Court’s decision
The Delhi High Court partly allowed a writ petition filed by an association of chilli exporters challenging the foreclosure of the Transport and Marketing Assistance scheme. The Court held that while the Central Government lacks statutory power under the Foreign Trade law to issue or withdraw export incentive schemes retrospectively, exporters cannot claim incentives for a period when no valid scheme was in operation. Consequently, the Court ruled that incentives under the revised scheme are payable only for exports effected between 09 September 2021 and 24 March 2022, and not for the earlier retrospective window sought to be enforced by exporters. The writ petition was accordingly partly allowed with directions to process eligible claims .
Facts
The Transport and Marketing Assistance scheme was originally introduced in 2019 to offset higher transportation costs incurred by exporters of specified agricultural products, including chillies. The scheme was extended from time to time and remained in force until 31 March 2021. Thereafter, there was a policy gap during which no incentive scheme operated between 01 April 2021 and 08 September 2021.
On 09 September 2021, the Central Government issued a revised scheme making incentives applicable for exports from 01 April 2021 to 31 March 2022, thereby giving the scheme retrospective effect. However, before exporters could fully avail the benefit, the Government issued a notification dated 25 March 2022 foreclosing the scheme with immediate effect, citing the need to revamp and redesign it. Chilli exporters challenged this foreclosure and the subsequent rejection of their representation by the Directorate General of Foreign Trade.
Issues
The core issues before the Court were whether the Central Government has the power under the Foreign Trade law to issue or withdraw incentive schemes retrospectively, whether exporters acquired vested rights to incentives for exports made during the retrospective period, and whether the doctrine of legitimate expectation could be invoked to claim benefits for exports made when no scheme was actually in force.
Petitioner’s arguments
The exporters’ association argued that the revised scheme, once notified, created enforceable rights for exports made from 01 April 2021 onwards and that these rights could not be taken away by a subsequent notification. It was contended that neither the provision empowering formulation of foreign trade policy nor the provision allowing its amendment authorises retrospective withdrawal. Relying heavily on Supreme Court precedent, the petitioners submitted that subordinate legislation cannot operate retrospectively unless expressly permitted by statute, and that exporters had altered their position relying on the representation held out by the revised scheme.
Respondents’ arguments
The Government opposed the petition, contending that formulation and withdrawal of export incentives is a policy matter involving complex economic considerations and must be accorded judicial deference. It was argued that no exporter could legitimately claim incentives for a period when no scheme was in existence, and that retrospective application of the revised scheme itself was legally questionable. The respondents also submitted that legitimate expectation cannot override public interest or bind the Government in economic policy matters.
Analysis of the law
The Court undertook a detailed examination of the Foreign Trade statutory framework and reiterated the settled principle that delegated legislation is prospective unless the parent statute expressly provides otherwise. It reaffirmed that while the Government has wide latitude in economic policy, this flexibility does not extend to retrospectively conferring or withdrawing benefits in the absence of legislative authority. At the same time, the Court emphasised that a benefit cannot vest during a period when no valid scheme existed in law.
Precedent analysis
Relying on authoritative Supreme Court judgments on foreign trade policy, the Court reiterated that the power to amend or rescind a policy does not imply the power to do so retrospectively. It followed binding precedent holding that vested rights under export incentive schemes crystallise only when the scheme is validly in force. The Court also discussed the doctrine of legitimate expectation, clarifying that it cannot operate as an independent legal right and must yield where statutory competence is absent.
Court’s reasoning
The Court reasoned that although retrospective withdrawal of export benefits is impermissible, the revised scheme itself could not have been lawfully applied to a period prior to its issuance. Since no incentive scheme existed between 01 April 2021 and 08 September 2021, exporters could not claim any vested right for that period. However, once the scheme was validly notified on 09 September 2021, exporters who effected exports thereafter acquired a legitimate entitlement which could not be defeated by the foreclosure notification. The foreclosure was therefore held inapplicable to claims arising during the lawful operation of the scheme.
Conclusion
The Delhi High Court partly allowed the writ petition and directed the authorities to process incentive claims of chilli exporters only for exports made between 09 September 2021 and 24 March 2022, subject to eligibility. Claims for exports made prior to 09 September 2021 were rejected. No costs were imposed.
Implications
This judgment strikes a balance between protecting exporters from unlawful retrospective policy changes and preventing windfall claims based on non-existent schemes. It reinforces statutory discipline in foreign trade policy-making and provides clarity on when export incentives legally vest. For exporters, the ruling underscores the importance of verifying the operative date of incentive schemes rather than relying on retrospective policy promises.
Case law references
- Director General of Foreign Trade v. Kanak Exports
Held that foreign trade policies and incentive schemes cannot be amended or withdrawn retrospectively in the absence of express statutory authority. - Union of India v. Asian Food Industries
Reiterated that export prohibitions and incentives under foreign trade law operate prospectively. - Balco Employees’ Union v. Union of India
Recognised judicial restraint in reviewing economic policy while affirming limits of statutory power.
FAQs
1. Can export incentive schemes be withdrawn retrospectively?
No. The Delhi High Court reaffirmed that retrospective withdrawal of foreign trade incentives is impermissible without clear statutory authority.
2. Are exporters entitled to incentives for periods when no scheme existed?
No. Exporters cannot claim incentives for periods when no valid scheme was in force, even if a later notification purports to apply retrospectively.
3. What period are chilli exporters entitled to claim incentives for in this case?
Only for exports effected between 09 September 2021 and 24 March 2022, subject to eligibility conditions.
