TMI Blog2015 (1) TMI 1127X X X X Extracts X X X X X X X X Extracts X X X X ..... This, clearly, would amount to introducing an additional eligibility condition which is extraneous to the eligibility criteria as spelt out in paragraph 3.12.2 of the FTP 2009-14. Introduction of such condition would, in effect, amount to amending the FTP 2009-14. The conclusion of DGFT that Indian companies having foreign equity cannot be considered as Indian, militates against well established canons of company law. The petitioners are companies incorporated under the Companies Act, 1956 and are governed by the provisions of the statute (currently Companies Act, 2013). Insofar as the domicile of the petitioners is concerned, no distinction can be drawn between the petitioners and other companies incorporated under the said Act. It is also well established that the situs of shares is located in the country in which the register upon which they are registered is kept. (See: R. Viswanathan v. R.S. Abdul Wajid: [1962 (5) TMI 25 - SUPREME COURT], Vodafone International Holdings BV v. Union of India and Anr.: [2012 (1) TMI 52 - SUPREME COURT OF INDIA]. Companies incorporated under the laws of India and having their registered offices in India would undeniably be Indian companies. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - hereafter referred to as Yum ) is, inter alia, engaged in providing wide range of management services to Yum! Asia Franchise Pte. Ltd., Singapore in respect of franchisees located in Nepal, Bangladesh, Sri Lanka, Mauritius etc. Yum applied for license (Duty Credit Scrips) in terms of the SFIS under the applicable foreign trade policies for the financial years 2004-05 to 2010-11. Yum s applications were accepted and it was provided the Duty Credit Scrips in terms of the SFIS. Subsequently, Yum also applied for benefits under the SFIS, for the financial year 2011-12 under the Foreign Trade Policy, 2009-14 (hereafter FTP 2009-14 ). In response, the respondents called upon Yum to furnish details of its share holding. By a letter dated 11.07.2012, Yum was informed that its application was rejected for the following reasons:- YUM BRAND IS NOT A ESSENTIALLY INDIAN BRANDS. THE NAME OF COMPANY REPRESENTS BRAND NOT ESSENTIALLY IDENTIFIED AS INDIAN BRAND THEREFORE. YOU CLAIM REJECTED IN TERMS OF PARA 3.12.2 OF FTP -2009-2014. 4.2 Thereafter, Yum was issued communications dated 30.05.2013 and 17.06.2013, inter alia, stating that the Duty Credit Scrip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agenda, represent brands not identified as Indian Brands and accordingly the grant of SFIS benefits would not be harmonious with the intent behind the Scheme . 5. Before proceeding to address the controversy, it would be essential to refer to the applicable legal and policy framework relevant for foreign trade. The Foreign Trade (Development and Regulation) Act, 1992 (hereafter the Act ) has been enacted for development and regulation of foreign trade. Section 5 of the Act provides that the Central Government may, from time to time formulate and announce, by notification in the Official Gazette, the export and import policy and may also, in the like manner, amend that policy. 6. In exercise of powers under Section 5 of the Act, the Central Government had framed and notified FTP 2004-09. Subsequently, the Central Government declared FTP 2009-14, which came into force on 27.08.2009. In terms of paragraph 1.2 of FTP 2009-14, all exports and imports up to 26.08.2009 would be governed by FTP 2004-09. Both FTP 2004-09 and FTP 2009-14 provide for an incentive scheme captioned as Served from India Scheme (i.e. SFIS), which entails providing duty credit scrips - as an incenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of HBPv1 would alone be eligible. Such eligible service providers will be entitled to Duty Credit Scrip equivalent to 10% of free foreign exchange earned during current financial year (w.e.f. 1.1.2011). For services rendered prior to 1.1.2011, Appendix 10 of HBPv1 would be applicable. Clause 3.12.2 of FTP 2009-14 as initially framed used the expression All Indian Service Providers . This was subsequently amended by deleting the word All to read as above. Notably, PIC had deliberated on the SFIS as initially framed. 7. Section 6 of the Act provides for the appointment of DGFT and also indicates the functions to be performed by the DGFT. The said Section is quoted below:- 6. Appointment of Director General and his functions. (1) The Central Government may appoint any person to be the Director General of Foreign Trade for the purposes of this Act. (2) The Director General shall advise the Central Government in the formulation of the export and import policy and shall be responsible for carrying out that policy. (3) The Central Government may, by Order published in the Official Gazette, direct that any power exercisa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice Providers as per Para 3.12.2 of the FTP 2009-14 and for grant of duty Credit Scrip under the Served From India Scheme. After the detailed discussions on this issue, the committee felt that mere registration with the RoC does not give them the status of an Indian company for SFIS benefit. The Committee felt that the firm s need to prove how they are Indian companies by way of their share holding pattern which would enable the committee to determine whether they are truly Indian company or not. It was decided that details from RoC need to be collected as regard to share holding/ownership status of all these companies before a view can by taken by the PIC. 11. Subsequently, the question regarding entitlement of Indian subsidiaries of foreign companies including Nokia and DuPont was considered by the PIC at a meeting held on 27.12.2011 where it was decided that SFIS s benefits could not be granted to the said companies. The relevant extract of the minutes of the said meeting are as under:- PIC considered the issue pertaining to request for grant of SFIS by the above companies. PIC also referred its earlier decision of 27.1.2009 in the case of M/s. Fede ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amend or alter the foreign trade policy in any manner. Although certain powers exercisable by the Central Government can be delegated to DGFT, the same does not include the power under Section 5 of the Act. Thus, DGFT would have no power to either amend or alter any provision of the FTP. The question, whether the DGFT has the power to add to or amend the policy, has been considered by courts in a number of decisions and it is now well established that the DGFT must act strictly within the four corners of the foreign trade policy. The Supreme Court in Atul Commodities Pvt. Ltd. v. Commissioner of Customs, Cochin: (2009) 5 SCC 46 also held that DGFT would have no power to amend the foreign trade policy. This Court had also expressed a similar view in BRG Iron Steel Co. Ltd. v. Union of India: 2014 (309) ELT 393 (Del.). The decision of the DGFT as noted in the impugned minutes must be considered in the above perspective. 14. Concededly, there was no ambiguity in the language of the provisions of paragraph 3.6.4.2 of FTP 2004-09. All Service Providers complying with the specific eligibility criteria were entitled to the benefits under the SFIS as framed under FTP 2004-09. The ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Indian. This, in my view, is wholly unsustainable; Served from India brand used in the context of accelerating growth of services does not refer or allude to any trade name or trade mark of any individual service provider. The DGFT/PIC has introduced a completely new concept in the eligibility criteria as specified under the FTP 2009-14, that is, to limit the incentives only to companies with trade names, which reflect their association with India. The expression Served from India brand must be read in the context of the object to accelerate growth in export of services from India. The purpose of granting incentive to Indian Service Providers is to incentivize export from India in order to strengthen such exports and to ensure that larger quantum of services are outsourced or procured from India. Clearly, the objective is to establish India as a brand; a recognized destination for outsourcing of services. The objective as specified under paragraph 3.12.1 of FTP 2009-14 contains no reference to trade names of Indian companies. 17. The incentive provided under the SFIS is also available to individuals providing the specified services and fulfilling the criteria of earnin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly Companies Act, 2013). Insofar as the domicile of the petitioners is concerned, no distinction can be drawn between the petitioners and other companies incorporated under the said Act. It is also well established that the situs of shares is located in the country in which the register upon which they are registered is kept. (See: Re Clarke, McKechnie v. Clarke: (1904) 1 Ch 294, Brassard v. Smith: (1925) AC 371, R. Viswanathan v. R.S. Abdul Wajid: AIR 1963 SC 1, Vodafone International Holdings BV v. Union of India and Anr.: (2012) 6 SCC 613). Companies incorporated under the laws of India and having their registered offices in India would undeniably be Indian companies. 21. In view of the aforesaid, the petitions are allowed; the decisions of DGFT/PIC, denying the benefit of the SFIS to the petitioners reflected in the impugned minutes, as well as separate communications sent to the petitioners withdrawing/recalling the said benefits (i.e. Duty Credit Scrips), are set aside. ................... Notes: Judgement modified as per the order in EI DUPONT INDIA PVT LTD ANOTHER Versus UOI OTHERS [2015 (2) TMI 758 - DELHI HIGH COURT] - - TaxTMI - TMITax - Custom ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
