Overview of Foreign Trade Policy 2023 – Background | Interpretation | Classification

The Foreign Trade Policy 2023 outlines India's strategies to boost exports and enhance global trade engagement. It aims to achieve $2 trillion in exports by 2030, emphasizes ease of doing business, and introduces various schemes to support exporters, such as the Remission of Duties and Taxes on Exported Products (RoDTEP) and the Export Credit Guarantee Corporation (ECGC) initiatives. The policy also focuses on leveraging digital platforms, improving trade infrastructure, and fostering bilateral and multilateral trade agreements.

Table of Contents

1. Background
2. FT(D&R) Act, 1992 and Rules
3. Foreign Trade Policy, 2023
4. Foreign Trade Policy has overriding effect
5. Interpretation of Foreign Trade Policy, HBP and classification of DGFT Final
6. Standing Grievance Committee
7. Administration of Foreign Trade Policy by DGFT
8. Proceedings under FT(D&R) against companies under Insolvency Code

Check out R.K. Jain's Foreign Trade Policy 2023 Which is comprehensive materials on Foreign Trade Policy, including all related Notifications, Public Notices and Forms. It is updated till 27th March 2024 and includes the Aayat-Niryat Forms and Appendices to the Handbook of Procedures.

1. Background

Import Trade Controls were first introduced in early stages of Second World War by notification under Defence of India Rules. Later, Imports and Exports (Control) Act, 1947 was passed. Foreign exchange rate was artificially controlled by RBI.

Heavy customs duty was imposed to discourage imports.

These controls led to various ill effects like smuggling, hawala, shortages, poor quality of Indian products etc.

Policy changes since 1991 – Government realised the ill effects of controls on imports and foreign exchange rates. Liberalisation of policies started in 1991. Restrictions on imports have been considerably reduced. Rupee has been made freely convertible on current account. Rupee trade is being introduced in international transactions. Customs duty has been gradually reduced to almost international level.

The policy for foreign direct investment (FDI) in India and Overseas Direct Investment have been considerably liberalised. India has established a good lead in service exports, particularly in the software sector.

Liberal Foreign Trade Policy – As per WTO stipulations, Quantitative Restrictions (QR) on imports (i.e. import license restrictions) have to be removed.

Para 2.01 of FTP 2023 states that Exports and Imports shall be ‘Free’ except when regulated by way of ‘Prohibition’, ‘Restriction’ or ‘Exclusive trading through State Trading Enterprises (SYEs)’.

Most of non-agricultural goods are freely importable. Even import of gold and silver has been considerably liberalised. However, there are some restrictions on imports and exports of agricultural produce, old cars etc. There will be prohibition of import of animal skins, narcotics, drugs, environmentally dangerous goods etc. Such prohibitions are permissible under WTO.

1.1 World Trade Organisation

One major development on the international front was the formation of the World Trade Organisation. This has a major impact on our foreign trade policies.

WTO (World Trade Organisation) has been formed on 1st January, 1995, based at Geneva, to replace GATT. After World Bank and IMF, this is the third biggest international organisation in finance and trade matters. It is a permanent body with global status similar to IMF & World Bank. It provides permanent forum for trade negotiations. WTO is the legal and institutional foundation of multilateral trading system. Its basic principle is equal treatment to products and services of all other WTO countries. (Of course, there are concessions and let-outs). WTO covers multilateral trading system and commercial activities like trade in services, intellectual property protection, besides international trade in goods.

The four main WTO guidelines are –

1. Trade without discrimination
2. Predictable and growing market access
3. Promoting fair competition, and
4. Encouraging development and economic reforms.

All member countries should treat all members equally, i.e. no special favour such as lower tariff etc. to a particular country or group of countries. All member countries should be treated as ‘Most Favoured Nation’ [MFN]. Second aspect is ‘national treatment’ i.e. treating foreigners and locals equally. Once foreign goods or services enter local market of any country, these should be treated at par with comparable local goods and services.

WTO promotes free trade by lowering tariffs, quotas, import restrictions, quantity restrictions etc. Countries should ‘bind’ their commitments so that stability and predictability and investment is encouraged.

WTO was established to deal with following major counts –

• Trade Related Aspects of Investment Measures (TRIMS)
• Trade Related Aspects of Intellectual Property Rights (TRIPS)
• General Agreement on Trade in Services (GATS)
• Trade Policy Review Mechanism (TPRM) to review national trade policies of member countries.

WTO has very efficient Dispute Settlement Body (DSB). The General Council of WTO functions as DSB. It is chiefly responsible for the implementation of the rules and regulations relating to inter-governmental disputes. The main areas of dispute are

• Subsidies
• Customs duties
• Sanitary and phytosanitary
• Patent protection

1.2 WTO stipulations in respect of export subsidies

As per the stipulation of the World Trade Organisation (WTO), no country can give ‘export subsidies’ on export performance as such if its Gross National Product (GNP) is more than USD 1,000 per annum (per capita income).

The reason is that WTO intends to encourage free competition among nations. If incentives are given for exports, there will not be free competition. That is the reason why income-tax incentives on export income are being phased out.

The Agreement on Subsidies and Countervailing Measures (SCM Agreement) governs subsidies granted to WTO members. ASCM defines a subsidy and defines when it is actionable.

Basically, subsidy is a financial contribution by the Government or a public body to exporters. This can be in the form of grants, loans, equity, revenue forgone or not collected, etc.

Subsidies contingent upon export performance or the use of domestic goods over imported goods are prohibited. A country can ask the WTO panel or Appellate BodT to remove an export subsidy provided by a developed country. India is a developing country, and hence, some export subsidies are permitted.

Goods can be made tax-free for export purposes by India, which is permissible under WTO stipulations. Hence, all our export promotion schemes are directed towards ensuring that inputs and final products are made ‘tax-free’.

USA had filed complaint to WTO in March, 2018 for violating export promotion subsidies provided in Foreign Trade Policy 2015-2020, including SEZ scheme. WTO Panel has ruled that export promotion schemes provided in FTP, including SEZ are inconsistent with SCM Agreement. Appeal filed by the Government of India is pending.

In Foreign Trade Policy 2023, the emphasis has shifted from incentives to tax remission.

2. FT(D&R) Act, 1992 and Rules

Imports and Exports (Control) Act, 1947 was stitching the foreign trade and was a roadblock. That Act was replaced by the present Foreign Trade (Development and Regulation) Act FT (D&R) Act, 1992 in August 1992. The Act was last amended on 27-8-2010.

As per the preamble of the FT(D&R) Act, the Foreign Trade (Development and Regulation) Act [FT(D&R) Act] is designed to develop and regulate foreign trade by facilitating imports into India and augmenting exports from India; and for matters connected therewith. FT(D&R) Act is designed to authorise the Central Government to formulate Foreign Trade policies and change the policy as per changing situations. AuthoritT is granted by Act to the Government to implement the policy.

Foreign Trade (Regulation) Rules, 1993 – Foreign Trade (Regulation) Rules, 1993 have been notified under the FT(D&R) Act. The Rules were last amended on 17-4-2015.

Foreign Trade (Exemption from Application of Rules in certain cases) Order – Foreign Trade (Exemption from Application of Rules in certain cases) Order, 1993 have been issued, which have been substantially amended on 25-7-2017. This order exempts the Central Government, State Government, duty free shops, baggage, diplomatic personnel, officials of UN and UN Agencies, and transit and transshipped goods from provisions of Foreign Trade (Regulation) Amendment Rules, 2015.

Notifications under FT (D&R) Act, 1992 – Notifications have been issued empowering Director General, DeputT/Joint/Additional/Assistant Director General, Development Officer, SEZ etc. under FT(D&R) Act, 1992.

2.1 Administration of FT(D&R) Act

Department of Commerce, Ministry of Commerce and Industry, Government of India, Udyog Bhawan, New Delhi – 110 011 is the controlling ministry in respect of FY(D&R) Act. Issues relating to imports and exports of goods are controlled by customs department in Ministry of Finance. Foreign exchange aspects are controlled by RBI.

2.2 Board of Trade (BOT)

Board of Trade has been re-constituted vide MC&I (DC) Notification No. 11/2015-20 dated 17-7-2019.

Union Commerce and Industry Minister is its Chairperson. The Board consists of Minister of State, Secretaries to Government of India of various Ministries, President/Chairman of various associations and non-official members, DGFT is Member Secretary.

The Board is expected to discuss trade policy, develop export strategies, review export performance, promotion of foreign trade etc.

BOT is a jumbo Board, and it is doubtful that meaningful discussions or recommendations are possible. 29 non-official members have been nominated vide S.O. 3176(E) dated 8-7-2022. Terms of reference have been specified in very broad terms.

3. Foreign Trade Policy, 2023

Section 3 of Foreign Trade (Development and Regulation) Act (FT(D&R) Act), 1992 empowers Central Government to make provisions for development and regulation of foreign trade by facilitating imports and increasing exports, by an order published in Official Gazette.

Section 5 of Foreign Trade (Development and Regulation) Act, 1992 empowers Central Government to formulate and announce by notification in Official gazette, the Foreign Trade Policy (FTP) and also amend the same by issuing a notification. In respect of SEZ, the FTP will apply with exceptions and modifications, as may be notified.

Under these powers, Ministry of Commerce issues Foreign Trade Policy (FTP). Normal practice was to issue such policy for five years, but amended from time to time.

However, the new FTP has notified on 31-3-2023 and as effective from 1-4-2023, will be continuous without any sunset clause. Policy will be revised as and when required and shall not be linked to any date.

3.1 Confusing for common person to understand policy

The Foreign Trade Policy is presented in a clumsy way, making it difficult for a common person to understand and comprehend a provision.

In almost all cases, some part is covered in FTP, some part in HBP (Handbook of Procedures) and some part in various Appendices. In addition, DGFT issues public notices and policy circulars from time to time. Aayat Niryat forms are part of HBP. CBI&C also issues notifications and circulars in respect of matters in FTP which are relevant for customs law.

3.2 Contents Foreign Trade Policy, 2023

The contents of the FTP are as follows:

1. Foreign Trade Policy (FTP) – notified by Central Government on 31-3-2023 and effective from 1-4-2023 are as follows
2. Handbook of Procedures (HBP) covering procedural aspects of policy – by DGFT by public notice No. 1/2023 dated 1-4-2023 and effective from 1-4-2023, in exercise of powers under conferred on DGFT under paras 1.03 and 2.04 of FTP
3. Appendices and Aayat Niryat Forms – (AANF) containing appendices and forms – issued by DGFT
4. Standard Input-Output Norms – Standard Input-Output Norms (SION) of various products are notified by DGFT from time to time.
5. ITC (HS) 2022 for import policy in respect of each item.

ITC (HS) 2022 – Import Policy has been specified item-wise, termed as ITC (HS) 2022 [Import Trade Classification (Harmonised System) of Import Items, 2022].

The ITC (HS) 2022 is aligned with Customs Tariff, which has been amended w.e.f. 1-1-2022.

ITC (HS) 2022 has been notified vide DGFT Notification No. 54/2015-20 dated 9-2-2022. Updated ITC (HS) 2022 is available on website of DGST (https://dgft.gov.in).

SION – Standard Input Output Norms (SION) are specified by way of public notices. SION means Standard Input Output Norms notified by DGFT – para 11.54 of FTP 2023. The SION is relevant for issue of Advance Authorisations for import of Inputs to be used for manufactured and exported final product.

3.3 Matters covered by Foreign Trade Policy, 2023

Following issues are covered under FTP 2023 –

• Legal Framework and Trade Facilitation – Chapter 1
• General Provisions regarding imports and exports – Chapter 2
• Developing Districts as Export Hubs – Chapter 3
• Duty Exemption/Remission Schemes – Chapter 4
• Export Promotion Capital Goods (EPCG) scheme – Chapter 5
• EOU/EHYP/SYP and BYU schemes – Chapter 6
• Deemed Exports – Chapter 7
• Quality Complaints and Trade Disputes – Chapter 8
• Promoting Cross Border Trade in Digital Economy – Chapter 9
• SCOMET – Special Chemicals, Organisms, Materials, Equipment and Technologies – Chapter 10
• Definitions – Chapter 11

SEZ – Policy in respect of Special Economic Zones [SEZ] is contained in SEZ Act and Rules.
Duty Drawback and Manufacture in Customs Warehouse – Provisions covered under Customs Act.

3.4 Classification of goods and import/export policy as per ITC (HS)

Schedule I of ITC (HS) classification gives Import Policy of each product based on 8 digit HSN classification code.

Schedule II gives Export Policy. It contains very few products, where export is prohibited or restricted. Excluding those items, all other goods except those prohibited or restricted are freely exportable.

ITC (HS) refers to Indian Trade Classification (Harmonised System) at 8 digits – para 11.27 of FTP 2023.

The item-wise export and import policy shall be as specified in ITC (HS) [Import Trade Classification (Harmonised System)].

List of prohibited, restricted and STE items can be viewed by clicking downloads on DGFT website [http://dgft.gov.in].

Import policy in respect of any article can be seen on DGFT website by entering 4 or 6 or 8 digits of the HSN classification of a product.

3.5 Highlights of Foreign Trade Policy, 2023

Some highlights of FTP 2023 are given below.

FTP on continuous basis – The earlier practice of announcing Foreign Trade Policy for five years has been discontinued. There will be no sunset clause. FTP 2023 will have policy continuity and a responsive framework. FTP will be revised as and when required, based on feedback from trade and industry.

From incentives to tax remission – In view of WTO stipulations, export incentives are done away with. The emphasis will be on tax remissions on inputs and final product.

Ease of doing business – Online approvals, reduction in process time, automatic approvals, paperless filing, E-certificates.

Rupee payment to be accepted under FTP schemes – In line with Government and RBI policy, Rupee payment to be accepted under FTP schemes as per RBI guidelines. Working towards making Indian Rupee a global currency.

Towns of export excellence (TEE) – Four new TEE will be developed in addition to 39 TEE existing. TEEs are industrial clusters to maximize their potentials. Common service provider facility will be encouraged in TEE.

Encouraging e-commerce exports – Export through E-commerce will be encouraged. All FTP benefits will be extended to e-commerce exports. E-Commerce export hubs will be developed.

Dak Niryat Facilitation – Dak Ghar Niryat Kendras will be developed to facilitate cross-border e-Commerce and help land-locked regions to reach international markets.

Promoting Merchanting trade – Merchanting trade involving shipment of goods from one foreign country to another foreign country without touching Indian ports, involving an Indian intermediary is allowed subject to compliance with RBI guidelines, except for goods/items in the CITES and SCOMET list.

District as export hubs – Districts will be developed as export hubs to decentralise exports promotion and make them active participants, to focus on testing, branding, marketing, connectivity and common services.

Streamlining SCOMET licensing – SCOMET licensing will be streamlined.

3.6 Duty Exemption/Remission Schemes under FTP

Purpose of Duty Exemption/Remission Schemes is to make inputs meant for exports duty free. This is permissible under WTO stipulations. The schemes enable duty free import of inputs for export production, including replenishment of inputs or duty remission.

As per para of FTP 2023, the schemes are as follows –.

• Duty Exemption Schemes – The Duty Exemption schemes consist of the following:

1. 1. Advance Authorisation (AA) (which will include Advance Authorisation for Annual Requirement)
   2. Duty Free Import Authorisation (DFIA).

• Duty Remission Scheme – Duty Drawback (DBK) Scheme, administered by Department of Revenue.
• Scheme for Rebate on State and Central Taxes and Levies (RoSCTL), as notified by the Ministry of Textiles.
• Schemes for Remission of Duties and Taxes on Exported Products (RoDTEP) notified by Department of Commerce and administered by Department of Revenue.

Other duty exemption scheme under FTP – Other duty exemption schemes are as follows –

• SEZ
• EOU/EHTP/STP/BTP.

Manufacture in Customs bonded warehouse under section 65 [or newly inserted section 65A] of Customs Act – Manufacture and Other Operations in Customs Warehouse (MOOWR, 2019) scheme helps in obtaining imported inputs without payment of customs duty and export final product.

EPCG under FTP and Project Imports Scheme under Customs – EPCG scheme under FTP and Project Imports Scheme under Customs enable exporter to obtain capital goods without payment of customs duty, to manufacture goods which are then exported.

3.7 Growth in exports

Export of goods and services were USD 435 Billion in FY 2016, These rose to USD 676 Billion in FY 2022 and are expected to cross USD 750 Billion in FY 2023.

4. Foreign Trade Policy has overriding effect

DGFT cannot amend Foreign Trade Policy – DGFT v. Kanak Exports (2016) 2 SCC 226 = 326 ELT 26 (SC).

Amendments in Foreign Trade Policy can be made only through notification in Gazette of India and not through handbook. The Handbook of Procedure merely prescribes certain administrative guidelines while legal provisions are contained in the policy. – Himani Industries v. CC 1996 (83) ELT 617 (CEGAT) * TIL Ltd. v. CC 2001(132) ELT 445 (CEGAT).

DGFT cannot amend the policy. However, that does not mean that whatever is not found in the policy cannot be provided by DGFT – Jindal Drugs v. UOI (2011) 273 ELT 27 (Bom HC DB).

4.1 Foreign Trade Policy prevails over Handbook of Procedures

Handbook of Procedures is issued/amended by DGFT.

In Narendra Udeshi v. UOI (2003) 41 SCL 121 = 156 ELT 819 (Bom HC DB), it has been held that DGFT cannot lay down a procedure which is contrary to Foreign Trade Policy (that time Exim Policy), as section 6(3) of FT(D&R) Act specifically prohibits DGFT from exercising power of amending Foreign Trade Policy (that time Exim Policy). In case of conflict, Foreign Trade Policy will prevail – followed in BRG Iron and Steel Co. P. Ltd. v. UOI (2014) 309 ELT 393 (Del HC) * Uni Colloids Impex v. CC (2014) 310 ELT 583 (CESTAT).

Amendments in EXIM policy (now Foreign Trade Policy) can be made only through notification in Gazette of India and not through handbook. The Handbook of Procedure merely prescribes certain administrative guidelines while legal provisions are contained in the policy – Himani Industries v. CC 1996 (83) ELT 617 (CEGAT) * TIL Ltd. v. CC 2001 (132) ELT 445 (CEGAT).

Foreign Trade Policy can be amended only by notification issued by Central Government. DGFT cannot change it by way of a circular – Atul Commodities v. CC (2009) 5 SCC 46 = 235 ELT 385 (SC) * Eurotex Industries v. UOI (2011) 107 SCL 133 (Mag) (Bom HC DB) * Yum Restaurants (India) P. Ltd. v. UOI (2015) 130 SCL 134 = 55 taxmann.com 122 = 320 ELT 781 (Del HC).

DGFT cannot issue a clarification which amounts to amendment of Foreign Trade Policy – Malik Tanning Industries v. UOI (2015) 129 SCL 507 = 53 taxmann.com 467 = 320 ELT 508 (Del HC).

Handbook of Procedures must be in consonance with Foreign Trade Policy. Any circular or provision in Handbook which is inconsistent with Foreign Trade Policy would be liable to be set aside – BRG Iron v. UOI (2015) 49 GST 642 = 53 taxmann.com 450 (Del HC).

4.2 Foreign Trade Policy cannot be amended with retrospective effect

Section 5 of FT(D&R) Act does not authorize Central Government to amend the Foreign Trade Policy with retrospective effect – DGFT v. Kanak Exports (2016) 2 SCC 226 = 326 ELT 26 (SC) * Soubhik Exports Ltd. v. UOI (2007) 214 ELT 334 (Cal HC) – quoted and followed in Global Exim v. CC (2014) 310 ELT 322 (CESTAT) * Uni Colloids Impex v. CC (2014) 310 ELT 583 (CESTAT) * Malik Tanning Industries v. UOI (2015) 129 SCL 507 = 53 taxmann.com 467 = 320 ELT 508 (Del HC).

In Hindustan Granites v. UOI (2007) 80 SCL 449 = 211 ELT 3 (SC), policy in respect of EOU manufacturing marble was suddenly changed with immediate effect. The reasons for change were found to be satisfactory and hence change was upheld.

In Amritsar Swadeshi Woolen Mills v. Addl. DGFT (2013) 292 ELT 183 (Karn HC), it was held that amendment to Foreign Trade Policy can be only prospective. The changes in the scheme cannot affect exports already made prior to change in policy.

In UOI v. Asian Food Industries (2006) 13 SCC 542 = 204 ELT 8 (SC), it has been held that a vested or accrued right cannot be taken away by amendment to policy. Amendment can only be prospective.

4.3 Transitional provisions in case of midway policy changes

Policy in respect of import and import changes frequently.

Transitory provision when Import/Export Policy for particular goods is changed – Item wise Import/Export Policy is delineated in the ITC (HS) Schedule I and Schedule II respectively. The importability/exportability of a particular item is governed by the policy as on the date of import/export. The date of import/export is defined in para 2.17 of HBP 2023. Bill of Lading and Shipping Bill are the key documents for deciding the date of import and export respectively. In case of change of policy from ‘free’ to ‘restricted/prohibited/state trading’ or ‘otherwise regulated’, the import/export already made before the date of such regulation/restriction will not be affected. However, the import through High Sea sales will not be covered under this facility. Further, the import/export on or after the date of such regulation/restriction will be allowed for importer/exporter who has a commitment through Irrevocable Commercial Letter of Credit (ICLC) before the date of imposition of such restriction/regulation and shall be limited to the balance quantity, value and period available in the ICLC. For operational listing of such ICLC, the applicant shall have to register the ICLC with jurisdictional RA against computerized receipt within 15 days of imposition of any such restriction/regulation. Whenever, Government brings out a policy change of a particular item, the change will be applicable prospectively (from the date of Notification) unless otherwise provided for – Para 1.05(b) of FTP 2023.

4.4 Specific provision prevails over general

Where a specific provision is spelt out in the FTP/Handbook of Procedures (HBP), the same shall prevail over the general provision – Para 1.04 of FTP 2023.

[Even otherwise, this is one of the basic rule of interpretation of any statute or provision]

4.5 Foreign Trade Policy can be changed any time – no promissory estoppel

Doctrine of Promissory Estoppel is not applicable with regard to amendment in Foreign Trade Policy (FTP). Policy can be changed without notice – Chowgule & Company Ltd. v. Assistant Director General of Foreign Trade [2022] 145 taxmann.com 42 = 1 Centax 3 = 382 ELT 580 (SC).

4.6 FTP, Excise and Customs Law form an integrated code

In Sarla Performance Fibres v. CCE (2010) 253 ELT 203 (CESTAT), it has been indeed rightly held that Foreign Trade Policy (FTP), Handbook of Procedures under FTP, Central Excises Act and Customs Act and notifications issued thereunder form an integrated scheme of indirect taxation. All these statutes have to be read as a whole and not in isolation, since they are series of statutes relating to same subject matter.

Use of FTP in interpreting customs notifications – In Tetra Pack v. CC 2005 (190) ELT 257 (CESTAT), it was held that goods imported duty free can be sent outside for processing/job work. It was also observed that customs notifications have to be interpreted keeping the provisions of Foreign Trade Policy (FTP) in mind.

5. Interpretation of Foreign Trade Policy, HBP and classification of DGFT Final

The decision of DGFT shall be final and binding on all matters relating to interpretation of Foreign Trade Policy, or provision in Handbook of Procedures (HBP), Appendices and Aayat Niryat Forms or classification of any item for import/export in the ITC (HS) – Para 2.58(a) of FTP 2023.

Policy Interpretation – A Policy Interpretation Committee (PIC) may be constituted to aid and advice DGFT. The composition of the PIC would be as follows:

1. DGFT: Chairman
2. All Additional DGFTs in Headquarters: Members
3. All Joint DGFTs in Headquarters looking after Policy matters: Members
4. Joint DGFT (PRC/PIC): Member Secretary
5. Any other person/representative of the concerned Ministry/Department, to be co-opted by the Chairman – Para 2.58(b) of FTP 2023.

Application for seeking interpretation of any policy provision shall be made in ANF-2F to Policy Interpretation Committee (in the Hqrs.) under Para 2.58(b) of FTP – Para 2.95 of HBP 2023.

5.1 Authorisation or clarification issued by DGFT cannot be challenged by customs

Once advance license (now authorisation) is granted by licensing authority the customs authorities cannot refuse exemption on an allegation that there was misrepresentation. – Titan Medical Systems v. CC 2003 (151) ELT 254 (SC). – followed in Autolite (India) Ltd. v. UOI 2003 (157) ELT 13 (Bom HC DB), where it was held that even assuming that licensing authorities have wrongly accepted the statement of petitioner and granted him advance license (now authorisation), so long as license is valid and subsisting, import against advance license cannot be denied. Customs authorities cannot sit in appeal over decision of licensing authority – also followed in Bhilwara Spinners v. CC (2008) 223 ELT 172 (CESTAT 3 member bench) – view upheld in Bhilwara Spinners v. UOI (2011) 267 ELT 49 (Bom HC DB).

Validity of license (now authorisation) is to be decided by DGFT and not customs. Until license is cancelled by licensing authority, it is deemed to be valid – CC v. Jupiter Exports (2007) 213 ELT 641 (Bom HC DB).

Customs cannot challenge DFIA issued by DGFT – CC v. Sicpa India Ltd. (2012) 279 ELT 113 (CESTAT).

Department cannot say that DEPB authorisation issued by DGFT is invalid, without referring the matter to DGFT – Khanna Paper Mills v. CC (2011) 273 ELT 149 (CESTAT).

Customs authorities have no jurisdiction to sit in appeal against grant of licence, once licence (now authorisation) is granted by licensing authority. It is for licensing authority to take action, if any – Bussa Overseas and Properties (P.) Ltd. v. UOI  1991 (53) ELT 165 (Bom HC), quoted and followed in – Punjab Niryat Ayat Pvt. Ltd. v. CC – 1992 (62) ELT 228 (CEGAT). Same view in C L Jain Woollen Mills v. UOI – 1995 (79) ELT 197 (Del HC) * Indo Exim v. UOI 2004 (165) ELT 506 (Del HC) * Wearon Exports v. UOI 2004 (163) ELT 149 (Bom HC DB) * Lokesh Chemical Works v. M S Mehta 1981 (8) ELT 235 (Bom HC) * Marmo Classic v. CC 2002 (143) ELT 153 (CEGAT) * Garware Wall Ropes v. CC 2002 (145) ELT 308 (CEGAT) * Sprint Services v. CC (2009) 236 ELT 167 (CESTAT) * Aditya Birla Nuvo v. CC (2010) 249 ELT 273 (CESTAT) * Hindustan Lever Ltd. v. CC (2012) 281 ELT 241 (CESTAT).

One import is of goods is approved by Board of Approval (of EOU) and Development Commissioner, customs authorities cannot question such import – GE India Tech v. CC 2006 (198) ELT 266 (CESTAT).

Customs authorities cannot issue show cause notice on basis that license issued is against import policy – A V Industries v. UOI 2005 (187) ELT 9 (Bom HC).

License (now authorisation) issued by DGFT cannot be questioned by customs unless it is strictly permitted by the words of notification. – Navneet Kumar Didwala v. CC 2001 (138) ELT 1258 (CEGAT) * Jaysynth Dyechem v. CC 2001 (136) ELT 1429 (CEGAT) * CC v. Neelachal Ispat Nigam 2006 (201) ELT 51 (CESTAT).

DEPB license (now authorisation) issued by DGFT cannot be challenged by customs – Pradip Polyfils v. UOI 2004 (173) ELT 3 (Bom HC DB). Customs authorities are not competent to sit over decision of DGFT authorities regarding DEPB credit – Suresh Enterprises v. CC 2005 (179) ELT 466 (CESTAT) * Adani Exports Ltd. v. CC 2006 (199) ELT 613 (CESTAT) * Baby Marine Exports v. CC (2007) 210 ELT 259 (CESTAT) * Baby Marine Exports v. CC (2007) 209 ELT 83 and 208 ELT 353 (CESTAT).

The Foreign Trade Policy is administered by DGFT. Customs officers, while implementing customs notifications, cannot question or appear to question the decisions and actions of the competent authority in DGFT, unless it is strictly permitted by the terms of notification. – Navneet Kumar Didwania v. CCE (2001) 138 ELT 1258 (CEGAT).

Once an issue is clarified by licensing authority, it is binding on customs authorities – CC v. Goel Enterprises 2005 (179) ELT 509 (CESTAT) * Kushalchand & Co. v. CC (2011) 265 ELT 109 (CESTAT).

Decision of Licensing authority about fulfilment of export obligation final – Decision of Licensing authority about fulfilment of export obligation final. Excise and customs authorities can only refer matter to them – Hindustan Lever Ltd. v. CC (2012) 281 ELT 241 (CESTAT).

Decision of DGFT about fulfilment of export obligation should be normally accepted by customs – CC v. Shri Ram Rayons (2009) 236 ELT 104 (CESTAT).

Decision about value addition – Whether value addition norms have been achieved has to be decided by Development Commissioner. His decision cannot be overlooked or brushed aside by customs authorities – Beekay Hygiene Products v. CC (2009) 236 ELT 115 (CESTAT).

5.2 Interpretation of authorisation only by DGFT

Interpretation of authorisation is left to licensing authorities. Customs authorities cannot question the same – Vimal Nath v. UOI (2008) 232 ELT 592 (Bom HC DB).

The Foreign Trade Policy is administered by DGFT. Customs officers, while implementing customs notifications, cannot question or appear to question the decisions and actions of the competent authority in DGFT, unless it is strictly permitted by the terms of notification. – Navneet Kumar Didwania v. CCE (2001) 138 ELT 1258 (CEGAT).

Once an issue is clarified by licensing authority, it is binding on customs authorities – CC v. Goel Enterprises 2005 (179) ELT 509 (CESTAT).

Decision of DGFT on interpretation of policy is final and binding on customs authorities – CC v. AKM Trading Corporation (2007) 208 ELT 406 (CESTAT).

If there is difference of opinion between Ministry of Commerce and Ministry of Finance, opinion of DGFT has to be followed – Akzo Nobel Non-Stock Coatings v. CCE (2009) 241 ELT 244 (CESTAT).

CBI&C cannot specify a substantive condition not found in FTP – CBI&C cannot, by circular, prescribe a substantive condition which is at variance with Foreign Trade Policy – Essel Mining and Industries v. UOI (2012) 111 SCL 47 = 16 taxmann.com 265 (Bom HC DB).

6. Standing Grievance Committee

For speedy redressal of genuine grievances of trade and industry pertaining to Export and Foreign Trade, Grievance Committees have been constituted chaired by

• DGFT at Headquarters and
• head(s) of RA(s) in regional offices. – Para 11.08 of HBP 2023.

7. Administration of Foreign Trade Policy by DGFT

The Foreign Trade Policy is controlled and supervised by DGFT.

Central Government can appoint Director General of Foreign Trade (DGFT) and other officers like Additional Director, Joint Director, Deputy Director, Assistant Director, Export Commissioner etc. The DGFT advise Central Government in formulating policy and exercise specified powers under the Act [section 6 of FT(D&R) Act].

Office of DGFT is at H Wing, Gate No. 2, Udyog Bhawan, Maulana Azad Road, New Delhi – 110 011. Other office is at Vanijya Bhavan, A Wing, 16, Akbar Road, New Delhi – 110011. Tel – 011 23061562.

Website – https://dgft.gov.in. The website contains information relating to Acts, Rules, Policy and Procedures including DGFT portal. Email – dgft@nic.in.

Addresses of DGFT, Joint DGFT in various regions and Development Commissioners in various SEZ, their territorial jurisdiction, their phone numbers and e-mail addresses are given in Appendix 1A of HBP 2023.

DGFT is empowered to issue Handbook of Procedures, SION and ITC(HS). He also issues various public notices.

General Power of Review of DGFT – DGFT may, on his own or otherwise, call for records of any case pending with or decided by an officer subordinate to him or an officer of any EPC/FIEO including a Group/Committee of officers nominated, appointed or authorised by him and pass such orders as he may deem fit – Para 11.13 of HBP 2023.

DGFT as a facilitator of exports/imports – DGFT has a commitment to function as a facilitator of exports and imports. Focus is on good governance, which depends on efficient, transparent and accountable delivery systems. In order to facilitate international trade, DGFT consults various Export Promotion Councils as well as Trade and Industry bodies from time to time – Para 1.07 of FTP 2023.

(Unfortunately, ground realities are entirely different).

7.1 Regional Authority and Committees

DGFT has established Regional Authority (RA) at various places under Joint Director General of Foreign Trade.

“Regional Authority” means authority competent to grant an Authorisation under the FT(D&R) Act/Order – Para 11.46 of FTP 2023.

Powers have been delegated to various regional offices to issue authorisation upto prescribed limits.

Addresses of Regional Authorities, their phone numbers and e-mail addresses are given in Appendix 1A of HBP 2023.

If the application for authorisation is beyond their powers, the application is sent for approval to Committee at headquarters.

Often exporter/importer has to issue bank guarantees, export obligations, legal undertakings etc. These are controlled by regional offices of DGFT. Export obligations are monitored by offices of DGFT.

Committees – Following are some important committees, for granting any exemption or relaxation from foreign trade policy or procedure –

1. Norms Committee to fix/modify norms under all schemes
2. Policy Interpretation Committee
3. Policy Relaxation Committee (PRC)
4. Standing Grievance Committee.

Norms Committee – “NC” means the Norms Committee in the Directorate General of Foreign Trade for approval of adhoc input–output norms in cases where SION does not exist and recommend SION to be notified in DGFT – Para 11.34 of FTP 2023.

7.2 Handbook of Procedures 2023 (HBP)

Paras 1.03 and 2.04 of FTP 2023 empower Director General of Foreign Trade (DGFT) to specify procedures to be followed by importer, exporter, licensing authority or other authority, for purposes of implementing provisions of FT(DR) Act, Rules and orders made thereunder and Foreign Trade Policy (FTP). The procedures are to be prescribed by issuing a public notice.

The procedures can be amended by issuing a public notice.

Under these powers the Handbook of Procedures 2023 [HBP] have been issued by DGFT vide public notice No. 01/2023 dated 1-4-2023.

The objective is to implement provisions of FT (D&R) Act, Rules and Orders made thereunder and provisions of FTP by laying down simple, transparent and digitally (electronically) compatible procedures, which are user friendly and easy to comply with and administer for efficient management of Foreign Trade – Para 1.02 of HBP 2023.

Handbook of Procedures must be in consonance with Foreign Trade Policy. Any circular or provision in Handbook which is inconsistent with Foreign Trade Policy would be liable to be set aside – BRG Iron v. UOI (2015) 49 GST 642 = 53 taxmann.com 450 (Del HC).

In Narendra Udeshi v. UOI (2003) 41 SCL 121 (Bom HC DB), it has been held that DGFT cannot lay down a procedure which is contrary to Foreign Trade Policy, as section 6(3) of FT(D&R) Act specifically prohibits DGFT from exercising power of amending Foreign Trade Policy (FTP). In case of conflict, FTP policy will prevail.

General Forms and instructions – The forms required for specific purpose have been specified in Handbook of Procedures issued by DGFT.

Public Notices and circulars by DGFT under old policy continue to be valid – DGFT issues public notices, policy circulars, notifications or decisions etc. from time to time. Such public notices, policy circulars, notifications or decisions issued under earlier policy will continue to be valid under new policy, so far as they are not inconsistent with provisions of present policy and procedures [no specific provision but it is understood as none of these has been rescinded].

7.3 All ANFs and Appendices under FTP 2015-2020 valid upto 31-5-2023

As per DGFT public notice No. 5/2023 dated 11-4-2023, all ANFs (Aayat-Niryat Forms) and Appendices issued under FTP 2015-20 will be valid upto 31-5-2023 or date on which new ANFs and Appendices are issued, whichever is earlier.

8. Proceedings under FT(D&R) against companies under Insolvency Code

DGFT has issued circular No. ECA Circular No. 32/2015-20 dated 2-3-2020, regarding institution and/or continuation of proceedings under Foreign Trade (Development and Regulation) Act, 1992 [FT(D&R)] and Rules thereunder against companies against whom proceedings have been instituted in the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code.

As per the circular, unless there are specific directions by the National Company Law Tribunal (NCLT) prohibiting proceedings under the FT(D&R) Act/Rules, the Adjudicating Authority can proceed under the FT (D&R) Act/Rules. However, the liquidator shall be added as one of the respondent along with the parties.