Bombay High Court rules IEC not required to avail benefits under services scheme

Bombay High Court rules IEC not required to avail benefits under services scheme

Instructs the Director-General of Foreign Trade to consider the petitioner's application without any insistence

The Bombay High Court has ruled that the requirement of holding an Import Export Code (IEC) number at the time of rendering the services to avail benefits under the Services Export from India Scheme (SEIS) is against the intent and purpose of the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act).

The division bench of Justice S.V. Gangapurwala and Justice Vinay Joshi held that the condition could not be termed as mandatory in nature for availing of the benefits since it was against the principal legislation.

The petitioner Smarte Solutions Pvt. Ltd. provides market research services and is eligible for benefits under SEIS, imposed by the Foreign Trade Policy (FTP) 2015-2020.

But the petitioner's application for availing the benefits was rejected by the Policy Relaxation Committee of the Director General of Foreign Trade (DGFT). It was done on the ground that it did not hold a valid IEC number at the time of the rendition of services exported from India.

The petitioner filed a review application, which was rejected. It then approached the Bombay High Court.

The petitioner submitted that the object of the FTP was to encourage exports from India. It was required to hold an IEC number only at the time of applying under the scheme. The petitioner contended that obtaining an IEC number at the time of rendering services was not a statutory requirement. The condition was against the very objective of the FTDR Act. It was further submitted that FTP was notified by the Central government in the exercise of the powers conferred under the FTDR Act. The policy should be in conformity with the provisions.

(The FTDR Act provides that no person shall make any import or export except under an IEC number granted by the director-general or the officer authorized by the director-general. The Act said that in case of import or export of services or technology, an IEC number would be necessary only when the service or technology provider was taking benefit under FTP or was dealing with specified services or technologies).

The court observed that the Supreme Court in the 1989 Supreme Court Employees Welfare Association vs Union of India case, had ruled that delegated legislation or subordinate legislation must conform to the power granted to it. The rules framed by it must be consistent with the parent law under which the power has been derived.

The bench ruled, "The proviso does not lay down that IEC number is essential at the time of rending the services of the specified kind. The requirement is only for taking benefits under the scheme. The eligibility criteria of the FTP were imposed as an additional restriction of having an IEC number, which was not the intent of the statute. It is against the principal legislation and cannot be termed as mandatory for availing the benefits under the scheme."

Allowing the writ petition, the court directed the DGFT authorities to consider the petitioner's application without insisting on having an active IEC number.