Karnataka HC Directs DGFT to Reconsider Duty Credit Scrip Claim above ₹1 Cr under Incremental Export Incentivisation Scheme [Read Order]

The Karnataka High Court recently directed the Joint Director General of the Directorate Generalof Foreign Trade (DGFT) to reconsider the application of an entity seeking for grant of Duty Credit Scrip benefits exceeding ₹1 crore under the Incremental Export Incentivisation Scheme (IEIS), noting that the Supreme Court had earlier permitted such availment subject to higher scrutiny by the Authority.

The petitioner, M/s Oswal Alloys Pvt. Ltd., an export company registered under the Foreign Trade (Development and Regulation) Act, 1992 approached the High Court challenging a DGFT order dated 30 March 2023 restricting the petitioner’s IEIS benefit to ₹1 crore despite a verified entitlement of ₹1.43 crore.

At the outset, the High Court noted that it had directed the authorities to consider Oswal Alloys’ representation within three months in W.P. No.12826/2018. However, the DGFT subsequently rejected the claim beyond ₹1 crore relying on a 2013 Notification amending paragraph 3.14.5(c) of the Foreign Trade Policy 2009-14 which limited the scrip value to ₹1 crore per Importer Exporter Code (IEC).

Chidananda Urs B.G. for the petitioner and B. Pramod for the respondents submitted in unison that the Supreme Court has since decided all related matters against the Union of India, clarifying that exporters are eligible for IEIS benefits beyond ₹1 crore, though such higher claims are subject to “a greater scrutiny by the Regional Authority”.

The council further submitted that this scrutiny would involve verification of manufacturing or purchase records, excise and sales tax returns, and export data of the company from whom the goods have been purchased to verify export growth and consequent entitlement for Duty Credit Scrip under the Scheme.

Accordingly, Justice B.M. Shyam Prasad observed quashed the DGFT’s impugned order and restored the petitioner’s application for reconsideration with a direction to the Regional Authority to decide the matter afresh within eight weeks of receiving a certified copy of the judgment, allowing the petitioner to submit additional evidence to examine whether the petitioner's representation for Duty Credit Scrip over ₹1 Crore was allowable.

The Court further noted that the claim had been pending for over twelve years and passed directions to adjudicate the matter expeditiously.

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