Last month, the Gujarat high court, in the case of Alstom India Vs Union of India and Another [2014-TIOL-223-HC-AHM-EXIM], held Para 8.3.6 of the Handbook of Procedures, Vol. 1 (HOP), by which the Customs and Central Excise Duty Drawback Rules, 1995, had been adopted, breached the Foreign Trade Development & Regulation (FTDR) Act, 1992.
The said Act, it said, had not conferred this power upon the Director General of Foreign Trade (DGFT). Only the central government could, in exercise of its power under Section 19 of the FTDR Act, issue the appropriate notification and make appropriate rules for enforcing the Act's provisions. In the process, it may make rules similar to the ones indicated in the Customs and Central Excise Duty Drawback Rules, said the judgment.
The Alstom case related to deemed export benefits for supplies to non-mega power projects. The Foreign Trade Policy (FTP) did not allow refund of terminal excise duty against such supplies. Some deemed exporters got around the problem by claiming the terminal excise duty on such supplies by way of drawback on duties paid for the inputs which go into making a power plant. Some Regional Licensing Authorities (RLAs) granted drawback based on a DGFT Policy Circular issued in 2001. On March 15, 2011, the Policy Interpretation Committee held such payments were incorrect and stopped these. The deemed exporters were asked to give back the drawback so obtained. Alstom India challenged the decision before the HC.
The court further held the power to frame Duty Drawback Rules under the FTDR Act could be legislated by the central government only, in exercise of power conferred under Section 19 in the manner prescribed under the Act. It could not be delegated to DGFT, as expressly prohibited by Section 6(3). The court said any attempt by the executives to legislate without the authority of law was a breach of Article 246 of the Constitution of India.
Whether DGFT was in fact legislating or merely prescribing the procedures for grant of duty drawback or recovery if granted erroneously, in exercise of his legitimate powers to prescribe the procedures, is a moot point that deserves closer scrutiny. The commerce ministry should put that point in appeal before the Supreme Court.
email: tncr@sify.com
The said Act, it said, had not conferred this power upon the Director General of Foreign Trade (DGFT). Only the central government could, in exercise of its power under Section 19 of the FTDR Act, issue the appropriate notification and make appropriate rules for enforcing the Act's provisions. In the process, it may make rules similar to the ones indicated in the Customs and Central Excise Duty Drawback Rules, said the judgment.
The Alstom case related to deemed export benefits for supplies to non-mega power projects. The Foreign Trade Policy (FTP) did not allow refund of terminal excise duty against such supplies. Some deemed exporters got around the problem by claiming the terminal excise duty on such supplies by way of drawback on duties paid for the inputs which go into making a power plant. Some Regional Licensing Authorities (RLAs) granted drawback based on a DGFT Policy Circular issued in 2001. On March 15, 2011, the Policy Interpretation Committee held such payments were incorrect and stopped these. The deemed exporters were asked to give back the drawback so obtained. Alstom India challenged the decision before the HC.
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The court held the FTDR Act does not grant power to DGFT or its subordinates to redetermine or reverify the deemed export benefits if these were approved or granted as in the provisions of the said Act, except by way of review as provided in Section 16. In the absence of any power under the Act, the DGFT or subordinates cannot assume quasi-judicial power. For instance, the power to redetermine or reverify under the administrative guidelines i.e. Para 7 of the ANF-8 Form. Therefore, by virtue of the latter, DGFT is deriving the quasi-judicial power, which was beyond the Act's provisions, said the judgment.
The court further held the power to frame Duty Drawback Rules under the FTDR Act could be legislated by the central government only, in exercise of power conferred under Section 19 in the manner prescribed under the Act. It could not be delegated to DGFT, as expressly prohibited by Section 6(3). The court said any attempt by the executives to legislate without the authority of law was a breach of Article 246 of the Constitution of India.
Whether DGFT was in fact legislating or merely prescribing the procedures for grant of duty drawback or recovery if granted erroneously, in exercise of his legitimate powers to prescribe the procedures, is a moot point that deserves closer scrutiny. The commerce ministry should put that point in appeal before the Supreme Court.
email: tncr@sify.com