UOI Vs. HARSH VARDHAN CHAUHAN

JUDGEMENT

(1.) In the financial year 2004-2005, two companies namely Rajesh Exports Limited (hereinafter referred to as "REL") and Adani Exports Limited (hereinafter referred to as "AEL") obtained Advance Licenses from the office of The Directorate General of Foreign Trade (hereinafter referred to as "DGFT") under the provisions of Chapter 4 of Foreign Trade Policy 2004-2009 and pargraph 4.56.1(b) of Handbook of Procedures authorizing them to effect duty free import of gold bars having 99.5% purity, with an obligation to manufacture and export gold jewellery studded with synthetic, semi-precious and imitation stones having 7% value addition. On the basis of advance licenses granted to them, REL and AEL imported duty free gold, manufactured the final product and exported the same; as claimed by them and in respect whereof they filed the necessary documents with the concerned department.

(2.) On 11.02.2005, DGFT issued policy circular No.18/2004- 9, which reads as under:-

(3.) Being aggrieved by the aforesaid circular issued by DGFT, REL filed a petition bearing No.7256/2005 (GM-RES) under Articles 226 and 227 of Constitution of India before High Court of Karnataka, seeking quashing of the said policy circular and sought issuance of a direction to DGFT to redeem the licenses in respect of which REL had completed exports in accordance with Foreign Trade Policy 2004-2009 by achieving the required value addition. In the said petition, it was contended on behalf of REL that studded gold jewellery items fall within paragraph 4.56.1(a) of Handbook of Procedures Volume I (2004-09) and therefore minimum value addition required for studded gold jewellery items is 7%; that they had utilized gold which was purchased locally from the open market in manufacturing studded gold jewellery items and that the value of local gold should also be taken into consideration in determining the value addition in terms of the policy circular dated 11.02.2005.