By TIOL News Service

HYDERABAD, JAN 14, 2015 : THE petitioner is 100% subsidiary of GMR Hyderabad International Airport Limited (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 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, the Petitioner approached the High Court.

After hearing both sides, the High Court held:

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.

(See 2015-TIOL-97-HC-AP-CUS )