DGFT Can’t Curtail Export Incentives by “Clarificatory” Circular: Delhi HC

The Delhi High Court has dismissed a batch of appeals filed by the Directorate General of Foreign Trade (DGFT) and the Union of India, holding that the DGFT had no authority to restrict export incentives under the Focus Product Scheme (FPS) through a policy circular when the Foreign Trade Policy (FTP) and the Handbook of Procedures (HBP) clearly entitled exporters to such benefits. The bench of Justice C. Hari Shankar and Justice Om Prakash Shukla affirmed earlier single-judge rulings striking down DGFT Policy Circular No. 42 (RE-2010)/2009-14 dated 21 October 2011, which sought to limit FPS benefits for “Technical Textiles – Woven Fabrics of Synthetic Filament Yarn” to only 33 specified items. The controversy arose under the Foreign Trade Policy 2009–2014, which provided export incentives under the Focus Product Scheme for notified goods listed in Appendix 37D of the Handbook of Procedures.Serial No. 33 of Table 4 in Appendix 37D granted FPS benefits to “Technical Textiles – Woven Fabrics of Synthetic Filament Yarn”, classifiable under ITC (HS) Code 5407. Several exporters, including Malik Tanning Industries and other textile exporters, exported polyester dyed/printed synthetic filament fabrics falling squarely under HS Code 5407 and claimed FPS benefits accordingly. However, acting on internal queries from regional offices, the DGFT issued the impugned circular in October 2011, asserting that only “technical textiles” used for functional, non-aesthetic purposes (such as parachute fabric, tent fabric, protective textiles, etc.) would qualify. The circular annexed a list of 33 eligible items and directed recovery of FPS benefits already granted to other exporters with effect from 1 April 2011. The central legal question before the Court was whether the DGFT could, by issuing a “clarificatory” policy circular, restrict the scope of FPS benefits expressly provided under the FTP and HBP, and apply such restriction retrospectively. The Court answered the issue firmly in favour of exporters, holding that the power to frame or amend the Foreign Trade Policy vests with the Central Government, not the DGFT. The DGFT’s role is limited to implementation and procedural clarification, not substantive curtailment of benefits. The Bench agreed with the Single Judge that the circular effectively reduced the number of eligible products from all woven synthetic filament fabrics under HS 5407 to only 33 items—amounting to a policy amendment in disguise. Serial No. 33 of Appendix 37D was found to be clear and unambiguous. Once goods fell within the description “woven fabrics of synthetic filament yarn” and HS Code 5407, exporters were automatically entitled to FPS benefits. The Court noted that the DGFT wrongly focused only on the phrase “technical textiles” while ignoring the qualifying words “woven fabrics of synthetic filament yarn”, rendering them meaningless—an interpretation the Court refused to accept. Relying on the Supreme Court’s decision in Union of India v. Asian Food Industries, the Court reiterated that export incentives cannot be withdrawn retrospectively, as neither the FTDR Act nor the FTP permits such retroactive deprivation of vested rights. Dismissing all appeals filed by the DGFT, the Delhi High Court held that exporters of woven fabrics of synthetic filament yarn under ITC (HS) 5407 are entitled to FPS benefits as per the original policy framework. The Court concluded that the entire dispute was “an entirely unnecessary exercise”, as eligibility flowed directly from the plain language of the Handbook of Procedures. Case Details Case Title: UOI Versus M/S Malik Tanning Industries Case No.: LPA 335/2015, CM APPLs. 10003/2015 & 10006/2015 Date: 13.01.2026 Counsel For Appellant: Piyush Beriwal Counsel For Respondent: Naveen Malhotra Click Here To Read Order Read More: CESTAT Remands Customs Refund Claim Where Duty Was Paid Twice Due to Container Off-Loading at Different Port

DGFT Can’t Curtail Export Incentives by “Clarificatory” Circular: Delhi HC

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