Supreme Court of India
M/S. NOLA RAM DULICHAND DAL MILLS & ANR.versusUNION OF INDIA & ORS.
- Citation
- 2020 INSC 186
- Decided
- 14 February 2020
- Disposal
- Dismissed
- Bench
- DEEPAK GUPTA
Holding
The 2009 circular is a permissible clarification, not an amendment, and therefore does not violate the FT Act; purchasers from EOUs cannot claim scheme benefits.
Summary
The appellant, M/s Nola Ram Dulichand Dal Mills, challenged a 2009 circular that clarified exports by 100% Export Oriented Units (EOUs) were ineligible for duty credit under the Vishesh Krishi Upaj Yojna scheme for 2006-07. The High Court dismissed the writ, and the Supreme Court examined whether the circular amounted to an amendment of the scheme, which would require gazette notification under the Foreign Trade (Development and Regulation) Act, 1992. The Court held that the circular merely clarified existing provisions and did not modify the scheme, which remains valid. It further ruled that purchasers from EOUs cannot indirectly claim the scheme’s benefits, as the scheme expressly excludes EOUs and SEZ units. Consequently, the appeal was dismissed, affirming the legality of the circular and the government's power to issue such clarifications.
Issues considered
- Whether the circular dated 21 January 2009 constitutes an amendment of the Vishesh Krishi Upaj Yojna scheme requiring gazette publication.
- Whether the circular is contrary to the Foreign Trade Policy 2004-2009 and the Foreign Trade (Development and Regulation) Act, 1992.
- Whether a purchaser from a 100% Export Oriented Unit can claim duty credit entitlement indirectly under the scheme.
- Whether the government has the authority to reserve the right to specify ineligible export products under Clause 3.8.5.
Legislation cited
Subjects
Foreign Trade PolicyExport Oriented UnitsDuty Credit EntitlementScheme clarificationStatutory amendmentExport incentivesLegal interpretation
Judgment
870 [2020]REPORTS
SUPREME COURT 2 S.C.R. 870 [2020] 2 S.C.R.
A M/S. NOLA RAM DULICHAND DAL MILLS & ANR.
v.
UNION OF INDIA & ORS.
(Civil Appeal No. 10636 of 2010)
B FEBRUARY 14, 2020
[DEEPAK GUPTA AND HEMANT GUPTA, JJ.]
Export-Import Policy: Foreign Trade Policy 2004-2009 –
Scheme notified for 2006-2007 provided that exports made by
export-oriented units (EOUs) shall not be taken into account for
C
Duty Credit Entitlement under the scheme – Circular dated
21.01.2009 was issued to clarify that for the period 1.4.2006 to
31.3.2007, exports made by EOUs are not eligible for benefits under
various schemes – Appellant was engaged in the manufacturing/
trading and selling of Guar Gum, Guar Chri and Korma and was
D purchasing Guar Gum Powder from a 100% EOU – Appellant filed
writ petition before High Court challenging the circular on the
ground that it was contrary to the Foreign Trade Policy 2004-2009
– High Court dismissed writ petition – Held: Circular dated
21.01.2009 did not modify or amend the Scheme notified for the
year 2006-07 – It only clarified that 100% EOUs who are not
E
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 – The purpose of the Scheme is that 100% EOU or
F 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
100% Export Oriented Units – 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
G
of entitlement – Therefore, Circular dated 21.01.2009 cannot be
said to be illegal in any manner – Since the appellant is a purchaser
from 100% EOUs, therefore, the medium of the appellant cannot be
used to avoid the intended purport of the policy for the year 2006-
07 – Foreign Trade (Development and Regulation) Act, 1992 – s.5.
H
870
M/S. NOLA RAM DULICHAND DAL MILLS & ANR. v. 871
UNION OF INDIA & ORS.
Dismissing the appeals, the Court A
HELD: 1.1 Section 5 of the Foreign Trade (Development
and Regulation) Act, 1992 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, B
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. 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 C
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. [Para 12][877-E-G]
1.2 There is no merit in the argument that the Scheme D
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- E
oriented unit, therefore, the medium of the appellant cannot be
used to avoid the intended purport of the policy for the year 2006-
07. 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. [Para 15][878-B-C]
F
Director General of Foreign Trade & Anr. v. Kanak
Exports & Anr. (2016) 2 SCC 226 : [2015] 15 SCR
287 – referred to.
Case Law Reference
[2015] 15 SCR 287 referred to Para 9 G
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 10636
of 2010.
H
872 SUPREME COURT REPORTS [2020] 2 S.C.R.
A From the Judgment and Order dated 18.10.2010 of the High Court
of Rajasthan at Jaipur in D.B. Civil Writ Petition No. 13519 of 2009.
With
Civil Appeal Nos. 7257 of 2009, 10637 of 2010 and 7233 of 2009.
B Arijit Prasad, Sr. Adv., Vivek Sharma, Abhishek Anand, Ishaan
Saran, M. P. Devanath, Ms. Rashmi Malhotra, Ms. Gargi Khanna,
Mrs. Anil Katiyar, A. N. Arora, Arvind Kumar Sharma, B. Krishna
Prasad, Lalit Bhasin, Ms. Nina Gupta, Ms. Palak Chadha, Ms. Ruchika
Joshi, Mrs. Bina Gupta, Advs. for the appearing parties.
C The Judgment of the Court was delivered by
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
D
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 Section 5 of the Foreign
Trade (Development and Regulation) Act, 19922. The FTP provides
various schemes for providing incentives.
E 2. The present is a case pertaining to “Vishesh Krishi Upaj Yojna3”
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:
F “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
G 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.
1
for short, ‘FTP’
2
for short, ‘Act’
H 3
for short, ‘Yojna’
M/S. NOLA RAM DULICHAND DAL MILLS & ANR. v. 873
UNION OF INDIA & ORS. [HEMANT GUPTA, J.]
(b) Deemed exports (even when payments are received in Free A
Foreign Exchange and payment is made from EEFC account).”
3. However, in the Scheme notified for the year 2006-2007 on
7th 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 B
(SPECIAL AGRICULTURE AND VILLAGE INDUSTRY
SCHEME)
xx xx xx C
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
D
Foreign Trade Policy or exports made through transshipment.
(b) Deemed Exports.
(c) Exports made by SEZs units and EOUs units.
xx xx xx
E
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 F
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 G
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 H
874 SUPREME COURT REPORTS [2020] 2 S.C.R.
A 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
B 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 commercial in nature. In the writ
petition, it is averred as under:
“12. That the petitioner firm used to purchase the Guar Gum
C 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.”
D 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
E 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
F 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
G 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
H
M/S. NOLA RAM DULICHAND DAL MILLS & ANR. v. 875
UNION OF INDIA & ORS. [HEMANT GUPTA, J.]
under the foreign trade policy or is dealing with specified services A
or specified technologies.
(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. B
(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. C
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: D
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.” E
7. Learned counsel for the appellant argued that the Scheme
excludes the benefit of exports by units in Domestic Tariff Area4 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 F
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.
8. Learned counsel for the appellants also argued that in Para G
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
4
for short, ‘DTA’
5
for short, ‘FMS’ H
876 SUPREME COURT REPORTS [2020] 2 S.C.R.
A 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
B 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
C 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
D 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
E be ignored.
xx xx xx
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
F 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
G 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
6
H (2016) 2 SCC 226
M/S. NOLA RAM DULICHAND DAL MILLS & ANR. v. 877
UNION OF INDIA & ORS. [HEMANT GUPTA, J.]
not admit of solution through any doctrine or straitjacket formula A
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
B
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 7th 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 C
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. D
11. We have heard learned counsel for the parties and find no
merit in 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 E
time to time. The Circular dated 21st 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
F
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 G
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 H
878 SUPREME COURT REPORTS [2020] 2 S.C.R.
A purpose and object of the Scheme notified cannot be defeated by granting
incentives to units which exports though 100% Export Oriented Units.
14. 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
B 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
C
when 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 2010
D
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 is
dismissed.
Civil Appeal Nos. 7233 of 2009 and 7257 of 2009
E
17. 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:
F
“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
G
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,
H
M/S. NOLA RAM DULICHAND DAL MILLS & ANR. v. 879
UNION OF INDIA & ORS. [HEMANT GUPTA, J.]
the benefit under the said Policy has not been extended to Special A
Economic Zone Units and Export Oriented Units.”
18. We do not find any error in the findings recorded. Accordingly,
the appeals are dismissed.
B
Devika Gujral Appeals dismissed.
C
D
E
F
G
H
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "Foreign Trade Policy"Sign in to search