2023 (2) TMI 107 - HC - Customs

Served From India Scheme - grant of excess duty credit in respect of the scrips issued between 01.04.2009 to 26.08.2009 - impugned order states that the credits scrips that were issued to the petitioner on 21.02.2011 had inadvertently computed the credit at 10% instead of 5% to which the petitioner was entitled - HELD THAT - The interpretation of the policy itself must be in tune with the avowed objectives of the various schemes that have been formulated under the policy. The Served from India Scheme has been outlined from Clause 3.12 of the Foreign Trade Policy and the avowed objective is ' to accelerate growth in export of services so as to create a powerful and unique 'Served From India' brand, instantly recognized and respected world over.' Needless to say financial year qua a revenue enactment/policy is always understood to mean the 1st of April of the relevant year till the 31st of March of the year to follow. In the present case, no doubt the Foreign Trade Policy for the period 2009 to 2014 has come into effect only on 27.08.2009, and there is also a categoric stipulation in Clause 1.2 which deals with duration of the policy, that all exports and imports upto 26.08.2009 shall be governed only by the terms of the previous policy which prescribes the rate of 5% only - we are concerned with specified imports under the Served From India scheme which must stand on a separate pedestal. As far as the eneitlement to the imports/exports under this scheme are concerned, the entitlement is categoric to the effect that the service provider is entitled to duty credit scrips equivalent to 10% earned during current financial year. The impugned order is set aside and as a consequence the surrendered scrips of a value of Rs.86,81,454/- shall be refunded to the petitioner within a period of eight (8) weeks from date of receipt of this order - Petition allowed.

Summary

Issues:
Interpretation of the 'Served From India Scheme' (SFIS) under the Foreign Trade Policy for duty credit entitlement and refund of excess duty credit with interest.

Analysis:
1. The petitioner, a hotel catering to foreigners, applied for SFIS benefits for foreign exchange earnings during a specific period. Excess duty credit was identified, leading to a demand for refund with interest under the Foreign Trade (Development and Regulation) Act, 1992.

2. The petitioner responded by surrendering scrips slightly exceeding the demanded amount, explaining the discrepancy. The subsequent communication clarified the scrips surrendered and requested reinstatement of their value for ongoing projects.

3. Despite the petitioner's compliance with scrip surrender, the respondents insisted on interest payment along with refund due to an audit objection regarding duty credit computation errors in the issued scrips.

4. The petitioner contested the interest demand, claiming entitlement to a higher duty credit rate of 10% instead of the 5% computed in the impugned order, citing the policy's spirit and specific clauses supporting their position.

5. The Court analyzed the policy's language, emphasizing the entitlement of service providers to duty credit scrips equivalent to 10% of free foreign exchange earned during the current financial year, aligning with the standard financial year definition.

6. The judgment highlighted that the policy's duration clause, specifying the effective date and transitional provisions, pertained to general exports and imports, not the specific scheme's entitlements like SFIS, which mandated a distinct treatment.

7. Considering the scheme's objectives and entitlement criteria, the Court ruled in favor of the petitioner, overturning the impugned order, and directed the refund of surrendered scrips' value within a specified timeline, with the option to adjust the amount against future imports.

This detailed analysis of the judgment showcases the legal intricacies involved in interpreting trade policies, duty credit entitlements, and the resolution of disputes related to excess duty credit demands, emphasizing the importance of aligning policy interpretation with scheme objectives and specific entitlement clauses.