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100% export-oriented units which are not entitled to seek exemption cannot avail benefit indirectly


The judgment was pronounced by Hon’ble Justice DEEPAK GUPTA and HEMANT GUPTA

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. 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 2004-2009. The present is a case pertaining to “Vishesh Krishi Upaj Yojna” for giving incentives to promote export of fruits, vegetables, flowers, minor forest produce, dairy, poultry and their value added products.

Learned counsel for the appellant argued that the Scheme excludes the benefit of exports by units in Domestic Tariff Area pertaining to Focus Market Scheme 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. counsel for the appellants also argued that in Para, 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.

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. 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 Observed that, 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. 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. 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. The appellant is 100% export-oriented unit. Such export-oriented unit stands specifically excluded from the Scheme in Para, therefore, we do not find any merit in the present appeal. The same is dismissed.

Consequently, the Court dismissed the appeal.

–  Aarthy K



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