AI Drafter 
TaxTMI 
TaxTMI 
2025 (2) TMI 386
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....ule. Respondents waive service. Rule made returnable forthwith. With the consent of the parties taken up for final hearing. Context and Factual Background: 2. This is a Writ Petition challenging the issuance of a show cause notice dated January 13, 2023 ("Impugned SCN") issued by the Director General of Foreign Trade ("DGFT") to the Petitioner, Essar Shipping Ltd. ("Essar") under Section 14 of the Foreign Trade (Development and Regulation) Act, 1992 ("FTDR Act") and subordinate law thereunder. The allegation is that Essar availed of the benefits under the Foreign Trade Policy 2004-2009 ("FTP") by furnishing information, making declarations and relying on certificates, that were allegedly wrong. 3. For the reasons set out in this judge....
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....a. Some international clients would also avail of services between intermittent stops on the routes of such ships - on its voyage, a ship may carry freight between two foreign countries. For example, if a ship were to sail from Singapore to Mumbai, some clients may consign freight from Singapore to Colombo, and the ship would shed such cargo in Colombo en route to Mumbai. Essar would earn foreign exchange from such services too. Based on all earnings from export of services including from fright between two foreign countries, Essar sought duty credit scrips linked to foreign exchange earnings between 2006 and 2007. The duty credit scrips were also utilised for setting off Customs Duty on imports from time to time. 6. The DGFT's case is t....
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....ation should be called for when examining and finalising any claims for duty credit scrips. In the FTP for 2009-2014, a specific amendment was made, to explicitly exclude services on routes not touching India from the ambit of the SFIS. 8. On December 8, 2009, the DGFT issued a letter to Essar asking for a break-up of foreign exchange earned between April 1, 2006 and March 31, 2007, in line with the clarification issued in the Policy Circular. After receiving such data, the DGFT issued two notices dated January 28, 2010 and May 31, 2010 ("Recovery Notices") seeking recovery of Customs Duty benefits along with interest, to the extent the duty credit scrips were attributable to the foreign exchange earnings from routes that were serviced b....
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.... for by the Learned Division Bench of this Court, to examine the real intent and policy purpose behind the Circular. Eventually, in the DB Judgement, the Learned Division Bench was pleased to rule that the Policy Circular was clarificatory in its terms, but was intended to be a prospective clarification. It was noted that in the discussions held on December 14, 2007, it had originally been proposed that even settled benefits already granted and utilised should be revisited, and duty credit granted in the past should be reversed within three months. However, the final Policy Circular did not make this stipulation. 12. The DB Judgement held that the Policy Circular inherently contained the stipulation that the clarified position would be a....
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....ven by it while obtaining benefits under the SFI Scheme, the respondents may proceed against the petitioner to take away such benefits only if such an action is permissible in law." [Emphasis Supplied] 15. The import of this paragraph is easy to discern. The DB Judgement, having ruled on how to read and apply the Policy Circular, (even quashing the Recovery Notices) left a limited scope for penal or remedial intervention in Paragraph 56 of the DB Judgement. Such intervention would necessarily be dependent on any mis-statement or suppression in the information provided by Essar at the time it applied for the benefits, outside of the scope of what was dealt with and ruled upon by the DB Judgement. 16. The Policy Circular has al....
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.... 18. The DB Judgment has already ruled that closed and settled claims of the past cannot be re-opened and that they were legitimate. It would also stand to reason that the term "Service Provider" contained in Paragraph 9.53 of the FTP had not made any exception for foreign exchange earned by an Indian shipping company on the basis of routes outside Indian territory. Paragraph 9.53(iii) defines a "Service Provider" to mean a person providing "Supply of a 'service' from India through commercial or physical presence in territory of any other country". Shipping lines and the DGFT had always understood this to cover services from Country X to Country Y (both countries outside India), until the Policy Circular was issued. That Policy Circular h....