By TIOL News Service

MUMBAI, SEPT 10, 2015: THE issue pertains to interpretation of the provisions of FTP - 2009-14 in relation to Served From India Scheme. The Petitioners are multinational brands like Johnson And Johnson and Thyssenkrupp , engaged in export of services. In a batch of Writ Petitions filed before the Bombay High Court, they challenged the order passed by the Secretary, Department of Commerce and Industry, Government of India holding that the Petitioners are not entitled to the Duty Credit scrip under the Served From India Scheme as they are not promoting Indian Brands.

Before the High Court, the Petitioners contended inter alia that:

A Status Holder shall be eligible for privileges as spelt out Clauses in 3.10.4 and 3.11.1 denotes as to for why "Served from India" scheme has been promulgated. The objective is set out in clauses 3.12.1 to 3.12.2. It does not mean that the scheme, is inapplicable to the Petitioner. Clause 3.12.3 referring to the ineligible services does not include the Petitioner's services. Further, the Petitioner fulfills the entitlement criteria as set out in clause 3.12.4 of Chapter 3 of FTP. Eventually the objective is to ensure that foreign exchange reserves are augmented by export of goods and services. The objection that the Petitioner does not promote Indian brand or is not engaged in service which is expected to create a powerful and unique 'Served from India brand' instantly recognized and respected world over, is of no substance. In the circumstances, it is submitted the order of the Secretary in the Department of Commerce and Industry should be set aside.

After hearing both sides, the High Court held:

A perusal of the relevant paras in FTP would denote that object 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 worldwide.' We are in agreement with counsel for respondents that the object which is sought to be achieved would be only by encouraging those entities and conferring benefits and giving incentives to such companies who create an Indian brand. This is therefore, apparent. By referring to the identity of share holders and the nation they belong, the policy makers are not trivializing the issue. That reference is to highlight the object of accelerating growth in export of services so as to create a powerful and unique 'Served from India' brand instantly recognized and respected world over. One must appreciate the object properly and completely. The role that Indian Suppliers are expected to play in creating such a brand is underlined by making a reference to the person and Nationality of shareholders and directors. The brand created should be served from India and must get recognition and respect world over. It is not the soil or piece of land which is important but the involvement of Indian suppliers, which is predominant. Their engagement and involvement is therefore primarily referred and throughout the scheme which is a duty credit entitlement. Eventually the eligibility criteria has been framed and evolved for the purpose of Indian Service Providers and who provide services listed in Appendix 41 of HBP Volume 1, who have free foreign exchange earning of at least Rs.10 lakhs in current financial year. They will be eligible for Duty Credit Scrip. For individual Indian Service Providers, the minimum criteria is free foreign exchange earning of Rs . 5 (five) lakhs. Such service Providers and who are Indian service providers are therefore mentioned in 3.12.2 and they will be eligible for duty credit scrip. 'Served from India' brand is thus granting an incentive to those eligible service providers who fulfill the eligibility criteria. The Petitioner cannot claim a vested right in matters of duty credit or exemption from payment of a duty or tax. None can say that the mandate of Article 19 (1) (g) of the Constitution of India is violated merely because at certain time and on certain occasions, the concessions and benefits were given or there is exemption from payment of duty and taxes imposed by laws of Parliament. The traders or citizens to whom the benefits and facilities are granted on fulfillment or requirement of a distinct eligibility criteria stand apart from others. Those not granted the same cannot claim any parity. Hence, in the absence of a vested right and only on the strength of a particular treatment of such cases in the past, no plea of violation of constitutional mandate enshrined in Articles 14 and 19 (1) (g) can be accepted.

As rightly urged by respondents, the intention 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.' That cannot be achieved by permitting those who are not creating a powerful and unique 'Served From India' brand instantly recognized and respected world over. The entity establishing a foreign brand of service and prior to entry in India therefore, will not qualify and cannot be held eligible for FSIS benefit. The brand of such an entity is already created, existing and established. It may not be unique much less served from India exclusively. That does not get instantly recognized and respected world over as Indian brand.

With regard to the ratio of Single Judge order of Delhi High Court in Yum Restaurant's case, the High Court observed:

With greatest respect to the learned Single Judge of the Delhi High Court he has construed the policy narrowly. The complete picture of the policy, its objects and purpose was not placed before him. With great respect, we disagree with the learned Single Judge. The learned Single Judge failed to note that parties like the Petitioner do not have a vested right in seeking or claiming incentives and benefits under what we call as Duty Credit Scrips. It is only when they fulfill the criteria and the provisions of the nature carved out that they would be entitled to the benefits. It is not possible for us to agree with the view recorded in paragraphs 12 to 16 of the judgment. The learned Judge has construed the expression "Indian Service Providers' narrowly. He has not construed it in the backdrop of the policy measures and by interpreting them in a holistic manner. The learned Judge, once again, with great respect reads the paragraphs in the policy in isolation. We are not persuaded to agree with the views of the Delhi High Court and the challenge cannot be construed to be arising in the backdrop of section 5 of the Foreign Trade Act.

With regard to benefits already granted for earlier periods, the High Court held that it will not be permissible for the authorities adjudicating the claims or issues arising therefrom to recover the SFIS benefits granted till 2007-08. They are clearly falling within earlier policy framework and to that extent all petitions succeed. Any recoveries that are proposed for the period after 2007-2008 under FTP 2009-2014 will have to be made in accordance with law by the authorities competent to do so.

(See 2015-TIOL-2090-HC-MUM-EXIM + Also see video headnote of Yum Restaurant)