HAWA VALVES A COMPANY REGISTERED AND INCORPORATED & ANR v. THE UNION OF INDIA AND ORS

1. The petitioners have filed the present petition impugning a trade notice – Trade Notice no. 11/2015 dated 14.12.2015 - issued by respondent no.3. The petitioners claim that the said notice (hereafter referred to as „the impugned notice‟) is contrary to the provisions of the Foreign Trade Policy (FTP) 2009-2014.

2. Petitioner no.1 is engaged in the business of manufacturing industrial valves, bulk of which are exported to other countries. According to the petitioners, petitioner no.1 is entitled to the benefits of the Focus Product Scheme (FPS) against its exports of industrial valves. The petitioners claim that in terms of the FPS, petitioner no.1 is entitled to licences equivalent to 4% of the FOB value of its exports. The petitioners are aggrieved as in terms of the impugned notice, such benefit is not available for export of industrial 2018:DHC:51 valves and is restricted only to bicycle parts.

3. The relevant paragraphs of FTP 2009-2014 containing the provisions relating to the FPS are set out below:- “3.15 FOCUS PRODUCT SCHEME (FPS) 3.15.[1] Objective of FPS is to promote export of products which have high export intensity/employment potential, so as to offset infrastructural inefficiencies and other associated costs involved in marketing of these products. 3.15.[2] (a) Export of products (listed in Table 1 of Appendix 37D of HBPv[1]) to all countries (including SEZ units) shall be entitled for Duty Credit Scrip equivalent to 2% or 5% of FOB value of exports (in free foreign exchange) for exports made from 27.8.2009 onwards, unless a specific date of export/period is specified by public notice/notification. (b) Certain Focus Product(s)/sector(s) listed in Appendix 37D shall be granted bonus benefit in the form of an additional Duty Credit Scrip equivalent to 2% of FOB value of exports (in free foreign exchange) over and above the existing rate for that product/sector from the admissible date of export/period specified in the public notice issued to notify the product/sector.”

4. The list of products which are covered under the FPS are set out in Appendix 37D of the Handbook of Procedures (hereafter „HoP‟). The controversy relates to the products as specified at

┌────────────────────────────────────────────────────────────────────────────────┐
│       SL. NO.        FPS         ITC     (HS) DESCRIPTION                      │
│                      PRODUCTCO   CODE                                          │
│                      DE                                                        │
│       269            269         8481          ITEMS OF A KIND                 │
│                                                USED ON BICYCLES:               │
│                                                TAPS, COCKS, VALVES             │
│                                                AND           SIMILAR           │
│                                                APPLIANCES        FOR           │
│                                                PIPES, BOILER SHELLS,           │
│                                                TANKS, VATS OR THE              │
│                                                LIKE,      INCLUDING            │
│                                                PRESSURE REDUCING               │
│                                                VALVES           AND            │
│                                                THERMOSTATICALLY                │
│                                                CONTROLLED                      │
│                                                VALVES”                         │
├────────────────────────────────────────────────────────────────────────────────┤
│ 5.      The petitioners claim that in the past they had applied for and were   │
└────────────────────────────────────────────────────────────────────────────────┘

12. Secondly, the plain reading of the description of the product against serial no. 269 of Appendix 37D indicates that products such as valves for pipes, boiler shells, tanks, vats or the like including pressure reducing valves cannot possibly be considered as items used in bicycles. Thus, the only manner in which the said description of the goods can be read is to ignore the punctuation mark of colon after the word bicycle or read the same as a coma. It would plainly not be open for the description to be read in a manner so as to retain the meaning of the punctuation mark of colon after the word bycycle and ignore the text (which includes goods that cannot be possibly used in a bycycle) that follows.

13. Lastly and more importantly, the FPS was discontinued with effect from 31.03.2015 and was replaced by a new incentive scheme captioned “Merchandise Exports from India Scheme” (hereafter MEIS). Paragraph

3.04 of the FTP provides for entitlement under the MEIS and reads as under:- “3.04 Entitlement under MEIS Exports of notified goods/products with ITC(HS) code, to notified markets as listed in Appendix 3B, shall be rewarded under MEIS, Appendix 3B also lists the rate(s) of rewards on various notified products [ITC (HS) code wise]. The basis of calculation of reward would be on realised FOB value of exports in free foreign exchange, or on FOB value of exports as given in the Shipping Bills in free foreign exchange, whichever is less, unless otherwise specified.”

14. The relevant entry under Appendix 3B – Entry No. 4097 is set out below:- Sr. No HS Code ITC (HS) Code Description of goods 4097 84807900 Other Moulds For Rubber/Plastics 8481 Taps, Cocks, Valves and Similar Appliances for pipes, boiler shells, tanks, vats or the like including pressure-reducing valves and thermostatically controlled valves

15. Thus, admittedly, export of goods covered under ITC (HS) Code 8481 is eligible for benefits under the MEIS. In the past, respondents had readily accepted that the industrial valves were covered under the products specified against serial no. 269 of Appendix 37D and were eligible for benefits under the FPS. Such benefits are also available under MEIS, which came into effect from 01.04.2015 and has effectively replaced the FPS. In this view, it would be difficult to accept that the intention of the Central Government was to not grant export incentives to industrial valves and restrict the same only to valves used in bicycles for a short intervening period.

16. In view of the above, the impugned notice cannot be sustained.

17. It is relevant to mention that the impugned notice was also subject matter of challenge before the Gujarat High Court in Intolcast Pvt. Ltd & Anr. v. Union of India and Anr.: 2017 (345) ELT 217 (Guj), wherein Division Bench of the Gujarat High Court has set aside the impugned notice. The said decision was subject matter of a Special Leave Petition (SLP (C) No. 033155-033158/2017) captioned Union of India & Anr. v. M/s Intolcast Pvt. Ltd. The said SLP was dismissed by the Supreme Court by an order dated 03.10.2017 expressly stating as under:- “Heard learned counsel for the petitioners and perused the relevant material. Application for exemption from filing certified copy of the impugned order is allowed. Delay condoned. We find no merit in the present Special Leave Petitions. The Special Leave Petitions are accordingly dismissed.”

18. In view of the above, the petition is allowed and it is clarified that industrial valves falls squarely within the goods covered under serial no. 269 of Appendix 37D. This court respectfully concurs with the view of the Gujrat High Court in Intoclast Pvt Ltd. (supra) in setting aside the said impugned notice. The pending application is also disposed of.

VIBHU BAKHRU, J JANUARY 03, 2018 pkv