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Through: Mr. Tarun Gulati, Advocate with Ms. Shruti Sabarwal, Advocate.

CORAM :-

HON'BLE THE ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW A.K. SIKRI, Acting Chief Justice

1. This intra-appeal filed by the Union of India impugns the judgment dated 05.8.2010 rendered by the learned Single Judge of this Court in Writ Petition (Civil) No.2497 of 2008 filed by the respondents herein. By means of the said decision, the writ petition of the respondents has been allowed to a limited extent holding that the duties and entitlement of the respondent society will be computed on the basis stated in the judgment and the corresponding duty credit will be given to them by the appellants within a period of 12 weeks from the date of judgment. The dispute arose on the nature of entitlement, viz., the duty credit that may be used by the exporters earned by way of export incentive under the scheme called the Target Plus Scheme (TPS). Under the aforesaid TPS which was aimed at boosting the exports, it was decided to reward those exporters who achieved quantum growth in exports as per the target mentioned in the said scheme and were described as Star Export Houses. Certain percentage of incremental growth of FOB values of the exports were fixed as duty entitlement. The scheme further provided that these duty credits could be used for import of "any inputs, used capital goods including spares, office equipment, professional equipment and office furniture provided the same is freely importable under ITC (HS) Classification of Export and Import items, for their own use and that of supporting manufacturers................." It is the nature of these imports for which duty credit may be used has become the subject matter of contention. The learned Single Judge in the impugned judgment has given the detailed background of the scheme and the amendments made from time to time. It may not be necessary to restate all those in details. However, the relevant facts which touch upon the controversy that arises in the matter is the TPS was first introduced in the Foreign Trade Policy, 2004 announced in 01.9.2004. As per the said scheme:

12. In reply, it was submitted by Mr.A.S.Chandhiok, learned Additional Solicitor General (ASG) appearing for the Respondents, that the term "broad nexus‟ became necessary to be defined since otherwise a person exporting garments might end up importing automobile parts which could not have been used by such importer as either an input in manufacture by him or by an associate manufacturer. It is pointed out that the FTP does not use the expression "broad nexus‟ which appears in the HBP. However the term in the HBP cannot be dissociated from the words "input‟ and "use‟ in the FTP. The intended input must have a relationship with the export product. It is submitted that the condition of the broad nexus in para 3.2.5 (II) of the HBP was clarificatory of the terms "inputs‟ and "use‟ in the FTP and any interpretation so as to dissociate „inputs‟ from "use‟ in the exported goods would be contrary to the provisions of the FTP. The Law Ministry had therefore clarified that "the holder of Target Plus Scheme certificate is permitted to import an item under the Target Plus Scheme and get the same processed into possible resultant products only if the same has a "broad nexus‟ with the product group as input in the export product and is required to be used as an input in the product exported for which Target Plus Scheme benefit is sought. It also clarified that "the term „broad nexus‟ with the product group is in addition to and not in substitution of the words "inputs‟ and "own use‟ in para 3.7.6 of the Scheme". It is submitted that the subsequent circulars are all consistent with the above opinion of the Law Ministry.

23. The Circular dated 01.8.2006 was withdrawn by the DGFT vide letter dated 09.5.2007. Public Notice No.9 dated 21.6.2007 was issued deleting the words "for the purposes of import entitlements under this scheme, „broad nexus‟ would mean goods imported with reference to any of the product groups of the exported groups within the overall value of the entitlement certificate" form Para 3.2.5 of the HBP. Circular No.21/2007- Cus was issued by the Department finally clarifying the scope of "broad nexus" for the purposes of the Target Plus Scheme.

Thus it is clarified that in your case, you are permitted to import Almonds (dry fruits) under the Target Plus Scheme and get the same processed/converted from any processor of your choice into possible resultant product(s) before selling in the domestic market.

This clarification is issued with the approval of DG on file."

35. It was thus understood that the nexus has to be maintained that „product group‟, viz., the category of the products which is exported. If the import also falls in the same category/group, it would be allowable. In the aforesaid letter, in relation to the export in food, it was clarified that it would be „food category‟ with respect to which the exporter was required to maintain nexus. In that particular case, the exporter was exporting dry fruits, he was permitted to import almond which falls in the category of „dry fruits‟. Initially, when Public Notice NO.16 dated 04.6.2005 was issued replacing earlier Appendix 17D with new one in Para 10 thereof, "broad nexus" was explained to mean goods imported with respect to any product group of the exported goods within the overall value of entitlement certificate. Same meaning was assigned in Para 3.2.5 of the HBP amended on 08.4.2005. Thus, Circular dated 01.8.2006 of the DGFT was in tune with the aforesaid. It is only thereafter that another Circular dated 08.5.2007 was issued bringing the concept of „use‟ and „own used‟ contained in the Policy to associate the same with „input‟ and stating that the import was possible of those products only if the same had a „broad nexus‟ with the product group as an input with the export group and is required to be used as an input in the product exported by which TPS benefit is sought. On this basis, Public Notice No.21.6.2007 was issued a this was departure of earlier understating, the respondents naturally felt aggrieved against the same.