”

7. Learned counsel for the appellant argued that the Schemeexcludes the benefit of exports by units in Domestic Tariff Area[4] pertainingto Focus Market Scheme[5] notified along with Yojna. Therefore, therewas specific exclusion of exports by DTA in FMS, whereas, there is nosuch exclusion in the Yojna. Therefore, the Revenue has drawn distinctionbetween the two Schemes notified on the same day, which shows thatthe Revenue has treated two Schemes differently, therefore, exportsother than by units in SEZ and EUO units are entitled to benefit ofexports.

8. Learned counsel for the appellants also argued that in Para3.8.2.2, the benefit of exports is not available if the exports are made byEOU or units situated in SEZ Units. It is contended that only exports bythese units are not entitled to incentive whereas the appellants are not 4 for short, ‘DTA’

5 for short, ‘FMS’

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Apart of either EOU or SEZ Unit as the expression used is exports made‘by’ EOU and SEZ Unit and not ‘through’ them.

9. Mr. Arijit Prasad, learned senior counsel appearing for therespondents refers to a judgment of this Court reported as DirectorGeneral of Foreign Trade & Anr. v. Kanak Exports & Anr.[6] whereinBin respect of FTP notified under Section 5 of the Imports and Exports(Control) Act, 1947, it was held that the Government has a right to amend,modify or even rescind a particular scheme. The Court held as under:

“105. We may state, at the outset, that the incentive scheme inquestion, as promulgated by the Government, is in the nature ofconcession or incentive which is a privilege of the CentralGovernment. It is for the Government to take the decision to grantsuch a privilege or not. It is also trite law that such exemptions,concessions or incentives can be withdrawn any time. All theseare matters which are in the domain of policy decisions of theGovernment. When there is withdrawal of such incentive and it isalso shown that the same was done in public interest, the Courtwould not tinker with these policy decisions. This is so laid downin a catena of judgments of this Court and is now treated asestablished and well-grounded principle of law. In suchcircumstances, even the doctrine of promissory estoppel cannotbe ignored.

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109. Therefore, it cannot be denied that the Government has aright to amend, modify or even rescind a particular scheme. It iswell settled that in complex economic matters every decision isnecessarily empiric and it is based on experimentation or whatone may call trial and error method and therefore, its validity cannotbe tested on any rigid prior considerations or on the application ofany straitjacket formula. In Balco Employees’ Union v. Unionof India [Balco Employees’ Union v. Union of India, (2002) 2SCC 333] , the Supreme Court held that laws, including executiveaction relating to economic activities should be viewed with greaterlatitude than laws touching civil rights such as freedom of speech,religion, etc. that the legislature should be allowed some play inthe joints because it has to deal with complex problems which do F

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not admit of solution through any doctrine or straitjacket formulaand this is particularly true in case of legislation dealing witheconomic matters, where having regard to the nature of theproblems greater latitude require to be allowed to the legislature.The question, however, is as to whether it can be doneretrospectively, thereby taking away some right that had accruedin favour of another person?”

10. It is argued that 100% export-oriented units have beenspecifically excluded from benefit of the Scheme when it was notifiedon 7[th] April, 2006. The appellant is purchaser from the said 100% export-oriented unit and claiming benefit of the Scheme in respect of exportsmade by it. It is contended that since the 100% export-oriented units arenot entitled to the benefit under the Scheme, therefore, the purchasersfrom such export-oriented units will also not be entitled to the benefit ofthe Scheme. It is contended that what cannot be done directly cannot bedone indirectly. Since there was ambiguity in the Scheme, the same wasclarified.

11. We have heard learned counsel for the parties and find nomerit in the present appeal.

12. Section 5 of the Act empowers the Central Government toformulate and announce by notification in the official gazette the ForeignTrade Policy and may also, in the like manner, amend that policy fromtime to time. The Circular dated 21[st] January, 2009 does not modify oramend the Scheme notified for the year 2006-07. It only clarifies that100% export-oriented units which are not entitled to seek exemptioncannot avail benefit indirectly through the purchasers from them. It ismodification or amendment of the Scheme which is required to be carriedout by publication in the official gazette but not the clarifications to removeambiguity 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 theexport products which shall not be eligible for calculation of entitlement.Since the Government has reserved right in public interest in terms ofthe Scheme notified under the Act, therefore, the Circular dated 21[st]January, 2009 cannot be said to be illegal in any manner.

13. We do not find any merit in the argument that exports madethrough an Export Oriented Unit would be entitled to incentives. Thepurpose of the Scheme is that 100% Export Oriented Units or unitssituated in Special Economic Zone are not to be granted incentives. The AB

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Apurpose and object of the Scheme notified cannot be defeated by grantingincentives to units which exports though 100% Export Oriented Units.

14. We do not find any merit in the argument that the Schemeexcludes the benefit of exports by units in DTA in a Scheme pertainingto FMS notified along with Yojna in April 2006 for the reason that FMSBhas an explicit clause whereas the DTA was not excluded from claimingexemption under clause 3.8.2.2 related to Yojna. Since the appellant is apurchaser from 100% export-oriented unit, therefore, the medium of theappellant cannot be used to avoid the intended purport of the policy forthe year 2006-07. We find that the export-oriented units cannot use theappellant for export under the Scheme and to claim benefit of exportCwhen it is not permissible for them directly.

15. Consequently, we do not find any merit in the present appeal.The same is dismissed.

Civil Appeal No. 10637 of 2010D

16. The appellant is 100% export-oriented unit. Such export-oriented unit stands specifically excluded from the Scheme in Para 3.8.2.2,therefore, we do not find any merit in the present appeal. The same isdismissed.

Civil Appeal Nos. 7233 of 2009 and 7257 of 2009E

17. The appellant challenged the change in the Policy “VisheshKrishi Upaj Yojna” wherein 100% export units were denied the benefitof exemption on the ground that the policy binds the respondents for aperiod of five years and that such policy is discriminatory as direct tariffareas were excluded. The High Court held as under:F

“After hearing the counsel for the petitioners, we do not find anyillegality in the impugned Notification dated 7.4.2006 (AnnexureP-7) as by the said Notification the Government has taken a policydecision to withdraw the aforesaid benefit as the Export OrientedUnits enjoy special status for tax exemptions and permission tosource various requirements including the one in agricultural sector,duty free. They also enjoy income tax benefits and have been setup primarily for exports, therefore, they cannot be treated at parwith DTA Units which do not enjoy all these benefits. Therefore, G

the benefit under the said Policy has not been extended to SpecialEconomic Zone Units and Export Oriented Units.”

18. We do not find any error in the findings recorded. Accordingly,the appeals are dismissed.

Devika Gujral

Appeals dismissed.

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