2022 (8) TMI 186 - HC - Customs

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

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 ... Services Export from India Scheme (SEIS) - Import-Exporter Code (IEC) - proviso to Section 7 of the Foreign Trade (Development and Regulation) Act, 1992 - legality of delegated legislation - delegated legislation must conform to parent statute - ultra viresProviso to Section 7 of the Foreign Trade (Development and Regulation) Act, 1992 - Import-Exporter Code (IEC) - legality of delegated legislation - ultra vires - delegated legislation must conform to parent statute - Validity of eligibility condition in para 3.08(f) of the Foreign Trade Policy requiring an active IEC at the time of rendering services for entitlement to SEIS - HELD THAT: - The proviso to Section 7 of the FTDR Act makes IEC necessary in cases of import or export of services or technology only when the service provider is taking benefit under the foreign trade policy; it does not stipulate that an IEC must exist at the time services were rendered. Clause 3.08(f) of the FTP, by insisting on an active IEC at the time of rendition of services, imposes an additional temporal obligation not mandated by the principal statute. Delegated legislation must conform to and remain within the scope of the parent Act and cannot create substantive rights or obligations beyond those contemplated by the Act. Applying these principles, the Court found that para 3.08(f) imposes a restriction inconsistent with the proviso to Section 7 and is therefore beyond the rule making power, rendering the condition impermissible as a mandatory precondition for SEIS entitlement. [Paras 16]Clause 3.08(f) of the FTP is inconsistent with the proviso to Section 7 of the FTDR Act and cannot be treated as a mandatory requirement for claiming SEIS.Services Export from India Scheme (SEIS) - Import-Exporter Code (IEC) - Relief to the petitioner in relation to its SEIS applications for 2015-2016 and 2016-2017 - HELD THAT: - Having held that the FTP condition requiring an active IEC at the time of rendering services is not mandatory, the Court directed respondents to reconsider the petitioner's SEIS applications without insisting on possession of an active IEC at the time the services were rendered. The respondents are directed to take an appropriate decision on the applications within three months from receipt of the order and communicate the decision to the petitioner. [Paras 17]Respondents to consider the petitioner's SEIS applications afresh without insisting on an active IEC at the time of rendition, and decide within three months.Final Conclusion: The writ petition is allowed: the FTP condition in para 3.08(f) requiring an active IEC at the time of rendering services is held inconsistent with the proviso to Section 7 of the FTDR Act and cannot be imposed as a mandatory bar; respondents are directed to reconsider the petitioner's SEIS applications for 2015-2016 and 2016-2017 without regard to IEC status at the time of rendition and to decide within three months. 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.