SFIS entitlement and policy interpretation: circular could not impose netting-off or reopen concluded claims under the scheme.

The Served From India Scheme entitled eligible service providers to benefits on free foreign exchange earned, and the Foreign Trade Policy did not adopt a net foreign exchange formula for SFIS. A circular and PIC minutes sought to deny or curtail benefits in three telecom call scenarios by introducing netting-off and by reopening concluded claims. That approach was treated as a substantive change to the policy, not a mere clarification, because the service chain in the international call scenarios fell within the definition of service provider and the earned foreign exchange could not be reduced by importing a concept absent from the policy text. The circular was therefore ultra vires to the extent it required reopening, recovery, and implementation of the disputed directions.

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Issues: Whether the impugned circular and the consequential directions to reopen settled SFIS cases and recover benefits were valid, and whether telecom service providers were entitled to SFIS benefits on the foreign exchange earned in the three disputed call scenarios.

Analysis: The policy under the Served From India Scheme granted entitlement to eligible service providers on the basis of free foreign exchange earned, and the Foreign Trade Policy did not use a net foreign exchange formula for SFIS. The circular of 15 July 2010, implemented through the PIC minutes of 5 July 2010, sought to deny or curtail benefits in the first, second and third scenarios by introducing a netting-off approach and by reopening concluded cases. That approach went beyond clarification and operated as a substantive alteration of the policy. The service chain in the international call scenarios fell within the policy definition of service provider, and the foreign exchange earned by the petitioners could not be reduced by importing a concept not found in the policy text.

Conclusion: The circular, to the extent it directed implementation of the decisions at serial nos. 1, 2(a) and 2(b) of the PIC minutes and required reopening and recovery, was ultra vires and liable to be quashed. The petitioners succeeded.

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