TaxTMI 
TaxTMI 
2010 (12) TMI 124
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....ment and Regulation) Act 1992 and whether the show cause notices dated 16th July 2007 sent to the Petitioner by the JDGFT proposing cancellation of the duty free scrips on the ground of misrepresentation of facts by the Petitioner are liable to be quashed? Factual Background 2. The Petitioner states that it is a company engaged in development and construction of residential and commercial properties in India and selling them to the customers in India and abroad. In terms of para 3.6.4 of the FTP 2004-09 and para 3.18 of the Hand Book of Procedures 2004-09, ("HBP 2004-09") the Petitioner applied for the grant of DFCE certificate (or duty free scrip) under the SFIS against the exports made during the years 2003-04 and 2004-05. Pursuant thereto, the Directorate General of Foreign Trade ("DGFT") granted the Petitioner two duty free scrips - one dated 4th February 2005 for Rs. 5,64,04,700/- and another dated 9th January 2006 for Rs. 7,62,60,848/-. 3. On 2nd November 2006, the JDGFT wrote to the Petitioner as under: "Gentlemen, This has reference to the Licence No. 0510150403 dt. 4/2/05 under "Served From India Scheme" issued to you under our above-mentioned file No. The audit team....
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....trading stock by the seller, but not sales of property where the sales are disposals of the fixed assets of the selling unit. Examples of residential properties include houses with land, multiple dwelling buildings with land and individual dwelling units within such buildings, such as individual apartments or condominiums. Such property can be either leasehold or freehold. Also included are own account sales of residential buildings that have been constructed on contract by a construction unit for the selling unit and which are treated as trading stock by the seller. Exclusion: Sales of property that has been physically constructed by the selling unit are classified in group 512 (Construction work for buildings)." 7. On 21st December 2006, the Petitioner wrote to the JDGFT drawing attention to the clarification dated 7th December 2006 received from the MoC and requested that the letter dated 2nd November 2006 be withdrawn with immediate effect. 8. On 13th April 2007, two letters were issued to the Petitioner by the JDGFT. By the first it was stated that the DGFT had since clarified that "only those foreign exchange receipts that are realised for rendering of service can alone....
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....ssion/brokerage can come under this entry. The issue is also similar with respect to 82203-"Residential buildings and land sales on a fee or contract basis"." 11. The Petitioner was given a personal hearing on 3rd October 2007 and it also filed its written submissions on 25th October 2007. On 25/26th June 2008, the impugned order was issued by the Secretary, Ministry of Commerce stating as under: " a) The sale of property for a consideration would not amount to providing services other than those which are part and parcel of any sale, whether they be for the sale of a moveable or immoveable property. This kind of a sale would not appear to be as per the letter and spirit of the Served from India Scheme (SFIS), which is only for the export of services. b) A clarification has been provided by the Trade Policy Division (Services) of Deptt. of Commerce in December, 2006 to M/s DLF Ltd. In response to their query, which was specifically to help the company "...in understanding the International Business under "REAL ESTATE SERVICES" as we wish to go Globally to capture Global Market of "REAL ESTATE SERVICES". The clarification, therefore, provided by TPD only referred to the tex....
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....ATS negotiations, the services like construction and/or real estate service would be defined, but in a particular context only. For instance, Indian Expertise in Engineering Field, or Medical Field is not recognized worldwide. Trade in these services is not allowed unless an agreement of movement of natural persons is put in place. Once such an agreement is in place, and then Indian Engineer would be allowed in WTO member countries, and similarly for Medical field as well as for Real Estate Services, whereby Indian Real Estate Companies may be permitted to carry on real estate business in such nations. All this has no connection with Export of Service and eligibility of a service provider under the Served from India Scheme (SFIS). Moreover, Department of Commerce has themselves re-examined the issue and given DGFT a reply with their comments vide their letter dated 19.05.2008 [Annexure-E], which are reflected in DGFT letter dated 26.6.2008 [Annexure-B]. Hence their earlier letter dated 7.12.2006 [Annexure-F] has become irrelevant, particularly in light of the usage beyond the GATS filed. This cannot be used under SFIS, in our view." Whether DFCE certificates are 'licences' under....
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....ther permission issued or granted under the FTDR Act. Importantly, Section 2 begins with words "In this Act, unless the context otherwise requires". Section 9 empowers the DGFT to cancel any licence after giving the holder of the licence a reasonable opportunity of being heard. It is in this context that the Petitioner seeks to urge that since the DFCE certificates are not licences at all, this power could not have been invoked. 18. In the considered view of this Court, it is not possible to place a narrow interpretation on the word "licence" while interpreting Section 2(g) of the FTDR Act. The DFCE certificates issued under the SFIS would indeed qualify as licences since they permit the holders of such certificates to avail of duty credit while making subsequent imports of freely importable goods. To this extent, this Court negatives the submission of the Petitioner that the two DFCE certificates dated 4th February 2005 and 9th January 2006 are not licences within the meaning of Section 2(g) of the FTDR Act. Whether DGFT was justified in initiating proceedings to cancel the duty free scrips under the FTDR Act? 19. The next submission of Mr. Ganesh, learned Senior counsel for....
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....Exim Policy was served. Therefore even on an application of the rule of purposive construction real estate services in Appendix 10 to the HBP ought to include sale of immovable property. He submitted that the position taken now by the DGFT that the relevant Clauses of the Exim Policy could not be interpreted by referring to the GATS or the UNCPC was erroneous. He referred to para 3.6.1 of the FTP 2004-09 which adverts to GATS and para 9.52 which defines "services" to include all tradable services covered under the GATS and earning free foreign exchange. Mr. Ganesh further pointed out that a perusal of the Services Sectoral Classification List prepared by the WTO way back on 10th July 1991 showed that while classifying Real Estate Services, it refers to the corresponding UNCPC divisions 821 and 822. The wording of the UNCPC was identical to the wording of Sl. 1 (D) of Appendix 10 of the HBP 2004-09. Mr. Ganesh submitted that the wording of Article 1(2) of the GATS was no different from para 9.53 of the FTP 2004-09 which defines "Service Provider." He accordingly submitted that for all practical purposes, the words and expressions not defined in detail in the FTP 2004-09 or the HBP 2....
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....GATS of the WTO (Document W/120) or the sub-sectors under Real Estate Services listed in the UNCPC. 24. In the considered view of this Court, the stand now taken in the counter- affidavit by the Respondents that it is only such service that is relatable to the sale of immovable property that would be eligible for issuance of DFCE certificate under the SFIS is a plausible one to take. While it does not completely repudiate the reference to the definition contained in the UNCPC, it contextualises the services relatable to sale of immovable property, for which alone the entitlement would be available. In a sense, it harmonises the Clause at Serial No. 1(D) in Appendix 10 of the HBP 2004-09 with the sub-sector definition of real estate services under the UNCPC. The title of the scheme, which is "Served" from India Scheme, emphasises the service component of the transaction. The emphasis has to be at all times on "services" as understood under the FTP 2004-09 and in particular Para 9.53 thereof. The foreign exchange receipts realised for rendering such services alone would qualify for the DFCE certificate under the SFIS. Consequently this Court finds merit in the contention of the Re....
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....er the scrip was fully utilised, as in the instant case, by the Petitioner. 28. In reply to this submission, Mr. Chandhiok points out that the claim for issuance of a DFCE certificate on the basis that the Petitioner was providing "real estate services" would itself amount to misrepresentation of facts by the Petitioner when in fact it was claiming the entire sale consideration of the immovable property for the purposes of DFCE. Therefore, the issuance of the show cause notices was justified, notwithstanding the clarification sought by the JDGFT and later provided on 7th December 2006 by the MoC. The Respondents, after the final hearing concluded, produced a copy of the declaration made by the Petitioner to the JDGFT on 24th December 2004 stating that it had applied for duty free entitlement under the SFIS only against those remittances which had been received by it as service charges and fee charges for Real Estate Services. It was submitted that this document could be discovered from the record only recently. It is submitted that it is only on the basis of the above declaration that the Petitioner"s application for grant of duty free scrips was allowed. However, the Petitioner....