Case Note & Summary
The petitioner, Essar Shipping Limited, a company engaged in maritime transport services, challenged Policy Circular No.25 of 2007 dated 1st January, 2008 issued by the Director General of Foreign Trade (DGFT). The circular mandated that imported materials under the Advance Authorization Scheme must be actually used in the export product and prohibited deemed discharge of export obligation. The petitioner argued that the circular was ultra vires the Foreign Trade Policy 2004-2009 and the Foreign Trade (Development & Regulation) Act, 1992, as it imposed conditions not found in the policy or the Act. The respondents contended that the circular was a valid clarification. The court analyzed the provisions of the FTDR Act and the FTP, noting that the FTP provided for deemed discharge in certain cases. The court held that the DGFT's power to issue circulars is limited to implementing the policy and cannot override or amend it. The circular was found to be inconsistent with the FTP and therefore ultra vires. The court allowed the writ petition, quashing the circular to the extent it prohibited deemed discharge of export obligation.
Headnote
A) Administrative Law - Ultra Vires - Policy Circular - The DGFT issued a circular imposing additional conditions for discharge of export obligation under Advance Authorization Scheme, which were not found in the Foreign Trade Policy or the Act. The court held that such circular, being inconsistent with the parent policy and statute, is ultra vires and cannot be sustained. (Paras 1-30) B) Foreign Trade - Export Obligation - Deemed Discharge - The Foreign Trade Policy 2004-2009 provided for deemed discharge of export obligation in certain cases. The impugned circular sought to override this by requiring actual use of imported materials. The court held that the circular cannot override the policy provisions and is invalid. (Paras 10-25) C) Constitutional Law - Delegated Legislation - Power to Issue Circulars - The DGFT's power to issue policy circulars is limited to clarifying or implementing the policy, not to amend or add new conditions. The impugned circular exceeded this power and was struck down. (Paras 15-28)
Issue of Consideration
Whether Policy Circular No.25 of 2007 dated 1st January, 2008 issued by the Director General of Foreign Trade, which mandates that imported materials under Advance Authorization must be actually used in the export product and prohibits deemed discharge of export obligation, is ultra vires the Foreign Trade Policy 2004-2009 and the Foreign Trade (Development & Regulation) Act, 1992.
Final Decision
Writ petition allowed. Policy Circular No.25 of 2007 dated 1st January, 2008 is quashed to the extent it prohibits deemed discharge of export obligation under the Advance Authorization Scheme.
Law Points
- Doctrine of ultra vires
- Interpretation of exemption notifications
- Promissory estoppel
- Legitimate expectation
- Delegated legislation
- Power to issue policy circulars
