2020 (1) TMI 598 - HC - Customs

Benefit of SFIS Scheme - FTP 2004-2009 - interpretation of provisions of FTP - rejection of Refund of duty - HELD THAT - Para 3.6.4.2 of the FTP 2004-2009 is clear and unequivocal in its terms. All Service Providers, who provided service enlisted in Appendix 10 of the FTP, and who have a total free foreign exchange earning of at least ₹10 Lakhs in the preceding financial year, qualified for the benefits of the SFIS. Significantly, the clause talks that all such service providers, shall qualify for the benefits of the SFIS Scheme. Etymologically, the expression shall denotes a mandate, and the Supreme Court has, in various decisions, held so - It is also well-settled that beneficial fiscal statute sought to be liberally construed, and provisions which confer tax benefits, conditional to obligations to be fulfilled by the beneficiary, should be so construed as to advance the benefit, rather than deny the same, subject, of course, to fulfilment of the requisite obligation. It cannot be forgotten that export promotions schemes are intended to benefit exporters, who, through the export, earn valuable foreign exchange. It is precisely for this reason that, minimum free foreign exchange has been stipulated as one of the pre-conditions for being entitled to the benefits of SFIS . It would do complete disservice to the intent to clause 3.6.4.2 of the SFIS , therefore, to restrict the benefit thereof, to entities which fulfill the two conditions stipulated therein, viz. of providing of a service/services listed in Appendix-10 of the FTP and of earning free foreign exchange of at least ₹ 10 lakhs in the preceding financial year, to the benefits of the said Scheme. The decision of the said PIC is, therefore, on the fact of it, unsustainable in law - The PIC, no doubt, was entitled to interpret the policy. Under the guise of such interpretation, however, the PIC had no authority, however, to reword the policy, or import, into the policy, conditions and restrictions which were not to be found therein. What the PIC has effectively done is to dovetail para 3.6.4.1 of the FTP 2004-2009 into para 3.6.4.2 thereof. Such an exercise is totally untenable in law. The claim of the appellant, if accepted, would result to substituting para 3.6.4.2, in the FTP 2004-2009, with para 3.12.2 of the FTP 20092014. Needless to say, this can never be allowed. Respondent No. 1, clearly, was entitled to the benefits of the SFIS, under the FTP 2004-2009 - the rejection of refund claim also could not sustain - petition allowed.

Summary

Issues Involved:
1. Condonation of delay in filing and refiling Letters Patent Appeals.
2. Entitlement to benefits under the "Served From India Scheme" (SFIS) as per the Foreign Trade Policy (FTP) 2004-2009.
3. Interpretation of the SFIS provisions by the Policy Interpretation Committee (PIC).
4. Refund of customs duty based on the entitlement to SFIS benefits.

Issue-wise Detailed Analysis:

Condonation of Delay:
The court considered applications for condonation of delay in filing and refiling Letters Patent Appeals (LPA Nos. 770/2015 and 631/2019). The delays were 94 and 82 days for LPA No. 770/2015, and 181 and 15 days for LPA No. 631/2019. The court found reasonable reasons for the delays and allowed the applications, condoning the delays.

Entitlement to SFIS Benefits:
The respondents, E.I. Dupoint India Private Limited and its Manager-Indirect Tax, were issued SFIS scrips/licenses under the FTP 2004-2009. The SFIS aimed to accelerate growth in export of services and create a "Served From India" brand. The eligibility criteria under FTP 2004-2009 required service providers to have a total free foreign exchange earning of at least ?10 Lakhs in the preceding financial year.

The appellants argued that the respondents did not qualify for SFIS benefits as they were not Indian brands and did not contribute to the creation of a unique "Served From India" brand. This decision was based on the PIC's interpretation, which emphasized the scheme's objective to promote Indian brands.

Interpretation by PIC:
The PIC, in its meeting on 27th December 2011, decided that the SFIS benefits should be restricted to Indian brands, and companies like the respondents, being subsidiaries of foreign companies, did not qualify. The respondents challenged this decision, arguing that the FTP 2004-2009 did not impose such a restriction and extended benefits to all service providers meeting the specified criteria.

The court held that the PIC's interpretation was unsustainable in law. The FTP 2004-2009 clearly mandated that all service providers meeting the eligibility criteria were entitled to SFIS benefits. The PIC had no authority to reword the policy or impose additional conditions not specified in the FTP.

Refund of Customs Duty:
Following the favorable judgment in WP(C) 1663/2012, the respondents sought a refund of customs duty paid without availing SFIS benefits. The learned Single Judge, in WP(C) 6640/2015, allowed the refund, reiterating that the respondents were entitled to SFIS benefits under FTP 2004-2009.

The appellants' reliance on the pending appeal in the case of M/s Yum Restaurants (I) Pvt. Ltd., which dealt with FTP 2009-2014, was found misplaced as the respondents' case pertained to FTP 2004-2009.

Conclusion:
The court dismissed the appeals, upholding the judgments dated 27th January 2015 and 14th January 2019. The respondents were entitled to SFIS benefits under FTP 2004-2009, and the rejection of their refund claim was unsustainable. The applications for stay in the LPAs were also disposed of accordingly.