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Defaulters are subjected to penal action under Foreign Trade Development and Regulation Act, 1992 (for short, FTDR). By virtue of notification dated 30th March 2006 issued by the Director General of Foreign Trade (for short, DGFT), the petitioners were allowed to sell un- mutilated worn clothing in DTA to the extent of 15% of CIF value of imports made in the previous year. By notification dated 19.05.2010, this provision came to be deleted. The petitioners may not be eligible for sale of 15% of un- mutilated worn clothing after the date of notification dated 19.5.2010 but they were eligible for their past accrued entitlement for the period from 1.4.2009 to 18.5.2010. This is because the notification dated 30.03.2006 provided that the petitioners would be entitled to sell in DTA un-mutilated worn clothing to the extent of 15% of CIF value of imports made in the previous year. This was denied to the petitioners by the respondents. On 3.4.2013, the respondents issued a Circular along with the draft policy to regulate the functioning for worn clothing units in Special Economic Zone (for short, SEZ) and the same was circulated to all the Ministries including Ministry of Textile, Ministry of Environment, Ministry of Finance and to the stakeholders. After considering the feedback from all the concerned, the respondents framed a policy dated 17.9.2013 wherein it was prescribed that in addition to achieving NFEE, the petitioners will be required to make physical exports out of India to the extent of 40% at the end of second year, 80% at the end of fourth year and 100% at the end of fifth year and thereafter, 100% every year of their total turnover. Apart from this condition, the units were shown to be entitled to sell their un- mutilated worn clothing being export surplus and export rejects to the extent of 15% of their FOB value of their exports. After issue of policy dated 17.9.2013, the LOA of the petitioners were renewed in December, 2013, wherein all the conditions of their policy were inserted. The petitioners agreed to the terms and conditions in its totality. On 30th January, 2014, the respondents unilaterally, arbitrarily deleted the portion of entitlement of selling of un-mutilated worn clothing C/LPA/694/2017 CAV ORDER being export surplus and export rejects in DTA on payment of applicable duties and accordingly renewed LOA issued to the petitioners in May, 2014 directing the petitioners to accept the terms and conditions. The petitioners accepted the terms and conditions subject to outcome of this petition that they had filed and which is being disposed of.

4.3 The learned Single Judge, in the judgment so impugned, held as under:

"19. This Court has gone through the entire record of the case and having heard the learned advocates for the respective parties. The definition of export given in Section 2(m) of the Act says that the exports can be physically or otherwise. For this purpose, Rule 53 provides number of transactions which are considered to be deemed export for the purpose of calculation of NFEE and to discharge of export obligation of the petitioners. Even in the policy dated 17.9.2013, the respondents have provided that the petitioners will be allowed to sell un-mutilated worn clothes, being export surplus and export rejects on payment of applicable duty to the extent of 15% of FOB value of their exports. The unilateral withdrawal of 15% from retrospective effect may not be justified. This industry is providing large employment to unskilled workers in the local area and phasing them out will result in loss of employment of about 12,000 workers. One of the key motive of establishment of SEZ is to generate maximum employment, which would be defeated if their LOAs are not renewed.
27. In regard to the past accrued entitlement, it is abundantly clear to this Court that the petitioners were entitled for the DTA sales of un-mutilated worn clothing being export surplus and export rejects on payment of applicable duties to the extent of 15% of their CIF value for their imports made in previous year i.e. from 1.4.2009 to 18.5.2010 and for the unutilized DTA entitlement as on 19.5.2010. If this is not allowed to them then it will be promissory estoppal on part of the Government. Had the respondents allowed past accrued entitlement of 15% at the relevant time, the petitioners would have cleared the same at the valuation norms prevalent prior to withdrawal of this 15% vide notification dated 19.5.2010.
Period Minimum Physical Export Obligation At the Not less than 40% of the total annual end of turnover 2 year nd At the Not less than 80% of the total annual end of 4th turnover year At the 100% of the total annual turnover end of 5th year The unit will be required to continue physically export 100% of their annual turnover, thereafter. Further the sales to DTA of un-mutilated clothing on account of export surplus or export rejects will not exceed 15% of the physical export turnover of the unit.