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Supreme Court of India
M/S Nola Ram Dulichand Dal Mills … vs Union Of India on 14 February, 2020Author: L. Nageswara Rao
Bench: L. Nageswara Rao, Hemant Gupta
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 10636 OF 2010
M/S. NOLA RAM DULICHAND DAL MILLS &
ANR. …..APPELLANT(S)
VERSUS
UNION OF INDIA & ORS. …..RESPONDENT(S)
WITH
CIVIL APPEAL NO. 7257 OF 2009
CIVIL APPEAL NO. 10637 OF 2010
AND
CIVIL APPEAL NO. 7233 OF 2009
JUDGMENT
HEMANT GUPTA, J.
Civil Appeal No. 10636 of 2010
1. The challenge in the present appeal is to an order passed by the
High Court of Rajasthan whereby the writ petition filed by the
appellant was dismissed. In the writ petition, challenge was to a
Circular dated 21st January, 2009 on the ground that it is contrary
to the Foreign Trade Policy 2004-20091. Such policy is issued under
1 for short, ‘FTP’
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Section 5 of the Foreign Trade (Development and Regulation) Act,
19922. The FTP provides various schemes for providing incentives.
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. In the Scheme notified for the year 2005-06, the
following exports were not to be taken into account for duty credit
entitlement under the Scheme:
“3.8 VISHESH KRISHI UPAJ YOJANA
(SPECIAL AGRICULTURAL PRODUCE SCHEME)
xx xx xx
3.8.2.2. Following exports shall not be taken into
account for duty credit entitlement under the scheme:
(a) Export of imported goods covered under Para 2.35
of the Foreign Trade Policy or exports made through
transshipment.
(b) Deemed exports (even when payments are received
in Free Foreign Exchange and payment is made from
EEFC account).”
3. However, in the Scheme notified for the year 2006-2007 on 7 th
April 2006, clauses 3.8 and 3.8.2.2 were changed. The clauses
read as under:
“3.8 VISHESH KRISHI AND GRAM UDYOG YOJANA
(SPECIAL AGRICULTURE AND VILLAGE INDUSTRY
SCHEME)
xx xx xx
3.8.2.2. Following exports shall not be taken into
account for duty credit entitlement under the scheme:
2 for short, ‘Act’
3 for short, ‘Yojna’
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(a) Export of imported goods covered under Para 2.35
of the Foreign Trade Policy or exports made through
transshipment.
(b) Deemed Exports.
(c) Exports made by SEZs units and EOUs units.
xx xx xx
3.8.5. Government reserves the right in public interest,
to specify from time to time the export products, which
shall not be eligible for calculation of entitlement.”
4. The Circular dated 21st January, 2009 was issued so as to clarify the
scheme notified for the year 2006-07. The relevant part of the
circular reads as under:
“
xx xx xx
2. However, in FTP RE-2006 (issued on 7.4.2006),
exports made by EOUs were made ineligible for benefits
under VKGUY scheme [vide introducing Para 3.8.2.2
(c)]. In further, in FTP RE-2006, two new schemes,
namely, Focus Market Scheme (FMS) and Focus Product
Scheme (FPS) were introduced. Similar provisions were
made under para 3.92.2(b) for FMS, and under Para
3.10.2.2 (b) for FPS. Accordingly, for the period from
1.4.2006 to 31.3.2007, exports made by EOUs (or
through DTA units) are not eligible for benefits under
VKGUY, FMS and FPS.”
5. The appellant is said to be engaged in manufacturing/trading and
selling of Guar Gum, Guar Chri and Korma, Refined Splits and Guar
Gum Powder in the domestic as well as export market. The
appellant asserts that it is purchasing Guar Gum Powder from M/s.
Neelkanth Polymers, which is 100% export-oriented unit. The
reason to purchase from the said supplier are multiple and
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commercial in nature. In the writ petition, it is averred as under:
“12. That the petitioner firm used to purchase the Guar
Gum Powder from M/s. Neelkanth Polymers supporting
manufacturer under cover of invoice which was further
exported in capacity of merchant 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.“
6. The appellant-writ petitioner has sought quashing of the Circular,
inter alia, on the ground that it is contrary to the Policy notified on
7th April, 2006. Learned counsel for the appellant contended that
the Scheme has been notified under the Act, therefore, such
Scheme has a statutory force which cannot be amended or
modified by the Executive issuing the impugned Circular. The said
Circular issued by the Government being contrary to the Scheme is
not permissible. The learned counsel referred to Sections 3 and 5
of the Act, which read as under:-
“3. Powers to make provisions relating to
imports and exports.-(1) The Central Government
may, by Order published in the Official Gazette, make
provision for the development and regulation of foreign
trade by facilitating imports and increasing exports.
(2) The Central Government may also, by Order
published in the Official Gazette, make provision for
prohibiting, restricting or other wise 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:
Provided that the provisions of this sub-section shall
be applicable, 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 services or specified
technologies.
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(3) All goods to which any Order under sub-section (2)
applies shall be deemed to be goods the import or
export of which has been prohibited under section 11 of
the Customs Act, 1962 (52 of 1962) 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 be necessary for import or export of any
goods, nor any goods shall be prohibited for import or
export except, as may be required under this Act, or
rules or orders made thereunder.
xx xx xx
5. Foreign Trade Policy—The Central Government
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:
Provided 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.”
7. Learned counsel for the appellant argued that the Scheme
excludes the benefit of exports by units in Domestic Tariff Area 4
pertaining to Focus Market Scheme5 notified along with Yojna.
Therefore, there was specific exclusion of exports by DTA in FMS,
whereas, there is no such exclusion in the Yojna. Therefore, the
Revenue has drawn distinction between the two Schemes notified
on the same day, which shows that the Revenue has treated two
Schemes differently, therefore, exports other than by units in SEZ
and EUO units are entitled to benefit of exports.
4 for short, ‘DTA’
5 for short, ‘FMS’
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8. Learned counsel for the appellants also argued that in Para 3.8.2.2,
the benefit of exports is not available if the exports are made by
EOU or units situated in SEZ Units. It is contended that only
exports by these units are not entitled to incentive whereas the
appellants are not part 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 the
respondents refers to a judgment of this Court reported as
Director General of Foreign Trade & Anr. v. Kanak Exports &
Anr.6 wherein in 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 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 in a 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.
xx xx xx
6 (2016) 2 SCC 226
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109. 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 straitjacket
formula. In Balco Employees’ Union v. Union of
India [Balco Employees’ Union v. Union of India, (2002)
2 SCC 333] , 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 straitjacket 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?”
10. It is argued that 100% export-oriented units have been specifically
excluded from benefit of the Scheme when it was notified on 7 th
April, 2006. The appellant is purchaser from the said 100% export-
oriented unit and claiming benefit of the Scheme in respect of
exports made by it. It is contended that since the 100% export-
oriented units are not entitled to the benefit under the Scheme,
therefore, the purchasers from such export-oriented units will also
not be entitled to the benefit of the Scheme. It is contended that
what cannot be done directly cannot be done indirectly. Since
there was ambiguity in the Scheme, the same was clarified.
11. We have heard learned counsel for the parties and find no merit in
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the present appeal.
12. Section 5 of the Act empowers the Central Government to
formulate and announce by notification in the official gazette the
Foreign Trade Policy and may also, in the like manner, amend that
policy from time to time. The Circular dated 21 st January, 2009
does not modify or amend the Scheme notified for the year 2006-
07. It only clarifies that 100% export-oriented units which are not
entitled to seek exemption cannot avail benefit indirectly through
the purchasers from them. It is modification or amendment of the
Scheme which is required to be carried out by publication in the
official gazette but not the clarifications to remove ambiguity 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 the
export products which shall not be eligible for calculation of
entitlement. Since the Government has reserved right in public
interest in terms of the Scheme notified under the Act, therefore,
the Circular dated 21st January, 2009 cannot be said to be illegal in
any manner.
13. We do not find any merit in the argument that exports made
through an Export Oriented Unit would be entitled to incentives.
The purpose of the Scheme is that 100% Export Oriented Units or
units situated in Special Economic Zone are not to be granted
incentives. The purpose and object of the Scheme notified cannot
be defeated by granting incentives to units which exports though
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100% Export Oriented Units.
14. We do not find any merit in the argument that exports made
through an Export Oriented Unit would be entitled to incentives.
The purpose of the Scheme is that 100% Export Oriented Units or
units situated in Special Economic Zone are not to be granted
incentives. The purpose and object of the Scheme notified cannot
be defeated by granting incentives to units which exports through
100% Export Oriented Units.
15. We do not find any merit in the argument that the Scheme
excludes the benefit of exports by units in DTA in a Scheme
pertaining to FMS notified along with Yojna in April 2006 for the
reason that FMS has an explicit clause whereas the DTA was not
excluded from claiming exemption under clause 3.8.2.2 related to
Yojna. Since the appellant is a purchaser from 100% export-
oriented unit, therefore, the medium of the appellant cannot be
used to avoid the intended purport of the policy for the year 2006-
07. We find that the export-oriented units cannot use the appellant
for export under the Scheme and to claim benefit of export when it
is not permissible for them directly.
16. Consequently, we do not find any merit in the present appeal. The
same is dismissed.
Civil Appeal No. 10637 of 2010
17. The appellant is 100% export-oriented unit. Such export-oriented
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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 is dismissed.
Civil Appeal Nos. 7233 of 2009 and 7257 of 2009
18. The appellant challenged the change in the Policy “Vishesh Krishi
Upaj Yojna” wherein 100% export units were denied the benefit of
exemption on the ground that the policy binds the respondents for
a period of five years and that such policy is discriminatory as
direct tariff areas were excluded. The High Court held as under:
“After hearing the counsel for the petitioners, we do not
find any illegality in the impugned Notification dated
7.4.2006 (Annexure P-7) as by the said Notification the
Government has taken a policy decision to withdraw the
aforesaid benefit as the Export Oriented Units enjoy
special status for tax exemptions and permission to
source various requirements including the one in
agricultural sector, duty free. They also enjoy income
tax benefits and have been set up primarily for exports,
therefore, they cannot be treated at par with DTA Units
which do not enjoy all these benefits. Therefore, the
benefit under the said Policy has not been extended to
Special Economic Zone Units and Export Oriented
Units.”
19. We do not find any error in the findings recorded. Accordingly, the
appeals are dismissed.
………………………………………J.
(DEEPAK GUPTA)
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………………………………………J.
(HEMANT GUPTA)
NEW DELHI;
FEBRUARY 14, 2020.
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