2016 (1) TMI 957 - HC - Customs

Validity of Complete and overall cap on the duty credit scrip - Incremental Export Incentivisation Scheme ( IEIS ) - misuse of the scheme - Held that - We find it difficult to accept the proposition that where there was no cap or limit in the 2012 Notification or in any of its surrounding or contemporaneous documents such as public speeches, policy documents, changes in the Handbook of Procedures and so on, such a restriction could be said to have been brought in by the 2013 Notification. We are mindful of the purpose and intent of the 2013 Notification. It is entirely salutary. None should receive unintended benefit from the 2012 Notification. Certain checks and measures are undoubtedly essential and the Department quite wisely has chosen the course of specifying a greater scrutiny for high value claims. There is nothing objectionable about any of this. Indeed, the Petitioners do not object to this. But this a far cry from an insistence that irrespective of the value of the incremental exports, those incentives must be restricted to a paltry ₹ 20 lakhs. - There is no such restriction to be found in the 2012 Notification or in the 2013 Notification. We certainly cannot read it into 2013 Notification. None can claim any benefit or incentive as an absolute right. However, a definite policy is enunciated in the present case. That policy extends an incentive for a demonstrated increase in exports. Its purpose is also clear, viz., to encourage more exports. The policy s terms must, therefore, receive an interpretation as would advance its stated purpose, viz., to promote and encourage exports. That this is also one of the avowed objects of the Foreign Trade (Development and Regulation) Act, 1992 is also not doubted. Where the policy did not itself place any such cap - and plainly it did not, for we find no words of limitation in it, other than those in the eligibility criteria, and these are accepted - any interpretation of the 2013 Notification, therefore, that restricts the incentives in their entirety would therefore be arbitrary, violating the policy s objective and the mandate of Article 14 of the Constitution of India. All four Petitions succeed in part. We hold that the 2013 Notification places no cap or restriction on the value of the IEIS scrip. The Authorities concerned will consider the Petitioners applications on merits bearing in mind our findings and this order, and without any regard to the impugned Clarification of 23rd September 2014. - Decided in favor of appellant and against the revenue.

Issues Involved:
1. Validity and interpretation of Notification No. 27(RE-12)/2009-2014 dated 28th December 2012.
2. Validity and interpretation of Notification No. 44(RE-2013)/2009-2014 dated 25th September 2013.
3. Validity and interpretation of the Clarification dated 23rd September 2014.
4. Whether the 2013 Notification imposed a cap on the value of the duty credit scrip.
5. Whether the 2014 Clarification unlawfully imposed a cap on the duty credit scrip.

Issue-Wise Detailed Analysis:

1. Validity and Interpretation of Notification No. 27(RE-12)/2009-2014 dated 28th December 2012:
The 2012 Notification introduced the Incremental Export Incentivisation Scheme (IEIS) to incentivize incremental exports, allowing a duty credit of 2% on the incremental growth in export achieved by IEC holders. The Notification did not prescribe any cap or ceiling limit on the quantum of the duty credit scrip, only specifying a percentage of the incremental growth and various qualifying restrictions.

2. Validity and Interpretation of Notification No. 44(RE-2013)/2009-2014 dated 25th September 2013:
The 2013 Notification added two paragraphs to the 2012 Notification. Paragraph (i) stated that the benefit of the IEIS would be limited to 25% growth or incremental growth of Rs. 10 crores, whichever was less. Paragraph (ii) stated that claims in excess of this value would be subject to greater scrutiny by the Regional Authority. The Petitioners argued that this Notification did not impose a cap on the value of the duty credit scrip but only introduced additional scrutiny for higher claims.

3. Validity and Interpretation of the Clarification dated 23rd September 2014:
The 2014 Clarification purported to impose a complete and overall cap on the value of the duty credit scrip, limiting it to Rs. 20 lakhs. The Petitioners contended that this Clarification unlawfully imposed a cap that was not present in the original 2012 Notification or the 2013 Notification.

4. Whether the 2013 Notification Imposed a Cap on the Value of the Duty Credit Scrip:
The Court found that the 2013 Notification, when read as a whole, did not impose a cap on the value of the duty credit scrip. Paragraph (ii) of the 2013 Notification, which called for greater scrutiny for claims exceeding Rs. 20 lakhs, indicated that claims above this amount were contemplated and permissible, subject to additional scrutiny. The Court held that imposing a cap would render paragraph (ii) redundant.

5. Whether the 2014 Clarification Unlawfully Imposed a Cap on the Duty Credit Scrip:
The Court concluded that the 2014 Clarification unlawfully imposed a cap on the duty credit scrip, which was not supported by the 2012 or 2013 Notifications. The Clarification was quashed and set aside as it had no basis in the original Notifications.

Conclusion:
The Court held that the 2013 Notification did not place any cap or restriction on the value of the IEIS scrip. The authorities were directed to consider the Petitioners' applications on merits without regard to the impugned 2014 Clarification. The Petitions succeeded in part, with no order as to costs, and the Respondents were granted eight weeks to comply with the directions.

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