2018 (4) TMI 979 - HC - Customs

Court Clarifies Export Incentive Limit, Scrutiny Process

The court held that clause (i) in paragraph 3.14.5.(c) of the Foreign Trade Policy 2009-2014 did not impose an upper limit on the benefit under the ... Foreign Trade Policy (FTP) - Incremental Export Incentivisation Scheme (IEIS) - N/N. 43(RE-2013)/2009-2014 dated 25th September, 2013 - whether clause (i) incorporated in paragraph 3.14.5.(c) poses an upper limit of benefit under the IEIS for the year 2013-14 or in view of clause (ii), and on interpretation of paragraph 3.14.5.(c) claims in excess to this value would be subjected to greater scrutiny by the Regional Authority? Held that: - A Division Bench in the case of T.T. Ltd. Vs. Union of India & Anr. [2016 (1) TMI 418 - DELHI HIGH COURT] had upheld constitutional validity of the Notification Nos.43(RE-2013)/2009-2014 and 44(RE2013)/2009-2014 both dated 25th September, 2013 adding sub-para to paragraphs 3.14.5 (c) and 3.14.4 (c) to the Foreign Trade Policy 2009-14, albeit had stated that in view of sub-paras (ii), added to paragraph 3.14.4 (c) and 3.14.5 (c) vide Notification Nos. 43(RE-2013)/2009-2014 and 44(RE-2013)/2009-2014 the claims could not have been rejected without assigning any reason - In terms of clause (ii), the Regional Authority was required to pass a reasoned order after application of mind on the contents of the applications. Direction was accordingly given to the Regional Authority to pass a speaking order within 8 weeks. Petition allowed with a direction to the Regional Authority to examine the case of the petitioner for grant of export incentive and pass a reasoned and speaking order. Issues Involved:1. Interpretation of Notification No. 43(RE-2013)/2009-2014 dated 25th September, 2013.2. Whether clause (i) in paragraph 3.14.5.(c) of the Foreign Trade Policy 2009-2014 imposes an upper limit on the benefit under the Incremental Export Incentivisation Scheme (IEIS) for the year 2013-14.3. The requirement for greater scrutiny by the Regional Authority for claims exceeding Rs. 1 crore.Detailed Analysis:1. Interpretation of Notification No. 43(RE-2013)/2009-2014 dated 25th September, 2013:The primary issue in the judgment revolves around the interpretation of Notification No. 43(RE-2013)/2009-2014, which introduced amendments to paragraph 3.14.5.(c) of the Foreign Trade Policy 2009-2014. The notification added two clauses:- Clause (i) limited the benefit of the Incremental Export Incentivisation Scheme (IEIS) for the year 2013-14 to a scrip of a value not exceeding Rs. 1 crore per IEC.- Clause (ii) stated that claims exceeding this value would be subjected to greater scrutiny by the Regional Authority.2. Whether Clause (i) Imposes an Upper Limit on the Benefit:The petitioners argued that the Rs. 1 crore mentioned in clause (i) was not an upper limit but a threshold for greater scrutiny by the Regional Authority. The respondents, however, contended that it was indeed an upper limit. The court examined the amendments and found that the public notice No.28/2009-2014(RE-2013) dated 25th September, 2013, clarified the intent behind the amendments. The public notice indicated that the amendments were to ensure that claims in excess of Rs. 1 crore would be scrutinized more thoroughly, rather than imposing an upper limit. The court held that interpreting clause (i) as an upper limit would render clause (ii) redundant, which was not the intent of the notification.3. Requirement for Greater Scrutiny by the Regional Authority:The court emphasized that the two newly inserted clauses must be read harmoniously. Clause (i) did not prescribe an upper limit but indicated that claims exceeding Rs. 1 crore would undergo greater scrutiny. The public notice detailed the procedure for such scrutiny, including the documents and particulars to be submitted by the exporter. The court noted that if Rs. 1 crore was the upper limit, there would be no need for the detailed scrutiny procedure outlined in the public notice. This interpretation was supported by similar judgments from the Bombay High Court and the Calcutta High Court, which also held that the clauses did not impose an upper limit but required greater scrutiny for higher claims.Conclusion:The court allowed the writ petitions and directed the Regional Authority to examine the petitioner's claims for export incentives and pass a reasoned and speaking order. The applications should not be rejected solely because the total amount claimed exceeded Rs. 1 crore during the financial year 2013-14. However, the greater scrutiny as per clause (ii) of paragraph 3.14.5.(c) read with paragraph 3.8.3(e)(ii) would be undertaken. The exercise was to be completed within 10 weeks from the date a copy of the order was served on the respondent. There was no order as to costs.