14 February 2020
Supreme Court
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M/S NOLA RAM DULICHAND DAL MILLS PARTNER Vs UNION OF INDIA

Bench: HON'BLE MR. JUSTICE L. NAGESWARA RAO, HON'BLE MR. JUSTICE HEMANT GUPTA
Judgment by: HON'BLE MR. JUSTICE L. NAGESWARA RAO
Case number: C.A. No.-010636-010636 / 2010
Diary number: 37848 / 2010
Advocates: M. P. DEVANATH Vs


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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)

W I T H

CIVIL APPEAL NO. 7257 OF 2009

CIVIL APPEAL NO. 10637 OF 2010

A N D

CIVIL APPEAL NO. 7233 OF 2009

J U D G M E N T

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 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:

“3.8 VISHESH KRISHI UPAJ YOJANA  (SPECIAL AGRICULTURAL PRODUCE SCHEME)  

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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)

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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.

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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:

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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.

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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 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 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.

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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 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 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 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 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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