2022 (12) TMI 277 - HC - Customs

Service Exports from India Scheme - challenge to provisions of Clause 3.08 (f) of the FTP 2015-20, the vires of which in relation to the Parent Act, i.e., the FTDR Act - repugnant to the Parent Act or not - requirement of obtaining IEC - HELD THAT - As rightly pointed out by Ld. ASG Mr. Balbir Singh, the principal grievance of the exporters that the Government cannot insist upon IEC at the time of export stands satisfied in light of the amendment in para 2.05 of the FTP 2015-20. This Court is also in agreement with the decision of the Bombay High Court in Smarte Solutions 2022 (8) TMI 186 - BOMBAY HIGH COURT , where it was held that The respondents are directed to consider the petitioner s application without insisting for an active IEC number at the time of rendering services. However, it was brought to the notice of this Court during these proceedings, the said amendment pointed out by Ld. ASG was not brought to light before the Bombay High Court. In view of the amendment made in the FTP 2015-20, this Court does not deem it fit to venture further on individual facts of the present case - It is now open to the Petitioners to raise their grievances before the authorities regarding other reliefs as prayed for in the instant Writ Petitions and the authorities are directed to consider the grievances of the Petitioners, if any, and adjudicate upon them afresh, in accordance with law. Petition disposed off.

Summary

Issues Involved:
1. Validity of Clause 3.08(f) of the Foreign Trade Policy (FTP) 2015-20.
2. Requirement of Importer-Exporter Code (IEC) for claiming benefits under the Service Exports from India Scheme (SEIS).
3. Alleged violation of fundamental rights under Articles 14, 19(1)(g), and 300A of the Constitution of India.
4. Procedural versus substantive compliance for claiming SEIS benefits.

Issue-wise Detailed Analysis:

1. Validity of Clause 3.08(f) of the FTP 2015-20:
The petitioners challenged Clause 3.08(f) of the FTP 2015-20, arguing it was ultra vires the Foreign Trade (Development & Regulation) Act, 1992 (FTDR Act). They contended that the clause imposed an additional requirement of having an active IEC at the time of rendering services, which was not mandated by Section 7 of the FTDR Act. The Court noted that the Bombay High Court in Smarte Solutions Pvt. Ltd. v. Union of India had already held that Clause 3.08(f) imposed additional restrictions not intended by the principal statute, making it inconsistent with the FTDR Act.

2. Requirement of IEC for Claiming SEIS Benefits:
The petitioners argued that obtaining an IEC was only a procedural requirement and should not deny them substantive benefits under the SEIS scheme. They highlighted that the FTDR Act required an IEC only when the service provider intended to take benefits under the FTP, not necessarily at the time of rendering services. The Court agreed with this interpretation, especially in light of the amendment to para 2.05 of the FTP 2015-20, which clarified that an IEC was necessary only when taking benefits under the FTP.

3. Alleged Violation of Fundamental Rights:
The petitioners claimed that denial of SEIS benefits due to the absence of an IEC at the time of rendering services violated their fundamental rights under Articles 14 (equality before the law), 19(1)(g) (right to practice any profession), and 300A (right to property) of the Constitution. The Court acknowledged these concerns but noted that the amendment to the FTP 2015-20 addressed the primary grievance, thereby mitigating the alleged violations.

4. Procedural versus Substantive Compliance:
The petitioners argued that they complied with all substantive provisions of the SEIS scheme and that the denial of benefits for a procedural lapse (delayed IEC) was arbitrary and capricious. They cited various legal precedents to support their claim that procedural lapses should not deny substantive benefits. The Court found merit in this argument, emphasizing that the substantive benefit should not be denied due to procedural delays, particularly when the petitioner had met the Net Foreign Exchange (NFE) requirements.

Conclusion:
The Court recognized the amendment to para 2.05 of the FTP 2015-20, which resolved the primary issue regarding the necessity of an IEC at the time of rendering services. The Court agreed with the Bombay High Court's decision in Smarte Solutions and directed the authorities to consider the petitioners' grievances afresh, in accordance with the amended policy. The petitions were disposed of with these observations, allowing the petitioners to seek further relief from the appropriate authorities.