2023(12)LCX0323

SOUTH GUJARAT WARP KNITTERS ASSOCIATION

Versus

Union of India

R/SPECIAL CIVIL APPLICATION NO. 16316 of 2021 decided on 21-12-2023

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

R/SPECIAL CIVIL APPLICATION NO. 16316 of 2021

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA

SOUTH GUJARAT WARP KNITTERS ASSOCIATION, AN ASSOCIATION
OF PERSON
Versus
UNION OF INDIA

Appearance:
MR PRAKASH SHAH WITH MR DHAVAL SHAH(2354) for the Petitioner(s)
No. 1,2
MR PY DIVYESHVAR(2482) for the Respondent(s) No. 1
NOTICE SERVED for the Respondent(s) No. 2,3

CORAM: HONOURABLE MR. JUSTICE BIREN VAISHNAV
              and
              HONOURABLE MR. JUSTICE BHARGAV D. KARIA

Date : 21/12/2023

CAV JUDGMENT

(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

1. Heard learned advocate Mr. Prakash Shah with learned advocate Mr. Dhaval K. Shah for the petitioners and learned advocate Mr. P.Y. Divyeshvar for the respondents.

2. By this petition under Article 227 of the Constitution of India, the petitioners have prayed for the following reliefs:

“(a) YOUR LORDSHIPS may be pleased to issue a writ of Prohibition or a writ in the nature of Prohibition or any other appropriate writ, order or direction under Article 226 of Constitution of India prohibiting the Respondents, their officers, subordinates, servants and agents, from taking any steps or proceedings in pursuance of or in furtherance of amended Paragraph 5.10(c) of the revised Handbook of Procedures under revised FTP 201520 and Policy Circular Notice No. 22/2015-20 dated 29.03.2019 issued by the Respondent No. 3 in respect of EPCG authorisations issued prior tο 05.12.2017;

(b) YOUR LORDSHIPS may be pleased to issue writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India, ordering and directing the Respondents, their subordinate servants and agents to permit the members of the Petitioners to fulfil their Export Obligation in accordance with the relevant FTP under which EPCG Authorizations has been issued to them, by counting full realized value of the Shipping Bill in case of Third-party exports;

(c) YOUR LORDSHIPS may be pleased to issue writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India, ordering and directing the Respondents, their subordinate servants and agents to give an additional extension of two years to the members of the Petitioner No. 1 to fulfil their Export Obligation in respect of EPCG authorisations issued prior to 05.12.2017;

(d) During the pendency and final disposal of this Petition, YOUR LORDSHIPS be pleased to, by an interim order or injunction, restrain the Respondents, by themselves, their subordinate servants and agents from acting upon or taking any steps or proceedings in accordance with amended Paragraph 5.10(c) of the revised Handbook of Procedures under revised FTP 2015-20 and Policy Circular Notice No. 22/201520 dated 29.03.2019 for the third party exports effected after 05.12.20217 based on EPCG authorisations issued prior 05.12.2017 on such terms and condition as they Hon'ble Court may deem fit;

(e) During the pendency and final disposal of this Petition, YOUR LORDSHIPS be pleased to, by an interim order or injunction, restrain the Respondents, by themselves, their subordinate servants and agents from taking any action or proceedings against the members of the Petitioner No. 1 who have been issued EPCG authorization prior to 05.12.2017 and time period for fulfilment of Export Obligation has expired but not discharged;

(f) An ex-parte ad-interim relief in terms of paragraph 26(d) and (e) above may kindly be granted on such terms and conditions deemed fit by this Hon'ble Court;”

3. Brief facts of the case are that petitioner No. 1 is an Association of Persons representing its members who are mostly knitters engaged in the manufacture and sale of MMF knitted fabrics.

3.1) The Respondent No. 1 in the exercise of powers conferred upon it under the provisions of Foreign Trade (Development and Regulation) Act, 1992 (hereinafter referred to as “FTDR Act”) formulates and announces by notification in the Official Gazette the Foreign Trade Policy (FTP) from time to time which is generally for a period of 5 years and are being supplemented annually.

3.2) In order to facilitate the import of capital goods for producing quality goods and services and enhance the manufacturing competitiveness of India, respondent No. 1 has formulated Export Promotion Capital Goods (EPCG) Scheme under Chapter 5 of the FTP 2015-20 which came into force w.e.f. 01.04.2015 vide Notification No. 01/2015-2020. Similar scheme also existed under FTP 2009-14.

3.3) The EPCG Scheme allows the import of capital goods for pre-production, production, and post-production at zero/three percent customs duty. Import under the EPCG Scheme is subject to an export obligation equivalent to 6/8 times of duty saved on capital goods to be fulfilled in 6/8 years reckoned from the date of issue of Authorization.

3.4) In terms of Paragraph 2.42 of the original FTP 2015-20, third party exports are also allowed under FTP. The extracts of Paragraph 2.42 of the original FTP 2015-20 are reproduced below for ready reference:

“2.42 Third Party Exports

Third party exports (except Deemed Export) as defined in Chapter 9 shall be allowed under FTP. In such cases, export documents such as shipping bills shall indicate name of both manufacturing exporter/manufacturer and third-party exporter(s). Bank Realization Certificate (BRC), export order and invoice should be in the name of third-party exporter.”

3.5) Paragraph 9.60 of the original FTP 2015-20 defines "Third-party exports" as under:

““9.60 "Third-party exports" means exports made by an exporter or manufacturer on behalf of another exporter (s).

In such cases, export documents such as shipping bills shall indicate name of both manufacturing exporter/ manufacturer and third-party exporter(s). Bank Realisation Certificate, Self-Declaration Form (SDF), export order and invoice should be in the name of third party exporter.”

3.6) The conditions for fulfilment of Export Obligation are provided under Paragraph 5.10 of the Handbook of Procedures 2015-20, as notified by Public Notice No. 01/2015-2020 dated 01 April 2015. In this regard, the extracts of Paragraph 5.10(c) of the original Handbook of Procedures 2015-20 are reproduced below:

“5.10 Conditions for fulfilment of Export Obligation

In addition to conditions in paragraph 5.04 of FTP, the following conditions shall also be applicable for fulfilment of export obligation:

****

(c) In case the Authorization Holder wants to export through a third party, export documents viz., shipping bills/Bill of exports etc shall indicate name of both authorization holder and supporting manufacturer, if any, along with EPCG authorization number, BRC, GR declaration, export order and invoice should be in the name of third party exporter. The goods exported through third party should be manufactured by the EPCG Authorization Holder or the supporting manufacturer where the capital goods imported under the authorization has been installed.”

3.7) There was a mid-term review of the FTP 2015-20 by Respondent No. 1 purportedly to align FTP with the changes in the indirect taxes regime with the introduction of the Central Goods and Services Tax Act from 01.07.2017. The revised FIP 2015-20, as notified by Notification No. 41/2015-2020 dated 05.12.2017, came into force w.e.f. 05.12.2017

3.8) Simultaneously, revised edition of Handbook of Procedures was also notified vide Public Notice No. 43/2015-2020 dated 05 December 2017, to be effective from 05 December 2017.

3.9) While the respondent No. 1 continued with the EPCG scheme under revised FTP 2015-20 with some necessary changes to align it with GST, there was a major amendment made in the condition for fulfillment of Export Obligation provided under Paragraph 5.10(c) of the revised Handbook of Procedures 2015-20. The extracts of Paragraph 5.10(c) of the revised Handbook of Procedures 2015-20 are as under:

“5.10 Conditions for fulfilment of Export Obligation

In addition to conditions in paragraph 5.04 of FTP, the following conditions shall also be applicable for fulfilment of export obligation:

****

In case the Authorization Holder wants to export through a third party, export documents viz, shipping bills / Bill of exports etc. shall indicate name of both authorization bolder and supporting manufacturer, if any, along with EPCG authorization member. BRC, GR declaration, export order and invoice should be in the name of third party exporter. The goods exported through third party should be manufactured by the EPCG Authorization Holder or the supporting manufacturer where the capital goods imported under the authorization have been installed. Proceeds realized through normal banking channel from third party exporter's account to the authorization holder's account on account of such exports only shall be counted towards fulfilment of export obligation.”

3.10) The effect of revision was that, prior to 05.12.2017, the full realized value of the Shipping Bill was to be taken into consideration for fulfilment of Export Obligation. However, post the amendment i.e. w.e.f. 05.12.2017, only the actual payment received by the Authorization holder from the third-party exporter through normal banking channel is to be taken into consideration for fulfillment of Export Obligation.

3.11) The members of the petitioner No. 1 applied for and granted Authorizations under the EPCG scheme under FTP 2009-14 and original FTP 2015-20 (as applicable prior to 05.12.2017) under the pretext that the full realized value of the Shipping Bill would be taken into consideration for fulfillment of Export Obligation.

3.12) It is the case of the petitioners that the amendment made in Paragraph 5.10(c) of the revised Handbook of Procedures (HBP)2015-20 ought to have been applied only to the Authorization issued under EPCG scheme on or after 05.12.2017. However, vide the impugned Policy Circular, the respondent No. 3 has issued clarification that all the shipments made 05.12.2017 onwards will be counted towards Export Obligation only for the actual payment realised through the normal banking channel from the third party exporter's account to the authorisation holder's account. Therefore, petitioner no. 1 was aggrieved by the action of the respondent no. 3 to make applicable the Paragraph 5.10(c) of the revised Handbook of Procedures 2015-20 even to the Authorisation issued prior to 05.12.2017.

3.13) The petitioners therefore, made a representation vide Email dated 27.09.2019 to the respondents for withdrawal of condition imposed by Paragraph 5.10(c) of the revised Handbook of Procedure 201520(HBP) and the impugned Policy Circular.

3.14) In response to the public grievance raised by the petitioners, the Foreign Trade Development Officer, vide Letter dated 23.10.2019, reiterated the impugned Policy Circular that the amendment made in Paragraph 5.10(c) of the revised Handbook of Procedures 2015-20 shall apply to exports made on or after 05.12.2017.

3.15) The petitioners thereafter made various representations before the respondents but no response was given by the respondents. Last representation made by the petitioners was vide Email dated 06.10.2020. The petitioners therefore, has filed this petition with the aforesaid prayers.

4. Learned advocate Mr. Prakash Shah with learned advocate Mr. Dhaval K. Shah for the petitioners submitted that the power to amend the Foreign Trade Policy is within the exclusive domain of the Central Government and the same cannot be usurped by the respondent Nos. 2 and 3 under the guise of amendment in the Handbook of Procedures.

4.1) It was submitted that under the guise of amendment in Paragraph 5.10(c) in the revised HBP 2015-20 read with the Policy Circular dated 29.03.2019, the respondent Nos. 2 and 3 have indirectly amended the FTP.

4.2) It was submitted that respondent No. 2 and 3 have taken away the benefit which was available to the petitioners under the FTP 2009-14 and original FTP 2015-20.

4.3) It was further submitted that the amendment in paragraph 5.10(c) in the revised HBP 2015-20 read with the Policy Circular dated 29.03.2019 changes the meaning of Export Obligation and also the manner in which Export Obligation is to be computed.

4.4) Learned advocate Mr. Shah further submitted that any change to the meaning of Export Obligation or the manner in which Export Obligation is to be computed can be done only by way of amendment in FTP.

4.5) It was submitted that in terms of Section 5 of the FTDR Act, the Central Government alone has the power to amend the FTP. Further, in terms of para 1.03 of the FTP, the power of Respondent No. 2 is restricted only to lay down the procedure which is to be followed by an exporter or importer.

4.6) It was submitted that by way of amendment in Paragraph 5.10(c) in the revised HBP 2015-20, the respondent No. 2 has indirectly nullified the express provisions of the FTP 2015-20 framed by the Central Government.

4.7) Learned advocate Mr. Shah submitted that power to amend the FTP is the exclusive domain of the Central Government. The said powers cannot be usurped by respondent No. 2 in the guise of HBP. There is no provision either under the FTDR Act or FTP which authorizes respondents No. 2 and 3 to curtail the benefits granted to the petitioners under the FTP.

4.8) In support of his contentions, reliance was placed on the following judgments:

(1) In case of Alstom India Lad. vs. Union of India, reported in 2014 (301) ELT. 446 (Guj.).

(2) In case of Asahi Songwon Colors Ltd. vs. Union of India, reported in 2017 (356) ELT. 532 (Guj.).

It was pointed out that the said judgment is affirmed by the Supreme Court in case of Union of India vs. Asahi Songwon Colors Ltd., reported in 2019 (366) ELT. A20 (SC).

(3) In case of Hubbergroup India Pvt. Ltd. vs. Union of India, reported in 2019 (368) ELT. 940 (Guj.)

(4) In case of Narendra Udeshi vs. Union of India, reported in 2003 (156) ELT. 819 (Bom.).

It was pointed out that the said judgment is affirmed by the Hon’ble Supreme Court in case of Union of India vs. Narendra Udeshi, reported in 2003 (158) EL.T. 275 (S.C.)

(5) In case of Atlantic Shipping Pvt. Ltd. vs. Union of India & Ors., reported in 2021-TIOL-582-HC-MUM-CUS.

(6) In case of M.D. Overseas Limited vs. Union of India, reported in 2020 (373) ELT. 151 (Del).

4.9) It was submitted that without prejudice to the above and in any event, the amendment made in Paragraph 5.10(c) in the revised HBP 2015-20 cannot be given retrospective effect by making it applicable even to EPCG Authorizations issued prior to 05.12.2017.

4.10) Learned advocate Mr. Shah submitted that vide the impugned Policy Circular dated 29.03.2019, it has been clarified by the respondent No. 3 that all the shipments made from 05.12.2017 onwards will be counted towards Export Obligation only for the actual payment realized through the normal banking channel from the third-party exporter's account to the authorization holder's account and therefore, respondent No. 3 has made the Paragraph 5.10 (c) of the revised Handbook of Procedures 2015-20 applicable even to the EPCG Authorizations issued prior to 05.12.2017.

4.11) It was submitted that the petitioners have applied for and granted authorization under the EPCG Scheme under FTP 2009-14 and original FTP 2015-20 (as applicable prior to 05.12.2017) under the pretext that full realized value of the Shipping Bill will be taken into consideration for fulfillment of Export Obligation.

4.12) It was submitted that making the amendment made in Paragraph 5.10(c) of the revised Handbook of Procedures 2015-20 applicable to the EPCG Authorizations issued prior to 05.12.2017 is in violation of the principles of legitimate expectation and promissory estoppel.

4.13) Learned advocate Mr. Shah submitted that the petitioners were governed by the FTP in vogue during the time EPCG Authorizations were issued to the petitioners though the Courts have time and again held that the grant of license depends upon the FTP prevailing as on the date of issue of license.

4.14) The attention of the Court was invited to Paragraph 1.05(a) of the revised ETP 2015-20 which provides that any License / Authorisation/ Certificate/ Scrip/instrument bestowing financial or fiscal benefit issued before the commencement of revised FTP 2015-20 w.e.f. 05.12.2017 shall continue to be valid for the purpose and duration for which it was issued.

4.15) It was submitted that even the EPCG Authorizations issued to the petitioners clearly mention that the same shall be subject to the conditions/parameters as laid down in the FTP and HBP under which they were issued.

4.16) In support of such contentions, the petitioners placed reliance upon the following judgements:

1) In case of S.B. International Ltd. vs. Asstt. Director General of F.T., reported in 1996 (82) ELT. 164 (SC).

2) In case of Jain Exports (P) Ltd. vs. Union of India, reported in 1992 (61) ELT. 173 (SC).

3) In case of Sonia Fisheries vs. Union of India, reported in 1997 (90) ELT. 22 (Bom.).

4) In case of Ashok Kumar Jain vs. Union of India, reported in 2010 (253) ELT. 767 (Bom.).

5) In case of Commissioner of Cus. (Export), ACC, Mumbai-IV vs. Lactose (1) Ltd., reported in 2017 (355) ELT. 541 (Bom.).

4.17) Relying upon the decision in case of Director General of Foreign Trade v/s. Kanak Exports, reported in 2015 (326) ELLT. 26 (SC), it was submitted that the Hon'ble Apex Court has held that Section 5 of the FTDR Act does not empower the Government to make amendments with retrospective effect, thereby taking away the rights which have already accrued in favour of the exporters under the Target Plus Scheme.

4.18) It was pointed out that the time limit prescribed for completing the Export Obligation is 6/8 years but due to the uncertainty brought in by amendment in Paragraph 5.10(c) of the revised HBP 201520, read along with the Policy Circular dated 29.03.2019, and also because of the COVID-19 pandemic, the petitioners are not in a position to fulfill their Export Obligation within the prescribed time period including the permissible extension. Therefore, an extension of two years can be provided for completing the Export Obligation in terms of the HBP.

5. On the other hand, learned advocate Mr. P.Y. Divyeshwar for the respondent submitted that the power to amend the FTP is within the powers of the Central Government and that is through Director DGFT as the said authority is holding powers of Under Secretary of Government Of India as per section 6(3) of the FTDR Act. It was, therefore, submitted that the power exercised by the DGFT was within the law and it has the power to amend and clarify the process of working of the sections and rules of the Act and Rules.

5.1) It was submitted that the respondent authority has not exercised its power beyond the FTDR Act and the same is in furtherance to the original section and the condition is merely to develop and enhance genuine transactions of the exporters.

5.2) Learned advocate Mr. Divyeshwar submitted that on plain reading of the condition to 5.10 (c) it is clear that there is no benefit curtailed or restricted and if at all, more transparency was added by way of condition to it to curb fake and fictitious transactions and to promote real exporter in all manner.

5.3) It was submitted that para 5.10(c) in the revised Hand Book Of Procedures 2015-20 with effect from 5-12-2017 as clarified by the policy circular notice no. 22/2015-20 dated 29-3-2019, is within the domain of the respondent and it does not create any hindrance nor it is obstructive in the business of the export.

5.4) It was submitted that the adding of condition is just a procedural aspect and cannot be said to be in any manner outside the power of the authority. In support of his contention, reliance was placed on the following judgments:

1) In case of Union of India and others v. Agricas LLP and others etc. reported in 2020 10 Scale 740.

2) In case of Atul Commodities Private Limited and others v. Commissioner of Customs, Cochin reported in (2009) 5 SCC 46

3) In case of Union of India and others v. Raj Grow Impex LLP and others reported in AIR 2021 SC 2993

5.5) It was submitted that the condition attached to 5.10(c) itself is clear along with the reply of DGFT that the same is not retrospective and it is prospective from the date of the public notice in the year 2017.

5.6) Learned advocate Mr. Divyeshwar submitted that the amendment in para 5.10(c) is to promote real and genuine export of the business houses and the payment received by them from normal banking channel as in case of provisions of Income Tax Act, 1961 wherein for taking benefits of section 80G , the assessee has to produce the proper documentation for the same. It was submitted that in the same manner for the real time Export Obligation the person taking benefit has to produce that normal banking channel payments details only and there is no restriction or retrospective application of the said amendment as it would be applicable to exports made after 05.12.2017 and it cannot be corelated to the EPCG Authorisation.

5.7) It was submitted that it was a policy decision to promote and develop genuine export transactions and to curb fake and fictitious transactions in name of Export Obligations. It was submitted that at times, the license holder to third party in their harmonious attempt to show fake Export Obligations only show paper transactions and to put a check on it only condition was added to show real normal banking channel payments only and there is no restrictions or amendment to any provision of the Act or procedure.

5.8) Reliance was placed on the decision in case of Union of India and Ors. V. Dinesh Engineering Corporation and Anr. Reported in (2001) 8 SCC 491, wherein the Hon’ble Apex Court while exercising power of judicial review held as under :-

"There is no doubt that this Court has held in more than one case that where the decision of the authority is in regard to a policy matter, this Court will not ordinarily interfere since these policy matters are taken based on expert knowledge of the persons concerned and courts are normally not equipped to question the correctness of a policy decision. But then this does not mean that the courts have to abdicate their right to scrutinize whether the policy in question is formulated keeping in mind all the relevant facts and the said policy can be held to be beyond the pale of discrimination or unreasonableness, bearing in mind the material on record."

5.9) Reliance was also placed on decision in case of Arun Kumar Agrawal v. Union of India reported in (2013) 7 SCC 1], wherein it is held as under:

"41.... This Court sitting in the jurisdiction cannot sit in judgment over the commercial or business decision taken by parties to the agreement, after evaluating and assessing its monetary and financial implications, unless the decision is in clear violation of any statutory provisions or perverse or taken for extraneous considerations or improper motives. States and its instrumentalities can enter into various contracts which may involve complex economic factors. State or the State undertaking being a party to a contract, have to make various decisions which they deem just and proper. There is always an element of risk in such decisions, ultimately it may turn out to be a correct decision or a wrong one. But if the decision is taken bona fide and in public interest, the mere fact that decision has ultimately proved to be wrong, that itself is not a ground to hold that the decision was mala fide or taken with ulterior motives."

5.10) Reliance was also placed on the decision in case of Villianur Iyarkkai Padukappu Maiyam v. Union of India reported in (2009) 7 SCC 561], wherein it is held as under:

"169. It is neither within the domain of the courts nor the scope of judicial review to embark upon an enquiry as to whether a particular public policy is wise or whether better public policy can be evolved. Nor are the courts inclined to strike down a policy at the behest of a petitioner merely because it has been urged that a different policy would have been fairer or wiser or more scientific or more logical, Wisdom and advisability of economic policy are ordinarily not amenable to judicial review. In matters relating to economic issues the Government has, while taking a decision, right to "trial and error" as long as both trial and error are bona fide and within the limits of the authority. For testing the correctness of a policy, the appropriate forum is Parliament and not the courts."

5.11) It was submitted that the petitioners or the party who may not adhere to the benefits of the scheme only has to comply the conditions and the benefits may not be claimed as matter of right and there is no promissory estoppel or legitimate expectation of the petitioners. In support of such contention reliance was placed on the decision in case of Union of India v. Hindustan Development Corporation reported in 1993 SCR (3) 128 wherein the doctrine of legitimate expectation was explained as under:

".... For legal purposes, the expectation cannot be the same as anticipation. It is different from a wish, a desire or a hope nor can it amount to a claim or demand on the ground of a right. However earnest and sincere a wish a desire or a hope may be and however confidently one may look to them to be fulfilled, they by themselves cannot amount to an assertable expectation and a mere disappointment does not attract legal consequences. A pious hope even leading to a moral obligation cannot amount to a legitimate expectation. The legitimacy of an expectation can be inferred only if it is founded on the sanction of law or custom or an established procedure followed in regular and natural sequence. Again it is distinguishable from a genuine expectation. Such expectation should be justifiably legitimate and protectable. Every such legitimate expectation does not by itself fructify into a right and therefore it does not amount to a right in the conventional sense."

5.12) Relying upon the decision in case of Food Corporation of India v. Kamdhenu Cattle Feed Industries (Judgment dated 3.11.1992 in Civil Appeal No. 4731 of 1992.), it was submitted that this Court considered whether by submitting a tender in response to the notice issued by the Food Corporation of India for the sale of stocks of damaged food grains, the respondent had acquired a right to have its tender accepted and the appellant was not entitled to reject the same. It was submitted that the Hon’ble Apex Court while approving the view expressed by the High Court that rejection of the highest tender of the writ petitioner-respondent was legally correct, observed as under:

"The mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirement of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness. a necessary concomitant of the rule of law. Every legitimate expectation is a relevant factor requiring due consideration in a fair decision-making process. Whether the expectation of the claimant is reasonable or legitimate in the context is a question of fact in each case. Whenever the question arises, it is to be determined not according to the claimant's perception but in larger public interest wherein other more important considerations may outweigh what would otherwise have been the legitimate expectation of the claimant. A bona fide decision of the public authority reached in this manner would satisfy the requirement of non-arbitrariness and withstand judicial scrutiny. The doctrine of legitimate expectation gets assimilated in the rule of law and operates in our legal system in this manner and to this extent."

6. Having heard the learned advocates for the parties and having considered the provisions of FTDR ACT and Foreign Trade Policy 2015-20, a short question that arises for consideration is whether the Policy Circular Notice No. 22/2015-20 dated 29.03.2019 issued by the respondent No. 3 clarifying that all the shipments made from 05.12.2017 to be counted towards export obligation only for actual payment realised through the normal banking channel from the third party exporter’s account to the authorisation holder's account is valid or not because the said policy circular does not differentiate between the EPCG Authorisation issued prior to 5.12.2017 and after 5.12.2017 whereby paragraph no. 5.10(c) of the revised Handbook of Procedures 2015-20 which came into effect from 5.12.2017 came to be applicable even to the EPCG Authorisation issued prior to 5.12.2017. In other words whether the Policy Circular Notice No. 22/2015-20 dated 29.03.2019 issued by the respondent No. 3 is applicable to the EPCG Authorisation issued prior to 5.12.2017 or not is an issue to be decided in this petition.

7. Paragraph no. 2.42 of the FTP 2015-20 provides for “Third Party Exports” as defined in Chapter 9 and paragraph 9.60 defines “Third Party Exporters” which means exports made by an exporter or manufacturer on behalf of another exporter. Conditions for fulfillment of Export Obligation are provided in paragraph no. 5.10 of the Handbook of Procedures 2015-20 as notified by Public Notice No. 01/2015-2020 dated 01 April 2015 and clause no. (c) of paragraph 5.10 provides for export through a third party by an Authorisation holder and all the documents should be in the name of third party exporter.

8. It appears that on the introduction of Goods and Service Tax Act from 01.07.2017, FTP 2015-20 was revised by Notification No. 41/2015-2020 dated 05.12.2017 and the revised edition of Handbook of Procedures was also notified by the Public Notice No. 43/2015-2020 dated 05 December 2017, so as to align FTP-2015-20 with GST Act and there was a major amendment made in condition for fulfillment of export obligation provided under paragraph no. 5.10(c) of the revised Handbook of Procedures 2015-20 whereby was further amended that “Proceeds realized through normal banking channel from third party exporter's account to the authorization holder's account on account of such exports only shall be counted towards fulfillment of export obligation.”

9. Therefore, in view of such amendment in paragraph no. 5.10(c) of Handbook of Procedures 2015-20 with effect from 5.12.2017, the full realized value of the Shipping Bill was not to be taken into consideration for fulfillment of export obligation, but, only the proceeds realized through normal banking channel from third party exporter's account to the authorization holder's account to be considered whereas prior to 5.12.2017, full realised value of the shipping was to be taken into consideration for the fulfillment of the export obligation without there being any actual payment received by the authorised holders from third party exporters through normal banking channel.

10. Therefore, the effect of such amendment in paragraph no. 5.10(c) of Handbook of Procedures 2015-20 which came into effect from 05.12.2017 ought to have been applied only to the EPCG Authorisation issued under the EPCG Scheme on or after 05.12.2017. However, by Policy Circular Notice No. 22/2015-20 dated 29.03.2019, it was clarified that amendment to paragraph no. 5.10(c) of HBP 2015-20 shall apply to third-party exports made on or after 05.12.2017 and third party exports which have been made prior to 5.12.2017 will be governed by the provisions of relevant policy/procedure and accordingly, in case of third party exports, an authorisation holder can count till 4.12.2017 the full realised value of shipping bill towards fulfillment of export obligation subject to counting of export only once towards EPCG obligation and maintenance of average export obligation. It was clarified that all the expot shipments from 5.12.2017 onwards would be counted towards export obligation only for actual payment realised through normal banking channel from third party exporters Account to the authorisation holder’s Account. Clarification issued by the Joint Director General of Foreign Trade does not recognise the date of issuance of the EPCG Authorisation under EPCG scheme. It has only clarified about the procedure of claiming the benefits under paragraph no. 5.10(c) of HBP-201520. Therefore, even if the EPCG authorisation is issued for third party exports prior to 5.12.2017, the Authorisation holder would not be able to take benefit of the EPCG scheme if actual payment is not realised through normal banking channel from third party exporter’s account to Authorisation holder’s account.

11. Prior to the amendment on 5.12.2017 to paragraph no. 5.10(c) of the HBP 2015-20, the condition prescribed in the EPCG Authorisation, which is taken from the specimen of conditions produced by the petitioners at page no. 29 of the memo of the petition is as under :

“11(a) In the event of third party exports, name of the third party exporter, name of EPCG Authorization holder and supporting manufacturer, if any, number and date of EPCG Authorization shall also be indicated in the Shipping Bills. BRC, GR declaration, export order and invoice shall be in the name of third party exporter. The goods exported through third party shall be manufactured by the EPCG Authorisation holder or the supporting manufacturer where the capital goods imported under the authorisation have been installed [Para 5.10(c) of HBP 2015-2020)]. In such cases, the authorisation holder shall submit the additional documents prescribed in Para 5.10(d) of Handbook of Procedures, 20152020 at the time of final redemption.

12. There was no stipulation in the aforesaid condition with regard to actual payment realised through normal banking channel from third party exporter’s account to Authorisation holder’s account as such condition was not prescribed prior to 05.12.2017. Such condition would not be there in all the EPCG Authorisation which were issued prior to 5.12.2017.

13. In such circumstances, question arises as to whether the Policy Circular Notice No. 22/2015-20 dated 29.03.2019 can be said to implement the amendment in paragraph no. 5.10(c) of HBP 2015-20 (mid term review) to the EPCG Authorisation issued prior to the said date on the ground that it was a policy decision and the EPCG Authorisation issued under the EPCG scheme is in nature of exemption for concession under FTP to importers of capital goods and as per section 5 of the FTDR Act, respondent no. 1 has ample powers to amend HBP in public interest and such statutory powers to amend HBP for furthering the purpose for which it was implemented cannot be frustrated on the plea that the petitioners had a legitimate expectation.

14. However, in the facts of the case, such contentions of the respondent cannot be accepted in view of settled legal position as under:

1) Alstom India Ltd. v. Union of India reported in 2014(301) E.L.T. 446 (Guj), wherein this Court held as under:

“30. We find that the power granted to the Respondent No. 2 under Para 2.4 of the FTP is to lay down the procedure to be followed by an exporter or by any licensing/regional authority or by any other authority for the purposes of implementing provisions of FTDR Act, Rules and the orders made there under and FTP and, therefore, those by necessary implication excludes the “Rule making power” conferred under Section 19 of the FTDR Act inasmuch as the powers conferred under Section 19 cannot be re-delegated to the Respondent no. 2 as expressly prohibited under Section 6(3) of the Act.

31. On going through the provisions of the FTDR Act, we find that those do not grant power to the Respondent No. 2 or its subordinates to redetermine or re-verify the deemed export benefits if such benefits have been approved or granted as per the provisions of the FTDR Act except by way of review as provided in Section 16. In the absence of any power under FTDR Act, the Respondent No. 2 or its subordinates cannot assume quasi-judicial power for instance, the power to redetermine or re-verify under the administrative guidelines i.e. Para 7 of the ANF-8 Form. Therefore, by virtue of Para 7 of the ANF-8, the Respondent No. 2 is deriving the quasijudicial power which is beyond the provisions of FTDR Act. We have already pointed out that according to Section 6 of the FTDR Act, the Respondent No. 2 or the officer subordinate to him cannot usurp the power under Sections 3, 5, 15, 16 and 19 of the FTDR Act. According to Section 3, it is for the Central Government which may, by Order published in the Official Gazette, make provision for the development and regulation of foreign trade by facilitating imports and increasing exports. The Central Government may also, by Order published in the Official Gazette, make provision for prohibiting, restricting or otherwise regulating, in all cases or in specified classes of cases and subject to such exceptions, if any, as may be made by or under the Order, the import or export of goods or services or technology. According to subsection (3) of section 3 all goods to which any Order under subsection (2) of the said section applies should be deemed to be goods the import or export of which has been prohibited under section 11 of the Customs Act, 1962 and all the provisions of that Act shall have effect accordingly. According to section 5, it is for the Central Government which may, from time to time, formulate and announce, by notification in the Official Gazette, the foreign trade policy and may also, in like manner, amend that policy. The proviso to the said section provides that the Central Government may direct that, in respect of the Special Economic Zones, the foreign trade policy shall apply to the goods, services and technology with such exceptions, modifications and adaptations, as may be specified by it by notification in the Official Gazette.

38.1 In the case of KUNJ BEHARI LAL BUTAIL & ORS. VS. STATE OF H.P. & ORS. reported in AIR 2000 SC 1069, a three Judge Bench of the Supreme Court repeated the well settled proposition of law that a delegated power to legislate by making rules for carrying out the purpose of the Act is a general delegation without laying down any guidelines and in such circumstances, such power cannot be exercised so as to bring into existence substantive rights or obligations or disabilities not contemplated by the provision of the statute itself. By relying upon the above decision, Mr Ghosh, in our opinion, rightly contended that the HOP cannot create any substantive right in favour of the Respondent no. 2 by taking aid of delegated power and, therefore, we should declare the provisions mentioned in this application as ultra vires as it is for the Central Government to make substantive right by virtue of the delegation provided in the Act itself but the DGFT has not been given any power to legislate.

38.2 In the case of UNION OF INDIA VS. INTERCONTINENTAL (INDIA) reported in 2008 (226) ELT 16 (SC) a Bench of the Supreme Court held in the context of customs exemption notification that the Revenue could not, by issuing circular subsequent to the notification, add a new condition to the notification thereby either restricting the scope of exemption notification or whittle it down. By relying upon the aforesaid decision, Mr Ghosh rightly contended before us that by taking aid of HOP issued by the DGFT which has no statutory value, a concluded decision taken by the respondent-authority cannot be altered merely on the basis of a pre-consent taken by virtue of paragraph 7 of the declaration attached to ANF-8 form read with the provisions of HOP. We find substance in the above contention in view of the fact that HOP has no force of statute and, thus, it cannot create any additional right in favour of the respondent no. 2, apart from the right created under the Act itself.

38.3 In the case of STATE OF KERALA AND OTHERS VS. M/S TRAVANCORE CHEMICALS & MANUFACTURING CO. & ANR. reported in AIR 1999 SC 230, a question arose whether the provision contained in Section 59A of Kerala General Sales Tax Act,. 1963 was ultra vires the provisions of Article 14 of the Constitution of India. According to the provisions contained in Section 59A, if any question arises as to the right of tax leviable under the said Act on the sale or purchase of any goods, such question should be referred to the Government for decision and the decision of the Government thereon shall, notwithstanding any other provision of the said Act, be final. In the above context, the Supreme Court made the following observations:-

“13. Plain reading of Section 59A shows that if any question relating to the rate of tax leviable under the Act on any goods is referred to the Govt. then its decision thereon, notwithstanding any other provision in this Act is final. This section does not indicate as to who can make a reference to the Govt. There is no obligation on the Government to hear any dealer before it decides as to the rate of tax leviable on the sales or purchase of any type of goods. In fact, as we have noticed earlier, by an omnibus order dated 23rd April, 1984 the Govt. decided rates of tax payable in respect of various items without any opportunity of being heard having been granted to any of the dealers. Lastly Section 59A clearly states that the decision so given by the Govt. shall be final and would have an over-riding effect.

14. There is no warrant in our opinion in trying to read down the provisions of Section 59A. The works (sic) of the said provision are clear and unambiguous. The said section gives absolute power to the Govt. to decide any question regarding the rate of tax leviable on the sale or purchase of goods any manner it deems proper and finality is given to such a decision.

15. Section 59A enables the Govt. to pass an administrative order which has the effect of negating the statutory provisions of appeal, revision etc. contained in Chapter VII of the Act which would have enabled the appellate or reversion authority to decide upon questions in relation to which an order Under Section 59A is passed. Quasi-judicial or judicial determination stands replaced by the power to take an administrative decision. There is nothing in Section 59A which debars the Government from exercising the power even after a dealer has succeeded on a question relating to the rate of tax before an appellate authority. The power Under Section 59A is so wide and unbridled that it can be exercised at any time and the decision so rendered shall be final. It may well be that the effect of this would be that such a decision may even attempt to over-ride the appellate or the revisional power exercised by the High Court Under Section 40 of the Act as the case may be. The section enables passing of an executive order which has the effect of subverting the scheme of a quasi-judicial and judicial resolution of the lis between the State and the dealer.”

38.4 The above decision, in our opinion, fully supports the case of the petitioner that by virtue of administrative decision, no provision can be made by which gives rise to a substantive right created in favour of either of the parties, which is not there in the statute itself.”

2) In case of Asahi Songwon Colors Ltd. v. Union of India reported in 2017(356) E.L.T. 532(Guj), wherein this Court held as under:

“21. Even otherwise, the Hand Book of Procedures and in particular Appendix-14II contained therein nowhere aims to lay down any policy but prescribes the procedure to be followed for reimbursement of CST. It is undoubtedly true that para. 2 of this Appendix restricts the CST reimbursement on purchases made by an EOU from a DTA unit. However, this restriction in our opinion would run counter to the terms of FTP itself and ultra vires the powers of the Director General of Foreign Trade. The title of the Appendix itself provides that it is a procedure to be followed for reimbursement of Central Sales Tax. Para.1 further clarifies that the procedure given in the said annexure shall be applicable for reimbursement of CST. There is little doubt therefore, that Appendix 14II aimed to lay down the procedure for claiming the benefit. In any case, such procedure could not have restricted the benefit by excluding the purchases from certain source which exclusion did not flow from the Foreign Trade policy itself.

22. Perhaps a contention could have been raised by the respondents that the Foreign Trade Policy itself envisaged such a restriction since only when the goods are manufactured in a DTA area, it may be stated that same are manufactured in India and by a deeming fiction any manufacturing activity taking place in an EOU should be excluded from such expression. The respondents would draw our attention to subsection(1) of section 3 of the Central Excise Act, 1944, which besides others, envisages levy of excise duty on manufacture by a hundred per cent export unit undertaking which goods are brought to any other place in India. In other words, on the goods manufactured in an EOU, excise duty would be leviable, only when such goods are brought to any other place in India. We would have certainly considered this angle further, but for the fact that in the later year, the Government of India itself has recognised the benefit of CST reimbursement on the purchases made by the EOU from another EOU. It was for this purpose that we had referred to and noted relevant portion of the Foreign Trade Policy 20152020 and the procedure for claiming the CST reimbursement. We may recall that insofar as base policy is concerned for grant of such CST reimbursement, no change has been brought about in the Foreign Trade Policy 20152020 as compared to the Foreign Trade Policy 20042009. Despite this, base policy being the same, the procedure for claiming reimbursement of CST on supplies made to EOU under the current policy now envisages such reimbursement on any sales made to a EOU not only from DTA but also from EOU, SEZ, etc.

23. Once again the contention of the Union of India was that the policy itself does not envisage grant of such reimbursement on procurement from an EOU, the question would immediately arise is whether such benefits could have been recognized through a procedure framed for claiming such a benefit? This further development would effectively prevent the respondents from contending that the original Foreign Trade Policy 2004-2009 did not envisage CST reimbursement by an EOU upon procurement of goods manufactured in another EOU.

24. There is yet another angle why we would not permit the respondents to make recoveries. As noted, the claim pertained to period between 2006 and 2008. They were made at the relevant time and granted by the respondents without any dispute. Such reimbursements are now sought to be recovered for which show cause notice came to be issued on 10.7.2015. It is not the case of the respondents that the petitioner was responsible for any misrepresentation or misstatement of facts which resulted into such erroneous reimbursement being granted and which came to the notice later on. That being the position, it was not possible for the respondents to make recoveries after unduly long period of time which in the present case happens to be more than seven years, that too, without any explanation for such delayed action.”

3) In case of Ashok Kumar Jain v. Union of India reported in 2010(253) E.L.T. 767(Bom), wherein Bombay High Court held as under:

“6. The import and export policy for AM 88-91 is published in two Volumes. Volume 1 contains Import and Export Promotion Policy and Volume 2 contained policy in respect of items under Export licensing. The first volume contains 343 paragraphs divided into 23 chapters and 12 Appendices. Chapter I titled as "Introduction and definitions" inter alia contains definitions of certain words. Paragraph 6(8) defines capital goods to mean any plant, machinery, equipments or accessories required by an investor for the production of goods or for rendering services, including those require for replenishment or extension.

Chapters XI to XXIII of AM 88-91 contain Import Policy for registered exporters. Paragraph 164 of Chapter XV titled as "Import Policy for Registered Exporters" says that the object of the scheme is to provide to the registered exporters, by way of import replenishment, the essential inputs required in the manufacturing of the products exported and also to allow certain flexibilities to enable diversification of export goods. As a measure to promote exports, the registered exporter is granted a licence commonly known as "REP Licence" which enables him to import goods. The value of the REP licence i.e to say the extent to which import is permitted is determined inter alia on the of value and nature of the goods exported by the registered exporter. Paragraph 175 of AM 88-91 provides that Import Replenishment Licence (for short "REP Licence) issued under the policy will carry an in built flexibility except in cases covered by paragraph 182(1). Paragraph 177(1) provides that within the permitted flexibility, the REP licence can be utilised for import of items listed in Appendices 3 Part A, 3 Part-B and 5 Part-A subject to certain conditions. Paragraph 177(2) of AM 88-91 provides that out of the value of flexibility allowed, the REP licence can also be utilised for import of capital goods without the recommendation of the sponsoring authority subject to the conditions mentioned in the said subparagraph. Paragraph 183 provides that REP licences will be issued in the name of registered exporter and will not be subject to "actual user" conditions. A licence holder may transfer the licence to any other person. The licence holder or the transferee may import the goods permitted therein. Transfer of REP licence will not require any endorsement or permission from the licensing authority. Clearance of the goods covered by REP Licence issued under this policy will be allowed by the Customs Authority on production by the transferee of only the documents of transfer of REP licence in his name.

7. As stated earlier, paragraph no. 8 of the AM 198891 defines the expression "capital goods" and reads as follows:

"Capital Goods" means any plant, machinery, equipment or accessories required by an investor for production of goods or for rendering services, including those required for replacement or expansion."

8. Mr. Rana, learned Senior Advocate appearing for the applicant handed over to us the product literature of T.V broadcast and Studio equipment (Modern BETACAM SP 2000 PRO manufactured by Sony) which was imported under the REP licence. It describes the product and purposes for which it is used. The TV Broadcast and Studio Equipment in question is used for the purpose of recording and playing the cinematographic films contents of which are recorded on video audio tapes. Films are recorded on cassettes with the help of the equipment in question. The equipment in question which is used for production of films recorded on cassettes would therefore fall within the definition of capital goods.

9. Paragraph no. 177(2) of AM 1988-91 provides that within the value of flexibility allowed, the REP Licence can be utilised for import of capital goods without the recommendation of the sponsoring authority and without indigenous clearance subject to a condition that the total value of the import shall not exceed Rs. 10 lakhs and the capital goods imported do not fall in Appendix I (Part A) or Appendix 8 or is not an office machine as defined in paragraph 11.8. It is not the case of revenue that the TV broadcast and studio equipment in question falls in Appendix - I (Part A) or Appendix 8 or is an office machine as defined in paragraph 11.8. TV broadcast and Studio equipment in question, being a capital good could therefore be imported as a capital good in view of paragraph no. 177(2) of AM 1988-91.

10. Mr. Jetly, learned counsel for the applicant submitted that the equipment in question would fall under Entry No. 148 of Appendix II (Part B) of AM 1988-91 which covers all electrical equipments, systems, howsoever described (including consumer and professional types) excluding specifically allowed under OGL or specified elsewhere. In our view, the TV broadcast & Studio equipment does not fall under Entry No. 148 as mentioned. Even if it is assumed that it falls under Entry No. 148 of paragraph Appendix II, it is not an equipment import of which is banned. It would not cease to be capital goods the import of which under REP licence was permitted under para 177(2) of AM 1988-91. Consequently, custom authorities erred in refusing to allow the import which ought to have been permitted under the REP licence.”

4) In case of Narendra Udeshi v. Union of India reported in 2003 (156) E.L.T. 819 (Bom.), wherein Bombay High Court held as under:

“14. The Apex Court in the case of University of Kashmir & Ors v. Mohammed Yasin & ors. (AIR 1974 SC 238) has laid down the following proposition of law:-

When a statute creates a body and vests it with authority and circumscribes its powers by specifying limitations. the doctrine of implied engagement de hors the provisions and powers under the Act would be subversive of the statutory scheme regarding appointments of officers and cannot be countenanced by the Court. Power in this case has been vested in the University Council only and the manner of its exercise has been carefully regulated. Therefore, the appointment of the respondent could be made only by the Council and only in the mode prescribed by the statute

Respectfully following the aforesaid ratio of the Apex Court, we hold that the impugned circulars and the public notice amending the Hand Book of Procedures in fact, amount to amend the policy by an authority other than the Central Government which is not permissible in law. Hence the impugned circulars and the public notice issued by the DGFT being without authority of law, are liable to be quashed and set aside.

15. The procedures to be prescribed by an authority in implementing the policy must be in consonance with the policy. If the procedural norms are in conflict with the policy, then the policy will prevail and the procedural norms to the extent they are in conflict with the policy, are liable to be quashed and set aside.”

5) In case of Director General of Foreign Trade v. Kanak Exports reported in 2015(326) E.L.T. 26(SC), wherein the Hon’ble Apex Court held as under:

“101) We may state, at the outset, that the incentive scheme in question, as promulgated by the Government, is in the nature of concession or incentive which is a privilege of the Central Government. It is for the Government to take the decision to grant such a privilege or not. It is also trite law that such exemptions, concessions or incentives can be withdrawn any time. All these are matters which are in the domain of policy decisions of the Government. When there is withdrawal of such incentive and it is also shown that the same was done in public interest, the Court would not tinker with these policy decisions. This is so laid down by catena of judgments of this Court and is now treated as established and well grounded principle of law. In such circumstances, even the Doctrine of Promissory Estoppel cannot be ignored.

102) We may suitably refer to the judgment of this Court in Kasinka Trading v. Union of India(1995) 1 SCC 274. In that case, Government of India had issued Notification under Section 25(1) of the Customs Act, 1962 in 'public interest' granting exemption from whole of the customs duty on import of PVC resin. This Notification was to remain in force till March 31, 1981. However, even before the said date, by another Notification dated October 16, 1980, the full exemption from custom duty was withdrawn and it was reduced to the exemption from custom duty as is in excess of 40% ad valorem. The importer had contended that relying on the exemption notification dated March 15, 1979, it had placed orders for the import of PVC resins on the understanding that the commodity was totally exempt from customs duty, the Government must be held bound by the representations contained in the notification dated March 15,1979 and the Government was estopped on the basis of promissory estoppel to go back on its promise. The Government justified the withdrawal of exemption on the ground that the Government had issued notification dated March 15, 1979 with a view to equalizing sale prices of the indigenous and the imported material and to make the commodity available to the consumer at a uniform price, keeping in view the trends in the supply of the material. Subsequently, it was realized that the international prices of the product were falling and consequently the import prices had become lower than the ex-factory prices of the indigenous material. Hence, it was decided in “public interest” to withdraw the exemption notification.

This Court held that, “the reasons given by the Union of India justifying withdrawal of the exemption notification, in our opinion, are not irrelevant to the exercise of the power in public interest nor are the same shown to be insufficient to support the exercise of that power”. The Court also observed that, the power to grant exemption from payment of duty flows from the provisions of Section 25(1) of the Customs Act. The power to exempt includes the power to modify or withdraw the same. Such an exemption by its very nature is susceptible of being revoked or modified or subjected to other conditions. The supersession or revocation of an exemption notification in the public interest is an exercise of the statutory power of the State under the law itself as is obvious not merely from the language of Section 25 of the act, but also from the General Clauses Act under which the authority which has the power to issue a notification has the undoubted power to rescind or modify the notification in the like manner. The Court also examined the case of the appellant-petitioners that relying upon the notification dated March 15, 1979, they had acted and the Government could not be permitted to go back on its assurance otherwise they would be put to huge loss. The Court dealt with this contention in the following words:

“The Courts have to balance equities between the parties and indeed the Courts would bind the Government by its promise to prevent manifest injustice or fraud”.

The Court also quoted with approval the following observations from Malhotra & Sons v. Union of India AIR 1976 J&K 41:

“The Courts will only bind the Government by its promises to prevent manifest injustice or fraud and will not make the Government a slave of its policy for all times to come when the Government acts in its Governmental, public or sovereign capacity.”

103) The above decision was followed by this Court in Shrijee Sales Corporation v. Union of India(1999)3 SCC 398 where also the same notifications were considered.

In that case also, the appellants-petitioners had alleged that they would not have imported the PVC resin without the exemption as that would have been unviable and uneconomical and further that many persons took full advantage of the exemption. The Court held that the facts of the economic situation explained in the judgment rendered in Kasinka Trading's case were not contravened nor was it alleged that public interest did not call for supersession of the exemption notification.

The Court also examined the question whether the fact that the notification dated 15.03.1979 mentioned the period during which it was to remain in force would make any difference to the situation. The Court then held that 'once public interest is accepted as the superior equity which can override individual equity, the principles should be applicable even in cases where a period has been indicated'.

104) Therefore, it cannot be denied that the Government has a right to amend, modify or even rescind a particular Scheme. It is well settled that in complex economic matters every decision is necessarily empiric and it is based on experimentation or what one may call trial and error method and therefore its validity cannot be tested on any rigid prior considerations or on the application of any straight-jacket formula. In Balco Employees Union (regd.) v. Union of India and Ors. 9, the Supreme Court held that Laws, including executive action relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc., that the legislature should be allowed some play in the joints because it has to deal with complex problems which do not admit of solution through any doctrine or straightjacket formula and this is particularly true in case of legislation dealing with economic matters, where having regard to the nature of the problems greater latitude require to be allowed to the legislature. The question, however, is as to whether it can be done retrospectively, thereby taking away some right that had accrued in favour of another person?

108) We may, in the first instance, make this legal position clear that a delegated or subordinate legislation can only be prospective and not retrospective, unless rule making authority has been vested with power under a statute to make rules with retrospective effect. In the present case, Section 5 of the Act does not give any such power specifically to the Central Government to make rules retrospective. No doubt, this Section confer powers upon the Central Government to 'amend' the policy which has been framed under the aforesaid provisions. However, that by itself would not mean that such a provision empowers the Government to do so retrospective. This legal position is rightly discussed by the Bombay High Court in the impugned judgment in the following words:

“We are unable to accept the submissions of learned Additional Solicitor General. The word “amend” does not give power to make amendment retrospectively if it is used in relation to the power to make a piece of delegated legislation. The connotation of the word “amend” when it is used for the exercise of power by a legislature cannot be pressed to construe the word “amend” in relation to the power to make delegated legislation. In this regard the following observations of the Supreme Court in Accountant General and another v. Doraiswamy (1981) 4 SCC 93 are pertinent:

“The next question is whether clause (5) of Article 148 permits the enactment of rules having retrospective operation. It is settled law that unless a statute conferring the power to make rules provides for the making of rules with retrospective operation, the rules made pursuant to that power can have prospective operation only. An exception, however, is the proviso to Article 309. In B.S. Vadera v. Union of India AIR 1969 SC 118, this Court held that the rules framed under the proviso to Article 309 of the Constitution could have retrospective operation.

The conclusion followed from the circumstance that the power conferred under the proviso to Article 309 was intended to fill a hiatus, that is to say, until Parliament or a State Legislature enacted a law on the subject-matter of Article 309. The rules framed under the proviso to Article 309 were transient in character and were to do duty only until legislation was enacted. As interim substitutes for such legislation it was clearly intended that the rules should have the same range of operation as an Act of Parliament or of the State Legislature. The intent was reinforced by the declaration in the proviso to Article 309 that “any rules so made shall have effect subject to the provisions of any such Act”. Those features are absent in clause (5) of Article 148. There is nothing in the language of that clause to indicate that the rules framed therein were intended to serve until parliamentary legislation was enacted. All that the clause says is that the rules framed would be subject to the provisions of the Constitution and of any law made by Parliament. We are satisfied that clause (5) of Article 148 confers power on the President to frame rules operating prospectively only. Clearly then, the Rules of 1974 cannot have retrospective operation, and therefore subrule (2) of Rule 1, which declares that they will be deemed to have come into force on July 27, 1956 must be held ultra vires.” The reliance placed on the power to regulate under Section 3 of the Act is equally misconceived. Section 5 gives express power to formulate the policy and to amend it. This is specific power. The power to regulate therefore cannot be read as a power to amend when a specific power to amend is given. If the power to regulate does not include the power to amend retrospectively such a power cannot be read into Section 3 of the Act.

Section 21 of the General Clauses Act on which reliance is placed by learned Additional Solicitor General is also of no assistance to sustain the retrospective operation of the notification. Section 21 of the General Clauses Act embodies a rule of construction, nature and extent of application of which must inevitably be governed by the relevant provisions of the statute which confers power to issue the notification. The said power must be exercised within the limits prescribed by the provisions conferring the said power. (See Gopichand v. Delhi Administration, AIR 1959 SC 609, Lachmi Narayan and Ors. v. Union of India and Ors. (1976) 2 SCC 953 and State of Kerala and Ors. v. K.G. Madhavan Pillai and Ors. (1988) 4 SCC 669.

The ratio in H.C. Suman's case also cannot be applied because in that case it was found that Section 88 of the Delhi Cooperative Societies Act, 1972 contained the power to exempt and if the provisions of Section 12 of the said Act were to be exempted the provisions which provided that byelaws are effective from the date of registration. The notification issued under Section 88 would exempt it and Section 88 would contain the power to exempt retrospectively. Similarly, Section 14 of the General Clauses Act has no application as it merely provides that where any power is conferred on the Government, then that power can be exercised from time to time as occasion requires.

Under that Scheme the status holder is eligible for benefits upon achieving the incremental growth of 25% of the FOB value of exports in the current year over the previous year. It therefore follows that no sooner the status holder achieves 25% incremental growth, the status holder would be entitled to the benefits under the Scheme. Immediately upon attaining the prescribed incremental growth, the status holder becomes eligible to certificate for duty free import and thereby a right vests in the exporter to receive the same.”

109) So far so good. The effect of the aforesaid discussion would be that if the Status Holders had achieved 25% incremental growth in exports, they acquired the right to receive the benefit under the Scheme, which could not be taken away. The pertinent and crucial question is as to whether these exporters/writ petitioners acquired any such right? Let us sharpen this question before we answer the same by formulating it in the following words:

Whether, in the cases of these exporters, the exports shown by them can be treated as actual exports entitling them to avail the benefit of the Scheme?

110) This issue would be inter-twined with other related issue, namely, whether the notification has retroactive operation or it is retrospective in nature. Both these aspects are to be dealt with simultaneously in order to provide suitable and right answer to the question posed. The case of the exporters, as noticed above, is that since they had already fulfilled the requirement of 'incremental growth in exports' which they were require to fulfill between April 01, 2003 to March 31, 2004, a vested right accrued in their favour to get the special incentive in terms of the scheme which, of course, was to be availed from April 01, 2004. The case of the Government, on the other hand, is that the benefit was to accrue to these exporters only from April 01, 2004 and before that it was withdrawn and, thus, no vested right accrued in their favour. It was also argued that in the policy, which provides special incentives to status holder, the term “incremental growth in export” was not defined/clarified at the time when the policy was issued. By the impugned notification, the blanks/gaps were filled and the term incremental growth in export was defined and it was clarified as to how the incremental growth in export is to be actually worked out. This was also done before the question of actual working out of the incremental growth in exports arose and hence, no retrospective effect.

128) We have already discussed these aspects in detail. To recapitulate, it is held by us that Section 5 of the Act does not empower the Government to make amendments with retrospective effect, thereby taking away the rights which have already accrued in favour of the exporters under the Scheme. No doubt, the Government has, otherwise, power to amend, modify or withdraw a particular Scheme which gives benefits to a particular category of persons under the said Scheme. At the same time, if some vested right has accrued in favour of the beneficiaries who achieved the target stipulated in the Scheme and thereby became eligible for grant of duty credit entitlement, that cannot be snatched from such persons/exporters by making the amendment retrospectively. In the present case, we find that Section 5 of the Act does not give any specific power to the Central Government to make the Rules with retrospective effect. The Central Government is authorised to make Rules/ Schemes under the said provision as a delegatee, which means that the EXIM Policy/Scheme framed under the said provision is by way of delegated legislation. There has to be specific power to make the amendments with retrospective effect, which are lacking in the instant case. Moreover, even if there is such a power, it cannot take away vested rights which have accrued in favour of particular persons/exporters. We have already enlisted number of judgments of this Court taking such a view. A few such cases laying down the aforesaid principle are:

(i) Regional Transport Officer, Chittoor & Ors. v. Associated Transport Madras (P) Ltd. & Ors.(1980) 4 SCC 597

(ii) Accountant General & Anr. v. S. Doraiswamy & Ors.(1981) 4 SCC 93

(iii) A.A. Calton v. Director of Education & Anr.(1983) 3 SCC 33

(iv) Chairman, Railway Board & Ors. v. C.R. Rangadhamaiah & Ors. (1997) 6 SCC 626.”

15. In view of the above, in terms of paragraph no. 1.03 of the FTP, power of DGFT is restricted only to lay down the procedure which is to be followed by the exporter or the importer. DGFT while exercising such powers, notifies the procedure to be followed by the exporter or the importer but there is no power to amend/update the FTP.

16. By the impugned policy circular, respondent No. 2 has in effect amended the FTP with retrospective effect to the EPCG Authorisation issued prior to 5.12.2017 under the guise of mere procedural changes for third-party exports. By amendment in paragraph no. 5.10(c), respondent No. 2 has taken away the benefit which was available to the petitioners under FTP 2009-14 and original FTP 2015-20 prior to 5.12.2017 inasmuch as prior to revision even in case of third party exports, full realised value of shipping bill was to be taken into consideration for the fulfillment of export obligation which was restricted to actual payment from third party exporter after 5.12.2017. Moreover, by the impugned policy circular dated 29.03.2019, respondent no. 3 has further amended in paragraph no. 5.10(c) of the revised Handbook of Procedure 2015-20 applicable even to EPCG Authorisation issued prior to 5.12.2017 which is contrary to the powers conferred upon the respondent no. 3 because amendment in paragraph no. 5.10(c) of the revised HBP-2015-20 read with policy circular dated 29.03.2019 changes the meaning of export obligation and also the manner in which the export obligation is to be computed and such change to the meaning of export obligation or the manner in which export obligation is to be computed can be done only by way of amendment in FTP. Therefore, we are of the opinion that in facts of the case, under the guise of amendment in HBP with policy circular dated 29.03.2019, respondents nos.2 and 3 have tried to make changes in FTP so far as the application of such amendment in para 5.10 (c) of the HPB to the EPCG Authorisation issued prior to 05.12.2017- the date of amendment which is the exclusive domain of the Central Government.

17. The amendment in para 5.10(c) from 05.12.2017 can be made applicable to the EPCG Authorisation issued from the said date only and the date of issuance EPCG Authorisation under FTP cannot be ignored under guise of policy decision by applying the same to all third-party exports made after 05.12.2017. The respondents have jurisdiction to amend the HBP for availing the benefit under the EPCG Scheme in view of the revised FTP 2015-20 (mid term review) but such amendment cannot affect the conditions stipulated in the EPCG Authoristion already issued for the benefit under the EPCG Scheme framed under the provisions of FTDR Act and FTP 201520. Revised FTP 2015-20 would be applicable only from 05.12.2017 and hence any amendment made in 5.10 (c) of the revised HBP 2015-20 can apply to the EPCG Authorisation issued under the revised FTP 2015-20 only. The respondents were therefore not justified in the issuance of the circular dated 29.03.2019 to apply the amendment in para 5.10(c ) of the revised HBP to all exports made after 05.12.2017 ignoring the date of issuance of the EPCG Authorisation prior to 05.12.2017.

18. The impugned policy circular dated 29.03.2019 is therefore, beyond the jurisdiction of respondent no.3 as respondents nos.2 and 3 have no power to deny the benefit under the EPCG Scheme under the original FTP 2015-20 in respect of the EPCG Authorisation issued prior to 5.12.2017 and such benefit of availing full value of shipping bill under the EPCG Authorisation issued prior to 5.12.2017 could not have been curtailed by respondent nos.2 and 3 by applying revised HBP 2015-20 either under the FTDR Act or FTP. Therefore, the amendment made in paragraph no.5.10(c) of the revised HBP2015-20 read with policy circular dated 29.03.2019 is invalid so far as the same is made applicable to the Authorisation under the EPCG scheme issued prior to 5.12.2017. We therefore, hold that amendment in paragraph no. 5.10(c) in revised HBP-2015-20 read with policy circular dated 29.03.2019 is prospective in nature qua the EPCG Authorisation and would be applicable to the exports made under EPCG Authorisation issued after 5.12.2017 only.

19. The petition, therefore, partly succeeds and is allowed in part. Rule is made absolute to the aforesaid extent. No order as to costs.

(BIREN VAISHNAV, J)

(BHARGAV D. KARIA, J)