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ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 16.01.2026

Delhi High Court Strikes Down DGFT Circular related to Focus Product Scheme (FPS): A Victory for Exporters and Policy Transparency

This Article has been written by Shri Ravi Shekhar Jha, Advocate based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com or on his Mobile +91-9999005379.

On January 13, 2026, the High Court of Delhi delivered a significant judgment in favor of exporters, dismissing appeals filed by the Directorate General of Foreign Trade (DGFT) and upholding the decision of a learned Single Judge to strike down the DGFT Policy Circular dated October 21, 2011. This case, involving multiple appeals, revolved around the legality of the DGFT circular and its retrospective application, which had restricted the scope of export incentives under the Focus Product Scheme (FPS).

Background of the Case

The dispute originated from the Foreign Trade Policy (FTP) 2009-2014, which was issued under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act). The FTP provided export incentives under the Focus Product Scheme (FPS) to promote exports and increase foreign exchange earnings. Appendix 37D of the Handbook of Procedures (HBP), which was notified under the FTP, listed products eligible for FPS benefits. Serial No. 33 in Table 4 of Appendix 37D specifically mentioned “Technical Textiles – Woven Fabrics of Synthetic Filament Yarn” under ITC (HS) Code 5407 as eligible for FPS benefits.

However, the DGFT issued Policy Circular No. 42 (RE-2010)/2009-14 on October 21, 2011, which restricted FPS benefits to only 33 items listed in an annexure to the circular. This circular also applied retrospectively from April 1, 2011, effectively disqualifying many exporters who had already shipped products under the assumption that they were eligible for FPS benefits.

The Legal Challenge

The DGFT circular was challenged by several exporters, including Malik Tanning Industries, Good One Traders Pvt. Ltd., BRD International, High Value Exim Pvt. Ltd., Attire Designers Pvt. Ltd., and Welldone Exim Pvt. Ltd. These exporters argued that their products, described as “polyester printed-dyed texturized fabrics,” fell within the broad description of “woven fabrics of synthetic filament yarn” under ITC (HS) Code 5407 and were therefore entitled to FPS benefits as per the original provisions of the FTP and HBP.

The learned Single Judge of the High Court of Delhi upheld the challenge, striking down the DGFT circular on the grounds that it was not merely clarificatory but instead sought to restrict the scope of eligible products under the FPS. The DGFT appealed this decision, leading to the present case.

Key Issues in the Case

The appeals raised several critical legal questions:

Legality of the DGFT Circular: Did the DGFT have the authority to issue a circular that restricted the scope of products eligible for FPS benefits under the FTP and HBP?
Retrospective Application: Was the DGFT empowered to make the circular retrospectively applicable from April 1, 2011, thereby denying benefits to exporters who had already shipped products under the original provisions?
Interpretation of Serial No. 33 in Appendix 37D: Should the entry “Technical Textiles – Woven Fabrics of Synthetic Filament Yarn” be interpreted narrowly to include only the 33 items listed in the annexure to the circular?

The High Court’s Analysis 

The Division Bench of the High Court, comprising Justice, upheld the learned Single Judge’s judgment and dismissed the DGFT’s appeals. The court provided a detailed analysis of the case, addressing the key issues as follows:

DGFT’s Authority: The court emphasized that the power to frame the FTP under the FTDR Act rests solely with the Central Government. The DGFT’s role is limited to implementing the FTP and providing clarifications in case of ambiguities. The court found that the DGFT had overstepped its authority by issuing a circular that effectively amended the provisions of the FTP and HBP.
Retrospective Application: The court held that neither the Central Government nor the DGFT has the power to issue policies or amendments with retrospective effect. Citing the Supreme Court’s judgment in Union of India v. Asian Food Industries, the court reiterated that a vested or accrued right cannot be taken away by retrospective amendments.
Interpretation of Serial No. 33: The court agreed with the learned Single Judge that the entry “Technical Textiles – Woven Fabrics of Synthetic Filament Yarn” must be read as a whole. The DGFT’s interpretation, which focused solely on the term “technical textiles” and ignored “woven fabrics of synthetic filament yarn,” was deemed erroneous. The court noted that the products exported by the respondents clearly fell within the description of “woven fabrics of synthetic filament yarn” under ITC (HS) Code 5407 and were therefore entitled to FPS benefits.

Key Takeaways from the Judgment

The High Court’s judgment has several important implications for exporters and policymakers:

Clarifications vs. Amendments: The court made it clear that the DGFT cannot use clarificatory circulars to amend the provisions of the FTP or HBP. Any changes to the scope of export incentives must be made through proper amendments to the FTP or HBP, following due process.
Protection Against Retrospective Changes: Exporters are protected from retrospective changes to export incentive schemes, ensuring that their vested rights are not arbitrarily taken away.
Broad Interpretation of Policy Entries: The court emphasized the importance of interpreting policy entries in their entirety, rather than selectively focusing on specific terms. This ensures that the original intent of the policy is preserved.

Conclusion

The High Court’s decision to strike down the DGFT Policy Circular dated October 21, 2011, is a landmark judgment that upholds the rights of exporters and reinforces the principle that policy changes cannot be made retrospectively. By dismissing the DGFT’s appeals, the court has sent a strong message about the limits of administrative authority and the importance of adhering to statutory provisions.

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