Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation
Date: 11.05.2026
Delhi High Court Quashes Retrospective Restrictions on Export Incentive Scheme
This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email idΒ intelconsul@gmail.com . Β
The Delhi High Court recently delivered a significant judgment in the case of Indian Exporters Grievance Forum & Anr. vs. Union of India & Ors., addressing the legality of changes made to export incentive schemes through government circulars and notifications. This article provides a detailed overview of the case, its background, the legal arguments, and the court’s decision.
Background of the Case
- Petitioners: The Indian Exporters Grievance Forum, a registered society representing professional exporting firms and recognized export houses, challenged certain government circulars and notifications.
- Policy in Question: The dispute centered around the Target Plus Scheme (TPS), an export incentive scheme under the Foreign Trade Policy (FTP) effective from April 2004 to March 2006. TPS rewarded exporters achieving significant incremental growth in exports with duty credit entitlements.
- Contested Changes: The government issued circulars and public notices after the scheme period, restricting the use of duty credit to only those imports that were “inputs” used in the manufacture of exported goods, rather than allowing a broader range of imports as originally permitted.
Key Provisions of the Target Plus Scheme
- Objective: Accelerate export growth by rewarding high-performing export houses.
- Entitlement: Duty credit based on incremental export growth, with specific percentage slabs.
- Imports Allowed: Initially, duty credit could be used for importing any inputs, capital goods, office equipment, and furniture, provided they were freely importable.
- Restrictions Introduced: Later circulars narrowed the scope, requiring a “broad nexus” between imported goods and exported products, and eventually restricting imports to only those used as inputs in the exported goods.
Legal Arguments
Petitioners’ Submissions
- Retrospective Restriction: Petitioners argued that restricting import entitlements after exports had already occurred unfairly took away accrued benefits.
- Procedural Impropriety: Changes to the scheme should only be made through formal notifications under Section 5 of the Foreign Trade (Development & Regulation) Act, not via circulars or forms.
- Legitimate Expectation: Exporters planned their imports based on the original policy; sudden changes violated their legitimate expectations.
Respondents’ Submissions
- Clarification of Policy: The government contended that defining “broad nexus” was necessary to prevent misuse, ensuring imported goods were relevant to exported products.
- Policy Decision: Argued that the changes were policy decisions not subject to judicial review.
Court’s Analysis and Decision
Maintainability
- The court rejected the government’s objection to the petitioners’ locus standi, affirming their right to represent collective interests.
Scope of Judicial Review
- The court clarified it was not reviewing the policy itself, but the procedure used to change it.
Lawfulness of Procedure
- FTP Language: The court found that para 3.7.6 of the FTP did not restrict imports to only those used as inputs in exported goods; its language was broad.
- Power to Amend: Only the Central Government, not the DGFT or other authorities, could amend the policy via notification under Section 5 of the FTDR Act.
- Retrospective Effect: The restrictive circulars and notices were issued after exports had taken place, unfairly negating accrued benefits.
- Ultra Vires: The court held that the circulars and notices went beyond the FTP’s provisions and were ultra vires (beyond legal authority).
Final Orders
- The impugned circulars and notices were quashed.
- Duty entitlement for petitioners would be computed based on the original, broader interpretation of the scheme.
Implications for Exporters
- Policy Certainty: Exporters can rely on the announced policy without fear of retrospective changes through informal means.
- Legal Precedent: The judgment reinforces the requirement for formal amendments to trade policies, protecting exporters’ legitimate expectations.
Conclusion
This Delhi High Court judgment is a landmark in ensuring procedural fairness and legal certainty in India’s export incentive schemes. It underscores the importance of adhering to statutory procedures for policy changes and protects exporters from arbitrary, retrospective restrictions.
Connected Matter
Source: Delhi High Court
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