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TMI Blog2015 (1) TMI 1127X X X X Extracts X X X X X X X X Extracts X X X X ..... r 'SFIS'), as framed under the foreign trade policy, to the petitioners. 2. The Policy Interpretation Committee (hereafter 'PIC') and DGFT have held that the SFIS is not applicable to the petitioners as they are subsidiaries of foreign companies. According to PIC/DGFT, the SFIS is not applicable to subsidiaries of foreign companies as granting benefits available under the SFIS does not further the objective of the SFIS, which is to create a powerful and a unique 'served from India' brand. The petitioners dispute this. According to them, the SFIS is applicable to all "Indian Service Providers" who fulfill the specified criteria; no distinction can be drawn on the basis of nationality of their constituent shareholders. 3. The main controversy to be addressed is whether the petitioners could be denied the benefit of the SFIS only on the ground that they were subsidiaries of foreign companies. And, whether it was open for DGFT to interpret the foreign trade policy to exclude the petitioners from the benefit of the SFIS. 4. Briefly stated the relevant facts necessary to consider the controversy are as under:- 4.1 M/s Yum Restaurants (India) Pvt. Ltd. (the petitioner in W.P.(C) 7011/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m is not an Indian brand or company and does not contribute in creation a powerful & unique served from India brand. Hence the objective of SFIS Scheme to accelerate growth in export of Services from India which creates a powerful and unique served from India brand is not achieved. Hence your case is not covered under any category of para 9.53 of FTP and also does not meet the basic objective for grant of SFIS benefit." 4.4 M/s Nokia Solutions and Networks India Pvt. Ltd. (the petitioner in W.P.(C) 6800/2013 - hereafter referred to as 'Nokia') is, inter alia, engaged in manufacture and distribution of telecom infrastructure equipment and provision of wide range of services in telecommunications sector. Nokia applied for licenses (Duty Credit Scrips) in terms of the SFIS under the applicable foreign trade policies (FTP 2004-09 and FTP 2009-14) for the financial years 2009-10. Nokia's applications were accepted and it was provided the Duty Credit Scrips in terms of the SFIS. These were sought to be withdrawn by a letter dated 07.12.2010; Nokia was informed that the Duty Credit Scrips were "issued inadvertently without approval of competent authority" and was directed to "submit the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raph 3.18.1 of HBP v1 shall not be entitled." FTP 2009-14 "3.12 SERVED FROM INDIA SCHEME (SFIS) Objective 3.12.1 Objective of SFIS 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. Eligibility 3.12.2 Indian Service Providers, of services listed in Appendix 41 of HBP v1, who have free foreign exchange earning of at least Rs. 10 Lakhs in current financial year will be eligible for Duty Credit scrip. For Individual Indian Service Providers, minimum free foreign exchange earnings would be Rs. 5 Lakhs. Ineligible Services and Service Providers 3.12.3 Services and Service Providers as listed in Para 3.6.1 of HBPv1 shall not be entitled for benefits under the SFIS scheme. Entitlement 3.12.4 Service Providers of services listed in Appendix 41 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 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision thereon shall be final and binding." 9. Paragraph 2.3 of FTP 2009-14 was amended with effect from April 2010 to provide for constitution of a PIC to aid and advice the DGFT. Paragraph 2.3 as amended and effective from April 2010 reads as under:- "Interpretation of Policy 2.3 (a) The decision of DGFT shall be final and binding on all matters relating to interpretation of Policy, or provision in HBP v1, HBP v2 or classification of any item for import / export policy in the ITC (HS). (b) A Policy Interpretation Committee (PIC) may be constituted to aid and advice DGFT." 10. The minutes of the meetings of the PIC held on 29.04.2011 and 27.12.2011 embody the decision on the basis of which the petitioners have been denied the benefits of the SFIS. The cases of Nokia and DuPont were considered by the PIC in its meeting held on 29.04.2011; the relevant extract of the said minutes reads as under:- "The PIC considered the case as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ially such a brand should enhance the Indian image and hence the Foreign Trade Policy uses the phrase "Served from India" brand. 4. The Committee, therefore, noted that the names of companies mentioned in the agenda represent brands not identified as Indian Brands. They may be known in the global market. Accordingly, the Committee decided that grant of SFIS benefits to the above companies would not be harmonious with the intent behind the Scheme." 12. It is relevant to note that the above-referred meetings of PIC were held under the Chairmanship of DGFT and, thus, the decisions taken at the said meetings are, in effect, the decisions of the DGFT. The petitioners impugn the minutes of the said meetings (hereafter the 'impugned minutes') as being contrary to the FTP 2004-09/FTP 2009-14 and without jurisdiction. 13. The challenge laid by the petitioners to the impugned minutes must be considered in the backdrop of the legal and policy framework as indicated herein before. It is clear from the scheme of the Act and foreign trade policies framed under the Act that whereas Central Government is empowered to frame and/or to amend the foreign trade policy, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioners prior to 26.08.2009 are concerned, the same would be governed by FTP 2004-09. And, indisputably, the petitioners would be eligible for the SFIS in respect of services exported prior to 26.08.2009. 15. Paragraph 3.12.2 of FTP 2009-14 contains the provisions with regard to eligibility for claiming benefits under the SFIS for services exported after 26.08.2009. A plain reading of the said provision indicates that "Indian Service Providers" providing services as listed in the Appendix 41 of the Handbook of Procedures, Volume I and who have earned free foreign exchange of `10 lacs and more in the current financial year would be entitled duty credit scrips equivalent to 10% of the free foreign exchange earned during the current financial year. The eligibility condition of earning `10 lacs or more is relaxed to `5 lacs in case of Individual service providers. 16. Plainly, the expression "Indian Service Providers" would include all Indian entities including individual nationals. The decision of the DGFT/PIC to exclude Indian subsidiaries of foreign companies, from the scope of 'Indian service providers', is based on their interpretation of the stated objective of SFIS, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings. 19. I find it difficult to accept this contention as the meaning sought to be attributed to paragraph 3.12.2 of the FTP 2009-14 is not sustainable by the plain language of that provision. Whilst, it cannot be disputed that DGFT is empowered to interpret the foreign trade policy, such powers can be exercised only when the plain language of the policy presents an ambiguity. It would not be open for DGFT to introduce new conditions and criteria under the guise of interpreting the policy as that would, clearly, amount to amending the provision of the foreign trade policy. The words used in paragraph 3.12.2 of FTP 2009-14 are "Indian Service Providers". There is no scope to read into these words the condition that for service providers to be Indian, its shareholders must also be Indian. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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