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of <h1>DGFT Circular Amending SFIS Benefits Policy Ruled Ultra Vires</h1> The court held that the circular dated 15 July 2010 issued by the Directorate General of Foreign Trade (DGFT) requiring reopening and recovery of SFIS ... Ultra vires circular - Served From India Scheme - challenging the policy circular dated 1 January 2008 to the extent that it impacted upon Telecommunication service providers – Held that:- foreign exchange earned cannot be defined as the remittance of foreign exchange less an outflow. Where the policy intended that the concept of the net foreign exchange should be applied it has stipulated so expressly. In the absence thereof, it was wholly impermissible for the DGFT, by means of a policy circular, to direct the implementation of what constitutes clearly an amendment of the policy. circular dated 15 July 2010 in so far as it directs the implementation of the decision taken in the meting of the Policy Interpretation Committee dated 5 July 2010 is ultra vires the Foreign Trade Policy for 2004-09. directions contained in para 3 of the Circular dated 15 July 2010 to reopen the SFIS cases and to make recoveries in accordance with the decision taken at the PIC meeting on 5 July 2010 is quashed and set aside Issues Involved:1. Eligibility and entitlement under the Served From India Scheme (SFIS).2. Validity of the circular dated 15 July 2010 issued by the Directorate General of Foreign Trade (DGFT).3. Reopening and recovery of SFIS benefits granted to telecommunications service providers.Detailed Analysis:1. Eligibility and Entitlement under the Served From India Scheme (SFIS):The SFIS aims to accelerate the growth of export services to create a recognizable 'Served From India' brand. Eligibility under SFIS requires service providers to have a minimum foreign exchange earning of Rs. 10 lakhs in the preceding financial year (Rs. 5 lakhs for individual providers). The entitlement is a Duty Credit scrip equivalent to 10% of the foreign exchange earned. The definition of a 'Service Provider' includes services supplied from India to other countries, to foreign consumers in India, through commercial presence abroad, or relating to exports paid in foreign exchange.2. Validity of the Circular Dated 15 July 2010:The DGFT circular dated 15 July 2010, following the Policy Interpretation Committee (PIC) meeting on 5 July 2010, required reopening and re-computing SFIS entitlements for telecommunications services. The circular aimed to clarify eligibility for SFIS benefits in three specific telecom scenarios:(i) International incoming calls to Indian subscribers,(ii) Outgoing international calls by foreign subscribers roaming in India,(iii) Incoming international calls to foreign subscribers roaming in India.The court found that the circular's stipulations, particularly denying benefits for international incoming calls and limiting benefits to 50% for roaming scenarios, amounted to an amendment of the Foreign Trade Policy, which is beyond the scope of a policy circular.3. Reopening and Recovery of SFIS Benefits:The court held that the circular's directive to reopen and recover SFIS benefits was ultra vires the Foreign Trade Policy. The policy explicitly defines eligibility and entitlement based on 'free foreign exchange earned,' without reference to net foreign exchange. The DGFT's attempt to reinterpret this as net foreign exchange was deemed an unlawful amendment. Consequently, the directive to reopen cases and make recoveries based on the PIC decisions for the specified telecom scenarios was quashed.Conclusion:The court ruled that the DGFT circular dated 15 July 2010, to the extent it directed reopening and recovery of SFIS benefits for the specified telecom scenarios, was ultra vires the Foreign Trade Policy. The circular's provisions were set aside, and all consequential actions were to follow accordingly. Rule was made absolute with no order as to costs.
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