2022 (8) TMI 186 - HC - Customs

High Court rules for Private Limited Company in SEIS benefits case challenging IEC requirement

Smarte Solutions Pvt. Ltd, Versus Union of India through, The Joint Secretary, Department of Revenue, Ministry of Commerce, New Delhi, The Joint Secretary, Ministry of Law, Justice & Company, Mumbai, Director General Foreign Trade Policy, New Delhi, Regional Authority, Office of Addl. Director Gen. of Foreign Trade, Joint Director General of Foreign Trade, Mumbai

The High Court ruled in favor of the petitioner, a Private Limited Company, in a case challenging the rejection of SEIS benefits application due to the ... Non-consideration of the benefits under the Services Export from India Scheme - non-holding of valid Import Export Code (IEC) number, at the time of rendition of services exported from India - HELD THAT:- In case at hand, admittedly, when the petitioner- Company has rendered the services, it did not have a valid IEC number, however while applying for the reward/benefit under the scheme, it has obtained an IEC number and applied accordingly. Undoubtedly, in terms of eligibility Clause 3.08(f) of the FTP, the condition is of having an active IEC number at the time of rendering services for claiming reward. It is to be examined whether the said condition is inconsistent or casts an additional obligation on the exporter which was not intended or led under the principal statute. The learned counsel for the petitioner would submit that the FTP has been framed in pursuance of powers delegated under Section 5 of the FTDR Act. It is the prime submission that FTP being delegated legislation, it should be in conformity with the principal statute. Reverting to the Section 7 of the FTDR Act, it pertains to the mandatory requirement of IEC number for making import or export of general goods. However, exception has been carved out by the proviso particularly in cases of import or export of services or technology. In the said eventuality, IEC number shall be necessary only when the service provider is taking the benefits under the FTP. The proviso does not lay down that the IEC number is essential at the time of rending services of said specified kind. The requirement of IEC number is only for taking benefits under the scheme. Therefore, it is abundant clear that the eligibility criteria of Clause 3.08(f) of the FTP has imposed additional restriction of having IEC number at the time of rendering services which was not intent or purport of the statute - the said condition is against the principal legislation and therefore, it cannot be termed as of mandatory nature for availing benefits under the scheme. The respondents are directed to consider the petitioner’s application without insisting for an active IEC number at the time of rendering services - petition allowed. Issues:Challenge to non-consideration of SEIS benefits due to lack of valid IEC number at the time of service export.Analysis:1. The petitioner, a Private Limited Company providing data services, challenged the rejection of SEIS benefits application due to not holding a valid IEC number at the time of service export under the Foreign Trade Policy 2015-20 (FTP).2. The petitioner faced technical issues while filing SEIS applications online and manually submitted them, which were refused by the authorities, leading to a writ petition in the High Court.3. The petitioner argued that the requirement of having an active IEC number at the time of service export, as per para 3.08 of the FTP, was not a statutory requirement under the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act).4. The petitioner contended that the condition in para 3.08(f) of the FTP, mandating an active IEC number at the time of service export, exceeded the authority granted under the FTDR Act, making it ultra vires.5. The Deputy Director General of Foreign Trade defended the FTP provision, stating it aligned with the FTDR Act, but the petitioner argued that delegated legislation must conform to the parent law without imposing additional obligations.6. The Court analyzed the proviso to Section 7 of the FTDR Act, which exempts the necessity of an IEC number at the time of service export unless availing benefits under the FTP, concluding that the FTP's condition was inconsistent with the statute.7. Relying on legal precedents, the Court held that the condition in para 3.08(f) of the FTP, requiring an active IEC number at the time of service export, was against the principal legislation and not mandatory for availing SEIS benefits.8. Consequently, the Court allowed the petition, directing the respondents to reconsider the petitioner's application without insisting on an active IEC number at the time of service export, with a decision to be communicated within three months.