The Supreme Court will hear in October the Centre’s appeal challenging the Gujarat High Court’s order that held as unconstitutional the provisions of foreign trade policy relied upon by the Directorate General of Foreign Trade (DGFT) to recover duty drawback benefits already granted to power producers.As a result of the verdict, recovery notices issued in the past to non-mega power projects have become illegal as there is no stay from the Supreme Court.

The Centre has also sought transfer of around 16 petitions filed by variouspower companies, including Reliance Infrastructure, GMR Power, KSK Energy, before different high courts.A bench headed by Justice Dipak Mishra posted the matter for final disposal on October 14. The Gujarat High Court in February last year had held that through various provisions of the Foreign Trade Policy and the procedures there under, the DGFT was exercising certain powers without legal basis.

The judgment said the Foreign Trade Development and Regulation Act, 1992,had not conferred this power upon the DGFT or subordinates and its only the central government which can issue the appropriate notification and make appropriate rules for enforcing the Act’s provisions.

The high court order had come on a petition filed by Alstom India, which challenged the constitutional validity of the provisions on the ground that the debt-ridden power sector has been subjected to irrational and inequitableactions perpetuated by the DGFT which initiated proceedings of recovery of duty drawback benefits granted in the prior years.

In March 2011, the DGFT had decided to deny deemed export drawback on supplyof imported as well as domestic plant and machinery for constructing non-megapower plants.Following the decision, the DGFT directed various authorities to recover deemed export drawback running into several thousand crores.The authority also instructed the withdrawal of all prior approvals.Various companies then challenged the letters of May 2011 issued by the DGFT claiming back the duty drawback benefits already availed of by them before different high courts.

According to Rosa Power Supply, which moved the Delhi High Court, it had been asked to refund Rs 114.49 crore of duty drawback benefits which it had already availed of.It said the joint director general of foreign trade was not competent to issue the direction and it cannot suo moto review its own decision.Further, the FTDR Act does not grant the power upon subordinate authority to recover the duty drawback already granted, it said.