Legal principle

A policy circular ultra vires the FTDR Act—amending the FTP without a Section 5 notification—is a nullity once quashed and absent any stay, so all proceedings founded on it, including Section 28AAA duty recovery, must fall notwithstanding the availability of alternative statutory remedies.

Court decision

The Telangana High Court allowed the writ petition in favour of AGPL: it quashed Policy Circular No.06/2018 dated 22.05.2018, set aside the show cause notice dated 20.10.2023, the Order-in-Original dated 16.04.2024, the customs show cause notice dated 21.06.2024 and all consequential recovery proceedings, and directed refund of Rs. 2,95,66,263 with interest within four weeks, with no costs.

Facts

Adani Gangavaram Port Limited (AGPL), a port operator, was granted SEIS scrips under FTP 2015-2020 for FYs 2015-16 and 2016-17 on its foreign exchange earnings from integrated port and cargo-handling services, having subcontracted only tug/marine operations to third parties. After Policy Circular No.06/2018 dated 22.05.2018 retrospectively restricted SEIS eligibility to 'actual service providers', DGFT issued a Section 14 FTDR Act show cause notice (20.10.2023) and an unserved Order-in-Original (16.04.2024) cancelling the scrips, imposing a Rs. 50,00,000 penalty and ordering recovery of Rs. 1,81,24,518. The Commissioner of Customs, Kandla then issued a Section 28AAA Customs Act notice (21.06.2024) demanding duty of Rs. 2,09,67,102 with interest, penalty under Section 114AB, and proposed confiscation of goods imported against the scrips. The petitioner, which had already remitted Rs. 2,95,66,263 with 18% interest under protest, moved the High Court because all these actions rested on a Circular already quashed by the Bombay and Karnataka High Courts.

Key provisions

• Section 15, The Foreign Trade (Development and Regulation) Act, 1992 — Appeal.
• Section 5, The Foreign Trade (Development and Regulation) Act, 1992 — Foreign Trade Policy.
• Section 16, The Foreign Trade (Development and Regulation) Act, 1992 — Review.
• Section 14, The Foreign Trade (Development and Regulation) Act, 1992 — Giving of opportunity to the owner of the goods (including the goods connected with services or technology), etc.
• Section 11(5), The Foreign Trade (Development and Regulation) Act, 1992 — Contravention of provisions of this Act, rules, orders and foreign trade policy.
• Section 28AAA, Customs Act, 1962 — Recovery of duties in certain cases
• Section 108, Customs Act, 1962 — Power to summon persons to give evidence and produce documents