THE HONBLE SRI JUSTICE P.NAVEEN RAO
WRIT PETITION No.27177 of 2014
30-12-2014
GMR Hotels and Resorts Ltd Rep by the Chief Financial officer,
Shamshabad,Hyderabad 500 409 . Petitioner
The Union of India Rep by Director General of Foreign Trade Govt of India New
Delhi and another . Respondents
Counsel for the petitioner : Sri E.Manohar for Sri P Kamalakar
Counsel for the Respondents: Sri B Narayana Reddy,
Asst Solicitor General
<Gist :
>Head Note:
? Cases referred:
2012 (3) SCC 518
The Court made the following:
HONOURABLE SRI JUSTICE P. NAVEEN RAO
WRIT PETITION No. 27177 of 2014
ORDER:
The petitioner is 100 % subsidiary holding company of GMR Hyderabad
International Airport Limited (for short referred to as GHIAL). Petitioner is
one
of the group companies of GHIAL. In recognition of exports carried out by the
petitioner, competent authority issued Duty Credit scrips dated 4.7.2013 in
all
thirteen in number worth Rs.1,25,56,045/-, which can be encashed while
importing goods specified in the Served From India Scheme. These scrips are
transferable within the group company. Therefore, petitioner requested the
Director General of Foreign Trade to permit utilisation of scrips by GHIAL.
Petitioner submitted a representation dated 20.12.2013 requesting to grant such
permission. In response, by letter dated 12.2.2014, the petitioner was asked to
furnish documentary evidence as per para 9.28 of the Foreign Trade Policy for
the years 2009-2014 duly attested by Registrar of Companies to process the case
further. On application, the Registrar of Companies, informed that no such
certificate can be issued. Therefore, a certificate from M/s. Brahmayya &
Company, Chartered Accountant of GHIAL was obtained and submitted in lieu of
requirement of certificate of attestation from the Registrar of Companies. By
proceedings dated 22.7.2014, petitioner was informed that request for
transferability of Duty Credit scrips under the Served From India Scheme to
GHIAL was rejected on the ground that petitioner is not holding more than 26 %
of the shares in GHIAL, which is a mandatory requirement as per policy.
Aggrieved thereby, this writ petition is instituted.
2. Heard Sri E. Manohar, learned senior counsel appearing on behalf
of petitioner and Sri B. Narayana Reddy, learned Assistant Solicitor General for
respondents.
3. Learned senior counsel contended that GMR Hotels and Resorts
Limited-petitioner herein is 100 % holding company of GHIAL and controls the
affairs of the petitioner company in all respects. It is a group company and
therefore it is permissible for one company to transfer the scrips as per the
Foreign Trade Policy to another in the group company. Learned senior counsel
further contended that on literal reading of para 3.2.7 read with para 9.28 of
Foreign Trade Policy 2009-14 makes it clear that petitioner can transfer the
scrips to GHIAL. When the policy is clear and unambiguous, the Director
General cannot apply his own interpretation to the said term of the policy nor
the
Policy Interpretation Committee can give wholly a different meaning to what is
contained in para 3.2.7 read with para 9.28 of Foreign Trade Policy. Therefore,
any such clarification given by the Policy Interpretation Committee, is wholly
illegal, without jurisdiction and competency and rejection of the request of the
petitioner on the ground that petitioner does not hold minimum 26 % share
holding in GHIAL is contrary to Foreign Trade Policy.
4. Learned senior counsel further contended that the scheme is a
beneficial provision and has to be liberally construed. The scheme is to
encourage foreign trade. Thus, facility of utilisation of scrips obtained on
account of such foreign trade carried out by one company be utilised by another
company is also intend to encourage foreign trade. This encourages the group
companies to actively involve in foreign trade and earn good returns. The
interpretation placed by the Policy Interpretation Committee and applied by the
Director General is erroneous and contrary to very spirit of the foreign trade
policy. Placing reliance on COMMISSIONER OF CENTRAL EXCISE, BHOPAL
Vs MINWOOL ROCK FIBRES LIMITED learned senior counsel contended
that circulars /clarifications are not binding on the Court and Court is
competent
to construe the provision as such without regard to a clarification. Learned
senior counsel therefore contends that interpretation placed by the Policy
Interpretation Committee was erroneous and same can be ignored and benefit of
provision contained in para 9.28 of the policy should be extended to the
petitioner to enable the petitioner to transfer the scrip to its holding
company.
5. Learned Assistant Solicitor General placing reliance on the
averments in counter affidavit contended that para 9.28 envisages that a group
company must have 26 % or more voting rights in other enterprise to which the
benefit of exports account can be transferred in accordance with Foreign Trade
Policy. The interpretation placed by the Policy Interpretation Committee is in
tune with the provisions contained in para 9.28 of the Foreign Trade Policy.
The
Director General of Foreign Trade consistently holding that a group company
which does not have 26 % of the share holding in another company cannot
transfer the scrips issued to it on account of exports carried out, to that
other
company.
6. The decisions given by the Policy Interpretation Committee and
applied by the Director General are enclosed to the counter. In cases of M/s.
Tata Teleservices Maharastra Limited and M/s.Essar Oil Limited, the facts are
identical and request was rejected by applying the provisions in para 9.28 of
the
Foreign Trade Policy strictly. He therefore submits that decision communicated
to the petitioner is valid and is not erroneous nor illegal or arbitrary
warranting
interference by this Court.
7. With an objective to facilitate imports and to augment export,
Foreign Trade (Development and Regulation) Act, 1992 (Act 22 of 1992) was
made. From time to time Central Government notifies Foreign Trade Policy
(FTP). Last such policy was notified in the year 2009 operative for a period
from
2009 to 2014. Wherever necessary, changes were effected in the meantime.
The policy sets out Government agenda to promote foreign trade. The Foreign
Trade Policy is divided into 10 chapters. Each of the chapter deals with each
of
the aspects of foreign trade. In this case relevant paras are paragraph 2.3
of
Chapter 2, 3.12.7 of Chapter 3 and Para 9.28 of chapter 9.
8. Chapter 2 deals with general provisions regarding imports and
exports. According to para 2.3(a) the decision of DGFT is final and binding on
all
matters relating to interpretation of policy. Policy interpretation committee
(PIC)
aids and advices him in this regard.
9. Chapter 3 deals with promotional measures. As part of promotional
measures, Served from India Scheme (SFIS) was launched. Objective of the
scheme is to accelerate growth in export of services to create powerful and
unique Served From India brand. Person qualified to avail the SFIS is
entitled
to Duty Credit sops equivalent to 10 % of free foreign exchange earmarked
during the financial year. Duty credit sops can be utilised for import of
certain
capital goods/for payment of duty on import of certain vehicles/ for import of
consumables /for payment of excise duty for procurement from domestic sources
in respect of items permitted for import under SFIS duty credit scrip.
10. Chapter 9 provides for definitions on terms used in the FTP. Para
9.28 defines Group Company as under:
9.28 Group Company : Group company means two or more
enterprises which, directly or indirectly, are in a position to:- (a)
Exercise twenty six percent, or more of voting rights in other
enterprise; or (b) Appoint more than fifty percent of members of
board of directors in the other enterprise.
For group companies to claim benefits or have their exports counted
for benefits to be claimed by another member of group, the group
company should have been in existence at least 2 years prior to date
of application under any of export promotion schemes notified in
Foreign Trade Policy.
11. Cumulative reading of objectives of the Act and the FTP, more
particularly various incentives incorporated in Chapter 3, would show that
Central
Government is giving lot of impetus to encourage exports, more particularly in
service sector. As part of this impetus, the Duty Credit Scrips are issued as
incentive. As per para 3.12.7, normally Duty Credit Scrips are not transferable
but within the group companies, the said scrips can be transferred. While
granting relaxation of conditions of non-transferability of Duty Credit Scrip
within
group companies, it has not put any further restrictions. Para 9.28 only deals
with definition of term Group Company. On reading of this definition, it
would
mean that to qualify to be a group company, an enterprise must have minimum
of 26% or more voting rights or in a position to appoint more than 50% of Board
of Directors in another company. It does not envisage that the company which
earned Duty Credit Scrips alone should hold 26 % or more voting rights or has
power to appoint more than 50 % of Board of Directors in the other company.
On a plain reading, neither the provision in para 3.12.7 nor definition in para
9.28 seeks to restrict transfer of Duty Credit Scrip from a group company to
another company based on holding capacity as understood by the Director
General of Foreign Trade. Chapter 3 and more particularly para 3.12 deals with
incentive scheme for export of services and is a beneficial scheme. Such
beneficial scheme must receive liberal construction. The petitioner company
availed the SFIS and earned Duty Credit Scrips. When relevant provision does
not impose any restriction on transferability of Duty Credit Scrips by invoking
power of interpretation, Director General of Foreign Trade cannot introduce
something which is not envisaged and impose an additional restriction. The
Director General of Foreign Trade has only power to interpret the existing
clauses but cannot seek to amend or alter the Foreign Trade Policy terms. The
impugned decision amounts to altering the terms of Served From India Scheme
and is in excess of power and jurisdiction vested in him.
For the foregoing reasons, the impugned proceedings dated 22.7.2014 is
set aside and second respondent is directed to receive served from India Duty
Credit scrip No.09100566123 dated 4.7.2013 and transfer the same in favour of
GMR Hyderabad International Airport Limited in terms of Foreign Trade Policy
2009-2014, if necessary by extending the period of validity for a further period
of
six months from 3.1.2015.
Accordingly the writ petition is allowed. No costs. Having regard to the
same, miscellaneous petitions are closed.
______________
P NAVEEN RAO,J
DATE: 30.12.2014
WRIT PETITION No.27177 of 2014
30-12-2014
GMR Hotels and Resorts Ltd Rep by the Chief Financial officer,
Shamshabad,Hyderabad 500 409 . Petitioner
The Union of India Rep by Director General of Foreign Trade Govt of India New
Delhi and another . Respondents
Counsel for the petitioner : Sri E.Manohar for Sri P Kamalakar
Counsel for the Respondents: Sri B Narayana Reddy,
Asst Solicitor General
<Gist :
>Head Note:
? Cases referred:
2012 (3) SCC 518
The Court made the following:
HONOURABLE SRI JUSTICE P. NAVEEN RAO
WRIT PETITION No. 27177 of 2014
ORDER:
The petitioner is 100 % subsidiary holding company of GMR Hyderabad
International Airport Limited (for short referred to as GHIAL). Petitioner is
one
of the group companies of GHIAL. In recognition of exports carried out by the
petitioner, competent authority issued Duty Credit scrips dated 4.7.2013 in
all
thirteen in number worth Rs.1,25,56,045/-, which can be encashed while
importing goods specified in the Served From India Scheme. These scrips are
transferable within the group company. Therefore, petitioner requested the
Director General of Foreign Trade to permit utilisation of scrips by GHIAL.
Petitioner submitted a representation dated 20.12.2013 requesting to grant such
permission. In response, by letter dated 12.2.2014, the petitioner was asked to
furnish documentary evidence as per para 9.28 of the Foreign Trade Policy for
the years 2009-2014 duly attested by Registrar of Companies to process the case
further. On application, the Registrar of Companies, informed that no such
certificate can be issued. Therefore, a certificate from M/s. Brahmayya &
Company, Chartered Accountant of GHIAL was obtained and submitted in lieu of
requirement of certificate of attestation from the Registrar of Companies. By
proceedings dated 22.7.2014, petitioner was informed that request for
transferability of Duty Credit scrips under the Served From India Scheme to
GHIAL was rejected on the ground that petitioner is not holding more than 26 %
of the shares in GHIAL, which is a mandatory requirement as per policy.
Aggrieved thereby, this writ petition is instituted.
2. Heard Sri E. Manohar, learned senior counsel appearing on behalf
of petitioner and Sri B. Narayana Reddy, learned Assistant Solicitor General for
respondents.
3. Learned senior counsel contended that GMR Hotels and Resorts
Limited-petitioner herein is 100 % holding company of GHIAL and controls the
affairs of the petitioner company in all respects. It is a group company and
therefore it is permissible for one company to transfer the scrips as per the
Foreign Trade Policy to another in the group company. Learned senior counsel
further contended that on literal reading of para 3.2.7 read with para 9.28 of
Foreign Trade Policy 2009-14 makes it clear that petitioner can transfer the
scrips to GHIAL. When the policy is clear and unambiguous, the Director
General cannot apply his own interpretation to the said term of the policy nor
the
Policy Interpretation Committee can give wholly a different meaning to what is
contained in para 3.2.7 read with para 9.28 of Foreign Trade Policy. Therefore,
any such clarification given by the Policy Interpretation Committee, is wholly
illegal, without jurisdiction and competency and rejection of the request of the
petitioner on the ground that petitioner does not hold minimum 26 % share
holding in GHIAL is contrary to Foreign Trade Policy.
4. Learned senior counsel further contended that the scheme is a
beneficial provision and has to be liberally construed. The scheme is to
encourage foreign trade. Thus, facility of utilisation of scrips obtained on
account of such foreign trade carried out by one company be utilised by another
company is also intend to encourage foreign trade. This encourages the group
companies to actively involve in foreign trade and earn good returns. The
interpretation placed by the Policy Interpretation Committee and applied by the
Director General is erroneous and contrary to very spirit of the foreign trade
policy. Placing reliance on COMMISSIONER OF CENTRAL EXCISE, BHOPAL
Vs MINWOOL ROCK FIBRES LIMITED learned senior counsel contended
that circulars /clarifications are not binding on the Court and Court is
competent
to construe the provision as such without regard to a clarification. Learned
senior counsel therefore contends that interpretation placed by the Policy
Interpretation Committee was erroneous and same can be ignored and benefit of
provision contained in para 9.28 of the policy should be extended to the
petitioner to enable the petitioner to transfer the scrip to its holding
company.
5. Learned Assistant Solicitor General placing reliance on the
averments in counter affidavit contended that para 9.28 envisages that a group
company must have 26 % or more voting rights in other enterprise to which the
benefit of exports account can be transferred in accordance with Foreign Trade
Policy. The interpretation placed by the Policy Interpretation Committee is in
tune with the provisions contained in para 9.28 of the Foreign Trade Policy.
The
Director General of Foreign Trade consistently holding that a group company
which does not have 26 % of the share holding in another company cannot
transfer the scrips issued to it on account of exports carried out, to that
other
company.
6. The decisions given by the Policy Interpretation Committee and
applied by the Director General are enclosed to the counter. In cases of M/s.
Tata Teleservices Maharastra Limited and M/s.Essar Oil Limited, the facts are
identical and request was rejected by applying the provisions in para 9.28 of
the
Foreign Trade Policy strictly. He therefore submits that decision communicated
to the petitioner is valid and is not erroneous nor illegal or arbitrary
warranting
interference by this Court.
7. With an objective to facilitate imports and to augment export,
Foreign Trade (Development and Regulation) Act, 1992 (Act 22 of 1992) was
made. From time to time Central Government notifies Foreign Trade Policy
(FTP). Last such policy was notified in the year 2009 operative for a period
from
2009 to 2014. Wherever necessary, changes were effected in the meantime.
The policy sets out Government agenda to promote foreign trade. The Foreign
Trade Policy is divided into 10 chapters. Each of the chapter deals with each
of
the aspects of foreign trade. In this case relevant paras are paragraph 2.3
of
Chapter 2, 3.12.7 of Chapter 3 and Para 9.28 of chapter 9.
8. Chapter 2 deals with general provisions regarding imports and
exports. According to para 2.3(a) the decision of DGFT is final and binding on
all
matters relating to interpretation of policy. Policy interpretation committee
(PIC)
aids and advices him in this regard.
9. Chapter 3 deals with promotional measures. As part of promotional
measures, Served from India Scheme (SFIS) was launched. Objective of the
scheme is to accelerate growth in export of services to create powerful and
unique Served From India brand. Person qualified to avail the SFIS is
entitled
to Duty Credit sops equivalent to 10 % of free foreign exchange earmarked
during the financial year. Duty credit sops can be utilised for import of
certain
capital goods/for payment of duty on import of certain vehicles/ for import of
consumables /for payment of excise duty for procurement from domestic sources
in respect of items permitted for import under SFIS duty credit scrip.
10. Chapter 9 provides for definitions on terms used in the FTP. Para
9.28 defines Group Company as under:
9.28 Group Company : Group company means two or more
enterprises which, directly or indirectly, are in a position to:- (a)
Exercise twenty six percent, or more of voting rights in other
enterprise; or (b) Appoint more than fifty percent of members of
board of directors in the other enterprise.
For group companies to claim benefits or have their exports counted
for benefits to be claimed by another member of group, the group
company should have been in existence at least 2 years prior to date
of application under any of export promotion schemes notified in
Foreign Trade Policy.
11. Cumulative reading of objectives of the Act and the FTP, more
particularly various incentives incorporated in Chapter 3, would show that
Central
Government is giving lot of impetus to encourage exports, more particularly in
service sector. As part of this impetus, the Duty Credit Scrips are issued as
incentive. As per para 3.12.7, normally Duty Credit Scrips are not transferable
but within the group companies, the said scrips can be transferred. While
granting relaxation of conditions of non-transferability of Duty Credit Scrip
within
group companies, it has not put any further restrictions. Para 9.28 only deals
with definition of term Group Company. On reading of this definition, it
would
mean that to qualify to be a group company, an enterprise must have minimum
of 26% or more voting rights or in a position to appoint more than 50% of Board
of Directors in another company. It does not envisage that the company which
earned Duty Credit Scrips alone should hold 26 % or more voting rights or has
power to appoint more than 50 % of Board of Directors in the other company.
On a plain reading, neither the provision in para 3.12.7 nor definition in para
9.28 seeks to restrict transfer of Duty Credit Scrip from a group company to
another company based on holding capacity as understood by the Director
General of Foreign Trade. Chapter 3 and more particularly para 3.12 deals with
incentive scheme for export of services and is a beneficial scheme. Such
beneficial scheme must receive liberal construction. The petitioner company
availed the SFIS and earned Duty Credit Scrips. When relevant provision does
not impose any restriction on transferability of Duty Credit Scrips by invoking
power of interpretation, Director General of Foreign Trade cannot introduce
something which is not envisaged and impose an additional restriction. The
Director General of Foreign Trade has only power to interpret the existing
clauses but cannot seek to amend or alter the Foreign Trade Policy terms. The
impugned decision amounts to altering the terms of Served From India Scheme
and is in excess of power and jurisdiction vested in him.
For the foregoing reasons, the impugned proceedings dated 22.7.2014 is
set aside and second respondent is directed to receive served from India Duty
Credit scrip No.09100566123 dated 4.7.2013 and transfer the same in favour of
GMR Hyderabad International Airport Limited in terms of Foreign Trade Policy
2009-2014, if necessary by extending the period of validity for a further period
of
six months from 3.1.2015.
Accordingly the writ petition is allowed. No costs. Having regard to the
same, miscellaneous petitions are closed.
______________
P NAVEEN RAO,J
DATE: 30.12.2014
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