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CASE NO.: Transfer Case (civil)  165 of 2006

PETITIONER: M/s Hindustan Granites

RESPONDENT: Union of India & Ors

DATE OF JUDGMENT: 03/04/2007

BENCH: DR. ARIJIT PASAYAT & S.H. KAPADIA

JUDGMENT: J U D G M E N T

I.A. Nos. 1 & 2 in T.C.(C) No. 165/2006 with  I.A.Nos.2,4,5,6,7, & 10 in TP(C) No.579 of  2006 T.P.(C) No.1067 of 2006 I.A.No.1 & 2 in T.C.(C) No.168 of 2006 SLP (C) No.13670 of 2006 SLP (C) No.13671 of 2006 C.A. No.         of 2007 arising out of S.L.P)\005\005\005\005\005 (CC  NO.9879 of 2006) C.A. No.         of 2007 arising out of S.L.P)\005\005\005\005\005 (CC  No.9880 of 20006) C.A. No.         of 2007 arising out of S.L.P)\005\005\005\005\005 (CC  NO.9881 of 2006) T.C. (C) No.166 of 2006 W.P.(C) No.600 of 2006 T.C.(C) NO.167 of 2006 T.C.(C) 1 of 2007 W.P.(C) No.22 of 2007 SLP (C) No.5376 of 2007

KAPADIA, J.

       In this batch of matters, the central question which we  are called upon to decide is regarding the validity of Policy  Circular dated 30.8.05 and Notification No.24 dated 31.8.05  which has the effect of amending para 6.8(a) and para 6.8(h) of  the Foreign Trade Policy 2004-2009.

       This judgment is confined to Domestic Tariff Area sales  (DTA sales) by 100% Export Oriented Unit (EOU).

Leave granted in special leave petitions filed by Union of  India against various EOUs.   

       The basic issue which we need to decide in this batch of  cases is: whether DTA sales by 100% EOUs form an integral  part of EOU Scheme?

       For the sake of convenience we reproduce hereinbelow  the facts as reproduced in the case of Union of India & others  v.  M/s. Abhishek Exports [Civil Appeal No\005\005\005\005\005\005of  2007 arising out of S.L.P. (C) No\005\005\005\005(CC9879 of 2006)].

       The concept of EOU was introduced in 1980 in the EXIM  Policy.  The EOU Scheme was framed in order to boost the

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Indian exports.  Under the said Scheme, EOU could be located  at any place.  In 1992, statutory recognition was given to  EXIM Policy vide Section 5 of the Foreign Trade (Development  and Regulation) Act, 1992.  In 1991, EOU was permitted to  sell rejects upto 5% and goods in the DTA after obtaining  permission from the Export Commissioner.  In 1997, under  EXIM Policy 1997-2002, EOU was permitted to sell rejects as  well as goods upto 50% of the FOB Value of exports subject to  payment of duty and fulfillment of minimum Net Foreign  Exchange Earnings (NFE).  Over and above this limit, EOU  could sell finished products which were freely importable  against payment of full duty.

       On 24.3.2000 M/s. Abhishek Exports was granted the  Letter of Permission (LOP) by the Development Commissioner,  NOIDA, to manufacture and export marble tiles and finished  marble blocks.  In the LOP it was stipulated that M/s.  Abhishek Exports had to maintain NFE percentage and they  were required to achieve minimum Export Obligations.  In the  said LOP it was further stipulated that M/s. Abhishek Exports  cold make domestic sales as per the provisions of EXIM Policy  1997-2002.

       M/s. Abhishek Exports started exporting finished marble  made out of rough imported marble and rough indigenous  marble.  The rough marble so imported was duty-free.  Under  the LOP, M/s. Abhishek Exports had the right to make sales  in DTA, subject to payment of concessional and full duty as  the case may be.

       On 1.4.04 FTP 2004-2009 came into force.  We quote  herein below paras 6.1, 6.5, 6.8(a), 6.8(b), 6.8(d), 6.8(e), 6.8(g)  and 6.8(h) of the FTP 2004-2009 which read as under: "CHAPTER- 6 EXPORT ORIENTED UNITS (EOUs), ELECTRONICS HARDWARE  TECHNOLOGY PARKS (EHTPs), SOFTWARE TECHNOLOGY PARKS (STPs)  AND BIO-TECHNOLOGY PARKS (BTPs) Eligibility 6.1 Units undertaking to export their entire production of goods and services  (except permissible sales in the DTA), may be set up under the Export  Oriented Unit (EOU) Scheme, Electronic Hardware Technology Park (EHTP)  Scheme, Software Technology Park (STP) Scheme or Bio-Technology Park  (BTP) scheme for manufacture of goods, including repair, re-making,  reconditioning, re-engineering, and rendering of services. Trading units,  however, are not covered under these schemes.  

Net Foreign  Exchange Earnings  (NFE) 6.5 EOU/EHTP/STP/BTP unit shall be a positive net foreign exchange earner.  Net Foreign Exchange Earnings (NFE) shall be calculated cumulatively in  blocks of five years, starting from the commencement of production.  

DTA Sale of  Finished Products/  Rejects Waste/  Scrap/ Remnants  and By-products 6.8 The entire production of EOU/EHTP/STP/BTP units shall be exported subject  to the following:

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(a) Units, other than gems and jewellery units, may sell goods upto  50% of FOB value of exports subject to fulfillment of positive  NFE on payment of concessional duties . Within the entitlement  of DTA sale, the unit may sell in DTA its products similar to the  goods which are exported or expected to be exported from the  units. No DTA sale at concessional duty shall be permissible in  respect of motor cars, alcoholic liquors, books and tea (except  instant tea) or by a packaging/ labeling /segregation/  refrigeration unit/  compacting/micronisation/pulverization/granulation /conversion  of mono-hydrate form of chemical to anhydrous form or vice- versa and such other items as may be notified from time to time.  Sales made to a unit in SEZ shall also be taken into account for  the purpose of arriving at FOB value of export by EOU  provided payment for such sales are made from EEFC Account.  Sale to DTA would also be subject to mandatory requirement of  registration of pharmaceutical products (including bulk drugs).     (b) For services, including software units, sale in the DTA in any  mode, including on line data communication shall also be  permissible up to 50% of FOB value of exports and /or 50% of  foreign exchange earned, where payment of such services is  received in foreign exchange.      

   (d)  Unless specifically prohibited in the LOP, rejects may be sold in  the Domestic Tariff Area (DTA) on payment of duties as  applicable to sale under paragraph 6.8(a) on prior intimation to  the Customs authorities. Such sales shall be counted against  DTA sale entitlement. Sale of rejects upto 5% of FOB value of  exports shall not be subject to achievement of NFE.     (e)                 Scrap/ waste/ remnants arising out of production process or in  connection therewith may be sold in the DTA as per the  Standard Input-Output norms notified under the Duty  Exemption Scheme on payment of concessional duties as  applicable within the overall ceiling of 50% of FOB value of  exports. Such sales shall not, however, be subject to  achievement of positive NFE. In respect of items not covered by  the norms, the Development Commissioner may fix ad-hoc  norms on the basis of data for a period of six months and within  this period, he shall get the norms fixed by the BOA. Sale of  waste/scrap/remnants by units not entitled to DTA sale or sales  beyond the DTA sale entitlement, shall be on payment of full  duties. The scrap/waste/remnants may also be exported.   

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   (g) By-products included in the LOP may also be sold in the DTA  subject to achievement of positive NFE on payment of  applicable duties within the overall entitlement of paragraph  6.8(a). Sale of by-products by units not entitled to DTA sales or  beyond the entitlements of paragraph 6.8 (a) shall also be  permissible on payment of full duties.     (h) EOU/ EHTP/ STP/BTP units may sell finished products, which  are freely importable under the Policy in the DTA under  intimation to the Development Commissioner against payment  of full duties provided they have achieved the positive NFE."     To sum up, para 6.8(a) of the FTP provided that goods,  upto 50% of FOB Value of exports, could be sold on payment  of concessional rate of duty in the DTA subject to fulfillment of  positive NFE.  The ceiling, therefore, included sale of rejects  under para 6.8(d) as well as sale of waste under para 6.8(e)  and by-products under para 6.8(g).  Under para 6.8(h), sale of  finished products could be made in DTA against payment of  full duty, provided the said good was freely importable under  the Policy.  Further, under para 6.8(h) sale of by-products and  sale of waste beyond the entitlement of para 6.8 was  permissible on payment of full duty.  The above quoted  paragraphs are relevant extracts of FTP 2004-2009  in respect  of EOU.

On 16.12.04, the Development Commissioner, NOIDA,  approved the Renewal Application made by M/s. Abhishek  Exports for next five year that is from 2005-2006 to 2009- 2010, under LOP dated 24.3.2000.

The approval dated 16.12.04 stipulated that M/s.  Abhishek Exports should have NFE of Rs.9.90 crores in the  next five years.  Under the LOP, the exporter was required to  maintain positive NFE.

On 31.8.05 the impugned Notification was issued  amending para 6.8(a) and para 6.8(h) of FTP 2004-2009.  By  the impugned Notification the EOUs were prevented from  making DTA sales of the finished marble from imported rough  marble, with immediate effect.  It is this Notification which is  the subject-matter of challenge.

According to M/s. Abhishek Exports, an investment of  Rs.300 lakhs had been made; that, it had taken a loan from  State Bank of Bikaner & Jaipur to the tune of Rs.2.30 lakhs  on the basis of the Policy of Government of India and that by  making the above investments it had changed its position  substantially.  According to M/s. Abhishek Exports, on  account of the impugned Notification, the quantity of marble  sold by it in the DTA stood reduced.  According to M/s.  Abhishek Exports such an amendment to the FTP 2004-2009  by the impugned Notification was devoid of any element of  public interest.  According to M/s. Abhishek Exports, the  impugned Notification was against the basic feature of the  EOU Scheme.   

The Notification was challenged before the Rajasthan

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High Court.  Vide Order dated 29.09.06 the writ petition filed  by M/s. Abhishek Exports in the Rajasthan High Court stands  transferred to this Court vide Transfer Case (C) No.165 of  2006.

According to M/s. Abhishek Exports, by the impugned  Circular dated 30.8.2005 the quantity which could be  imported by Special Import License Units (SIL Units) was  arbitrarily increased from 80,000 MT to 1.30 Lakh MT.  The  Circular dated 30.8.05 has been challenged on the ground  that it discriminates unreasonably between 100% EOUs and  SIL Units; that, the impugned Circular gives benefit to selected  importers; that, the effect of the impugned Circular was to  increase the availability of imported rough marble blocks for  use in the domestic market and that for no reason the right to  import has been unreasonably limited only to SIL Units by the  impugned Notification dated 31.8.05.  According to M/s.  Abhishek Exports, by reason of the impugned  Circular/Notification the quantity of marble sold by the EOUs  in the domestic area has been reduced and the quantity of  marble sold by SIL Units from the same imported rough  marble stood significantly increased which has resulted in the  loss to the EOUs.  According to M/s. Abhishek Exports, the  impugned Circular/Notification was against public interest  since the SIL Units had no Export Obligations, they were not  Foreign Exchange Earners; they were required to pay lesser  rate of duty and consequently according to M/s. Abhishek  Exports the impugned Circular/Notification was not in public  interest.  Further, according to M/s. Abhishek Exports, DTA  sales constituted essential feature of the EOU Scheme since  vide para 6.1, 100% EOUs undertook to export their entire  production of goods, except permissible sale in the DTA, under  the EOU Scheme and, therefore, the DTA sales constituted an  integral part of EOU Scheme.  It was submitted that the DTA  sales were permitted only if the EOU fulfilled its Export  Obligations and achieved positive NFE and, therefore, the  intention was to grant benefit to the EOU on achieving positive  NFE and it had no co-relation with the imported raw material  out of which the exports are made.  According to M/s.  Abhishek Exports, in the absence of DTA sales, an EOU would  be compelled to sell its entire production in the export market.   According to M/s. Abhishek Exports, on account of total  restriction on DTA sales their inventory of marble tiles is likely  to get accumulated in the factory blocking the working capital  and funds, which otherwise would have been disposed of in  the local market.  According to M/s. Abhishek Exports, the  unamended Policy had provided an insulation/hedge against  the fall in the export business in the international market.   According to M/s. Abhishek Exports, an EOU could sell the  marble tiles in the domestic market in the slump season so  that production and business activity of an EOU was not  adversely affected.  According to M/s. Abhishek Exports on  account of impugned Circular/Notification an idle capacity  during the slump season would accrue.  Further, under the  unamended Policy, in case of loss, an EOU could make good  the loss by DTA sales and, therefore, such sales constituted an  essential feature of the EOU Scheme.  According to M/s.  Abhishek Exports, DTA sales were essential to run the plant at  maximum capacity, to minimize the cost of production in the  competitive export market, to deal with export surplus and to  provide for disposal of export products on cancellation of  export orders.  According to M/s. Abhishek Exports, the  impugned Circular/Notification has been published with the  view to protect the SIL Units at the cost of 100% EOUs.   According to M/s. Abhishek Exports, the impugned

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amendments would disrupt the business of EOUs and it would  flood the domestic market with 1.30 lakhs MT of finished  marble product made from imported rough marble which  would not serve the public interest.  According to M/s.  Abhishek Exports, the impugned Circular/Notification has  been issued to protect the marble industry of Gujarat which is  the primary beneficiary of the SIL based import policy of  marble.  M/s. Abhishek Exports further submitted that Article  14 of the Constitution of India is violated in the present case  since the impugned Circular/Notification has been issued to  give concession to SIL importers at the cost of EOUs.

On 10.1.07 when the above matters came for hearing  before this Court, the following order was passed:          "Ban on DTA sales by 100% EOU under OGL  licence and limiting the issuance of licences to  those applicants who have imported crude marble  between 1999-2001 under SIL scheme vide  impugned policy circulars Nos. 24 dated  30.8.2005, No. 34 dated 30.11.2005 and  notification Nos. 23 and 24 dated 31.8.2005  (hereinafter referred to as the impugned new  policy) was the subject matter of challenge vide  writ petitions filed in various High Courts.          By order dated 29.9.2006, the said writ  petitions stood transferred to this Court.          Having regard to the arguments advanced  before us and in view of the fact that the  entitlement of Domestic Users for financial year  2005-06 is going to lapse on 31.3.2007 the  following interim order is passed.

       DGFT would be entitled to grant licences to  the applicants who are so entitled under policy  circular No. 24 dated 30.8.2005. To that extent  our order dated 29.9.2006 stands vacated.

In T.P. (C) No. 579/06 filed by the Director  General of Foreign Trade it has been inter alia  stated that on account of representations received  from the traders and the material (including  complaints) gathered by DGFT, the impugned new  policy came to be enacted. This was after detailed  discussions with the Trade. The broad features of  the new policy and the reasons for enacting the  policy are given in paragraphs 15, 16 and 17 of  T.P. (C) No. 579/06. However, it appears that the  requisite material was not supplied to the affected  100% EOUs. who have complained before us that  the changes have been made in FTP vide the  impugned policy without giving any opportunity to  the affected Units. At this stage we may point out  that learned Solicitor General of India stated  before us that the impugned policy decision  is  taken on certain material (including complaints/  representations received) which he is prepared to  disclose to the concerned EOUs. Accordingly,  we  direct DGFT to supply the material in its  possession to the affected EOUs., who have filed  the writ petitions, on or before 15.1.2007. The said  petitioners (EOUs.) who have filed writ petitions in  the High Court shall thereafter make  representations to the DGFT within 10 days on

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and from the receipt of the material (including  complaints) from DGFT. Thereafter, DGFT will  decide the matter in accordance with law. We  make it clear that it will be open to DGFT to  equitably work out the matter, if possible. One  point, however, needs to be mentioned. It is stated  on behalf  of  M/s Hindustan Granites that they  have accumulated wastes which they are entitled  to sell in DTA under the unamended policy. It is  contended on behalf of M/s Hindustan Granites  that they have fulfilled the benchmark of Net  Foreign Exchange earnings and, therefore, they  were entitled to sell the accumulated wastes in the  domestic market (DTA) under para 6.8 (h) on  payment of full duty. On this point, M/s  Hindustan Granites can also make the  representation giving facts and figures regarding  the quantity of waste which has accumulated and  it will be open to DGFT if possible to decide the  question regarding sale of the said waste in the  DTA.

The question as to whether the impugned  circulars/notifications constitutes a change in the  policy or whether it is a matter of detail within the  existing policy is the question which will be  decided on the next date of hearing when we will  examine the merits of the case.

       On receiving the report from DGFT, we shall  hear the matter on merits on the next occasion. In  the meantime, the ban on EOU Units undertaking  DTA sales shall continue to remain in operation.  Consequently, interim order of the Rajasthan High  Court dated 26.10.2005 in DB Civil Writ Petition  No. 5811/05 shall remain stayed.

       Stand over to 31.1.2007." On 7.2.07, the Director General of Foreign Trade after  hearing the parties and after considering their representations  passed an order rejecting the various representations made by  M/s. Hindustan Granites Ltd., M/s. Abhishek Exports,  M/s. Pacific Industries Limited, M/s. Jain Grani Marmo  Pvt. Limited, M/s. Marble Art (all 100% EOUs).  The said  order is also under challenge before us.

The said order has re-affirmed the decision taken on  31.8.05 qua 100% EOUs and qua SIL Units without any  change.  In this connection, it is submitted on behalf of M/s.  Abhishek Exports that the Director General had erred in  holding that the EOUs were misusing the DTA facility by  making finished products from indigenous marble and  exporting the said finished products rather than making  finished products from the imported marble and exporting the  same.  According to M/s. Abhishek Exports, FTP 2004-2009  specifically allow EOUs to sell finished products made from  imported marble in the DTA, upto 50% of FOB value on  payment of concessional rate of duty vide para 6.8(a).  That,  the said Policy permitted EOUs to sell anything above 50% of  the FOB value of exports in the DTA on payment of full duty  [para 6.8(h)] subject to the EOUs maintaining a positive NFE.   According to M/s. Abhishek Exports, the above system  operated for seven years.  According to M/s. Abhishek  Exports, the above system is allowed in the Hand Book of  Procedure under which there was no requirement to co-relate

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every import consignment with exports.  According to M/s.  Abhishek Exports, for last seven years the Implementing  Authority has not objected to the manufacture of finished  goods from indigenous marble and that the said Authority has  never objected to such finished goods being exported as  breach or misuse of the Policy.  According to M/s. Abhishek  Exports, the Director General had erred in holding that the  impugned amendment was to protect the domestic marble  industry.  According to M/s. Abhishek Exports, on account of  change in Policy the EOUs which were previously buying  rough marble from the domestic market to make finished  products and exporting the same would not be now able to do  so.  That, under the amended Policy the EOUs are now  required to export finished products made from imported  marble.  According to M/s. Abhishek Exports, on account of  change in Policy qua SIL Units permitting them imports of  marble to the order of 1.30 Lakhs MT as compared 68,000 MT  would effect the domestic mining industry.  According to M/s.  Abhishek Exports, the Director General had erred in holding  that there was diversion of the imported rough marble in DTA  which defeated the very purpose of putting marble as under  the restricted category.  In this connection, M/s. Abhishek  Exports contend that there was no diversion because DTA  sales was specifically permitted under paras 6.8(a) and 6.8(h)  of FTP 2004-2009 prior to its amendment on 31.8.05 and,  therefore, there was no misuse as found by the Director  General of Foreign Trade.    We find no merit in the challenge to the impugned  Circular/Notification for the following reasons.  Firstly, it is  important to note that under para 6.1 of the unamended FTP  2004-2009, 100% EOUs undertook to export their entire  production except permissible sales in DTA.  Therefore, DTA  sales constituted an exception or an incidental facility.  DTA  sales were not an integral part of the EOU Scheme.  Under  para 6.1, EOUs were allowed to be set up on the condition that  they would export their entire production.  It is on this  condition that 100% EOUs could avail of various benefits  under Customs and Excise Act.  The said DTA sales or sales of  rejects were exceptions.  DTA sales were not an integral part of  the EOU Scheme in the sense that if for reasonable reasons if  these exceptions are eliminated, as in this case, the Scheme  would become unworkable.  In fact, M/s. Hindustan Granites  even today after the impugned amendment works without use  of domestic raw material.  Hence, DTA sales is not an integral  part of the EOU Scheme.   Secondly, it is important to note  that 100% EOUs have been importing rough marble blocks  from which they are producing marble tiles/slabs and what  they are exporting is the said marble tiles/slabs.  However, the  Director General found, in the course of last seven years, that  the entire export of marble tiles/slabs is made out of the poor  quality indigenous rough marble blocks.  On the other hand, it  is found that the entire sale of marble tiles/slabs in DTA is  from rich good quality imported rough marble blocks.   Therefore, the DTA sales by 100% EOUs are now disallowed  under the impugned Circular/Notification.  Thirdly, on  account of the above practice, the Director General has found  that four to five 100% EOUs have been importing rough  marble ostensibly for export but in effect after slight polishing  the same are sold in DTA.  Marble is a restricted item.  On  account of the above practice, the Director General has found  circumvention of the Restricted Import Policy of marble during  100% EOU Scheme (unamended).  As stated above, the  concept of Net Foreign Exchange earning is very important.   On account of the price differential, under the impugned

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practice, there is substitution of imported inputs by domestic  inputs.  The rational behind allowing imports of rough marble  blocks by 100% EOUs was that the raw material would be  used for export production and that it will not be diverted in  DTA defeating the very purpose of putting marble in the  restricted category.  The object behind the EOU Scheme is  consumption of imported raw material for manufacture of  finished products which are to be exported.  If that facility  leads to substitution of imported inputs by domestically  procured inputs then the facility has to be discontinued.  This  discontinuation has been done by the impugned  Circular/Notification.  Fourthly, as stated above, marble is an  item under restricted category.  It is put in the restricted  category since it is not treated as only revenue-generating  resource.  It is put in the restricted category because the  mining industry depends on that resource.  It generates  employment.  Mining generates employment.  Marble is an  input required in the mining industry.  As a result of  impugned substitution, the Indian market gets flooded by the  imported goods resulting in unemployment in the mining  industry.  Fifthly, by the impugned Circular/Notification, the  Government has stopped procurement of domestic rough  marble blocks for achieving NFE earnings.  This is the major  object behind the impugned Circular/Notification.  It is true  that the unamended Policy had no co-relation between the  input imported and the finished product exported.  That was  the loophole.  To stop the procurement of domestic rough  marble blocks for achieving NFE, the DTA sales had to be  prohibited.  By the amended Policy 100% EOUs are now  required to produce marble tiles/slabs (finished products) out  of imported rough marble blocks and thereby the amended  Policy stops the procurement of domestic rough marble blocks  for achieving NFE by these 100% EOUs.  Lastly, there are 20  to 25 SIL Units (found to be eligible) vis-‘-vis 4 to 5 100%  EOUs and, therefore, the volume has been increased from  68,000 MT to 1,30 Lakhs MT.

Before concluding, we would like to refer to the authority  cited on behalf of 100% EOUs.

In the case of Bannari Amman Sugars Ltd. v.  Commercial Tax Officer and Others \026 (2005) 1 SCC 625,  the Division Bench of this Court speaking through one of us,  Pasayat, J., has held that exemption from purchase tax on  sugarcane granted in favour of sugar mills established in  public sector whose production exceeded Rs.300 lakhs was  entitled to tax benefit and that the Government was not right  in withdrawing that benefit, particularly, when the industry  stood established on basis of representation made by the  Government.  While explaining the doctrine of promissory  estoppel it has been observed vide paras ’16’ and ’17’ that if  the State acts within the bounds of reasonableness to be  decided in an objective manner and from the stand point of  public interest then the restriction cannot be said to be  unreasonable, merely because it operates harshly.  In our  view, on the facts of the present case, we are satisfied that the  impugned amendment fulfills the test of public interest and it  also fulfills the test of reasonableness qua the restrictions  imposed on 100% EOUs.

Similarly, in the case of Union of India and Another v.  International Trading Co. and Another - (2003) 5 SCC 437,  the Division Bench of this Court speaking through one of us,  Pasayat, J., has held that if State acts reasonably keeping in  mind national priority and good trade policies then it cannot

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be said that the restrictions imposed in economic interest are  unreasonable even though they operate harshly [See: paras  ’22’ and ’23’].

In the case of Union of India & ors. V. M/s. Asian Food  Industries  - (2006) 12 Scale 105, on which reliance is  placed by counsel for M/s. Abhishek Exports, the Division  Bench of this Court has held that Foreign Trade Policy under  Foreign Trade (Development and Regulation) Act, 1992 along  with the Hand Book of Procedure constituted a composite  Scheme.  We do not dispute with this proposition.  Hand Book  of Procedure merely implements the policy.  It does not  prevent the Central Government from changing the policy.   Vide paras ’29’ and ’30’ of the said judgment it has been held  specifically that the Central Government can, in exercise of its  powers under Section 5 of the 1992 Act, prohibit exports.  In  that case, this Court was concerned with the question of  banning of exports.  It is not so in this case.  In the matter  before us there was an incidental.  Facility given to 100%  EOUs to hedge the losses which may arise on account of  changes in foreign exchange rates which facility is removed.   In our view, nothing prevents the Central Government, in  public interest, to plug the loophole by tinkering with the  existing policy as is done in the present case.  Disallowing DTA  sales by 100% EOUs for above reasons cannot be compared  with total ban on export of pulses which was the case in the  matter of M/s. Asian Food Industries (supra).  As held  hereinabove, DTA sales did not constitute an integral part of  the EOU Scheme, hence the above judgment has no  application.

For the above reasons, we do not see any merit in the  challenge to the impugned Circular dated 30.8.05 and the  Notification dated 31.8.05 by the above 100% EOUs.   Accordingly, we uphold the validity of the Circular dated  30.8.05 and the Notification dated 31.8.05.  Interlocutory  Applications, civil appeals, transfer petition and transfer cases  are disposed of accordingly with no order as to costs.

As stated above, this judgment is confined to the  challenge to the impugned Circular/Notification by 100%  EOUs and has nothing to do with the challenge by SIL Units  who have instituted separate petitions which will be heard in  normal course.