M/S WELLDONE EXIM PVT. LTD. v. DIRECTORATE GENERAL OF FOREIGN TRADE & ANR.

Delhi High Court · 12 Apr 2018 · 2018:DHC:2398-DB

Sanjiv Khanna; Chander Shekhar

W.P. (C) Nos. 5082/2017, 5091/2017 & 5093/2017

2018:DHC:2398-DB

administrative appeal_allowed Significant

AI Summary

The Delhi High Court held that the Rs. 1 crore threshold in the Incremental Export Incentivisation Scheme is not a cap but a trigger for greater scrutiny, directing the Regional Authority to consider claims beyond this amount through reasoned orders.

Full Text

W.P. (C) Nos. 5082/2017, 5091/2017 & 5093/2017
HIGH COURT OF DELHI
WRIT PETITION(CIVIL) No. 5082/2017
Date of Decision: 12th April, 2018 M/S WELLDONE EXIM PVT. LTD. (FORMERLY KNOWN AS M/S
G.D. MANGALAM EXIM PVT. LTD.) ..... Petitioner
Through Mr. G.K. Sarkar, Ms. Malabika Sarkar, Mr. Prashant Srivastava and Mr. Deepak Mahajan, Advocates.

VERSUS

DIRECTORATE GENERAL OF FOREIGN TRADE & ANR...Respondent
Through Mr. Amit Mahajan, Advocate for DGFT.
Mr. Sanjeev Narula, Sr. Standing Counsel for Customs.
WRIT PETITION (CIVIL) No. 5091/2017 M/S ATTIRE DEISIGNERS PVT. LTD. (FORMERLY KNOWN AS M/S
SIDH DESIGNERS PVT. LTD.) ..... Petitioner

VERSUS

DIRECTORATE GENERAL OF FOREIGN TRADE & ANR...Respondent
DGFT.
Customs.
2018:DHC:2398-DB
WRIT PETITION (CIVIL) No. 5093/2017
M/S GOODONE TRADERS PVT. LTD. (FORMERLY KNOWN AS M/S
YOGMAYA TRADERS PVT. LTD.) ..... Petitioner

VERSUS

DIRECTORATE GENERAL OF FOREIGN TRADE & ANR... Respondent
DGFT.
Customs.

CORAM:

HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE CHANDER SHEKHAR SANJIV KHANNA, J. (ORAL):
This common order and

JUDGMENT

would dispose of the aforestated writ petitions, which primarily relate to interpretation of Notification No.
43(RE-2013)/2009-2014 dated 25th September, 2013, by which the following additions were made to paragraph 3.14.5.(c) of Chapter 3 to the
Foreign Trade Policy 2009-2014:-
“i) Benefit of Incremental Export Incentivisation Scheme for the year 2013-14 will be limited to a scrip of a value not exceeding Rs. I Crore per IEC.
(ii) Claims in excess of this value will be subjected to greater scrutiny by Regional Authority."

2. As a result of the aforesaid amendment, paragraph 3.14.5.(c) relating to Incremental Export Incentivisation Scheme (IEIS) on annual basis would read as under:- ""3.14.[5] Incremental Exports lncentivisation Scheme (lEIS) on annual basis" Entitlement (a) Objective of the Scheme is to incentivize incremental exports. (b) An IEC holder would be entitled for a duty credit scrip @ 2% on the incremental growth (achieved by the IEC holder) during the current year (for example, say for the period 01.04.2013 to 31.3.2014) compared to the previous year (for example, say for the period from 01.04.2012 to 31.3.2013) on the FOB value of exports. Incremental growth shall be in respect of each exporter (IEC holder) without any scope for combining the exports for Group Company.

(c) Incentive will be admissible only if the IEC holder has achieved growth in the financial year 2013-2014 vis a vis financial year 2012-

2013. Quantum of benefit will be calculated on the incremental growth achieved subject to eligibility criteria given in para 3.14.4(d) of FTP 2009-14. i) Benefit of Incremental Export Incentivisation Scheme for the year 2013-14 will be limited to a scrip of a value not exceeding Rs. 1 Crore per IEC.

(ii) Claims in excess of this value will be subjected to greater scrutiny by Regional Authority. Eligibility Criteria (d) For the purpose of the scheme, export performance shall not be allowed to be transferred from any other IEC holder. Benefit under the scheme will not be allowed to an exporter who had made no export during fiscal year 2011-12 and fiscal year 2012-13. The following exports shall not be taken into account for calculation of export performance or for computation of entitlement under the Scheme:

(i) Export of imported goods or exports made through trans-shipment.

(ii) Export from SEZ/ EOU /EHTP /STPI/BTP/FlWZ

(iii) Deemed Exports

(iv) Service Exports

(v) Third Party exports

(vi) Diamond, Gold, Silver, Platinum, other precious metal in any form including plain and studded jewellery and other precious and semiprecious stones.

(vii) Ores and concentrates of all types and in all formations.

(viii) Cereals of all types.

(ix) Sugar of all types and all forms.

(x) Crude I petroleum oil and crude I primary and base products of all types and all formulations.

(xi) Export of milk and milk products.

17,809 characters total

(xii) Export performance made by one exporter on behalf of other exporter.

(xiv) Items, export of which requires an export authorisation (except SCOMET), will not be considered.

(xv) Export of Meat and Meat Products.

(xvi) Exports to Singapore, UAE and Hong Kong.

Special Provision (e) The scheme is region specific and will cover exports to USA, Europe and Asian countries only. In addition export to 53 countries in Latin America and Africa (as mentioned in Public Notice 3 dated 18th Apri12013) will be entitled to this benefit. Disclaimer provisions of para 3.17.[1] 0 (b) of FTP shall not be admissible. This benefit will be over and above any benefit being claimed by the exporter under any of the Chapter 3 Schemes. Utilisation of Scrip (f) The duty credit scrip will be freely transferable. Such scrips shall also be eligible for domestic sourcing and for payment of Service Tax as per para 3.17.[5] of FTP 2009-14." (for the sake of convenience, the amendments made by Notification NO. 43(RE-2013)/2009-2014 dated 25th September, 2013 have been quoted in italics and underlined).

3. The issue, which arises for consideration, is whether clause (i) incorporated in paragraph 3.14.5.(c) poses an upper limit of benefit under the Incremental Export Incentivisation Scheme for the year 2013-14 or in view of clause (ii), and on interpretation of paragraph 3.14.5.(c) claims in excess to this value would be subjected to greater scrutiny by the Regional

4. Stand of the petitioners herein is that amount of Rs.[1] crore specified in clause (i) was not the upper limit but the amount was specified for greater scrutiny by the Regional Authority. Respondents submit to the contrary.

5. By public Notice No.28/2009-2014(RE-2013) dated 25th September, 2013, amendments were made to the "Handbook of Procedure, Volume I for Incremental Exports Incentivisation Scheme" by inserting clause (e) and (f) to paragraph 3.8.[3] which are reproduced as under:- “(e) Claims with growth in excess of the value and percentage specified under paragraph 3.14.[4] (c)(i) and

(ii) and paragraph 3.14.[5] (c) (i) and (ii) of FTP, will be subjected to greater scrutiny by Regional Authority. Such scrutiny of the claim will require the following documents:- (i)Calling for evidence of manufacture/purchase of export goods i.e. excise return/sales tax returns or any other evidence.

(ii) Checking exports of company from whom goods have been purchased i.e. whether such company had done export in previous 2 years and quantum of exports in previous 2 years and quantum of exports in current year.

(iii) Calling for any other evidence to justify export growth and consequent entitlement of Incremental Exports Incentivisation Scheme. (f) The provisions mentioned in paragraph 3.8.[3] of HBP v[1] relating to procedure of Incremental Exports Incentivisation Scheme, will also applicable to claims filed under paragraph 3.14.[5] of FTP i.e. for the year 2013-14. The applications in this case can be filed after 1st April, 2014. The last date for filing of application will be as per para 3.11.[9] of HBP v[1] and late cut provisions of para 9.[3] of HBP v[1] 2009-14 will be applicable.”

6. The aforesaid public notice in our opinion settles the position beyond any doubt and debate. This public notice clarifies that amendment in form of clauses (i) and (ii) to paragraph 3.14.5.(c) of the Foreign Trade Policy were to ensure that annual claims in excess of Rs.[1] crore should be subjected to greater scrutiny by the Regional Authority. In other words, the two newly inserted clauses had to be read harmoniously. Clauses (i) and (ii) were not introduced and inserted as clauses, but as a part of sub-paragraph

To interpret it differently would make clause (ii) otiose and redundant. The public notice No.28/2009-14(RE-2013) dated 25th September, 2013 had set out the procedure for scrutiny of claims in excess of Rs.[1] crore, by giving details of the documents and particulars to be submitted by the exporter. Clearly, this was not required and necessary, if Rs. 1 crore was the upper limit, and therefore claims over this amount were not required to be scrutinised and examined.

7. Similar controversy had arisen before the Bombay High Court, when insertions made in the form of clauses (i) and (ii) to paragraph 13.4.4.(c) of the Incremental Exports Incentivisation Scheme, vide Notification No.44(RE-2013)/2009-2014 dated 25th September, 2013, which was applicable for the period beginning from 1st January, 2012 to 31st March,

2013. After amendment paragraph 3.14.4.(c) was as under:- ""3.14.[4] Incremental Exports lncentivisation Scheme Objective (a) The objective of the Scheme is to incentivize incremental exports. Entitlement (b) An IEC holder would be entitled for a duty credit scrip@ 2% on the incremental growth (achieved by the IEC holder) during the period 01.01.2013 to 31.3.2013 compared to the period from 01.01.2012 to 31.3.2012 on the FOB value of exports. Incremental growth shall be in respect of each exporter (IEC holder) without any scope for combining the exports for Group Company.

(c) Incentive will be admissible only if the IEC holder has achieved growth in the financial year 2012-2013 vis a vis financial year 2011-2012. Quantum of benefit will be calculated on the incremental growth achieved subject to eligibility criteria given in para 3.14.4( d) of FTP 2009-14. "(i) Benefit of Incremental Export Incentivisation Scheme for the last quarter of 2012-13 will be limited to 25% growth or Incremental growth of Rs. 10 crores in value, whichever is less.

(ii) Claims in excess of this value will be subjected to greater scrutiny by Regional Eligibility Criteria (d) For the purpose of the scheme, export performance shall not be allowed to be transferred from any other IEC holder. Benefit under this scheme will not be allowed to an exporter who had made no export between 01/01/12 to 31/03/12.The following exports shall not be taken into account for calculation of export performance or for computation of entitlement under the Scheme:

(i) Export of imported goods or exports made through trans-shipment.

(ii) Export from SEZ/ EOU IEHTP ISTPIIBTPIFTWZ

(iii) Deemed Exports

(iv) Service Exports

(v) Third Party exports

(vi) Diamond, Gold, Silver, Platinum, other precious metal in any form including plain and studded jewellery and other precious and semiprecious stones.

(vii) Ores and concentrates of all types and in all formations.

(viii) Cereals of all types.

(ix) Sugar of all types and all forms.

(x) Crude I petroleum oil and crude I primary and base products of all types and all formulations.

(xi) Export of milk and milk products.

(xii) Export performance made by one exporter on behalf of other exporter.

(xiii) Supplies made to SEZ units.

(xiv) Items, export of which requires an export authorisation (except SCOMET), will not be considered.

(xv) Export of Meat and Meat Products.

(xvi) Exports to Singapore, UAE and Hong Kong.

Special Provision (e) The scheme is region specific and will cover exports to USA, Europe and Asian countries only. Disclaimer provisions of para 3.17.[1] 0 (b) of FTP shall not be admissible. This benefit will be over and above any benefit being claimed by the exporter under any of the Chapter 3 Schemes, therefore, provisions of para 3.17.[8] of FTP 2009-14 will not be invoked for such benefit. Utilisation of Scrip (f) The duty credit scrip will be freely transferable. Such scrips shall also be eligible for domestic sourcing as per para 3.17.[5] of FTP 2009-14." (for the sake of convenience, amendments/modifications made by Notification No.44(RE-2013)/2009-2014 dated 25th September, 2013 have been typed in italics and underlined).

8. Bombay High Court in J.S.W. Steel Ltd. And Another. Vs. Union of India And Others, (2016) 334 ELT 222 (Bom) had held:-

“28. We have considered the rival submissions with great care. It seems to us that Mr. Nankani's submissions deserve to be accepted. 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 Rs.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. To do so would be to render, as Mr. Nankani says, clause (II) entirely 18 Exhibit "B", pp. 22-24 to WP NO. 10437/2015, at page 24 redundant. If the cap was Rs. 20 lakhs, no exporter, no matter what is his incremental exports for the period in question, would ever submit an application or make a claim in excess of Rs. 20 lakhs. There would then be no question of "greater scrutiny" by the Regional Authority. That clause would be entirely meaningless. Evidently, therefore, what clause (ii) says is that while claims up to the value of Rs. 20 lakhs will require one degree of scrutiny, those in cases of more than that amount will require much greater study, examination and scrutiny.

29. We are mindful of the principles of interpretation that Mr. Rana presses into service. 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.

30. It is well-settled that even in matters of policy, this Constitutional mandate of fairness, reasonableness, non- arbitrariness and nondiscrimination binds the Respondents. Once we approach these matters in this manner, then none of the judgments relied upon by Mr. Rana are applicable. This is a case of a policy interpretation by those in charge of its implementation by which, ostensibily to prevent undue benefit to some, undue and unjustified hurdles and obstacles are created disabling bona fide beneficiaries from availing of the policy's incentives and benefits. It Is this aspect, highlighted throughout, that persuades us to agree with the Petitioners- Exporters.

31. The other important and equally salutary principle of interpretation is that in a beneficient piece of legislation or a policy such as the one Involved In the present case, the Court will not or cannot read Into that policy or legislation anything not already there, the introduction of which would result in the imposition of an unwarranted restriction upon the rights of the beneficiaries or a class of beneficiaries. Jnan Ranjan Sen Gupta v Arun Kumar Bose, (1975) 2 SCC 526, paragraph 9, at p. 530.

32. This in turn means that apart from adopting a plain meaning approach to the Interpretation of the 2013 Notification, we must also adopt a purposive approach to its interpretation and construction. Mr. Rana's submissions do not tell us how a cap or limit or specifying the maximum benefit would advance the purpose-of the incentive scheme. All that these submissions tell us is that there was a concern that none should receive undue or unintended benefit. There can be no cavilling with that. But it surely cannot be suggested that any incentive above Rs.20 lakhs is axiomatically and ipso facto an "unintended benefit". This is where an acceptance of Mr. Rana's submission takes us. But this was never the purpose nor the object of the 2012 Notification. The 2013 Notification did not (and could not) suggest it.”

9. Similar view has been taken by the Calcutta High Court in W.P. NO. 1355/2015, LGW Industries Limited Vs. Union of India And Others decided on 28th January, 2016.

10. A Division Bench of this Court in W.P. (C) No. 6732/2015, T.T. Ltd. Vs. Union of India & Anr. decided on 7th January, 2016 had upheld constitutional validity of the Notification Nos.43(RE-2013)/2009-2014 and 44(RE2013)/2009-2014 both dated 25th September, 2013 adding sub-para to paragraphs 3.14.[5] (c) and 3.14.[4] (c) to the Foreign Trade Policy 2009-14, albeit had stated that in view of sub-paras (ii), added to paragraph 3.14.[4] (c) and 3.14.[5] (c) vide Notification Nos. 43(RE-2013)/2009-2014 and 44(RE- 2013)/2009-2014 the claims could not have been rejected without assigning any reason. In terms of clause (ii), the Regional Authority was required to pass a reasoned order after application of mind on the contents of the applications. Direction was accordingly given to the Regional Authority to pass a speaking order within 8 weeks.

11. We may note that the Bombay High Court in the case of J.S.W. Steel Ltd. (supra) had quashed the so-called clarification dated 23rd September, 2014 stating that the limit prescribed in clause (i) of paragraph 3.14.4.(c) in the Foreign Trade Policy place an upper limit for grant of import incentive for the fourth quarter for the financial year 2012-2013. Following this decision in J.S.W. Steel Ltd. (supra) in Writ Petition No. 2157/2016, Welspun Global Brand Limited and others versus Union of India and Others, decided on 12th June, 2017, Bombay High Court had held that the amount of Rs.[1] crore mentioned in clause (i) to paragraph 3.14.5.(c) of the Foreign Trade Policy did not prescribe or fix an upper limit of Rs. 1 crore for grant of export incentive payable on annual basis for financial year 2013-

2014.

12. In view of the aforesaid discussion, the present writ petitions are allowed with a direction to the Regional Authority to examine the case of the petitioner for grant of export incentive and pass a reasoned and speaking order. The application would not be rejected on the ground that total amount being claimed exceeded Rs.[1] crore during the financial year 2013-

14. However, the greater scrutiny in terms of clause (ii) of paragraph 3.15.[5]

(c) read with paragraph 3.8.[3] (e) (ii) would be undertaken. The aforesaid exercise would be completed within 10 weeks from the date copy of this order is served on the respondent. There would be no order as to costs.

SANJIV KHANNA, J. CHANDER SHEKHAR, J. APRIL 12, 2018 NA

M/S WELLDONE EXIM PVT. LTD. v. DIRECTORATE GENERAL OF FOREIGN TRADE & ANR.

AI Summary

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