DIRECTOR GENERAL OF FOREIGN TRADEANDANR. v. M/S. KANAKEXPORTSANDANR.

112Copy pinpoint112. We have referred to such material in detail while upholding the contention of the Union that Notifications were issued in public interest to ensure that their misuse is not allowed. To recapitulate, the inquiry conducted by the Government revealed that there were exports of rough diamonds even though India is not a rough diamond producing country. These exports stopped the moment DFCE benefits in respect of rough diamond were disallowed. It was also found that cut and polished diamonds were imported, stored inside a bond and re-exported with artificial value addition. Many of these exporters exported to their own counterparts in Dubai and Sharjah and when this consignments reached those H

408 SUPREME COURT REPORTS [2015] 15 S.C.R.

A destinations, they were declared as scrap to avoid import duty. Following statistics given by the Government in respect of so- called exports by these exporters makes out startling · revelations: Growth exceeding 2000% for two petitioners came from 100% 8 export of gold coins and plain jewellery Firm Turnover Turnover % Share of Gold 2002-03 2003-04 Growth coins and Plain jewellery in c total exports Rajesh 112 2372 2017 100 Exports, Bangalore Kanak 27 1070 3816 100 D Exports, Mumbai

For M/s Adani Exports. over 80% of export turnover came for E diamonds and Supplies from status holders not meeting the minimum turnover and growth criteria

Adani Exports Limited, Ahmedabad Exports (crores)

.F Total exports for the year 2003-04 of 4657 which

DIRECTOR GENERAL OF FOREIGN TRADE AND ANR. v. 409 M/S. KANAK EXPORTS AND ANR. [A. K. SIKRI, J.]

Export surge of 1135% for M/s. Adani Exports came in A 2003-04 while.for the past six years their exports were declining.

Export Tumover \in crores¹

~lr.tt':1.1~l!..ll B -·-.-.. ---·· ~~~~~~~~"'"' j_ --· ~\ ..

-- --··--------- It is pertinent to note that except the above mentioned persons no other exporter in the country has challenged the said Notifications or the Public Notices dated January 28, 2004 and April 21, 2004 respectively. It was also brought to the notice of the DGFT that some of the exporters have procured rough diamonds from local firms and exported the same by a 5% loss as they were confident of· covering up the loss by receiving the 10% DFCE incentives offered by the Government. All these aspects are discussed in much details earlier and need not be repeated. We would like to recapitulate the following stark features/practices which have surfaced on record as a result of investigation:

113Copy pinpoint113. Mr. Adhyaru has successfully demonstrated that the following methods were found to be .resorted to by these exporters to inflate their export turnovers:- (i) Export of rough diamonds even though India is not a rough diamond producing country. These exports stopped the moment DFCE benefits were disallowed. H

410 SUPREME COURT REPORTS [2015] 15 S.C.R.

A Export of such rough diamonds earlier has never been part of the normal commercial operations and has taken place just to take advantage of the Scheme. According to Gems and Jewellery Export Prorryotion Council, "India is not a rough exporting country. Rough 8 diamonds which are unsustainable for cutting in India are re- exported." Such exports stopped the moment benefit was explicitly withdrawn. (ii) In the present case also the respondent M/s Adani c Exports Limited had stopped exporting the rough diamonds the moment the Notification was issued in January, 2004 and according to Gems and Jewellery Export Promotion Council, "Party has not exported rough diamonds during January/March 2004". D (iii) Cut and polished diamonds were imported, stored inside a bond and re-exported with artificial value addition. Few large firms including the petitioners exported these products to buyers directly related to them. E (iv) According to reliable information the same sets of diamonds were rotating and these never entered the Indian domestic territory or to the end consumer$ abroad. The value of such exports in the past two years may exceed Rs. 15,000 crores. Government has detailed report of the modus operandi F of the firms involved. (v) Most notorious misuse of the Scheme was carried out by few firms who exported Gold medallion and studded jewellery. Key firms included M/s. Kanak Exports, M/s. Rajesh Exports Ltd. and M/s. Adani Exports Ltd. G (vi) Many of these exporters exported to their own counterparts in Dubai and Sharjah. Since the jewellery attracted 5% import duty at Dubai, the consignments which were declared as jewellery in India were declared as scrap in H Dubai to avoid the import duty.

DIRECTOR GENERAL OF FOREIGN TRADE AND ANR. v. 411 M/S. KANAK EXPORTSANDANR. [A. K. SIKRI, J.]

(vii) As it was difficult for them to achieve the value A addition prescribed by the Policy through craftsmanship, they added extra gold to get the value addition. However, in this process strangely enough per unit price of the gold exported was less than per unit price of gold imported. B (viii) Few exporters including petitioners have purchased exports of other firms to inflate their turnover. Contracts have been signed between the petitioners and other exporters that petitioner will provide marketing and other services and act as third party exporter. According to reports status-holders c were purchasing exports made by other parties at a premium with a view to show incremental growth of 25% or more in exports without having actually achieved such growth. 114, In such a scenario, a sagacious approach with practical sense leads us to conclude that these writ petitioners/ D exporters had actually achieved the targets set down in the original Scheme and thereby acquired any "vested right". It was pernicious and blatant misuse of the provisions of the Scheme and periscopic viewing thereof establishes the same. Thus, the impugned decision reflected in the notifications dated E April 21 and 23, 2004, did not take away any vested right of these exporters and amendments were necessitated by over- whelming public interest/ considerations to prevent the misuse of the Scheme. F Therefore, we are of the opinion that even when impugned Notification issued under Section 5 could 'not be retrospective in nature, such retrospectivity have not deprived the writ petitioners/exporters of their right inasmuch as no right had accrued in favour of such persons under the Scheme. G This Court, or for that matter the High Court in exercise of its writ jurisdiction, cannot come to the aid of such petitioners/ exporters who, without making actual exports, play with the

412 SUPREME COURT REPORTS (2015) 15 S.C.R.

A provisions of the Scheme and try to take undue advantage thereof. To this extent, direction of the Bombay High Court granting these exporters benefit of the Scheme for the past period is set aside.

115Copy pinpoint115. One incidental issue remains to be discussed. This pertains to imposition of fee sought to be levied by Public Notice No. 18 dated July 24, 2003. The exporters are right in their submission that fee could not be imposed by a Public Notice and it was necessary to have recourse to Section 5 of c the Act to impose such a fee. Notification dated July 24, 2003 insofar as it relates to imposition of fee is.. therefore, set aside.

116Copy pinpoint116. Thus, appeals and transfer cases stand disposed of in terms of aforesaid answers provided by this Court to the various questions formulated. To put it precisely, the effect of the aforesaid discussion would be to uphold the decision of the Gujarat High Court, though on different grounds, thereby dismissing the appeals of the exporters against the said judgment except to the extent indicated in para 114 above while the appeals of the Government are allowed. Likewise, appeals of the Union of India against the judgment of the Bombay High Court are allowed to the aforesaid extent and the appeals of the exporters/writ petitioners are dismissed. · Writ Petition (Civil) No. 27 of 2008 F Transfer Case (Civil) No. 32 of 2007 Transfer Case (Civil) No. 33 of 2007 Transfer Case (Civil) No. of 2015 (arising out of Transfer Petition (Civil) No. 568 of 2014)

117Copy pinpoint117. For the reasons mentioned in Transfer Petition G (Civil) No. 568 of 2014, the same is allowed and LPANo. 290 of 2007, entitled 'Union of India & Ors. v. Mis. We/spun India Limited', pending in the High Court of Gujarat atAhmedabad is transferred to this Court. Since the challenge laid in the case

DIRECTOR GENERAL OF FOREIGN TRADE AND ANR. v. 413 M/S. KANAK EXPORTS AND ANR. [A. K. SIKRI, J.]

is identical with that involved in the rest of the batch matters, summoning of the records of the case is dispensed with and the matter is heard on the basis of the record already available before the Court.

118Copy pinpoint118. In these cases, challenge is to the constitutional 6 validity of para 3.7.8 of the EXIM Policy 2004-2009 as well as Notification No. 48/2005 dated February 20, 2006 and Notification No. 8/2006 dated June 12, 2006 by which certain amendments in the aforesaid EXIM Policy were made. Though it involves a different Scheme, known as 'Target·Plus c Scheme', since the provisions and amendments are again primarily challenged on the ground that these amendments are given retrospective effect from April 01, 2005, these matters were also analogously heard with the other batch of cases which have already been dealt with above. D

119Copy pinpoint119. As already noted above, the Government had announced EXIM Policy 2004-2009. In this Policy various schemes _and incentives to promote exports were promulgated. One such scheme was known as 'Target Plus Scheme' (TPS) for the aforesaid period of EXIM Policy, i.e. E April 2004 to March 2009. This TPS was contained in para

3. 7 of the said EXIM Policy and reads as under: "3.7 TARGET PLUS SCHEME

3. 7 .¹ Objective F

The objective of the scheme is to accelerate growth in exports by rewarding Star Export Houses who have achieved a quantum growth in exports. High performing Star Export Houses shall be entitled for G a duty credit based on incremental exports, substantially higher than the general annual export target fixed (Since the target fixed for 2005-06 is 17%, the lower limit of performance for qualifying for rewards is pegged at 20% for the current year). H

414 SUPREME COURT REPORTS [2015] 15 S.C.R.

A 3. 7.² Eligibility Criteria All Star Export Houses (including Status Holders as defined in Para 3. 7.².¹ of Exim Policy 2002- 07) which have achieved a minimum export turnover in free foreign exchange of Rs.10 crores in the previous licensing year are eligible for consideration under the Target Plus Scheme. 3.7.3 Entitlement The entitlement under this scheme would be c contingent on the percentage incremental growth in FOB value of exports in the current licensing year over the previous licensing year, as under:

D r~~~nrage incremenraJ growth Duty Credit Entitlement (as a% of the incremental growth) /

20% and above but below 5%

~or above 25% but below 10% E 100%

I 100% and above 15% (of 100%)

Note: ( 1) Incremental growth beyond 100% will not qualify for computation of duty credit entitlement. (2) For the purpose of this scheme, the export performance shall not be transferred to or transferred from any other exporter. In the case of third party exports, the name of the supporting manufacturer/manufacturer exporter shall be declared. (3) Exporters shall have the option to apply for benefit either under the Target Plus Scheme or H

DIRECTOR GENERAL OF FOREIGN TRADE AND ANR. v. 415 M/S. KANAK EXPORTSANDANR. [A. K. SIKRI, J.]

under the Vishesh Krishi Upaj Yojana, but not both in respect of the same exported product/s. Provided that in calculating the entitlement under Para 3.7.3 the total eligible exports shall be taken into account for computing the percentage incremental growth but the duty credit entitlement shall be arrived at on the eligible exports reduced by the amount on which the benefit is claimed under para3.8.². (4) All exports including exports under free shipping c bill verified and authenticated by Customs and Gems & Jewellery shipping bills but excluding exports specified under para 3. 7 .5, shall be eligible for benefits under the Target Plus Scheme. (5) In respect of export of Cut & Polished diamonds D only those shipments would be taken into account for computation of eligible exports under the scheme where a minimum of 10% value addition has been achieved. E 3.7 .4 Applicant Companies Cc;:impanies which are Star Export Houses as well as part of a Group company shall have an option to either apply as an individual company or as a Group based on the growth in the Group's turnover as a F whole. (For the purpose of this scheme the definition of Group Company as given in Chapter 9 will be applicable. Furthermore, only such companies of the Group as are Star Export Houses will be considered). G

If a Group company chooses to apply based on the export of one or more of its individual Star Export House companies, the entitlement would be H

416 SUPREME COURT REPORTS [2015] 15 S.C.R.

A calculated considering the export performance of the applicant company during the previous licencing year and current licencing year. It shall be necessary that the adjusted export performance of all the Star Export House companies of the Group during the B current licencing year does not fall below the combined performance of all Star Export House companies of the Group in the previous licencing year.

c In case the Group chooses to apply based on the overall growth in Group's turnover (i.e. the turnover of all the Star Export House companies), any one of the Star Export House companies of the Group may file an application on behalf of all the Star Export D House companies of the Group. 3.7.5 The following exports shall not be taken into account for calculation of export performance or for computation of entitlement under the scheme:

E (a) Export of imported goods covered under Para 2.35 of the Foreign Trade Policy or exports made through transshipment. (b) Export turnover of units operating under SEZ/ EOU/EHTP/STPl/BTP Schemes or products manufactured by them and exported through OTA units. (c) Deemed exports (even when payments are received in Free Foreign Exchange and payment is made from EEFC account). (d) Service exports. (e) Rough, uncut and semi polished diamonds and other precious stones. H

DIRECTOR GENERAL OF FOREIGN TRADE AND ANR. v. 417 M/S. KANAK EXPORTSANDANR. [A. K. SIKRI, J.]

(f) Gold, silver, platinum and other precious metals A in any form, including plain and studded Jewellery. (g) Export performance made by one exporter on behalf of another exporter. 3.7.6 Imports allowed B The Duty Credit may be used for import of any inputs, capital goods inclCJding spares, office equipment, professional equipment and office furniture provided the same is freely importable under ITC (HS) Classification of Export and Import c items, for their own use or that of supporting manufacturers as declared in 'Aayat Niryaat Form'. Import of agricultural Products listed in Chapter 1 to 24 of ITC (HS) Classification of Export and Import items except the following shall be allowed: D (i) Garlic, Peas and all other Vegetables with a Duty of more than 30% under Chapter 7 of ITC (HS) Classification of Export and Import items. (ii) Coconut, Areca Nut, Oranges, Lemon, Fresh E Grapes, Apple and Pears and all other fruits with a Duty of more than 30% under Chapter 8 of ITC (HS) Classification of Export and Import items. (iii) All spices with a Duty of more than 30# under F Chapter 9 of ITC (HS) Classification of Export and Import items (except Cloves). (iv) Tea, Coffee and Pepper as per Chapter 9 of ITC (HS) Classification of Export and Import Items. (v) All Oil Seeds under Chapter 12 of ITC (HS) G Classification of Export and Import Items. Further, Natural Rubber as per Chapter 40 of ITC (HS) Classification of Export and Import items shall also not be allowed for import under the Scheme. H

418 SUPREME COURT REPORTS [2015] 15 S.C.R.

A Import of all edible oils classified under Chapter 15, shall be allowed under the scheme only through STC and MMTC.

3. 7. 7 Cenvat/Drawback

B Additional customs duty/excise duty paid in cash or through debit unde(J"arget Plus shall be adjusted as CENVAT Credit or Duty Drawback as per rules framed by the Department of Revenue. 3.7.8 Special Provision c Government reserves the right in public interest, to specify from time to time the category of exports and export products, which shall not be eligible for calculation of incremental growth/entitlement. D Further the Government shall have the right to change the eligibility criteria and rate of entitlement under the scheme effective from the date of notification of this policy. E Similarly, Government may from time to time also notify the list of goods, which shall not be allowed for import un_der the duty credit entitlement certificate issued under the scheme.

120Copy pinpoint120. Provisions relating to star export houses were F contained in para 3.5 of Chapter 1A of the said Policy, which enumerated the Status Category as well as the privileges which were to be enjoyed by these star export houses. Said para 3.5 is as under: G "3.5 STAR EXPORT HOUSES 3.5.¹ Star Export House Merchant as well as Manufacturer Exporters, Service Providers, Export Oriented Units (EOUs) H and Units located in Special Economic Zones

DIRECTOR GENERAL OF FOREIGN TRADE AND ANR. v. 419 M/S. KANAK EXPORTS AND ANR. [A. K. SIKRI, J.]

(SEZs), Agri Export Zone (AEZ's), Electronic A Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and Bio Technology Parks (BTPs) shall be eligible for applying for status as Star Export Houses. B 3.5.² Status Category The applicant shall be categorized depending on his total FOB/FOR export performance during the current plus the previous three years: c Performance Category (Rupees in Crores) One Start Export House 15 Two Star Export House 100 D Three Star Export House 500 Four Star Export House 1500 Five Star Export House 5000

E Note: 1. Manufacturer exporters in Small Scale Industry/Tiny Sector/Cottag.e Sector, Units registered with KVICs/KVIBs, Units located in North Eastern States, Sikkim and J&K, Units exporting handloom/handicrafts/hand knotted or silk carpets, F exporters exporting to countries in Latin America/ CIS/sub-Saharan Africa as listed in Appendix-9, units having ISO 9000 (series)/ISO 14000(series)/ WHOGMP/HACCP/SEI CMM level-II and above status granted by agencies listed in Appendix-6, G exports of services and exports of agro products shall be entitled for double weightage of exports made for grant of Start Export House status.

420 SUPREME COURT REPORTS [2015] 15 S.C.R.

A 2. Exports made on re-export basis shall not be counted for the purpose of recognition.

3. Exports made by a subsidiary of a limited company shall be counted towards export performance of the limited company for the purpose B of recognition only if the limited company has a majority share holding in the subsidiary company.

4. lri case the recognition is claimed based upon the current year's export performance, same shall c be considered only in case the exporter has export performance during any one of the preceding three years as well. 3.5.².¹ Privileges D A Star Export House shall be eligible for the following facilities: (i) Licence/certificate/permissions and Customs clearances for both imports and exports on self- declaration basis; E (ii) Fixation of Input-Output norms on priority within 60days; (iii) Exemption from compulsory negotiation of documents through banks. The remittance, F however, would continue to be received through banking channels; (iv) 100% retention of foreign exchange in EEFC account; G (v) Enhancement in normal repatriation period from 180 days to 360 days; (vi) Entitlement for consideration under the Target Plus Scheme; and H

DIRECTOR GENERAL OF FOREIGN TRADE AND ANR. v. 421 M/S. KANAK EXPORTS AND ANR. [A. K. SIKRI, J.]

(vii) Exemption from furnishing of Bank Guarantee A in Schemes under this Policy."

121Copy pinpoint121. Chapter 3 of the EXI M Policy mentions various 'promotional measures' and in para 3.².5 thereof, it contained, inter a/ia, procedure for availing the benefit underTPS. Among 8 other things, it was stipulated that the last date for filing of such applications shall be 31st of December and that the duty credit certificate shall be valid for a period of twenty four months from the date of issue, with a clear stipulation that revalidation of duty credit entitlement certificate shall not be allowed. c

122Copy pinpoint122. As is clear from the aforesaid provisions of TPS, the Central Government had announced an export incentive scheme under which star export houses were entitled to a duty free entitlement certificate at varying rates, depending on the quantum of incremental growth in exports achieved by them over their exports in the previous year. In terms of para 3.7.6, the Central Government issued Notification No. 32/2005 dated April 08, 2005 whereby it notified the duty credit of TPS which could be availed of in the course of import of any inputs, capital goods, including spares, office equipment, professional equipment and office furniture, provided the same is freely importable under the ITC (HS) classification of export and import items for their own use and that of supporting manufacturers, as declared· in the application 170. The F exporters in these cases claim that relying on the aforesaid Scheme, they ensured that they achieved incremental exports.

123Copy pinpoint123. Thereafter, however, the Central Government, in exercise of powers conferred by Section 5 of the Act issued Notification bearing No. 48 (RE 2005)/2004-2009 dated G February 20, 206. Vide this Notification, the Government amended the list of exports enumerated in para 3. 7 .5 of the FTP thereby excluding the exports of all types of forms of petroleum products covered under ITC (HS) codes 2706-2715 H

422 SUPREME COURT REPORTS [2015] 15 S.C.R.

A for the purpose of calculation of TPS and computation of its entitlement. This amendment was made effective from April 01, 2005 in respect of exports effected during April 01, 2005 to March 31, 2006. The relevant portion of the said Notification, with which we are concerned, reads as under: B "6. In para 3. 7.5, the following shall be inserted after sub para 3.7.5(f) (g). Ores and Concentrates, of all types and in all forms. c (h) Cereals, of all types. (i) Sugar, of all types and in all forms. 0) Crude/Petroleum Oil & Crude/Petroleum based Products covered under ITC HS codes 2709 to D 2715, of all types and in all forms."

124Copy pinpoint124. It maybe recollected that in para 3.7.5, certain items are specified which are not to be taken into account for calculation of exports performance or for computation of E entitlement under the TPS. The effect of the aforesaid amendment was to exclude the aforementioned four items as well insofar as calculation of export performance or computation of entitlement under the TPS is concerned.

125Copy pinpoint125. Another amendment to the TPS was made vide F Notification No. 8(RE 2006)/2004-2009 dated June 12, 2006. It also pertained to the exports effected during April 01, 2005 to March 31, 2006. By this Notification, para 3. 7.3 was substituted by the following para: G 'The entitlement under this scheme would be contingent on the minimum percentage incremental growth of 20% in FOB value of exports in the current licensing year over the previous licensing year, and the rate of entitlement shall be 5% of the incremental H growth."

DIRECTOR GENERAL OF FOREIGN TRADE AND ANR. v. 423 MIS. KANAK EXPORTSANDANR. [A. K. SIKRI, J.]

126Copy pinpoint126. Original para 3. 7 .3, which is in respect of A 'entitlement' under the TPS mentioned that the said entitlement would be contingent on the minimum percentage incremental growth in FOB value of exports in the current licensing year over the previous licensing year. The percentage incremental growth was subsequently stipulated in the table provided under the said para. As per that, if the incremental growth was 20% and above to below 25%, duty credit entitlement provided was 5%. In case of incremental growth of 25% or above, but below 100%, the duty credit growth entitlement was to the tune of 10%. On incremental growth of 100% and above, duty credit entitlement stipulated was 15% (of 100%). However, byway of amendment, the minimum percentage incremental growth was specified as 20% in the FOB value of exports in the current year over the previous year and entitlement was made uniform D @ 5% of the incremental growth.

127Copy pinpoint127. These Notifications are challenged on the ground that these export houses had achieved the desired target by making necessary exports within the stipulated period, i.e. April 01, 2005 to March 31, 2006 and thus got vested right to avail the entitlement as contained in para 3.7.6, which could not be reduced to 5%. It was also submitted that the various items exported included all types of forms of petroleum products covered under ITC (HS) codes 2706-2715 and these items could not be excluded by the aforesaid amendment. In nutshell, submission was that by giving retrospective effect to the amendment, which was in any case impermissible, even the vested right of these exporters was taken away. It can, thus, be seen that the arguments on vested right and retrospectivity are the same and the counsel who appeared in these matters advanced identical legal submissions.

128Copy pinpoint128. We have already discussed these aspects in detail. To recapitulate, it is held by us that Section 5 of the Act . does not empower the Government to make amendments with H

424 SUPREME COURT REPORTS [2015] 15S.C.R.

A retrospective effect, thereby taking away the rights which have already accrued in favour of the exporters under the Scheme. No doubt, the Government has, otherwise, power to amend, modify or withdraw a particular Scheme which gives benefits to a particular category of persons under the said Scheme. B At the same time, if some vested right has accrued in favour of the beneficiaries who achieved the target stipulated in the Scheme and thereby became eligible for grant of duty credit entitlement, that cannot be snatched from such persons/ exporters by making the amendment retrospectively. In the C present case, we find that Section 5 of the Act does not give any specific power to the Central Government to make the Rules with retrospective effect. The Central Government is authorised to make Rules/Schemes under the said provision as a delegatee, which means that the EXIM Policy/Scheme 0 framed under the said provision is by way of delegated legislation. There has to be specific power to make the amendments with retrospective effect, which are lacking in the instant case. Moreover, even if there is such a power, it cannot E take away vested rights which have accrued in favour of particular persons/exporters. We have already enlisted number of judgments of this Court taking such a view. A few such cases laying down the aforesaid principle are: (i) Regional Transport Officer, Chittoor & Ors. v. F Associated Transport Madras (P) Ltd. &Ors. 20 (ii) Accountant General & Anr. v. S. Doraiswamy & Ors. 21 (iii) A.A. Calton v. Director of Education & Anr. 22 (iv) Chairman, Railway Board & Ors. v. C.R. G Rangadhamaiah & Ors. 23 20 sec 597 (1980) 4 21 sec 93 (1981) 4 22 c1983) 3 sec 33 H 23 (1997) 6 sec 626

DIRECTOR GENERAL OF FOREIGN TRADE AND ANR. v. 425 M/S. KANAK EXPORTS AND ANR. [A. K. SIKRI, J.]

129Copy pinpoint129. Keeping in view the aforesaid legal position, we A embark on the discussion relevant for the purposes of these cases, namely, pertaining to TPS.

130Copy pinpoint130. TPS, which was introduced in EXIM Policy 2004- 2009 on August 31, 2004, adopted some of the features of 8 the earlier Schemes in the EXIM Policy 2002-2007 and introduced the concept of Multi-Entitlement Rates, thus, allowing higher entitlement rates for higher growth. The Multi- Entitlement Rates depended upon the quantum of incremental growth achieved by particular exporters. As taken note of c above, the TPS prescribed three rates of entitlement based on growth. It shows that TPS was in the nature of a reward Scheme and was somewhat different from the earlier Schemes which seek to neutralize the duty paid by the exporter. It intended to accelerate growth in export by rewarding star export houses who have achieved a quantum growth in exports.

131Copy pinpoint131. Vide Notification No. 32/2005 dated April 08, 2005, the Central Government amended para 3. 7.8 and instead of three rates of entitlement based on growth, it prescribed one single rate, i.e. 5% of the incremental growth. In replies given by the Government, no cogent or valid reason is given for this move. Interestingly, comments are made about the misuse of earlier Scheme in the EXIM Policy 2002-2007 and the evidence that surfaced during the said investigation, particularly with respect to the alleged dubious practices adopted by some exporters who had inflated their turnover in respect of gold and diamond exports and it is mentioned that under these circumstances, for 'anticipating misuse', the Government came out with the aforesaid Notification. The amendment Notification G is justified. on the ground that in the Scheme itself it had· preserved the right to change the eligibility criteria and rate of entitlement effective from the beginning of the year, in public interest. Thus, the action is justified on the ground that such a H

426 SUPREME COURT REPORTS [2015] 15S.C.R.

A power was reserved in the TPS itself and that measure was taken to avoid misuse by unscrupulous exporters. Nowhere it is stated that there was misuse by any of these parties.

132Copy pinpoint132. Pertinently, it is also not denied that these petitioners/exporters had achieved the quantum/incremental 8 growth, as stipulated in the TPS, which made them eligible to get the rewards under the said Scheme. These exporters, therefore, had fulfilled the conditions contained in the TPS. The Scheme was floated to accelerate quantum growth in c exports and when those star export houses achieved the quantum growth in exports, as stated in para 3.7.3, they would naturally become entitled to a particular percentage of duty credit entitlement depending upon the quantum of growth achieved. These exporters, thus, got vested right to avail the o duty credit entitlement and achieve higher rate, i.e. 10% or 15%, as the case may be. Reducing the same to 5% would clearly amount to taking away their vested right with the issuing of the Notification and making them effective retrospectively.

133Copy pinpoint133. Likewise, no cogent explanation is coming forward for adding four items by amending para 3.7.5 vide Notification No. 48 (RE 2005)/ 2004-2009 dated February20, 2006. The only argument advanced at the time of hearing was that the Government felt that benefit of TPS should not be extended to the exporters of these items. That may be a policy decision and the Government is empowered to take such a decision. It may be noted that in para 3.7.5 of TPS, as was originally provided, certain items of exports were specifically mentioned. which were not to be taken into account for calculation of export performance or for computation of entitlement under the Scheme and the items now added vide Notification No. 48 (RE 2005)/2004-2009 dated February 20, 2006 were not mentioned therein. If the Government realised afterwards that export of these items should not have been given the benefit H

DIRECTOR GENERAL OF FOREIGNTRADEANDANR. v. 427 M/S. KANAK EXPORTSANDANR. [A. K. SIKRI, J.]

of TPS and extending the benefit to now excluded items was an ill-considered move, though the Cen'tral Government was free to withdraw it in .respect of such items but it could do so only prospectively, but was not entitled to do so with effect from the back date, i.e. April 01, 2005, by taking away the vested right that had already accrued in favour of exporters of these items.

134Copy pinpoint134. As a result, we hold that Notification No. 48/2005 dated February 20, 2006 and Notification No. 8/2006 dated June 12, 2006 cannot be applied retrospectively and they would c be effective only from the dates they were issued.

135Copy pinpoint135. Writ Petition (Civil) No. 27 of 2008, Transfer Case (Civil) Nos. 32 and 33 of 2007 (which were the writ petitions filed by exporters before the High Court) are, thus, allowed in the aforesaid terms. The Transfer Case arising out of Transfer D Petition (Civil) No. 568 of 2014, which was the writ appeal filed by DGFT before the High Court is dismissed thereby confirming the order of the Gujarat High Court allowing the writ petition filed by the exporter, namely, M/s. Welspun India Limited. E

Bibhuti Bhushan Bose Matters disposed of.