The proposal for retrospective amendment of the DFIA notification (no. 40/2006-Cus. dated 1.5.2006) intends to recover duty and interest from exporters who had stayed within the law and obtained certain benefits, which the government very well knew to be legitimate but later on claimed to be unintended.

The DFIA scheme drafted by the commerce ministry was faulty and so was the notification (no. 40/2006-Cus. dated 1.5.2006) drafted by the finance ministry. Despite repeated representations the government did not react till February 17, 2009, when the notification was amended.

The Central Board of Excise and Customs tried to give the notification retrospective effect through its circular no. 11/2009-Cus. dated February 25, 2009.

As recoveries cannot be effected unless the law permits, the law is now being amended with retrospective effect. However, the explanatory notes to the Finance Bill do not clearly tell Parliament the real intentions behind the retrospective amendment.

In case of JK Spinning & Weaving Mills Ltd [1987 (032) ELT 0324 (SC)], the Supreme Court upheld the power to make retrospective amendments creating duty liability but held that confiscation and penalty are not imposable.

Mercifully, the proposed amendment does not seek to levy penalty but does propose recovery of duty and interest.

Even so, the proposed amendment, if it goes through Parliament, may be open to challenge on the grounds that the government misled Parliament.

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February 2024