Telangana High Court Delivers Landmark Verdict on Export Benefits
In a significant legal development, the Telangana High Court has quashed a controversial 2018 circular issued by the Directorate General of Foreign Trade (DGFT) that retrospectively restricted export benefits under the Service Exports from India Scheme (SEIS). The court's ruling grants substantial relief to Adani Gangavaram Port Limited (AGPL), a major port operator engaged in maritime logistics.
Court Orders Refund with Interest
The court has set aside the cancellation orders issued by DGFT and directed authorities to refund ₹2.95 crore with interest to AGPL. This amount represents the export benefits that the company had paid under protest in 2021 to avoid coercive action and ensure business continuity during the investigation period.
Legal Foundation of the Judgment
Delivering the verdict recently, Justice Nagesh Bheemapaka made several crucial observations that formed the bedrock of the judgment. The judge emphasized that once a central policy circular is declared ultra vires (beyond authority) by a constitutional court, it suffers from a fatal legal defect that applies uniformly across the entire country.
The court firmly stated that the interpretation of law cannot be determined solely by how authorities perceive it, and government bodies cannot feign ignorance or pretend to be naïve about the operation of legal proceedings. This principle establishes an important precedent for future cases involving administrative overreach.
Background of the Dispute
The legal battle began when AGPL, originally known as Adani Gangavaram Port Private Limited, was granted SEIS benefits for the financial years 2015-16 and 2016-17. The company operates from Visakhapatnam in Andhra Pradesh with its corporate office located in Jubilee Hills, Hyderabad.
The dispute emerged after DGFT issued a circular in 2018 that limited SEIS eligibility exclusively to "actual service providers" such as tug operators. This interpretation effectively excluded port operators who utilized third-party arrangements for partial marine operations, despite providing integrated maritime services.
Key Arguments Presented
AGPL approached the Telangana High Court challenging the DGFT order with several compelling arguments:
- The circular illegally redefined eligibility criteria through an executive clarification rather than a formal statutory notification
- The same circular had already been quashed by both the Bombay and Karnataka High Courts, rendering it void nationwide
- Port operators providing integrated services should be considered primary providers, not mere aggregators, even when subcontracting ancillary tasks like tug operations
The company maintained that it had paid approximately ₹2.95 crore including interest to DGFT in 2021 solely to avoid coercive action and ensure uninterrupted business operations during the ongoing investigation.
DGFT's Defense and Court's Rejection
DGFT argued that AGPL's petition was not maintainable because the company had bypassed statutory appellate remedies. The trade body maintained that the circular was merely clarificatory, designed to ensure that benefits reached those who actually earned foreign exchange rather than "aggregators" or intermediaries.
DGFT also claimed that the order cancelling the benefits was legally served despite being returned undelivered by the post office. However, the court took serious note of DGFT's actions against the petitioner in violation of court orders and rejected these arguments.
Court's Critical Observations
The bench made several critical observations that strengthened its final decision:
- DGFT lacked the legislative competence to introduce substantive conditions not found in the original Foreign Trade Policy
- Merely dispatching a notice that returned as "undelivered" did not constitute valid service when withdrawing substantial vested benefits
- Port operators providing integrated services qualify as primary service providers under SEIS, regardless of subcontracting arrangements
- DGFT's stance would perpetuate illegality if allowed to stand
Broader Implications
This judgment has significant implications for India's export sector and administrative law. By clarifying that port operators providing integrated maritime services qualify as primary service providers under SEIS, the court has provided much-needed clarity for the logistics and shipping industry.
The ruling also reinforces the principle that executive circulars cannot override statutory provisions or introduce substantive changes to policy without proper legal authority. This serves as an important check on administrative overreach and protects businesses from retrospective application of restrictive interpretations.
Concluding that DGFT's stance would perpetuate illegality, the court set aside the cancellation orders and directed authorities to refund the ₹2.95 crore with interest, finally disposing of the petition that had been pending resolution.
