2019 (1) TMI 1700 - HC - Customs

Applicability of SFIS scheme - Whether the subsidiaries of foreign entities could be considered as Indian Service Providers? HELD THAT - Insofar as the applicability of FTP 09-14 to Indian Subsidiaries of Foreign Entities is concerned this Court did not accept the contention of the respondents that such companies were excluded from the benefit of the SFIS Scheme under FTP 09-14. Notwithstanding the decision of this Court the respondents did not provide the benefit of the SFIS to the petitioners. The Bombay High Court in Shree Naman Hotels Pvt. Ltd. v. The Union of India 2015 (9) TMI 564 - BOMBAY HIGH COURT has taken a different view with regard to the applicability of the SFIS under the FTP 09-14. This Court is informed that the said issue is now pending before the Supreme Court in view of the divergence of the opinion between this Court and the Bombay High Court. However there was no divergence of opinion with regard to the applicability of the FTP 04-09. There can be no dispute that the petitioners are entitled to the benefits as were granted to the petitioners in terms of the SFIS scrips issued to the petitioners - It is stated that the petitioners have thereafter imported certain capital goods by payment of duty and the petitioners pray that directions be issued for refund of the duty already paid. Petition allowed.

Summary

Issues:
1. Interpretation of eligibility criteria under the Served From India Scheme (SFIS) for duty free licences.
2. Dispute regarding eligibility of subsidiaries of foreign entities as Indian Service Providers under different Foreign Trade Policies.
3. Non-compliance by the respondents with the court's decision to provide benefits under the SFIS Scheme.
4. Pending appeal related to the provisions of the SFIS Scheme under different Foreign Trade Policies.

Issue 1: Interpretation of eligibility criteria under the SFIS:
The petitioners were issued duty free licences under the SFIS, which were recalled by the respondents on the grounds that one petitioner was a subsidiary of a Foreign Entity and thus ineligible for benefits. The court noted that under the FTP 04-09, "All Service Providers" were entitled to SFIS benefits, and subsidiaries of foreign entities were not excluded. The court held the decision to deny benefits under FTP 04-09 to be unsustainable and directed the reissuance of transferable duty free scrips equivalent to those recalled.

Issue 2: Dispute over eligibility of subsidiaries under different FTPs:
The court highlighted the difference between FTP 04-09 and FTP 09-14 regarding the eligibility for SFIS benefits. While FTP 04-09 applied to "all service providers," FTP 09-14 limited benefits to "Indian Service Providers." The principal controversy was whether subsidiaries of foreign entities could be considered Indian Service Providers. The court rejected the contention that subsidiaries were excluded under FTP 09-14 and emphasized that the petitioners were entitled to benefits under FTP 04-09.

Issue 3: Non-compliance with court's decision:
Despite the court's decision granting benefits under the SFIS Scheme, the respondents did not provide the benefits to the petitioners. The court noted the lack of compliance by the respondents and directed the issuance of transferable duty free scrips within a specified timeframe.

Issue 4: Pending appeal related to SFIS provisions under different FTPs:
The judgment mentioned a pending appeal before the Division Bench regarding the SFIS Scheme under FTP 09-14. The court clarified that the appeal related to FTP 09-14 provisions and not FTP 04-09, which was the focus of the present petition.

In conclusion, the court allowed the petition, directing the reissuance of duty free scrips within a specified timeframe and emphasizing the entitlement of the petitioners to benefits under the SFIS Scheme. The judgment highlighted the importance of complying with court decisions and clarified the applicability of different Foreign Trade Policies to the eligibility criteria for SFIS benefits.