TMI Blog2022 (2) TMI 471X X X X Extracts X X X X X X X X Extracts X X X X ..... n evident from the Application and/or the Declaration/Undertaking but in pursuance of the said Circular based whereon the demand notice and the reminder have been issued and such circular and notice/reminder are under challenge, it is considered too far-fetched for Mr. Singh to argue that the petitioner has been guilty of suppression of a material fact. Had the demand notice/reminder been issued without being goaded by the said Circular but on the ground that the petitioner in terms of its Application and/or the Declaration/Undertaking was not qualified to obtain any benefit of the SFI Scheme and such notice had been made the subject matter of challenge without such application and/or such declaration/undertaking being brought on record of the writ petition, the decision on the issue could have been otherwise. The non-disclosure of the Application and/or the Declaration/Undertaking by the petitioner does not amount to suppression of material facts warranting dismissal of the writ petition. Should the answer to the above issue be in the negative, whether the said Circular is ultra vires Articles 14 and 19(1)(g) of the Constitution, section 5 of the FTDR Act and paragraph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e meeting of the Port Officers dated 25th November, 2008. Since the said Circular does not take away the benefits that have accrued on the basis of the SFI Scheme prior to the contents thereof being clarified by the said Circular, there are no reason to hold such circular to be ultra vires Articles 14 and 19(1)(g) of the Constitution of India as well as section 5 of the FTDR Act and paragraph 3.6.4 of the FTP 2004-2009. However, the demand notice dated 28th January 2010 and the reminder dated 31st May 2010 being unauthorized, are invalid in law and inoperative; hence, the same deserve to be set aside. Petition allowed. - WRIT PETITION NO. 1335 OF 2010 - - - Dated:- 8-2-2022 - DIPANKAR DATTA, CJ M. S. KARNIK, J. Mr. Vikram Nankani, Sr. Advocate with Mr. Prithviraj Choudhari a/w Mr. Archit Virmani and i/by Mr. Nikhil Mengde for petitioner. Mr. Anil C. Singh, ASG a/w Mr. M. S. Bhardwaj, Mr. Aditya Thakkar and Mr. D. P. Singh for respondents. JUDGMENT: [Per Dipankar Datta, CJ.] FACTS GIVING RISE TO THE WRIT PETITION 1. The petitioner is a company incorporated under the Companies Act, 1956 and, inter alia, engaged in the business of rendering mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Constitution of India seeking relief, which reads as follows: (a) that this Hon ble Court be pleased to declare the impugned Circular No. 25/2007 dated 1st January, 2008 (Exhibit- K hereto) ultra vires Article 14 and Article 19(1) (g) and Section 5 of the Foreign Trade (Development Regulation Act, 1992 and paragraph 3.6.4 of Foreign Trade Policy 2004-09; (b) that this Hon ble Court be pleased to issue a Writ of Certiorari, or a Writ in the nature of Certiorari, or any other appropriate Writ, Order or direction, leading to the issuance of the impugned demand Notices dated 28th January, 2010 and 31st May, 2010 (Exhibits- N and O respectively hereto) and after going into the legality, validity and propriety thereof, to quash and set aside the same; (c) that this Hon ble Court be pleased to issue a Writ of Prohibition or a Writ in the nature of Prohibition, or any other appropriate Writ, Order or prohibition, prohibiting the Respondents from implementing and/or carrying on and/or giving the impugned policy Circular No. 25/2007 dated 1st January, 2008 (Exhibit- K hereto); (d) that this Hon ble Court be pleased to issue a Writ of Mandamus, or a Writ in the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ood thus, we find that in line with a decision taken in the Port Officers Meeting dated 14th December, 2007 [Agenda 6, Decision No. 4(c)(ii)] presided over by the Joint Director General of Foreign Trade, New Delhi, such joint director issued the said Circular wherein it was clarified that the benefits of the SFI Scheme will not be available to service providers, such as the petitioner, who have provided maritime transportation services from a place outside India to another place outside India without making a port call in India. 8. Subsequently, in the FTP 2009-2014, a specific amendment was brought to this effect and such services were specifically excluded from the ambit of the SFI Scheme. 9. The third respondent issued the demand notice and the reminder in line with the said Circular, directing the petitioner to return back the customs duty benefits along with interest claimed by it while utilizing the SFI Scheme scrips issued to it in 2007. 10. In such factual background, the petitioner has invoked the writ jurisdiction of this Court with prayers noted above. CONTENTIONS OF THE PETITIONER 11. Appearing in support of the writ petition, Mr. Nankani, learned sen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case, the said Circular has been issued with a view to circumvent the due process of law prescribed under the FTDR Act to amend the FTP 2004-2009 and benefits, otherwise correctly granted to the service providers, such as the petitioner, were curtailed by introducing a new condition which was not existing under the prevalent policy provisions of the FTP 2004-2009. Therefore, introduction of such a new condition in the FTP 2004-2009 by way of the said Circular is wholly unsustainable and contrary to the settled position in law. f. At the time of issuance of the SFIS scrips in 2007, there was no specific restriction for availing benefit under the SFI Scheme with respect to the services provided by the petitioner. The said restriction was sought to be introduced by way of a clarification vide the said Circular and was later incorporated in 2009 as part of the FTP 2009-2014. The benefits claimed and obtained under the SFIS Scrips issued in 2007 cannot be retrospectively taken away by issuance of the said Circular and the demand notice as well as the reminder when, at the relevant time of issuance of such scrips, the law did not provide for any specific restriction to that effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the sole prerogative of the officers under the Customs Act. Thus, the demand notice as well as the reminder issued by the third respondent are without any authority of law and liable to be set aside on this count itself. 13. It was, accordingly, prayed that relief as claimed by the petitioner ought to be granted. CONTENTIONS OF THE RESPONDENTS 14. It is the case of the respondents in their affidavit-in-reply that the challenge in the writ petition is misconceived and hence, the petitioner is not entitled to any relief in the writ jurisdiction of this Court. 15. Mr. Anil Singh, learned Additional Solicitor General for the respondents raised a preliminary objection to the maintainability of this writ petition. It has been his submission that the petitioner is not entitled to discretionary equitable relief since it has approached this Court with unclean hands. We were reminded by Mr. Singh that one who seeks equity must act in a fair and equitable manner. 16. While addressing us, Mr. Singh disclosed that the petitioner has deliberately suppressed its Application and the Declaration/Undertaking at the time of seeking benefits under the SFI Scheme and in view thereo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .under the Foreign Trade Policy, as a part of promotional measures, Government of India has introduced Served from Indian Scheme (SFIS). As per para 3.6.4.1 of the Foreign Trade Policy, the objective of the scheme 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... (emphasis supplied by him). 21. Our attention was then invited to the relevant provisions of the SFI Scheme providing, inter alia, as under:- 3.6.4 SERVED FROM INDIA SCHEME 3.6.4.1 Objective: The objective is to accelerate the growth in export of services so as to create a powerful and unique Served From India brand, instantly recognized and respected word over. 3.6.4.2 Eligibility : All Service Providers, of services listed in Appendix 10 of HBP vl, who have a total free foreign exchange earning of at least ₹ 10 Lakhs in preceding financial year shall qualify for Duty Credit scrip. For Individual Service Providers, minimum would be ₹ 5 Lakhs: (emphasis supplied by him). 22. Next, the expression Service Provider defined in paragraph 9.53 of the FTP was referred to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention of the petitioner that the said Circular does not permit revising entitlements that have already been granted and hence, the subject demand notice and the reminder ought not to have been issued, it was contended by Mr. Singh that reliance placed by the petitioner on paragraph 3 thereof is misplaced. He submitted that a holistic reading of the said Circular clearly envisages that wrongful benefits that may have been granted cannot and ought not to be allowed. According to him, the contention of the petitioner is without basis for the following reasons, viz. a. The said Circular read as a whole show that the entitlements can be revisited. This would be evident on reading of the paragraph below paragraph b which reads, inter alia, as Thus payment might have been made by a service provider in India to a Foreign Service Provider, who has provided some part service in the foreign country. Such services provided abroad cannot be counted as Services originating from India , and hence would not be eligible for benefits under SFIS Scheme (emphasis supplied by him). b. The petitioner having wrongfully obtained benefits on the basis of an incorrect declaration cannot seek t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of a material fact, undoubtedly, is a valid ground for refusing exercise of discretionary writ jurisdiction. Law seems to be well-settled that a party is disentitled to the extra-ordinary remedy of writ if material facts, which would have materially affected the merits of the reliefs claimed (either interim or final), are not disclosed in the writ petition. One may usefully refer to the decision of the Supreme Court reported in (2004) 7 SCC 166 [S.J.S. Business Enterprise (P) Ltd. vs. State of Bihar] where, in paragraph 13, it has been held that: 13. As a general rule, suppression of a material fact by a litigant disqualifies such litigant from obtaining any relief. This rule has been evolved out of the need of the courts to deter a litigant from abusing the process of court by deceiving it. But the suppressed fact must be a material one in the sense that had it not been suppressed it would have had an effect on the merits of the case. It must be a matter which was material for the consideration of the court, whatever view the court may have taken 31. Applying the law as aforesaid, it needs to be considered whether non-disclosure by the petitioner of the Applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losely, which purports to have been issued with the approval of the DGFT. For ease of understanding and clarity, we quote the said Circular below in its entirety: POLICY CIR NO.25/2007, DT.01/01/2008 Service not originating from India and Served From India Scheme (SFIS) for service providers, clarification thereof. Attention is invited to Served from India Scheme. It is mentioned in Para 3.6.4 of Foreign Trade Policy that Served from India scheme s objective is promotion of export of services that are originating from India. 2. It has been brought to the notice of DGFT that applications have been received for grant of benefits under the scheme even where export of service from India does not take place, although foreign exchange may have been earned. The issue was deliberated in the Port Officer s Meeting held on 14.12.2007. Instances like development of software exclusively by an Indian wholly owned Subsidiary/Unit overseas (or by other Foreign Service Providers) and the sale of such software in International markets would lead to earning of foreign exchange for the Indian Company. However such providing of software service does not originate in India a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e will apply with retrospective effect. 37. In course of hearing we had called upon Mr. Singh to place before us the relevant records pertaining to the said Circular. The primary intention was to ascertain whether the said Circular was issued with the approval of the DGFT. Perusal thereof reveals this. On 28th December, 2007, Mr. A.K. Singh, Joint Director General of Foreign Trade, placed the following note before the DGFT: Draft Policy Circular for SFIS has been attempted, in line with the decision recorded for POM dt 14/12/07. Submitted for approval, pl. Thereupon, the DGFT appears to have endorsed on 1st January, 2008 as follows: As slightly modified . It was thereafter that the said A.K. Singh signed the document and directed for its Web Hosting . In such circumstances, we are inclined to record a satisfaction that the said Circular was not issued keeping the DGFT in the dark. 38. However, an interesting twist can be discerned if the decision taken in the Port Officers Meeting dated 14th December, 2007 is perused. We consider it appropriate to quote the relevant portion thereof below: c. Services not originating from India would not be entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tead, it must substantively be proved that the law was in fact clarificatory , While so observing, the Court affirmed its earlier decision reported in (2007) 9 SCC 665 (Virtual Soft Systems Ltd. vs CIT) where it was held that: 50. *** It is the well-settled legal position that an amendment can be considered to be declaratory and clarificatory only if the statute itself expressly and unequivocally states that it is a declaratory and clarificatory provision. If there is no such clear statement in the statute itself, the amendment will not be considered to be merely declaratory or clarificatory. 51. Even if the statute does contain a statement to the effect that the amendment is declaratory or clarificatory, that is not the end of the matter. The Court will not regard itself as being bound by the said statement made in the statute but will proceed to analyse the nature of the amendment and then conclude whether it is in reality a clarificatory or declaratory provision or whether it is an amendment which is intended to change the law and which applies to future periods. (emphasis ours) 41. We may also take note of the decision reported in (2009) 5 SCC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r by reason of such clarificatory circular, settled and/or closed claims could be reopened. 44. Having read the said Circular in between the lines, we may now proceed to record our reasons to reach our conclusions. 45. Recital of the said Circular envisaging that the same was issued as a clarification of the SFI Scheme notwithstanding, we are not to be bound by such recital but as guided by the aforesaid decisions of the Supreme Court its contents have to be analyzed to find out whether (i) it is clarificatory in nature; and (ii) even though clarificatory, whether the same is applicable without restrictions. As earlier observed, we have little reason to doubt that the said Circular only highlighted what was implicit in the SFI Scheme. What would Served From India mean required a clarification and it was, accordingly, clarified by the DGFT that where export of service from India does not take place, although foreign exchange may have been earned , such of those services not originating from India (emphasis ours) would not qualify for the benefit under the SFI Scheme. Based on such clarification, it is indeed arguable as to whether the petitioner was qualified to seek the be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eting too was chaired by the said A.K. Singh. Although it is recorded that the minutes had the approval of the DGFT, no such approval has been placed before us. Even otherwise, any statement recorded in the minutes of the meeting of the Port Officers dated 25th November, 2008, which is clearly contrary to the said Circular cannot be binding on any party. We unequivocally record that the said Circular does not, either expressly or by necessary implication, endorse the decision taken in the meeting of the Port Officers dated 14 th December, 2007 and in the absence of any stipulation in the said Circular authorizing reopening of claims that have been settled and/or closed, it seems to us to have been impermissible to again take a decision in the meeting of the Port Officers dated 25th November, 2008 contrary to the terms of such circular and in the absence of issuing a further clarificatory circular. 49. We, thus, hold on the terms of the said Circular that though it is clarificatory in nature, it does not have retrospective operation. As such, it was not open for the third respondent to issue the demand notice and the reminder to recover ₹ 27,40,35,827/- from the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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