The Gujarat High Court set aside two notifications that sought to withdraw Service Export Incentive Scheme (SEIS) benefits retrospectively, holding that Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 does not empower the Government to amend a scheme in a manner that extinguishes vested rights of exporters.
Background & Facts
The Dispute
The petitioners, OXANE PARTNERS INDIA PRIVATE LIMITED, provide towing and other support services at Indian ports. Their services fall under entry numbers 9(e) and 9(f) of Appendix 3D and Appendix 3E of the Foreign Trade Policy (FTP) 2015-20. They claimed benefits under the Service Exports from India Scheme (SEIS) as per Public Notice No. 3/2015-20 dated 01 April 2015.
Key Facts
- The SEIS benefits were available for services rendered between 01 April 2015 and 31 March 2020.
- Notification No. 57/2015-20 dated 31 March 2020 extended the FTP 2015-20 validity to 31 March 2021 and amended reward rates.
- Notification No. 29/2015-20 dated 23 September 2021 inserted Paragraph 3.08 (aa) and other provisions, retrospectively withdrawing SEIS benefits for the financial year 2019-20.
- On 25 March 2022 the Ministry of Commerce and Industry issued another notification withdrawing the scheme altogether, with retrospective effect.
- The petitioners had already earned foreign exchange and received SEIS benefits for FY 2015-19; the retrospective withdrawal prevented them from filing applications for FY 2019-20.
Procedural History
- 01 April 2015: Public Notice No. 3/2015-20 issued, enabling SEIS claims.
- 31 March 2020: Notification No. 57/2015-20 issued, extending FTP validity.
- 23 September 2021: Notification No. 29/2015-20 issued, inserting Paragraph 3.08 (aa) and withdrawing FY 2019-20 benefits retrospectively.
- 25 March 2022: Notification dated 25.03.2022 issued, withdrawing the entire SEIS scheme retrospectively.
- 2021: Special Civil Application No. 16673 of 2021 filed (facts incorporated).
- 2022: Special Civil Application No. 20730 of 2022 filed seeking quash of Notifications No. 57/2015-20 and No. 29/2015-20.
- 05 February 2026: Earlier judgment in Special Civil Application No. 17285 of 2025 cited by parties.
- 20 August 2026: Oral judgment delivered by Justices A.S. Supehia and Vaibhavi D. Nanavati.
The Parties' Positions
- Petitioners: Argue that Section 5 of the Foreign Trade Act does not permit retrospective amendment; vested rights accrued under the scheme cannot be taken away.
- Respondents (Union of India & Ors.): Contend that the Government has broad authority to amend the FTP and may withdraw schemes, including retrospectively, to serve policy objectives.
Relief Sought
The petitioners prayed for:
- Quash and set aside Notifications No. 57/2015-20 dated 31 March 2020 and No. 29/2015-20 dated 23 September 2021.
- Declaration that the retrospective effect of these notifications is invalid.
- Direction to process all pending SEIS applications of the petitioners and pay the accrued benefits within twelve weeks of receipt of the order.
The Legal Issue
Whether Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 empowers the Central Government to amend or withdraw the Service Export Incentive Scheme with retrospective effect, thereby extinguishing rights that had already accrued in favour of exporters.
Arguments Presented
For the Petitioners
The petitioners relied on precedents such as Asian Food Industries, Viraj Impex, and Kanak Exports to contend that vested rights cannot be taken away by a retrospective amendment. They emphasized that Section 5 merely allows the Government to formulate or amend the policy prospectively and that no specific power for retrospective alteration was conferred. The petitioners also highlighted the principle that delegated legislation must contain an express clause authorising retrospective effect, which was absent.
For the Respondents
The respondents argued that the Constitution vests the executive with the power to amend policies under Section 5 and that the FTP, being a policy instrument, can be modified or withdrawn at any time to reflect changing economic objectives. They submitted that the notifications were issued under the same statutory provision and therefore valid, irrespective of the temporal impact on existing claimants.
The Court's Analysis
The Court began by interpreting Section 5 of the Foreign Trade Act in its ordinary grammatical sense, noting that the provision speaks of “formulating and announcing” the policy and “amending” it, but does not expressly mention retrospective operation. The Court observed that retrospective legislation is an exception to the general rule of prospective effect and requires a clear legislative intent.
"The provision of Section 5 is self-explanatory. The same stipulates that the Central Government may, from time to time, formulate and announce the foreign trade policy and may also, in like manner, amend that policy."
The Court then examined the cited precedents. In Asian Food Industries the Delhi High Court held that a statutory order under Section 5 could not have a retrospective effect that would defeat vested rights. Viraj Impex reinforced the view that the operative date of a notification is its publication date, and any benefit accrued before that date cannot be retrospectively withdrawn. Kanak Exports further clarified that while the Government may amend a scheme, it cannot do so retrospectively unless a specific power is granted.
Applying these principles, the Court found that the notifications of 31 March 2020 and 23 September 2021 were issued after the petitioners had already earned foreign exchange and secured SEIS benefits for FY 2019-20. The retrospective withdrawal therefore sought to extinguish rights that had already vested, a step the Court deemed ultra vires.
The Court also stressed that the FTP and the SEIS scheme are forms of delegated legislation. As such, any amendment that affects vested rights must be expressly authorised, which was absent in the impugned notifications. Consequently, the Court concluded that the Government’s power under Section 5 is limited to prospective changes unless a specific enabling clause is present.
Finally, the Court addressed the procedural aspect, noting that the petitioners had not challenged the prospective operation of the 31 March 2020 notification; their grievance lay solely with its retrospective effect. Hence, the Court limited its relief to quashing the retrospective operation while leaving the prospective provisions intact.
The Verdict
The petitioners prevailed. The Court quashed and set aside Notifications No. 57/2015-20 dated 31 March 2020 and No. 29/2015-20 dated 23 September 2021, holding that their retrospective effect is invalid. The impugned notifications shall be deemed effective only from the dates of issuance. The respondents are directed to process all pending SEIS applications of the petitioners and to pay the accrued benefits within twelve weeks of receipt of a copy of this order.
What This Means For Similar Cases
Retrospective Amendments Are Not Permissible Without Express Power
- Practitioners must scrutinise the enabling provision of any delegated legislation before challenging a retrospective change.
- Courts will likely follow the Asian Food Industries line that vested rights cannot be taken away without a clear statutory mandate.
Vested Rights Under Export Incentive Schemes Are Protected
- Exporters who have already earned foreign exchange and received benefits enjoy a protected claim, even if the scheme is later altered.
- Claims arising before the amendment date must be processed and paid, subject to the timeline imposed by the court.
Government Must Provide Clear Prospective Transition Mechanisms
- When withdrawing a scheme, the Government should specify a prospective cut-off date and avoid retroactive denial of benefits.
- Legal counsel should advise clients to file applications promptly and preserve documentary evidence of entitlement before any policy change.
