FPS - Withdrawal of export incentive to items other than bicycle parts under entry No 269 of Appendix 37-D - HC quashes DGFT Trade Notice 11/2015 - No recovery of benefits already granted
By TIOL News Service
AHMEDABAD, OCT 24, 2016: PETITIONERS have challenged the Trade Notice No. 11 of 2015 dated 14.12.2015 issued by the Director General of Foreign Trade. The petitioners are engaged in manufacturing and exporting engineering goods like casting, valves, parts of valves etc. Under 2009-14 Policy, the Government of India framed a Focus Product Scheme (FPS) which envisaged granting of duty credit scrip equivalent to 2% of the FOB value of exports of notified products mentioned in Appendix-37-D which were made from 27.08.2009 onwards.
Appendix 37-D contained a list of notified products for the purpose of FPS. Entry 242 thereof reads as under:
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Sr. No
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FPS Product Code
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ITC (HS) Code
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Description
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Rate Percentage
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Bonus Benefit
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242
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242
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8481
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Items of a kind used on bicycles: Taps, Cocks, Valves and Similar Appliances for pipes, boiler shells, tanks, vats or the like including pressure-reducing valves and thermostatically controlled valves
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2%
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2%
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This Entry 242 was renumbered as Entry 269 in a revised Appendix 37-D.
Based on their applications, the authorities granted the benefit of the said scheme on all exports made by the petitioners of such valves and parts of the valves.
On 14.12.2015, the DGFT issued the impugned trade notice, clarifying that the intention from the beginning had been to grant incentive to bicycle parts only under this serial No. 269 under FPS and this intention has been clearly indicated. Other items, which are not parts of bicycle, appearing in the above mentioned description are not eligible for FPS benefit under FTP 2009-14 and the benefits already granted to other goods are liable to be reviewed and corrective measures be taken to recover such claims granted by over sight.
Pursuant to such trade notice, the respondents initiated two actions against the petitioners. First was to seek recovery of the benefits already released. The second action taken against the petitioners was to withhold the benefits under the MEIS scheme even though the same may be otherwise grantable. The grievance of the petitioners is that for not refunding the benefits under the FPS, the respondents would refute to even process the petitioners' application for the export incentives under the MEIS.
After hearing both sides, the High Court held:
+ The circular does not simply provide for a clarification. It goes much further and essentially seeks to amend the entry itself. In the impugned trade notice itself it was recognized that the entry contained several parts which were not bicycle parts. If that be so, a question would immediately arise, what would be utility of mentioning several other parts in the said entry. In other words, if the impugned circular is seen as merely a clarificatory circular, several parts mentioned in the entry would be rendered otiose. In fact, virtually, the entire entry would be rendered meaningless.
+ This entry contained a heading "Items of a kind used on bicycles". However, the main body of the entry contained predominantly parts which were not possible of being used on bicycles. These are taps, cocks, valves and other appliances for pipes, boiler shells, tanks, vats or the like. As per the entry, this would include pressure reducing valves and thermostatically controlled valves. Various parts mentioned in the first part of the entry ex facie are not useful on bicycles. The later part, the inclusive portion of the entry when it refers to pressure reducing valves and thermostatically controlled valves also are not used on bicycles. If we therefore, put unnecessary stress on the heading of the entry itself, we would destroy the very essence of the entry and render the entire incentive nugatory. If the intention of the policy makers was to confine the benefits of the export incentives to parts that can be used in bicycles, the description of various items in the said entry which can never be used on bicycles ought not to find place there. There was thus a clear mismatch between the heading and the main entry itself.
+ We are conscious that Entry 242 was flanked by several entries which referred to bicycles and parts of bicycles. Nevertheless, when the contents of the entry itself are sufficiently clear, have a wide import and apply to range of products and parts which have no relation to bicycles or its part, the interpretation sought to be given by DGFT in the clarificatory circular cannot be accepted.
+ A clarification cannot run counter to the plain interpretation of the provision and in guise of clarification, an entry cannot be amended. The power to amend an entry would be with the Government of India.
+ The impugned trade notice dated 14.12.2015 is quashed. The respondents shall not seek any recoveries of the export incentives granted to the petitioners under FPS and shall process further their applications for export benefits under MEIS in accordance with the provisions made therein.
(See 2016-TIOL-2576-HC-AHM-CUS)
