SCA/19753/2006 1/37 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 19753 of 2006 For Approval and Signature: HONOURABLE MR.JUSTICE DN PATEL ===================================================== ==== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ===================================================== WELSPUN INDIA LTD. & 1 - Petitioner(s) Versus UNION OF INDIA & 2 - Respondent(s) ===================================================== Appearance : MR KAMAL TRIVEDI, ADVOCATE GENERAL WITH MR RAKESH GUPTA , V.NANKANI and MR. K.M.THAKKAR FOR M/S TRIVEDI & GUPTA, ADVOCATES for the Petitioners. MR DHAVAL G NANAVATI for Respondent Nos.2 - 3. MR PURVISH J MALKAN for Respondent No.1. ===================================================== CORAM : HONOURABLE MR.JUSTICE DN PATEL Date : 30/11/2006 ORAL JUDGMENT SCA/19753/2006 2/37 JUDGMENT The present petition has been preferred challenging the Notification No.08/2006 dated 12th June,2006 issued by Director General of Foreign Trade and Ex-Officio Additional Secretary to the Government of India (Annexure “A” to the memo of the petition), whereby with retrospective effect, clause 3.7.3 of the Foreign Trade Policy,2004-2009, has been amended, consequently, the percentage of the Duty Credit Entitlement has been reduced. 2. An important issue which has arisen for adjudication of this Court is : Whether the respondents have power to issue Notification amending the Foreign Trade Policy with retrospective effect so that the right, which has already accrued in favour of the petitioner can be taken away? 3. Learned Senior Advocate Mr.Kamal Trivedi for M/s.Trivedi and Gupta Associates for the petitioners mainly submitted that Foreign Trade Policy has been drafted in pursuance of section 5 of the Foreign Trade (Development & SCA/19753/2006 3/37 JUDGMENT Regulation) Act,1992 (hereinafter referred to as “the Act,1992”). As per this Foreign Trade Policy, “Target Plus Scheme” (TPS) has been introduced under clause 3.7 of Foreign Trade Policy with a view to accelerate, growth in exports by rewarding Star Export Houses, who have achieved a quantum growth in exports. 4. It is further contended by the learned counsel for the petitioners that as per the said Target Plus Scheme for the year 2005-2006, (1st April,2005 to 31st March,2006), all the conditions imposed in Target Plus Scheme have been fulfilled by the petitioners and, therefore, they are entitled to get Duty Credit Entitlement at the rate of 10% of the incremental growth in export for the year 2005-2006 which was 34.06%. The total turnover for the year 2004-2005 was Rs.1039.70 Crores. For the year 2005-2006 because of Target Plus Scheme enshrined in Foreign Trade Policy, the petitioners achieved exports to the tune of Rs.1393.84 Crores. Thus, the petitioners achieved quantum growth of exports at a 34.06%, as against the minimum requirement of 20%. Therefore, as per clause 3.7.3. of the Target SCA/19753/2006 4/37 JUDGMENT Plus Scheme in Foreign Trade Policy, 2004-2009, the petitioners are entitled to get 10% Duty Credit Entitlement. 5. Learned counsel for the petitioners further submitted that as per handbook of procedure (Foreign Trade Policy,2004-2009), Part- II of Chapter III provides for Promotional Measures wherein, as per clause 3.2.5, a Duty Credit Entitlement Certificate ought to be issued by the respondent authorities, if the conditions imposed are fulfilled. For this, an application can be preferred on or before 31st December. Thus, after the completion of the year 2004-2005, the petitioners were preparing for preferring an application to get Duty Credit Entitlement Certificate from the respondent authorities, on the basis of the right already accrued in favour of the petitioners. Meanwhile, a Notification dated 12th June,2006 (Annexure “A” to the memo of the petition) has been issued by the respondent authorities, whereby the percentage of Duty Credit Entitlement has been reduced. Instead of 10%, it has been revised as 5%. Learned counsel for the petitioners submitted that the SCA/19753/2006 5/37 JUDGMENT Notification dated 12nd June,2006 has been illegally given retrospective effect i.e. from 1st April,2005. Parent Act namely Foreign Trade (Development and Regulation) Act,1992 does not permit to draft any policy with retrospective effect. Section 5 of the Act of 1992 does not contemplate any policy, which can be effected with retrospective effect and, therefore, the notification dated 12th June,2006 at Annexure “A” to the memo of the petition, which modifies the clause 3.7.3 with retrospective effect deserves to be quashed and set aside. 6. Learned counsel for the petitioners further submitted that once the right is already accrued in favour of the petitioners, it cannot be taken away by the respondents therefore such an amendment can be given prospective effect. Learned counsel for the petitioners has also relied upon several decisions and pointed out that delegated legislation cannot travel beyond the Act, under which, the power is given. Thus, it is submitted that notification dated 12th June,2006 is ultra vires the Act,1992 as per section 5 of the Act,1992. The petitioners have SCA/19753/2006 6/37 JUDGMENT fulfilled all the conditions imposed under Target Plus Scheme. The year 2004-2005 is already over. Quantum growth in export is more than minimum requirement i.e. the achievement of export is 34.06%, higher than that of the previous year and, therefore, benefit under the Target Plus Scheme ought to be given to the petitioners at 10%, as per clause 3.7.3, as originally contained in the policy. The amendment in the policy through Notification dated 12nd June,2006 (Annexure “A” to the memo of the petition), which reduces the percentage of the Duty Credit Entitlement cannot be given retrospective effect. The judgments cited by the learned counsel for the petitioners have been discussed hereinafter. 7. Learned Additional Solicitor General of India Mr.Vikas Singh with learned counsel Mr.Dhaval Nanavati for the respondents submitted that there is no vested right or accrued right with the petitioners. The right has never accrued in favour of the petitioners to get 10% Duty Credit Entitlement, despite the incremental growth at a 34.06%, in comparison with last year export. What is stated in the policy is, a SCA/19753/2006 7/37 JUDGMENT probability, but the right to get this benefit is said to have been accrued only upon issuance of notification under section 25 of the Customs Act,1962. This notification has been published on 12nd June,2006 bearing Notification No.08/2006. It is vehementally submitted by the learned counsel for the respondents that the percentage referred to in the Target Plus Scheme for Duty Credit Entitlement was not a final one but looking to clause 3.7.8., Government had reserved the right to make a variation in the percentage or the rate of entitlement under the Scheme effective from the date of notification of the policy and, therefore, looking to the misuse of the policy (as per note at Annexure “C” to the memo of the petition) and keeping in mind, provision of section 3.7.8 of the Target Plus Scheme, the Notification dated 12th June,2006 at Annexure “A” has been published, whereby clause 3.7.3 has been amended with effect from 1st April,2005 so that the rate of entitlement shall now be read as 5% of the incremental growth, which never takes away any accrued right of the petitioners. There is no vested right in the petitioners to get 10% Duty Credit Entitlement of the incremental growth. The SCA/19753/2006 8/37 JUDGMENT right accrues only when the notification under section 25 of the Customs Act,1962, is published. 8. In support of his contentions, the Learned counsel for the respondents has placed reliance on several judgments, which have been referred hereinafter and it is stated that in view of the aforesaid facts, the Central Government has all power, jurisdiction and authority to modify clause of entitlement i.e. 3.7.3. of the Foreign Trade Policy, 2004-2009 with retrospective effect. 9. Having heard the learned counsel for both the sides and looking to the facts and circumstances of the case, in my opinion, the Notification No.08/2006 dated 12th June,2006 issued by Director General of Foreign Trade and Ex-Officio Additional Secretary to the Government of India (Annexure “A” to the memo of the petition) is ultra vires the Act of 1992, so far as it gives retrospective effect from 1st April,2005 and, hence, deserves to be quashed and set aside, for the following facts and reasons: SCA/19753/2006 9/37 JUDGMENT (A) The relevant provisions of the Foreign Trade (Development & Regulation) Act,1992, Foreign Trade Policy (2004-2009), Trade Plus Scheme, read as under: Section 5 of the Act,1992 reads as under: “5. Export and import policy.- The Central Government may, from time to time formulate and announce, by notification in the Official Gazette, the export and import policy and may also, in the like manner, amend that policy.” In pursuance of the aforesaid section 5 of the Act,1992, Foreign Trade Policy,2004-2009 was framed and as per clause 3.7 of the Foreign Trade Policy, Target Plus Scheme has been introduced. Relevant clauses of the Foreign Trade Policy, 2004- 2009, read as under: 3.7.3 Entitlement The entitlement under this scheme would be contingent on the percentage incremental growth in FOB value of exports in the current licensing year over the previous licensing year, as under: SCA/19753/2006 10/37 JUDGMENT Percentage incremental growth Duty Credit Entitlement (as a % of the incremental growth) 20% and above but below 25% 5% 25% and above but below 100% 10% 100% and above 15% (of 100%) Note:(1) Incremental growth beyond 100% will not qualify for computation of duty credit entitlement. (2) For the purpose of this scheme, the export performance shall not be transferred to or transferred from any other exporter. In the case of third party exports, the name of the supporting manufacturer/ manufacturer exporter shall be declared. (3) Exporters shall have the option to apply for benefit either under the Target Plus Scheme or under the Vishesh Krishi Upaj Yojana, but not both in respect of the same exported product/s. Provided that in calculating the entitlement under Para 3.7.3 the total eligible exports shall be taken into account for computing the percentage incremental growth but the duty credit entitlement shall be arrived at on the eligible exports reduced by the amount on which the benefit is claimed under para 3.8.3. (4) All exports including exports under free shipping bill verified and authenticated by Customs and Gems & Jewellery shipping bills but excluding exports specified under para 3.7.5, shall be eligible for benefits under the Target Plus Scheme. (5) In respect of export of Cut & Polished diamonds only those shipments would be taken into account for computation of eligible exports under the scheme where a minimum of 10% value additional has been achieved. SCA/19753/2006 11/37 JUDGMENT 3.7.8 Special Provision Government reserves the right in public interest, to specify from time to time the category of exports and export products, which shall not be eligible for calculation of incremental growth/entitlement. Further the Government shall have the right to change the eligibility criteria and rate of entitlement under the scheme effective from the date of notification of this policy. Similarly, Government may from time to time also notify the list of goods, which shall not be allowed for import under the duty credit entitlement certificate issued under the scheme. Clause 3.2.5 of Chapter 3 namely Promotional Measures of Part II of Handbook of procedures (Foreign Trader Procedure), reads as under: 3.2.5 Target Plus Scheme The policy for the Target Plus Scheme is given at Chapter 3 of the Foreign Trade Policy. I. For direct as well as third party exports, the Export documents viz Export order, Invoice, GR Form, Bank Realization Certificate should be in the name of applicant only. However for the third party exports, where goods have been procured from a manufacturer, the shipping bill should contain the name of the exporter as well as the supporting manufacturer. II. Goods allowed to be imported under this scheme shall have a broad nexus with the products exported. For SCA/19753/2006 12/37 JUDGMENT the purpose of import entitlements under this scheme, 'broad nexus' would mean goods imported with reference to any of the product groups of the exported goods within the overall value of the entitlement certificate. III. The licensing authority shall at the time of issuance of the duty credit entitlement certificate endorse the name of the associate manufacturer/supporting manufacturer/job worker on the certificate as declared by the applicant. Goods imported against such entitlement certificate shall be used by the applicant or his supporting manufacturer/job worker. Further in order to enable supporting manufacturers, whose names appear in the shipping bills, to import directly, Licensing Authority concerned shall endorse the names of such supporting manufacturers on the certificate as co- licensees. IV. The last date of filing of such applications shall be 31st December. V. For each duty credit certificate, split certificates subject to a minimum of Rs 5 lakh each and multiples thereof may also be issued. A fee of Rs.1000/- each shall be paid for each split certificate. However, a request for issuance of split certificate(s) shall be made at the time of application only and shall not be considered at a later stage. VI. The duty credit certificate shall normally be issued with a single port of registration. However the applicant may choose for different ports of registration for each split certificate. VII. The duty credit certificate shall be valid for a period of 24 months from the date of issue. Revalidation of duty credit entitlement certificate shall not be allowed. VIII. The applicants shall within one month of the last imports made SCA/19753/2006 13/37 JUDGMENT under this certificate or within one month of expiry of the certificate which ever is earlier, submit a statement of imports/utilization made under the certificate as per 'Aayaat Niryaat Form', to the jurisdictional Regional Licensing Authority who have issued the Certificate with a copy to the jurisdictional Excise authorities. (Emphasis supplied) The aforesaid provisions have been read and re-read by the learned counsels appearing for both the sides, which clarify the Foreign Trade Policy,2004-2009 and Target Plus Scheme and procedures to get Duty Credit Entitlement Certificate and the last date before which an application can be preferred. (B) Whether the right has ever accrued in favour of the petitioners? Learned counsel for the petitioners submitted that in pursuance of the Foreign Trade Policy,2004-2009 enacted under the Act,1992, the Target Plus Scheme has been floated by the Government so as to achieve substantial growth in exports. Conditional benefit has been given in Target Plus Scheme. There is no ambiguity in the conditions nor in the quantum of benefits to be given to the Star Export Houses, which are achieving growth in exports SCA/19753/2006 14/37 JUDGMENT in comparison with the last year. Keeping in mind, this unequivocal and unambiguous Foreign Trade Policy,2004-2009 and especially Target Plus Scheme, the petitioners intended to achieve growth in exports. For the year 2004-2005, the total export of the petitioners was 1039.70 Crores and for the year 2005-06, the petitioners were able to effect the exports to the tune of Rs.1393.84 Crores. Thus, the petitioner company has already achieved the quantum growth of export at 34.06%, as against minimum requirements of 20% as stated hereinabove. As per clause 3.7.3., a table has been given, whereby Duty Credit Entitlement (as a percentage of the incremental growth) has been given and if percentage incremental growth is 25% or above, but below 100%, Duty Credit Entitlement will be 10%. Thus, the conditions have been fulfilled by the present petitioners for getting the benefit under Target Plus Scheme floated by the respondents. As per clause 3.7 of the Foreign Trade Policy,2004-2009, the current licensing year 2005-2006, which starts from 1st April,2005 to 31st March,2006 is already over. As per procedure enshrined in part-II - Handbook of Procedures, especially as per Chapter-3, the last date for preferring an application was 31st December, SCA/19753/2006 15/37 JUDGMENT so that Duty Credit Entitlement Certificate can be issued by the authority, (who has issued a policy i.e. Director General of Foreign Trade). Thus, the same authority, which has issued the policy, has to issue, Duty Credit Entitlement Certificate. Looking to the Target Plus Scheme especially clause 3.7.3., the word used is “Entitlement”. The meaning of word “entitlement”, even as per Advanced Law Lexicon, 3rd Edition, reads as under: “Entitle. To give a claim, right, or title to; to give a right to demand or receive, to furnish with grounds for claiming. “The word may, without any violence to language may be taken to means “entitled in interest” or “entitled in possession” or “entitled to payment” [Jopp v. Wood, (1865), 2 De J. & S.329: 46 ER 400: 4 De G.J.&S 616' 46 ER 1057]. The interpretation is in each case a question of construction, and no definite rule can be laid down.” Thus, all the conditions attached as per Target Plus Scheme have been fulfilled. There are no other conditions in the Target Plus Scheme enshrined in the Foreign Trade Policy,2004-2009. The Scheme is floated to accelerate quantum growth in exports. If, Star Export Houses achieve quantum growth in exports, as stated in clause 3.7.3., they are entitled to get 10% Duty Credit Entitlement. This SCA/19753/2006 16/37 JUDGMENT right is not contingent or this right (to get 10% Duty Credit Entitlement) is not dependent upon any other conditions, and, therefore, in my opinion, right has already accrued in favour of the petitioners to get Duty Credit Entitlement Certificate, once the minimum quantum of growth in export is achieved, in comparison with the previous year exports. The figures of exports as stated hereinabove are not disputed. (C) Effect of Customs Act, 1962: It is stated by the learned counsel for the respondents that the notification issued under the Customs Act,1962, especially section 25 thereof, was published on 10th July,2006, bearing Notification No.73/2006, i.e. after the amendment as per notification dated 12th June,2006 at Annexure “A” to the memo of the petition. Thus, Target Plus Scheme was floated with a promise of 10% Duty Credit Entitlement, if the quantum of growth is more than 25% but less than 100%. It is stated by respondent that this percentage can be varied by the Central Government with retrospective effect and, therefore, it was varied on 12th June,2006. Keeping in mind, all the conditions of Target Plus Scheme, the SCA/19753/2006 17/37 JUDGMENT notification has been issued on 10th July,2006 under the Customs Act,1962, and, therefore, it cannot be said that there was any right accrued in favour of the petitioners. This contention raised by the learned counsel for the respondents is not accepted by this Court mainly for the reason that custom notification under section 25 is not further crystalising a right, which has already accrued in favour of the petitioners, as per clause 3.7.3. of the Foreign Trade Policy. Notification under the Customs Act,1962 is not giving further strength to the right, which has already accrued in favour of the petitioners as per clause 3.7.3. of the Foreign Trade Policy. Duty Credit Entitlement Certificate is to be issued by the Director General of Foreign Trade as the policy has been enacted by the very same authority. The petitioners are asking for Duty Credit Entitlement Certificate upon fulfillment of all the conditions of the Target Plus Scheme. As per the said Scheme, for the whole year, the petitioners were busy in achieving quantum growth in export i.e. more than minimum growth. This goal has already been achieved by the petitioners for the year 2004-2005 and as per Handbook of Procedures, an application can be preferred on or before 31st December,2006. But the SCA/19753/2006 18/37 JUDGMENT notification at Annexure “A” has been issued meanwhile on 10th June,2006, so as to reduce the percentage of Duty Credit Entitlement and that too, with effect from 1st April,2005. The notification under the Customs Act,1962 has been issued on 10th July,2006. This notification is nothing but a consequential effect of the benefit, which has already accrued in favour of the petitioners. At least, as per Handbook of Procedures, the petitioners are entitled for Duty Credit Entitlement Certificate, there is already vested right or accrued right in favour of the petitioners, no sooner did, the conditions attached to Target Plus Scheme has been fulfilled for getting the Duty Credit Entitlement Certificate. Thus, notification under the Customs Act is not to have been issued to give strength to the right, which has already accrued in favour of the petitioners, who have achieved this quantum growth of export, but, the Notification under section 5 of the Act of 1992, has been issued so that procedurally a benefit can be given. Thus, the contention raised by the respondent that unless and until notification under Customs Act is issued, it cannot be said that there is vested right or accrued right in SCA/19753/2006 19/37 JUDGMENT favour of the petitioners. This contention of the learned counsel for the respondents is not accepted by this Court. (D) Whether a Notification dated 12th June,2006 is ultra vires the Foreign Trade (Development & Regulation) Act,1992 : To give answer of the aforesaid question, one has to look at the source of the Foreign Trade Policy. Foreign Trade Policy has been enacted under section 5 of the Act,1992, which empowers the respondents to formulate and announce the notification in the Official Gazette, the export and import policy, and may, also in the like manner has power to amend the policy. Thus, Foreign Trade Policy has been formulated and announced for the year 2004-2009 and there is also a concept of Target Plus Scheme for getting quantum growth in exports. The objective of the Target Plus Scheme and eligibility criteria, reads as under: 3.7.1. Objective The objective of the scheme is to accelerate growth in exports by SCA/19753/2006 20/37 JUDGMENT rewarding Star Export Houses who have achieved a quantum growth in exports. High performing Star Export Houses shall be entitled for a duty credit based on incremental exports, substantially higher than the general annual export target fixed (Since the target fixed for 2005-06 is 17%, the lower limit of performance for qualifying for rewards is pegged at 20% for the current year). 3.7.2 Eligibility Criteria All Star Export Houses (including Status Holders as defined in Para 3.7.2.1 of Exim Policy 2002-07) which have achieved a minimum export turnover in free foreign exchange of Rs.10 Crores in the previous licensing year are eligible for consideration under the Target Plus Scheme. As per further clause of the Target Plus Scheme, clause 3.7.3 is for Entitlement, clause 3.7.6 is for Imports allowed and a provision, which is known as a Special Provision under clause 3.7.8. It is contended by the respondent that as per clause 3.7.8 of Target Plus Scheme, Central Government can vary, the percentage of benefit and notification can be issued to that effect, with retrospective effect. This contention is not accepted by this Court for the reason that if the parent Act namely the Act,1992 is not permitting to pronounce a policy with retrospective effect, it permits not amendment in Export-Import Policy, with retrospective effect and, therefore, notification dated 12th June,2006 issued SCA/19753/2006 21/37 JUDGMENT bearing No.8/2006 at Annexure “A” to the memo of the petition, cannot be given retrospective effect i.e. from 1st April,2005 but it can be given prospective effect. If a close look is given to this problem, for solution, one has to read the provisions of the Act, under which policy or rule or regulation pronounced or enacted. Here, Section 5 of the Act,1992, does not empower Central Government to announce policy with retrospective effect. (E) JUDGEMENTS: (i) It has been held by the Hon'ble Supreme Court in the case Hukam Chand Etc. V/s. Union of India and others reported in (1972)2 SCC 601 in para 8, 9, 11 and 12, reads as under: “8. Perusal of Section 40 shows that although the power of making rules to carry out the purposes of the Act has been conferred upon the Central Government, there is no