Can Exporters Claim Benefits Under Vishesh Krishi Upaj Yojna? No, Says Supreme Court

Introduction

The Supreme Court of India recently addressed the eligibility of exporters to claim benefits under the Vishesh Krishi Upaj Yojna (VKGUY) in the case of M/S. NOLA RAM DULICHAND DAL MILLS & ANR. vs UNION OF INDIA & ORS. The Court dismissed the appeals challenging a circular issued by the government, which clarified the eligibility criteria for benefits under the scheme. This ruling has significant implications for exporters and the interpretation of foreign trade policies in India.

Case Background

The case arose from a challenge to a circular issued on January 21, 2009, which was claimed to be contrary to the Foreign Trade Policy (FTP) 2004-2009. The FTP, established under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992, provides various schemes to incentivize exports. The Vishesh Krishi Upaj Yojna was designed to promote the export of agricultural products, including fruits, vegetables, and dairy products.

In the original scheme notified for the year 2005-06, certain exports were excluded from duty credit entitlement. However, the scheme was amended in 2006 to include additional exclusions, particularly for exports made by units classified as Export Oriented Units (EOUs) and Special Economic Zones (SEZs).

The appellant, M/S. NOLA RAM DULICHAND DAL MILLS, engaged in the manufacturing and trading of Guar Gum and related products, argued that the circular was contrary to the FTP and sought to quash it. They contended that the scheme had statutory force and could not be modified by an executive circular.

What The Lower Authorities Held

The High Court of Rajasthan dismissed the writ petition filed by the appellant, affirming that the circular did not contravene the FTP. The court held that the government had the authority to clarify the scheme and that the circular merely provided necessary clarifications regarding the eligibility of EOUs and SEZs under the VKGUY scheme.

The Court's Reasoning

The Supreme Court, while dismissing the appeal, emphasized that the circular issued on January 21, 2009, did not amend the original scheme but clarified existing provisions. The Court referred to Section 5 of the Foreign Trade (Development and Regulation) Act, which empowers the government to formulate and amend the foreign trade policy. The Court noted that the circular's purpose was to eliminate ambiguity regarding the eligibility of exporters who sourced goods from EOUs.

The Court also highlighted that the government has the right to amend or clarify policies related to foreign trade, especially in the interest of public policy. The ruling reiterated that the benefits under the VKGUY scheme are not available to exporters who source goods from EOUs, as these units are specifically excluded from the scheme.

Statutory Interpretation

The Court's interpretation of the Foreign Trade (Development and Regulation) Act, 1992, and the FTP was crucial in determining the legality of the circular. The Court underscored that the government retains the authority to specify which export products are eligible for benefits under the VKGUY scheme, as stated in Clause 3.8.5 of the scheme. This provision allows the government to make necessary adjustments to the policy in response to changing economic conditions.

CONSTITUTIONAL OR POLICY CONTEXT

The ruling is significant in the context of the government's policy decisions regarding foreign trade. The Court acknowledged that economic policies often require flexibility and adaptability, allowing the government to make decisions based on empirical evidence and public interest. The Court's reference to previous judgments established the principle that the government has the discretion to withdraw or modify incentives as part of its policy decisions.

Why This Judgment Matters

This judgment is pivotal for exporters and legal practitioners in the field of foreign trade. It clarifies the boundaries of eligibility for benefits under the VKGUY scheme and reinforces the government's authority to regulate foreign trade policies. The ruling serves as a reminder that exporters must be aware of the specific eligibility criteria outlined in the FTP and related circulars to avoid potential disputes.

Final Outcome

The Supreme Court dismissed all appeals, affirming the High Court's decision and upholding the validity of the circular issued on January 21, 2009. The Court's ruling emphasizes the importance of adhering to the established guidelines under the Foreign Trade Policy and the implications of sourcing goods from export-oriented units.

Case Details

• Case Title: M/S. NOLA RAM DULICHAND DAL MILLS & ANR. vs UNION OF INDIA & ORS.
• Citation: 2020 INSC 186
• Court: IN THE SUPREME COURT OF INDIA
• Bench: DEEPAK GUPTA, J. & HEMANT GUPTA, J.
• Date of Judgment: 2020-02-14