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TMI Blog2011 (6) TMI 545X X X X Extracts X X X X X X X X Extracts X X X X ..... f the fourth Petitioner is pending. The challenge in these proceedings under Article 226 of the Constitution is to a Circular dated 15 July 2010 issued by the Office of the Directorate General of Foreign Trade and to several notices issued by the Zonal Joint Director and by the Joint Director General, revoking the benefit granted to the Petitioners. Since the issue before the Court arises out of the provisions of the Served From India Scheme of the Foreign Trade Policy for 2004-09, it would, at the outset, be necessary to set-forth the salient aspects of the scheme. Served from India Scheme (SFIS). 3. Paragraph 3.6.4 of the Foreign Trade Policy comprises of the provisions of the scheme. The objective of the scheme has been laid down in paragraph 3.6.4.1 as follows : "3.6.4.1 Objective 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." Paragraph 3.6.4.2 defines "eligibility" thus : "All Service Providers, of services listed in Appendix-10 of HBP v1, who have a total free foreign exchange earning of at least Rs. 10 lakhs in preceding financial year shall qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsequent to this, the Petitioners applied for Duty Credit scrips under the SFIS. The First Petitioner and the Third Petitioner received their Duty Credit scrips for financial years 2005-06, 2006-07 and 2007-08 from the Zonal Joint Director of Foreign Trade. The Second Petitioner received its entitlement for financial year 2005-06, 2006-07 and 2007-08 from the Joint Director General of Foreign Trade. The applications of the Fourth Petitioner were pending consideration. 8. The Director General of Foreign Trade (D.G.F.T.) had, from time to time, issued several policy circulars interpreting the provisions of the scheme. On 6 October 2004, D.G.F.T. clarified that the benefit of Duty Credit scrips under SFIS would be available only to those remittances which were received as service charges and fees levied for specific services. The circular also provided a list of services for which the benefit under SFIS would not be available. 9. On 8 June 2005 a clarification was issued by DGFT to the effect that the words "relating to exports" under SFIS actually meant "relating to exports of services by service provider under the GATT Agreement". The circular also clarified that servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in each of those situations. Following the meeting, the DGFT issued a policy circular on 15 July 2010. The circular mandated that all Regional Authorities would review the previously sanctioned telecom sector SFIS cases in accordance with the circular and the minutes of the PIC meeting held on 5 July 2010. The circular mandated that all SFIS cases shall be reopened in order to re-compute the entitlement in each case in terms of the decision taken on 5 July 2010. The Regional Authorities were directed to make recoveries and adjudication in the event that it was found that SFIS benefits in excess of what is permissible was granted or in the event that a service provider had not provided the required information. 13. The grievance of the Petitioners, in the challenge to the circular dated 15 July 2010, is to the extent that it mandates the reopening of the existing cases and the making of recoveries in relation to three of the situations which are contemplated in the minutes of the PIC meeting dated 5 July 2010. In order to appreciate the nature of the challenge, it would be necessary for the Court to dwell briefly on the three situations which form the subject matter of the cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceive a payment in foreign exchange from the FILDO. The earning in foreign exchange by the Indian service providers forms the basis of the claim for SFIS benefits. 16. The minutes of the PIC meeting dated 5 July 2010 deal with whether SFIS benefits would be available in each of the three situations to which a reference has been made earlier. In the first situation, where an Indian subscriber has received an international incoming call from overseas, the minutes provide, that the Indian Service Provider, namely IILDO, who earns foreign exchange for such a call is not covered by paragraph 9.53 of the FTP and the foreign exchange earnings are not entitled to SFIS benefits. In the second and the third eventualities where an overseas call is either made to a foreign overseas destination or received from an overseas destination by a foreign subscriber who is on a roaming facility in India, the minutes of 5 July 2010 stipulate that while the IAP would be entitled to SFIS benefits in respect of the foreign exchange earnings the Committee has decided that only fifty percent of the foreign exchange earned would be entitled to the benefit of the scheme. 17. The submission which ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e first is a supply of a service from India to any other country. The second is the supply of a service from India to a service consumer of any other country in India. The second situation places emphasis on the situs within India of a service consumer of any other country to whom a service is provided. The third situation involves the supply of a service from India through commercial or physical presence in the territory of any other country While the first three situations speak of a supply of service from India, the fourth situation contemplates supply of service in India. In the fourth situation, the supply of service in India relates to exports paid in free foreign exchange or in Indian rupees which are otherwise considered as having been paid for in free foreign exchange by the RBI. 21. The conditions of eligibility for availing of benefits under the scheme are spelt out in paragraph 3.6.4.2. In order to meet the conditions of eligibility, the applicant must firstly be a service provider within the meaning of that expression in clause 9.53. Secondly, the applicant must have provided services listed in Appendix-10 of the Handbook of Procedures. Thirdly, the applicant mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hange earning. Advisedly, the policy has not used the expression "net foreign exchange earning" either while defining the conditions of eligibility or the conditions of entitlement for the Served From India Scheme. Where the same policy document employs two distinct phrases, each of those phrases must be given a separate meaning according to its plain and natural interpretation. For the purposes of defining eligibility and entitlement under SFIS, the words that have been used are "total free foreign exchange earning' and "free foreign exchange earned'. The Central Government while defining the extent of the entitlement has confined it to ten per cent of the free foreign exchange earned. If the Government intended to restrict the entitlement to ten per cent of the net foreign exchange earned, it could have so stipulated. The concept of net foreign exchange earned was present to the mind of the Union Government when it formulated the policy since it had adopted that concept in other parts of the policy. Not having adopted that concept in formulating eligibility and entitlement under the SFIS, it would not be possible to restrict the benefits of SFIS with reference to the concept of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this would meet the definition of the expression "service provider". Sub-clause (ii) of Clause 9.53 brings within that definition supply of a service in India to a service consumer of any other country in India. The foreign subscriber is a consumer of 'any other country' who is physically present in India and utilises a roaming facility while in India. A supply of service to such a person falls within the definition of the expression "service provider" in clause 9.53(ii). However, the minutes of the PIC seek to restrict the grant of SIFS benefits only to the extent of fifty percent of the foreign exchange that is earned. The submission of the learned ASG is that a call which is made from India by a foreign subscriber to a foreign destination cannot be put through without the inter-position of the FILDO. The learned ASG submits that while it is true that the IILDO or, as the case may, the IAP earns foreign exchange for the call which is thus made or received by a foreign subscriber while in India a payment is made to the FILDO. Hence it is urged that it is necessary to net off what is earned by the IILDO against the payment which is made to the FILDO. 27. Counsel appearing on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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