TaxTMI 
TaxTMI 
2024 (4) TMI 1310
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....TH SABARISH SHIVADASS., ADVOCATE; SRI. V. RAGHURAMAN, SENIOR COUNSEL APPEARING FOR SRI. RAGHAVENDRA.C.R., ADVOCATE FOR THE RESPONDENT : BY SMT. SAROJINI MUTHANNA., CGC FOR R-1, R-2 & R-5 . SRI. AMITH DESHPANDE., ADVOCATE FOR R-3 & R-4; SRI. AMITH DESHPANDE, ADVOCATE FOR R-1, R-2, R-5 TO R-9 SRI. S.V. DESAI., CGC FOR R-3 & R-4 ORDER In W.P. No. 12044/2021, petitioner has sought for the following relief's: "a) Issue a writ of certiorari or any other appropriate writ or direction declaring the Policy Circular bearing No. 06/2018 dated: 22.05.2018 enclosed as Annexure-A and the impugned Policy Circular bearing No. 8/2018 dated: 21.06.2018 enclosed as Annexure-B both issued by respondent, seeking to add additional conditions to the SEIS scheme as ultra vires the provisions of Foreign Trade Policy 2015-2020 issued under the provisions of Foreign Trade (Development and Regulation) Act 1992; b) Issue a writ of certiorari or any other appropriate writ or direction declaring the Policy Circular bearing No. 06/2018 dated 22.05.2018 enclosed as Annexure-A and the impugned Policy Circular bearing No. 08/2018 dated 21.06.2018 enclosed as Annexure B both issued by third....
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....ions are as under: Petitioner No. 1 In W.P. No. 12044/2021 is a private limited company represented by its Directors, petitioners 2 and 3 who have entered into an Agency Agreement dated 03.03.2005 with M/s. Puyvast Chartering BV Netherlands to undertake the activities of arranging for berthing of vessels, loading and unloading of cargo and other works contemplated in the agreement for the vessels belonging to Puyvast Chartering BV Netherlands. In this connection, the 1^st petitioner engages various service providers and co-ordinates to provide above referred scope of services. In this petition, 1^st respondent is the Union of India and 2^nd respondent is the Central Board for Indirect Taxes and Customs. So also, respondents 3 and 4 are Director General for Foreign Trade (DGFT) and Joint Director General for Foreign Trade respectively, while 5^th respondent is the Additional Director General of Revenue Intelligence (DRI-Customs) and respondents 6 to 9 are also the Customs authorities. 3.1 Petitioner in W.P. No. 12068/2021 is engaged in the business of providing shipping related logistic services from India, for M/s ECL Singapore Pvt. Ltd, and for this purpose, the petitioner i....
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....us, the petitioner by themselves and M/s. Gemini Edibles and Fats India Pvt. Ltd., have both utilized a total duty credit scrip of Rs. 74,05,477/- out of a total scrip allotted of Rs. 74,05,493/-. 8. The DGFT issued the impugned Policy Circular No. 6/2018 dated 22.05.2018 inter alia clarifying the fact that the SEIS is eligible only for actual service provider and not eligible for aggregators of service providers like ports, etc. The DGFT also issued the impugned Policy Circular No. 8/2018 dated 21.06.2018 inter alia clarifying that service aggregators are not eligible and such service providers cannot claim the benefit to the extent of foreign exchange earnings simply routed through them for making payments for services rendered by other service providers like Port Trust, etc. 9. It is contended by the petitioner in W.P. No. 12044/2021 that based on the aforesaid impugned circulars, the DRI-Customs initiated investigation against the petitioner and issued the impugned show cause notice bearing No. 05/2021 DRI BZU dated 23.02.2021 proposing to demand an amount equal to the duty scrips granted for the years 2015-16 and 2016-17 alleging that the petitioner is only an aggregator....
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....e petition by filing their statement of objections, wherein they have detailed the scheme as having been made for the benefit of exporters. They have asserted that the benefit is not meant for aggregators and that is why the policy circulars were correctly issued. It is stated that the petitioners were not the actual service providers and therefore, they could not claim the benefits of the said scheme. The policy circular is clarificatory in nature and only tries to amplify what the Policy lays out and the FTP is a policy meant to give SEIS benefits to the actual exporter. It is therefore contended that there is no merit in the petitions and that the same are liable to be dismissed. 14. The petitioners have filed a detailed rejoinder, wherein it is stated that policy circulars cannot deny benefits of the FTP on the ground that it is clarificatory. The petitioners undertake the port related activities on behalf of the foreign principal in India and they are remunerated for the ultimate responsibility of ensuring that the services are rendered by them. Therefore, it is wrong to say that they are only aggregators as they are providing several services and only certain skilled servi....
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....ral Government to DGFT. * Circulars cannot restrict the scope of statutory provision/notification by reading into them a condition which is not provided for by the specific language of the statute and restricting the scope of the SEIS benefit through circulars is colorable excise of power, which is ultra vires the FTP. * Circulars are contrary to the provisions of FTP as the services provided by the petitioners fall under "Maritime Transport Services" and "Supporting Services for Maritime Transport" as notified in Appendic-3D, and the said services are tradeable services as envisaged in the GATS. * While considering eligibility to claim SEIS benefit for shipping support services, similar to the nature of services supplied by the petitioners, the Bombay High Court in Atlantic Shipping's case supra, has held that the circulars are ultra vires the provisions of FTP 2015-20 and allowed the benefit in favour of the writ petitioners. * Similar circular issued by the DGFT restricting the SEIS benefits to telecom service provider has been quashed by the Delhi High Court in the case of Ericson India Global Services Pvt. Ltd. Vs. Union of India and others ....
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....t of objections and submit that there is no merit in the petitions and that the same are liable to be dismissed. 19. I have given my anxious consideration to the rival contentions/submissions and perused the material on record. 20. In my considered opinion, the impugned circulars and show cause notices are illegal, arbitrary and contrary to law apart from being without jurisdiction or authority of law and the same deserve to be quashed for the following reasons: (i) The impugned Policy Circulars No. 6/2018 dated 22.05.2018 and No. 8/2018 dated 21.06.2018 issued by the DGFT have already be declared as illegal, invalid and ultra rvires the FTP by the Bombay High Court in Atlantic Shipping's case supra, wherein it is held as under: "16. We may state that section 5 of the FT (D&R) Act provides that the Central Government may from time to time formulate and announce the Exim Policy by issuing notification in the official gazette. Thus, it is the Central Government which has power to amend the policy by adopting the procedure as stated in the Act; the power to announce the policy and to amend as such solely remains within the domain of the Central Government and c....
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....e FT (D&R) Act would have to be carried out only by the Central Government. 19. The two impugned policy circulars clearly curb the right of the petitioner as an independent foreign exchange earner for the purposes of FTP 2015-20 and its consequential SEIS benefits in conformity with para 3.08(d) of the FTP. The designation or description of the petitioner as "aggregator" of services purchased by them is not in conformity with the underlying ethos of the FTP 201520 read with the FT (D&R) Act, 1992. 20. We also have to bear in mind the objective of the Exports from India Schemes as envisaged in para 3.00 and the objective of Service Export from India Scheme (SEIS) as envisaged in para 3.07 in consonance with the eligibility criteria stated in para 3.08 of Chapter 3 and the definition of 'service provider' provided in para 9.51 of the FTP. The said relevant provisions are reproduced hereunder :Exports from India Scheme; "3.00 Objective The objective of schemes under this chapter is to provide rewards to exporters to offset infrastructural inefficiencies and associated costs. 3.07 Objective Objective of Service Exports from ....
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....ountry. (Mode 4 - Presence of natural persons.)" 21. On thorough consideration of the above statutory provisions together with the definition of 'service provider' and the provisions of the Exports from India Schemes pertaining to eligibility, it is clearly discernible that the petitioner's activity falls within the definition of 'service provider' and is therefore eligible for benefit / reward under SEIS. We may also refer to the application form ANF3B for seeking benefit under SEIS filed by petitioner which is annexed at page 89 of the paper book. This application form states that the petitioner has been registered for the following products/services in terms of its main line of business: (i) marine transport service; (ii) rental of commercial vehicles with operator; (iii) road transport services - passenger transportation and (iv) supporting services for road transport services. 22. That apart we may also refer to the return filed by the petitioner under section 70 of the Finance Act, 1994 read with rule 7 of the Service Tax Rules, 1994 i.e form ST-3 (revised) wherein the petitioner has applied fo....
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....not agree to this submission for more than one reason. Firstly, having regard to what we have discussed above, this would not be a permissible interpretation. For this reason we would like to refer to para 22 in the case of Vodafone Essar Ltd (supra) which has clearly distinguished such a submission. Paragraph 22 of the said judgment reads thus:- "22. The learned ASG sought to submit that for the purposes of clause 3.6.4.3 the amount earned must refer to the net amount earned. Ex-facie, this would not be a permissible interpretation. For one thing, the amount earned cannot be different while defining entitlement and for determining eligibility. The amount earned can only mean the same thing, while applying the conditions of eligibility and for defining the extent of the entitlement. Secondly, where the Foreign Trade Policy postulates that a net foreign exchange earning should be computed, express provisions to that effect have been made by the Policy. For instance, in paragraph 6.5 of Chapter VI which relates interalia to export oriented units and paragraph 7.4 of Chapter VII which deals with Special Economic Zones, the policy has made a reference to net foreign exchange (....
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.... (ii) Impugned order of refusal dated 25.10.2018 passed by the Additional Director of Foreign Trade, Mumbai cannot be sustained and is accordingly quashed and set aside; (iii) Show Cause Notice dated 10.05.2019 issued by respondent No. 4 is quashed and set aside; (iv) Show Cause Notice dated 30.05.2019 issued by respondent No. 6 is quashed and set aside." (ii) I am in complete agreement with the above judgment of the Bombay High Court holding that the policy circulars cannot bring about additional conditions which are not present in the Foreign Trade Policy and they cannot supplant conditions not envisaged in a statutorily recognized scheme. In the instant case, the material on record clearly establishes that the petitioners are rendering services and they cannot be denied the benefit by a bald assertion to the contrary and consequently, in the light of the judgment of the Bombay High Court supra, the impugned policy circulars deserve to be quashed. (iii) In the case of Ericson India Global Services Pvt. Ltd. Vs. Union of India and others 2021-TIOL-998-HC-DEL-CUS, a similar policy circular issued by the DGFT restricting the SEIS benefits to t....
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....by means of Notification, in public interest; further, as per Para 1.03 and Para 2.04 of the FTP, the DGFT by means of Public Notice can notify and amend only the Hand Book of Procedure, amongst others, for laying down the procedure to be followed by an exporter or importer for the purpose of implementation of the FTP. In other words, while the power to amend the FTP vests solely and exclusively with the Central Government, the DGFT has the power to issue a Public Notice prescribing and amending only the procedure; in this context, a perusal of the Public Notice dated 24.05.2022 issued by the DGFT will clearly indicate that he traces his power to Para 1.03 and Para 2.04 of the FTP for the purpose of issuing the Public notice; similarly, even in the Public Notice dated 14.06.22 containing the impugned 'condition x', the DGFT traces his power only to Para 1.03 and Para 2.04 of FTP and in both the aforesaid Public notices, he does trace his power to the FTDR Act. 10. It follows there from that the power and jurisdiction to issue Public Notice stipulating the procedure and amending the same by the DGFT is circumscribed and traceable only to the FTP and consequently, the DGFT d....
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....ment sought to amend certain provisions of the EXIM Policy by inserting Notes 1 to 5, which was unpalatable to the exporters of the goods mentioned therein as, according to them, under the guise of the said Notes, some benefits which had already accrued to these exporters under the EXIM Policy were taken away. Vide Public Notice dated 28-1-2004, the Government announced exclusion of export performance in relation to four classes of goods mentioned in Para 2 thereof from computation of the entitlement under the Scheme and, at the same time, sought to disallow the import of agricultural products falling under Chapters I to XXIV of ITC (HS) under the said Scheme. Thereafter, Notification No. 38 dated 21-4- 2004 was published under Section 5 of the Act on the same lines on which Public Notice dated 28-1- 2004 was issued. The exporters of these goods, naturally, felt aggrieved thereby. There was an innocuous amendment to Notification No. 38 dated 21-4-2004 wherein in addition to the Director General of Foreign Trade (for short "DGFT") as an officer to enforce these notifications, ex officio Additional Secretary to the Government of India was also added. All such exporters who were affec....
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....n subsection (2) of Section 19. This power of the Central Government also cannot be delegated. 9. It may be noted that under Section 5 of the Act, the Central Government has been formulating EXIM policies from time to time. The Policy with which we are concerned is the EXIM Policy for the period 2002-2007, which was substituted by EXIM Policy 2004-2009. 10. The EXIM Policy of 2002-2007 was announced and came into force from 1-4-2002. Amendment to this Policy was notified on 31-3-2003 and the revised edition of the Policy was to come into force from 1-4-2003. Even though the Central Government is generally entitled and empowered to carry out amendments in this Policy from time to time, in the EXIM Policy 2002-2007, such a right was specifically reserved stating that "however, the Central Government reserves the right in public interest to make any amendments to this Policy in exercise of powers conferred by Section 5 of the Act". It was also mentioned that such amendments would be made by means of a notification published in the Gazette of India. 11. Chapter I of the Policy, which gives "Introduction", had made transitional arrangements vide Para 1.2 there....
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....termination on this issue is as to: III. Whether Public Notice dated 28-1-2004, issued by DGFT, which sought to exclude the export performance related to class of goods, is without jurisdiction? 87. The main submission of the petitioners, which was before the High Courts as well and reiterated before us, was that the Public Notice dated 28-1-2004 seeks to amend the EXIM Policy and DGFT does not have any such power inasmuch as this EXIM Policy is statutory which is issued under Section 5 of the Act by the Central Government and, therefore, it is only the Central Government which has the power to make amendments to the EXIM Policy. Therefore, the Public Notice issued by DGFT dated 28-1-2004 was without jurisdiction. An additional ground of retrospectivity was also taken to challenge the public notice. It was also argued that DGFT by the said public notice was seeking to impose additional conditions, not forming part of the original policy which was again impermissible. 88. Mr Adhyaru, learned Senior Counsel appearing for the Union of India, on the other hand, submitted that the paramount consideration in issuing the public notice was to check unscrupulous e....
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....ubordinate to the Director General, as may be specified in the Order." 90. From the aforesaid, it is clear that Section 5 provides that the Central Government may, from time to time, formulate and announce, the EXIM Policy. This has to be done by issuing/announcing this Policy by way of notification in the Official Gazette. The Central Government also has the power to amend the Policy so announced by adopting the same procedure i.e. by issuing notification in the Official Gazette. It is not in dispute that the EXIM Policy in question was issued by notification in exercise of powers conferred under Section 5 of the Act. This Policy, thus, is infested with statutory flavour. 91. For the purpose of carrying out the objectives of the Act which includes implementation of the Policy, the Central Government is authorised to appoint DGFT as per Section 6 of the Act. The main functions of DGFT are advising the Central Government in formulation of the Policy and he is also responsible for carrying out the said Policy. Subsection (3) of Section 6 provides that the Central Government may delegate its power exercisable under the Act. However, powers under Sections 3, 5, 15, 16....
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....e. Such procedures may, in like manner, be amended from time to time. The Handbook (Vol. 1) is a supplement to the EXIM Policy and contains relevant procedures and other details. The procedure of availing benefits under various schemes of the Policy are given in the Handbook (Vol. 1)." 93. It is explained by the learned counsel for the Union of India that a notification issued under Section 5 of the Act or any change brought about by DGFT in exercise of the powers under Para 2.4 of the Import and Export Policy in the Handbook Procedure, by way of a public notice the same are gazetted and notified in the Gazette of India. It is also pointed out that the notification/public notices issued relating to non-statutory rules, regulations, order and resolutions issued by the Ministries of Government of India (other than the Defence Ministry), and by the Supreme Court of India are published under Part 1 Section 1 of the Gazette of India. On the other hand, notifications issued by the Ministries of Government of India (other than the Defence Ministry) are published under Part II Section 3(ii) of the Gazette of India. On that basis, justification is sought to be given that N....
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....15 of the said judgment will indicate that the same were issued by the Central Government and that the DGFT had performed only the ministerial act of publication and that the decision to amend and issue the Notification was that of the Central Government. The said judgment is inapplicable to the facts of the instant case, since, as stated supra, the power to amend the FTP is vested solely and exclusively with the Central Government in terms of Para 1.02 of the FTP. In this context, as is clear from the Public Notice dated 14.06.2022 containing the impugned 'condition x', the said Public Notice is traceable to Para 1.03 and Para 2.04 of the FTP and not to Para 1.02 of the FTP. To put it differently, amendment to the FTP can be done only by the Central Government under Para 1.02 of the FTP, whereas amendment to the procedure can be done by the DGFT under Para 1.03 and Para 2.04 of the FTP. 16. Under these circumstances, in the light of the undisputed fact that the Public Notice dated 14.06.2022 containing the impugned 'condition x' has been issued by the DGFT by tracing his powers to Para 1.03 and Para 2.04 and not to Para 1.02, it is clear that the said Public Notice has be....
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....ry to the provisions of FEMA and regulations made there under. (vii) The impugned policy circulars namely No. 06/2018 dated 22.05.2018 and No. 08/2018 dated 21.06.2018 are arbitrary and unreasonable being violative of Article 14, as the circulars seeks to differentiate service providers as actual service providers and aggregators, which is not envisaged in the FTP in the light of the principles laid down by the Apex Court in the case of Shayara Bano Vs Union of India - (2017) 9 SCC 1 (Paras 87, 95, 100 and 101) and Deputy Commissioner of Income Tax Vs Pepsi Foods Ltd. - (2021) 433 ITR 295 (SC) (Paras 14 & 22). (viii) The Circulars cannot restrict the scope of statutory provision/notification by reading into them a condition which is not provided for by the specific language of the statute. Restricting the scope of the SEIS benefit through circulars is colorable excise of power, which is ultra vires the FTP as held in the following judgments: (a) CCE Vs. Ratan Melting & Wires Industries, (2008) (231) E.L.T 22 SC; (b) Alstom India Ltd. Vs. Union of India, 2014 (301) E.L.T. 446 (Guj); (c) Atlantic Shipping Pvt. Ltd. Vs. Union of India and o....
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....ms, Bangalore vs Aditya Birla Nuvo Ltd. 2021 (378) E.L.T. 42 (Kar.)[Para 9]; (c) Jeena & Company Vs. Union of India, (2024) 15 Cental 55(Mad) (xiii) As also rightly contended by the learned Senior counsel for the petitioners, it is seen that the said SEIS scrips which have been issued by the DGFT have not been cancelled and are still in force and consequently, the impugned show cause notices are also illegal and deserve to be quashed. In this regard, it would be necessary to extract Section 28AAA of the Customs Act, 1962, which reads as under: Section 28AAA - Recovery of duties in certain cases. (1) Where an instrument issued to a person has been obtained by him by means of- (a) collusion; or (b) wilful mis-statement; or (c) suppression of facts, for the purposes of this Act or the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992), 25a [or any other law, or any scheme of the Central Government, for the time being in force, by such person] or his agent or employee and such instrument is utilised under the provisions of this Act or the rules 25b [or regulations] made or notifications issued thereunder, by ....
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....t being in excess of the amount specified in the notice, and pass order to recover the amount of duty or interest or both and the person to whom the instrument was issued shall repay the amount so specified in the notice within a period of thirty days from the date of receipt of the said order, along with the interest due on such amount, whether or not the amount of interest is specified separately. (4) Where an order determining the duty has been passed under section 28, no order to recover that duty shall be passed under this section. (5) Where the person referred to in sub-section (3) fails to repay the amount within the period of thirty days specified therein, it shall be recovered in the manner laid down in sub-section (1) of section 142.] (ix) Under identical circumstances, in the case of Jeena & Co., vs. Union of India & others - (2024) 15 Centax 55, the Madras High Court quashed the show cause notices by holding as under: "17. In the instant case on hand, the principle laid down in Titan Medical Systems (P) Ltd v. Collector of Customs, New Delhi would only be applicable. It is an undisputed fact that Director General of Foreign Trade [DGF....