DGFT Cannot Amend Foreign Trade Policy; Can't Restrict The Benefit Of SHIS Scheme: Madras High Court

The Madras High Court has ruled that the Director General of Foreign Trade (DGFT), in exercise of its power to clarify the doubts regarding the interpretation of the Foreign Trade Policy (FTP), as formulated by the Central Government, cannot amend the very policy itself. The single bench of Justice N. Sathish Kumar noted that the FTP 2009-2014 provided for grant of Status Holder Incentive Scrip (SHIS), an export incentive, to the entire Plastic sector. The Court held that the DGFT cannot restrict the said incentive to the plastic products falling under a particular Serial Number under the ITC HS Classification, in the absence of any amendment in the FTP. The petitioner- M/s. Polyhose India Private Limited, is an exporter of Thermoplastic High Pressure Hoses and operates as a 100% Export Oriented Unit (EOU). The petitioner made an application before the respondent- the Additional Director General of Foreign Trade, seeking to avail the benefits of Status Holder Incentive Scrip (SHIS), in accordance with the Foreign Trade Policy (FTP) issued by the Government of India. The SHIS is an export incentive scheme, granting a status holder a Duty Credit Scrip. The application of the petitioner was rejected on the ground that the petitioner was operating as a 100% EOU. Against this, the petitioner filed a writ petition before the Madras High Court, seeking a direction to the respondent to issue the SHIS (Status Holder Incentive Scrip) in accordance with the Foreign Trade Policy. The petitioner- M/s. Polyhose India, submitted before the High Court that the petitioner being engaged in the plastic sector and being a status holder, was eligible for the benefit of SHIS. Therefore, the petitioner contended that the order passed by the respondent was in contravention of the law, particularly the FTP. The respondent/ Additional DGFT averred that the benefit of SHIS is restricted to plastic products which are classifiable under Headings 3901 to 3914, as specified under Notes in Chapter 39 of ITC HS Classification. It argued that since the products exported by the petitioner did not fall under the said Heading, it was not eligible for the benefit of SHIS. To this, the petitioner contended that there is no provision under the FTP which restricted the benefit of SHIS to plastic products falling under Headings 3901 to 3914. The petitioner argued that as per the FTP, the plastic sector is eligible for availing the benefit of SHIS and thus, the restriction placed by the respondent was beyond the provisions of FTP. The High Court observed that the application of the petitioner was rejected on the ground that it was a 100% EOU. However, it noted that before the High Court, the respondent had taken a fresh ground, contending that though the plastic sector is included in the Foreign Trade Policy, only certain category of plastic was eligible for the SHIS incentive. Perusing Para 3.16.4 of the Foreign Trade Policy 2009- 2014, the Court noted that as per Para 3.16.4(v), Status Holders engaged in the Plastic Sector are eligible for the Status Holders Incentive Scrip (SHIS). Further, the bench took into account that the respondent had issued a letter, contending that though plastic is included at Para 3.16.4(v) of FTP, only plastics falling under the Heading 3901 to 3914 were eligible for SHIS. The Court referred to Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act), which provides that the power to amend the foreign trade policy is only vested with the Central Government. The bench added that the power to amend the FTP has not been granted to the Director General of Foreign Trade (DGFT) under Section 6 of the FTDR Act, which deals with the functions of the DGFT. Further, it observed that as per Paragraph 2.3 of the FTP 2004-2009 and Paragraph 2.3 of the FTP 2009-2014, questions and/or doubts in respect of the interpretation of any provision of the Foreign Trade Policy would be referred to the DGFT, whose decision would be final and binding. The Court referred to the decision of the Delhi High Court in M/s.Yum Restaurants (I) Pvt. Ltd versus UOI (2015), where the High Court had ruled that though the DGFT is empowered to interpret the foreign trade policy, such powers can be exercised only when there is an ambiguity in the foreign trade policy. Further, the Delhi High Court had held that the DGFT cannot introduce new conditions and criteria under the guise of interpreting the policy as it would clearly amount to amending the provisions of the foreign trade policy. Hence, the Madras High Court ruled that the DGFT, in exercise of its power to clarify the doubts regarding the interpretation of the FTP, cannot amend the very policy itself. Thus, holding that the petitioner was entitled to the SHIS incentives as per Foreign Trade Policy, the Court allowed the writ petition and directed the respondent to grant...

DGFT Cannot Amend Foreign Trade Policy; Can't Restrict The Benefit Of SHIS Scheme: Madras High Court

Parina Katyal

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