Delhi High Court
Hawa Valves A Company Registered ... vs The Union Of India And Ors on 3 January, 2018
$~6
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 1180/2016 and CM No. 5175/2016
HAWA VALVES A COMPANY REGISTERED
AND INCORPORATED & ANR ..... Petitioners
Through: Mr Devan Parikh, Senior Advocate
with Mr Alok Yadav, Advocate.
versus
THE UNION OF INDIA AND ORS ..... Respondents
Through: Mr Amit Mahajan, CGSC with Ms
Aastha Jain, Advocate for UOI.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
ORDER
% 03.01.2018
VIBHU BAKHRU, J
1. The petitioners have filed the present petition impugning a trade
notice - Trade Notice no. 11/2015 dated 14.12.2015 - issued by respondent
no.3. The petitioners claim that the said notice (hereafter referred to as „the
impugned notice‟) is contrary to the provisions of the Foreign Trade Policy
(FTP) 2009-2014.
2. Petitioner no.1 is engaged in the business of manufacturing industrial
valves, bulk of which are exported to other countries. According to the
petitioners, petitioner no.1 is entitled to the benefits of the Focus Product
Scheme (FPS) against its exports of industrial valves. The petitioners claim
that in terms of the FPS, petitioner no.1 is entitled to licences equivalent to
4% of the FOB value of its exports. The petitioners are aggrieved as in terms
of the impugned notice, such benefit is not available for export of industrial
valves and is restricted only to bicycle parts.
3. The relevant paragraphs of FTP 2009-2014 containing the provisions
relating to the FPS are set out below:-
"3.15 FOCUS PRODUCT SCHEME (FPS)
3.15.1 Objective of FPS is to promote export of products
which have high export intensity/employment potential, so
as to offset infrastructural inefficiencies and other
associated costs involved in marketing of these products.
3.15.2 (a) Export of products (listed in Table 1 of
Appendix 37D of HBPv1) to all countries (including SEZ
units) shall be entitled for Duty Credit Scrip equivalent to
2% or 5% of FOB value of exports (in free foreign
exchange) for exports made from 27.8.2009 onwards,
unless a specific date of export/period is specified by
public notice/notification.
(b) Certain Focus Product(s)/sector(s) listed in Appendix
37D shall be granted bonus benefit in the form of an
additional Duty Credit Scrip equivalent to 2% of FOB
value of exports (in free foreign exchange) over and above
the existing rate for that product/sector from the admissible
date of export/period specified in the public notice issued
to notify the product/sector."
4. The list of products which are covered under the FPS are set out in
Appendix 37D of the Handbook of Procedures (hereafter „HoP‟). The
controversy relates to the products as specified at serial no. 269, which is set
out below:-
"APPENDIX 37D
LIST OF NOTIFIED PRODUCTS UNDER FOCUS
PRODUCT SCHEME (FPS)
TABLE 1
SL. NO. FPS ITC (HS) DESCRIPTION
PRODUCTCO CODE
DE
269 269 8481 ITEMS OF A KIND
USED ON BICYCLES:
TAPS, COCKS, VALVES
AND SIMILAR
APPLIANCES FOR
PIPES, BOILER SHELLS,
TANKS, VATS OR THE
LIKE, INCLUDING
PRESSURE REDUCING
VALVES AND
THERMOSTATICALLY
CONTROLLED
VALVES"
5. The petitioners claim that in the past they had applied for and were
granted licences against export of industrial valves. However, several
applications made by the petitioners in the recent past were kept pending.
The petitioners have filed a tabular statement (as Annexure - I) indicating
the applications that are pending. According to the petitioners, they are
entitled to licences for a total value of ₹3,68,47,195 against the pending
applications.
6. The petitioners received a deficiency letter dated 01.06.2015 in
respect of one of their applications, which stated that their applications were
rejected since the bills did not mention that the valves exported are of
bicycles.
7. Thereafter, petitioners made a representation to DGFT seeking a
clarification "whether industrial valves falling under ITC (HS) Chapter 8481
were eligible for incentives under the FPS". The petitioners pointed out that
ITC (HS) Code mentioned against serial no. 269 of Table 1 of Appendix
37D clearly indicated the ITC (HS) Code of the eligible products as 8481.
The petitioners also pointed out that wherever the products falling under a
broad classification were sought to be limited for the purposes of granting
the incentive, the specific eight digit ITC (HS) Code of the eligible
product(s) was mentioned instead of the four digit broad classification.
However, since the ITC (HS) Code mentioned against serial no. 269 was of
four digits, it must be assumed that the intention is that exports of all goods
covered under the broad classification were eligible for benefits under the
FPS. The industrial valves exported by petitioner no.1 fell under ITC (HS)
Code of 8481 80 30, which fell under the broad classification of 8481.
8. The petitioners followed the aforesaid letter by another letter dated
21.10.2015 and a further representation dated 21.10.2015.
9. According to the respondents, industrial valves were not covered
under serial no. 269 of Appendix 37D of Table 1 and therefore, the DGFT
issued the impugned notice. The relevant extract of which is set out below:-
"TRADE NOTICE NO. 11/2015
To
ALL IEC HOLDERS
ALL EPCs
ALL CHAMBERS OF TRADE AND INDUSTRY
FEDERATION OF INDIAN EXPORT ORGANISATIONS
ALL RA's OF DGFT
Subject : Clarification on availability of benefit under
Focus Product Scheme of Foreign Trade Policy 2009-14
on the export of items mentioned at Sl No. 269 of
Appendix 37-D, Table-1 of Foreign Trade Policy 2009-14
- of kind used on bicycle (ITC HS 8481).
The product description appearing under ITCHS 8481
mentioned at Sl No. 269 of Appendix 37-D, Table-1 of
Foreign Trade Policy 2009-14 notified vide public notice
no. 52 dated 25.02.2014 is as under:
„ITEMS OF A KIND USED ON BICYCLES: TAPS,
COCKS, VALVES AND SIMILAR APPLIANCE
FOR PIPES, BOILER SHELLS, TANKS, VATS OR
THE LIKE, INCLUDING PRESSURE REDUCING
VALVES AND THERMOSTATICALLY
CONTROLED VALVES‟
2. DGFT has received representations from exporters
requesting for providing benefits under focus Product
Scheme of Foreign Trade Policy 2009-14 on the export of
industrial valves under items at Sl. No. 269 of Appendix
37-D, Table-1 of Foreign Trade Policy 2009-14 notified
vide public notice no. 52 dated 25.02.2014 or under any
other any other Sl. No. in the earlier public notices having
same description and even to those items which are not
used in bicycles.
3. It is hereby clarified that intention from the
beginning had been to grant incentive to bicycle parts only
under this serial No. 269 under FPS and this intention has
been clearly indicated. Other items, which are not parts of
bicycle, appearing in the above mentioned description are
not eligible for FPS benefit under FTP 2009-14. The
Focus Product scheme has sunset on 31.03.2015,
therefore, there is no merit in requests for providing
benefit to other products.
4. Cases where RA has issued any scrips against the
export of parts other than those used in bicycle under
ITCHS 8481 mentioned at Sl No. 269 of Appendix 37-D,
Table-1 of Foreign Trade Policy 2009-14 notified vide
public notice no. 52 dated 25.02.2014 or under any other
Sl. No. in the earlier public notices having same
description, are liable to be reviewed and corrective
measures be taken to recover such claims granted by over
sight.
(J.M. Gupta)
JOINT DIRECTOR GENERAL OF FOREIGN TRADE
e-mail: [email protected]"
10. This Court is unable to accept that the relevant entry at serial no. 269
ought to be read in the manner as stated in the impugned notice for the
reasons as stated hereafter.
11. First of all, the product code noted against serial no. 269 is specified
as 8481. Concededly, the said products are not restricted to items used in
bicycles alone. The Indian Trade Classification based on Harmonised
System was adopted in India for import export operations (these codes are
commonly referred to as ITC (HS) Codes). The Harmonised Commodity
Description and Coding System (commonly referred to as the Harmonised
System or „HS‟) is an international nomenclature for clasification of
products. It was indroduced in the year 1988 and is maintained and
developed by World Customs Organization (WCO). The HS at the
international level uses a six digit code for product description. The first two
digits identify the chapter; the next two digits identify the groupings; and the
next two digits specify the products.
11.1 The ITC (HS) codes are also used by the Indian Customs. The ITC
(HS) Code 8481 indicates that the products fall under chapter 84 of the ITC
(HS), 2017, which is captioned "Taps, Cocks, Valves and similar appliances
for pipes, Boiler Shells, Tanks, Vats or the like including pressure reducing
Valves". The ITC (HS) code 8481 as extracted from Schedule 1 to the
import policy reads as under:-
"
8481 TAPS, COCKS, VALVES AND SIMILAR
APPLIANCES FOR PIPES, BOILER
SHELLS, TANKS, VATS OR THE LIKE,
INCLUDING PRESSURE-REDUCING
VALVES AND THERMOSTATICALLY
CONTROLLED VALVES
8481 10 00 Pressure-reducing valves
8481 20 00 Valves for oleo hydraulic or pneumatic
transmissions
8481 30 00 Check (non-return) valves
8481 40 00 Safety or relief valves
8481 80 Other appliances:
8481 80 10 Taps, cocks and similar appliances of iron or steel
8481 80 20 Taps, cocks and similar appliances of non-ferrous
metal
"
11.2 It is also relevant to observe that inner tube valves for bicycles is
specified under ITC (HS) Code 8481 80 41 and bicycle valves are classified
under the product Code 8481 90 10. Adopting a classification based on
Harmonised System enables a definite product description. Concededly,
ITC (HS) Code 8481 is a broad classification of various goods falling under
the said heading and is not limited to parts of bicycle alone.
11.3 It is also relevant to mention that the heading of chapter 84 and the
broad description of goods under HS code 8481 under ITC (HS) is identical
to the international HS as maintained by World Customs Organization
(WCO).
11.4 There is much merit in the contentnion that wherever the Central
Government desired that only specific products under a broad heading be
considered eligible for benefits under FPS, specific eight digit product code
of those products were mentioned in Appendix 37D to restrict the eligible
products to those of the specified description; however, in case of entry at
serial no. 269, a broad classification of four digit product code is stated.
This clearly indicates the intention to provide benefits to exporter exporting
all products falling under the said broad classification.
12. Secondly, the plain reading of the description of the product against
serial no. 269 of Appendix 37D indicates that products such as valves for
pipes, boiler shells, tanks, vats or the like including pressure reducing valves
cannot possibly be considered as items used in bicycles. Thus, the only
manner in which the said description of the goods can be read is to ignore
the punctuation mark of colon after the word bicycle or read the same as a
coma. It would plainly not be open for the description to be read in a manner
so as to retain the meaning of the punctuation mark of colon after the word
bycycle and ignore the text (which includes goods that cannot be possibly
used in a bycycle) that follows.
13. Lastly and more importantly, the FPS was discontinued with effect
from 31.03.2015 and was replaced by a new incentive scheme captioned
"Merchandise Exports from India Scheme" (hereafter MEIS). Paragraph
3.04 of the FTP provides for entitlement under the MEIS and reads as
under:-
"3.04 Entitlement under MEIS
Exports of notified goods/products with ITC(HS) code, to
notified markets as listed in Appendix 3B, shall be
rewarded under MEIS, Appendix 3B also lists the rate(s)
of rewards on various notified products [ITC (HS) code
wise]. The basis of calculation of reward would be on
realised FOB value of exports in free foreign exchange, or
on FOB value of exports as given in the Shipping Bills in
free foreign exchange, whichever is less, unless otherwise
specified."
14. The relevant entry under Appendix 3B - Entry No. 4097 is set out
below:-
Sr. HS ITC (HS) Code Description of goods
No Code
4097 84807900 Other Moulds For
Rubber/Plastics
8481 Taps, Cocks, Valves and
Similar Appliances for
pipes, boiler shells, tanks,
vats or the like including
pressure-reducing valves
and thermostatically
controlled valves
15. Thus, admittedly, export of goods covered under ITC (HS) Code 8481
is eligible for benefits under the MEIS. In the past, respondents had readily
accepted that the industrial valves were covered under the products specified
against serial no. 269 of Appendix 37D and were eligible for benefits under
the FPS. Such benefits are also available under MEIS, which came into
effect from 01.04.2015 and has effectively replaced the FPS. In this view, it
would be difficult to accept that the intention of the Central Government
was to not grant export incentives to industrial valves and restrict the same
only to valves used in bicycles for a short intervening period.
16. In view of the above, the impugned notice cannot be sustained.
17. It is relevant to mention that the impugned notice was also subject
matter of challenge before the Gujarat High Court in Intolcast Pvt. Ltd &
Anr. v. Union of India and Anr.: 2017 (345) ELT 217 (Guj), wherein
Division Bench of the Gujarat High Court has set aside the impugned notice.
The said decision was subject matter of a Special Leave Petition (SLP (C)
No. 033155-033158/2017) captioned Union of India & Anr. v. M/s
Intolcast Pvt. Ltd. The said SLP was dismissed by the Supreme Court by an
order dated 03.10.2017 expressly stating as under:-
"Heard learned counsel for the petitioners and perused the
relevant material.
Application for exemption from filing certified copy of the
impugned order is allowed.
Delay condoned.
We find no merit in the present Special Leave Petitions. The
Special Leave Petitions are accordingly dismissed."
18. In view of the above, the petition is allowed and it is clarified that
industrial valves falls squarely within the goods covered under serial no. 269
of Appendix 37D. This court respectfully concurs with the view of the
Gujrat High Court in Intoclast Pvt Ltd. (supra) in setting aside the said
impugned notice. The pending application is also disposed of.
VIBHU BAKHRU, J
JANUARY 03, 2018
pkv
