Madras High Court
M/S.Khivraj Tech Park Pvt. Ltd vs Union Of India on 15 April, 2025
Author: Mohammed Shaffiq
Bench: Mohammed Shaffiq
W.A. No.955 of 2020
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 15.04.2025
CORAM
THE HON'BLE MR.K.R.SHRIRAM, CHIEF JUSTICE
AND
THE HON'BLE MR.JUSTICE MOHAMMED SHAFFIQ
W.A. No.955 of 2020
and C.M.P. No.11487 of 2020
M/s.Khivraj Tech Park Pvt. Ltd.,
(Rep by its Authorized Signatory,
Mr.Ajit Kumar Chordia)
No.1, SIDCO Industrial Estate,
Guindy, Chennai 600 006. .. Appellant
-vs-
1. Union of India,
The Secretary,
Ministry of Communication Technolocy
Department of Information & Technology,
No.6, CGO Complex, Lodhi Road,
New Delhi 1 10 003.
2. M/s.Software Technology Park of India,
No.22/2, I Floor, Sardar Patel Road,
Adyar, Chennai 600 029.
3. The Assistant Commisssioner of Customs (EOU),
I Floor, Custom House, No.60, Rajaji Salai,
Chennai 600 001. .. Respondents
Prayer: Appeal filed under Clause 15 of the Letters Patent against the
order dated 24.07.2019 passed in W.P.No.21623 of 2019 on the file of
this Court.
Page 1 of 26
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W.A. No.955 of 2020
For Appellant : M/s.Radhika Chandra Sekhar
For Respondents : Mr.G.Ilangovan
Spl. Panel Counsel for RR 1 and 2
: Mr.K.S.Ramaswamy
Senior Stdg. Counsel for R-3
JUDGMENT
(Judgment of the Court was delivered by Mohammed Shaffiq, J.)
The question that arises for consideration in this writ appeal is
with regard to appellant's entitlement to exemption under Notification
No.153/93/Cus. dated 13.08.1993 on imports made for setting up a
Software Technology Park.
2.Brief facts:
2.1. Appellant is a company registered under the provisions of
Companies Act, 1956. Appellant intended to set up a Software
Technology Park in accordance with the policy formulated by the
Ministry of Communication and Information Technology, Government of
India. Appellant submitted an application on 25.01.2005 to 2nd
respondent Software Technology Park of India with all particulars
required for permission for setting up of Software Technology Park. List
of capital goods to be imported for the project in terms of Notification
No.153/93/Cus dated 13.08.1993 was also provided. Respondent No.2
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is the nodal agency. Notification No.153/93/Cus. dated 13.08.1993
provides for exemption for imports of Telematic Infrastuctural
equipments. Respondent No.1 vide letter dated 26.02.2005,
acknowledged receipt of application.
2.2. Proposal for setting up Software Technology Park is required
to be approved by Inter-Ministerial Standing Committee (hereinafter
referred to as “IMSC”) under 1 st respondent. Appellant was required to
submit the list of proposed capital goods to be imported and CIF value of
such goods duly supported by proforma invoice. Appellant submitted all
the requisite documents before 01.03.2005 as called for by 1 st
respondent. Respondent noted the list of capital goods on which duty
benefit had been sought, including both imported and indigenous goods
and appellant was entitled to the benefit of Notification No.153/93-Cus,
dated 13.08.1993 for import of various items including telematic
infrastructural equipments.
2.3. Respondent No.1 vide letter dated 22.06.2005
(communicated to appellant on 22.06.2005) informed appellant that
IMSC in their meeting held on 04.04.2005, recommended approval of
appellant's application for setting up Information Technology Park and
import of capital goods for a CIF value of Rs.2,743/- lakhs under
Notification No.153/93-Cus dated 13.08.1993. The recommendation
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was subject to obtaining permission from the Chennai Metropolitan
Development Authority (CMDA).
2.4. Prior to the above, appellant had submitted drawings and
necessary documents to CMDA as early as on 10.01.2005 and receipt of
the same was also duly acknowledged the very same day. On
21.10.2005, about 10 months later, multi-storey building panel of CMDA
approved the plan submitted by appellant and recommended the same to
Government of Tamil Nadu for issuance of Government Order. On
16.1 1.2005, Government of Tamil Nadu approved the recommendation
by CMDA for setting up a multi storey building. Respondent No.1 vide
letter dated 29.11.2005, communicated the approval of the Government
for setting up infrastructural facility for Software Technology Park under
the scheme in the name and style of Olympia Technology Park and
permission of IMSC.
2.5. In the meantime, appellant imported goods covered in the list
of capital goods approved in principle by IMSC for a CIF value
mentioned vide letter dated 22.06.2005 as recommended by IMSC based
on the approval of IMSC on 04.04.2005.
2.6. Appellant filed Bill of Entry for the import of approved capital
goods on 24.10.2005 and claimed benefit of Notification No.153/93-Cus
dated 13.08.1993. Customs Department rejected appellant's claim of
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exemption on imports vide Notification No.153/93, on the ground that
CMDA approval for setting up of Software Technology Park was granted
after import of capital goods.
2.7. Appellant approached 1st respondent vide letters dated
09.02.2006 and 21.03.2006 seeking clarification that the approval by the
IMSC and their recommendation in their meeting held on 04.04.2005
may be considered as permission for setting up of Software Technology
Park, while requesting to treat the date of Committee Meeting i.e.,
04.04.2005, as date of approval as against the date of communication of
approval (by CMDA) i.e., 29.1 1.2005.
2.8. Since the representation made by appellant, was not
considered by 1 st respondent, appellant approached this Court vide
W.P.No.1173/2006 to treat the date of approval for setting up of
Software Technology Park as 22.06.2005. This Court vide order dated
21.06.2018 directed 1 st respondent to consider the prayer of the
appellant.
2.9. Appellant submitted a letter dated 02.11.2018 for considering
the effective date to be the date of application or IMSC approval date,
i.e., 04.04.2005 as shown in the letter dated 22.06.2005.
2.10. Respondent No.1 rejected the request of appellant stating
that appellant was aware that letter dated 22.06.2005 was only a letter
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of intent and not a letter of permission and nevertheless went ahead to
import goods. Thus, the request to modify date of approval as
25.01.2005 being the date of application for approval (or) 04.04.2005
i.e., date on which IMSC approved instead of 29.11.2005 i.e., date on
which 2nd respondent issued the proceeding stood rejected. The relevant
portion of the order is extracted hereunder:
“...Whereas, the Committee after
deliberation opined that there is no merit in
changing the date of the approval as the ISP
was aware of the fact that the letter dated
22.06.2005 is Letter of Intent (LoI) only and
not the LoP still they went ahead to order the
goods.
Now therefore, with the above
observations, the request made by M/s Khivraj
Tech Park Pvt. Ltd., Chennai vide the
representations dated 09.02.2006 and
21.03.2006 is not agreed to and the matter is
treated as “closed”.
3. Aggrieved by the above order, appellant preferred a writ
petition in W.P.No.21623 of 2019 to quash order dated 14.12.2018. This
Court dismissed the writ petition on the premise that appellant had
submitted an application on 25.01.2005, they were informed about
approval of their application for setting up a STP on 29.1 1.2005. But
imports were made even prior to above approval. It was thus found by
the learned Judge that appellant/writ petitioner made imports even
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before approval of its application was communicated thus found that
their request for modification of date of approval cannot be acceded to.
4. Case of appellant:
(i) Appellant complied with the Scheme for setting up of Software
Technology Park. IMSC considered the application filed by appellant and
recommended for approval, list of capital goods required to be imported
and the CIF value thereof on 04.04.2005, communicated to Appellant on
22.06.2005. The recommendation of IMSC was communicated to
appellant and appellant imported the capital goods, covered in the list of
capital goods recommended by the Committee for a value within the
approved limit. Appellant imported the capital goods after the
communication of approval.
(ii) Appellant is entitled to exemption from the date on which the
application for grant of registration is made before the competent
authority and not from the date on which the approval was granted by
CMDA. Appellant cannot be made to suffer for the delay by CMDA in
granting approval on appellant's application made as early as
10.01.2005.
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5. Case of respondents:
a) Respondents would submit that exemption notification must be
strictly construed.
b) The letter dated 22.06.2005 relied upon by appellant in respect
of their entitlement to exemption vide notification No.153 of 1993 dated
13.08.1993 makes it clear that the above approval is "subject to the
appellant obtaining permission from CMDA". Imports were made on
24.10.2005 while CMDA had communicated its approval only on
29.11.2005 i.e., subsequent to the import. Impugned order 14.12.2018
and the order of learned Judge found that imports were made by
appellant on 24.10.2005 fully aware that Letter of Permission (LoP) is
yet to be issued and thus not entitled to exemption. The impugned order
dated 14.12.2018 and order of the learned Judge do not warrant
interference.
6. Analysis:
Against the above background question which arises is whether
grant of approval by CMDA dated 21.10.2005, communicated on
29.11.2005 would prove fatal to appellant's entitlement to claim the
benefit of exemption vide notification No.153 of 1993, in respect of
imports made prior there to i.e., 24.10.2005.
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6.1. To resolve the above controversy, it may be necessary to refer
to notification No.153 of 1993 dated 13.08.1993. The relevant portions
of which read as under:
“Telematic infrastructural equipments imported for being used
for the export of software under the Software Technology Parks
100% EOS:
In exercise of the powers conferred by sub-section (1) of
section 25 of the Customs Act, 1962 (52 of 1962), the Central
Government, being satisfied that it is necessary in the public
interest so to do, hereby exempts the telematic infrastructural
equipments (hereinafter referred to as the said goods) as
specified in the Annexure to this notification, when imported
into India for being used for the export of software out of India
under the Software Technology Parks Hundred Percent Export
Oriented Scheme from the whole of the customs duty leviable
thereon under the First Schedule to the Customs Tariff Act, 1975
(51 of 1975) and the additional duty if any leviable thereon
under Section 3 of the second mentioned Act subject to the
following conditions, namely:
i) The importer has been granted the necessary
permission to import the said goods by the Inter-Ministerial
Standing Committee for Hundred Percent Export Oriented Units
in the Electronics Hardware Technology Parks (EHTP) and
Software Technology Parka (STP) appointed by the notification
of the Government of India in the Ministry of Industry.
Department of Industrial Developriant No. S.O. 1 1 7(E), dated
the 22nd February, 1993.
ii) The importer uses the said goods only for the purpose
of export of software.
iii) The said imported goods shall shall be under customs
bond and subject to such other conditions as may be specified by
the Assistant Collector in this behalf.
iv) The importer agrees to-
a) bring the said goods into the unit and use them within
the unit in connection with the export of software;
b) not to move the said goods from the unit without the
approval of Assistant Collector of Customs; and
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c) to use the said goods only for the purpose of export of
the software.
v) The importer shall produce a certificate to the Assistant
Collector of Customs from the concerned Chief Executive of the
Software Technology Parks Society set up by the Government of
India, Department of Electronics, to the effect that the said
imported goods are to be installed or used in the unit and that
the importer of such goods has been authorised by the said Inter-
Ministerial Standing Committee.
vi) The importer executes a bond in such form and for
such sum and with such authority as may be prescribed by the
Assistant Collector of Customs binding himself to use the said
goods for export of software and to fulfil the conditions
stipulated in this notification, and in or under the Import and
Export Policy, 1992-97 and the conditions as may be specified by
the Department of Electronics, and to pay on demand an amount
equal to the duty leviable on the said goods as are not proved to
the satisfaction of the Assistant Collector to have been used for
the purposes for which the said goods were allowed to be
imported.
vii) The Collector of Customs, may subject to such
conditions as may be prescribed by him, allow a unit fo re-export
the said goods subject to the necessary permission being granted
by the Chief Executive of the Software Technology Park.
viii) The procedure as may be prescribed by the Collector
of Customs is followed by such unit.”
6.2. A reading of the above notification, would show that
Telematic Infrastructural equipments imported into India for being used
for export of software out of India under the Software Technology Parks
Hundred Percent Export Oriented Scheme is exempt from the whole of the
customs duty leviable thereon under the First Schedule to the Customs Tariff
Act, 1975 (51 of 1975) and the additional duty if any leviable thereon under
Section 3 of the Act. The above exemption is made subject to the
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conditions enumerated in clauses (1) to (8) of the said notification.
6.3. Before proceeding further, it may be relevant rather necessary
to refer and extract the relevant portion of the communications dated
22.06.2005 and 29.1 1.2005 of 1st respondent which reads as under:
Communication dated 22.06.2005 is extracted hereunder:
“This has reference to your application dated 25.1.2005,
addressed to STPI-Chennai and subsequent letter No. nil dated
4.3.2005 on the above cited subject.
2. In this connection, it is to inform that your application
regarding approval for setting up of infrastructure facility for
STP units under the STP Scheme, namely "Olympia Technology
Park" at Plot No.1, SIDCO Industrial Estate, Guindy, Chennai
and import of items under Customs Notification No.153/93
dated 13.8.1993, as amended from time to time, was considered
by the Inter-Ministerial Standing Committee (IMSC) for
Software Technology Park (STP) and Electronics Hardware
Technology Park (EHTP) Schemes in its meeting held on
4.4.2005. The Committee has recommended for approval your
application for setting up of above infrastructure facility for STP
units and import of items for a CIF value of Rs.2743 Lacs, for
Phase I of the Project in the first instance under Customs
Notification No.153/93 dated 13.8.1993, subject to your
obtaining permission from Chennai Metropolitan Development
Authority (CMDA).
3. In order to enable this Department to issue the
approval letter, you are requested to submit a copy of the said
CMDA permission for the Project.”
Relevant Portions of Communication dated 29.1 1.2005 is
extracted hereunder:
“3. I am also directed to convey the permission of the said
IMSC for import of items for a CIF value of Rs.2743 Lacs
(Rupees Twenty Seven Hundred Forty Three Lacs only) for
Phase I of the Project in the first instance, as per attested list
enclosed, under Customs Notification No.153/93 dated
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13.8.1993, as amended from time to time, subject to the
conditions lister therein, for setting up of above infrastructure
facility for STP units under the STP Scheme. This permission is
subject to the condition that these goods will be used for the
purpose of export of software and IT services by the STP units
located in the proposed infrastructure facility.
4. The STP Scheme is presently governed by the Foreign
Trade Policy, 2004-2009 and the Handbook of Procedures, Vol.1
)2004-2009) of the Department of Commerce, Ministry of
Commerce and Industry, Government of India.”
6.4. Undisputed facts/position :
a) Appellant had applied on 25.01.2005 for permission to import
the goods in question and that was approved by IMSC, subject to
approval by CMDA;
b) Appellant had applied to CMDA as early as on 10.01.2005;
c) IMSC approved the application during its meeting held on
04.04.2005;
d) Appellant imported Telematic Infrastructural Equipment, to be
used for the export of Software out of India in terms of Software
Technology Park 100% Export Oriented Scheme;
e) Value of import was within monetary limit mentioned in
communication dated 22.06.2005 and 29.11.2005 of 1 st respondent;
f) Goods imported were used for purposes mentioned in the
notification;
7. Assuming that approval was granted by CMDA on 29.1 1.2005
and the imports were prior thereto, denial of exemption in terms of
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Notification No.153 of 1993 on the ground that approval of CMDA was
granted subsequent to import, cannot be sustained for the following
reasons:
a) Ex-post facto approval – adequate compliance:
7.1. It may be necessary to note that vide communication dated
22.06.2005 appellant was informed that IMSC had recommended for
approval of appellant's application for setting up Infrastructure facility
for STP unit and import of items for a CIF value of Rs.2743 Lakhs for
Phase I of the project, it was made “subject to obtaining permission from
CMDA". The letter dated 22.06.2005 effectively informed appellant that
IMSC has approved appellant's application for setting up the
infrastructural facility for STP unit and does not say anywhere that
appellant, to get the benefit of the notification, should first get CMDA's
approval in hand. When the letter dated 22.06.2005 is read as a whole,
it only means that the appellant may go ahead with import, but should
also have the CMDA approval in hand before claiming the benefit under
the Scheme, which appellant has.
7.2. In other words, the above communication does not
mandate/require a prior approval/permission. In the absence of
requirement of prior permission, ex-post facto permission accorded by
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CMDA would be adequate compliance. In this regard it may be relevant
to refer to the following judgment wherein it was held that the ex-post
facto approval was adequate while dealing with similar issue/question:-
(i) LIC v. Escorts Ltd.,1
“63. ..... The object of the Foreign Exchange
Regulation Act, as already explained by us, undoubtedly, is
to earn, conserve, regulate and store foreign exchange. .....
The Foreign Exchange Regulation Act is, therefore, clearly a
statute enacted in the national economic interest. When
construing statutes enacted in the national interest, we have
necessarily to take the broad factual situations
contemplated by the Act and interpret its provisions so as to
advance and not to thwart the particular national interest
whose advancement is proposed by the legislation.
Traditional norms of statutory interpretation must yield to
broader notions of the national interest. If the legislation is
viewed and construed from that perspective, as indeed it is
imperative that we do, we find no difficulty in interpreting
“permission” to mean “permission”, previous or subsequent,
and we find no justification whatsoever for limiting the
expression “permission” to “previous previous'” only. In our
view, what is necessary is that the permission of the Reserve
Bank of India should be obtained at some stage for the
purchase of shares by non-resident companies.”
b) Delay not attributable to appellant – No reason to deny benefit:
7.3. It is necessary to note that appellant had applied to CMDA for
approval to set up STP as early as on 10.01.2005. Appellant sought
permission to import items for a CIF value of Rs.2743 Lakhs for setting
up of the 1 st phase of the project. The delay of more than 10 months in
1 (1986) 1 SCC 264:
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granting approval by CMDA in our view cannot be a reason to deny
appellant benefit of exemption in terms of notification No.153/93 dated
13.08.1993. The fact that CMDA took almost 10 months to grant its
approval, cannot be a reason to deny the appellant the benefit of
exemption. We say so, inasmuch as the delay cannot be attributed to
appellant but to CMDA authorities in granting permission. Delay due to
inter-departmental issues cannot result in denial of exemption to
appellant. In this regard it may be relevant to refer to the following
judgments of the Hon'ble Supreme Court:
i) Commissioner. of Customs (Imports) v. Tullow India
Operations Ltd.2 :
7.4. Here respondent's claim to exemption vide Notification No.20
of 1999, was sought to be rejected on the ground that the “essentiality
certificate”, from Directorate General of Hydrocarbons was not produced
in terms of Condition No.34, at the time of importation. Question was
whether such condition was a condition precedent or a condition
subsequent. It was held that though the exemption was subject to the
condition that importers therein would produce essentiality certificate,
grant of essentiality certificate not being in the hands of the assessees but
a function of the Government, importers cannot be denied the benefit of
2 (2005) 13 SCC 789
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exemption on the ground of delay in furnishing the essentiality
certificate. The relevant portions reads as under:
“21. Both the importers are licensees. Indisputably, they
were entitled to the benefit of the exemption notification subject,
of course, to the condition that they would produce the
essentiality certificate granted by the Directorate General of
Hydrocarbons at the time of importation of goods. Grant of
essentiality certificate was not in the hands of the assessees. It
was the function of a department of the Central Government.
The essentiality certificate admittedly was not granted by the
Directorate General of Hydrocarbons within a reasonable time.
The importers could not be blamed therefor. It is possible that
delay in granting the said essentiality certificate was by way of
default on the part of the authorities concerned.
ii) The above principle was reiterated in ONGC Ltd. v. Commr. of
Customs,3 wherein it was held as under:
“14. It may be true that grant of the essentiality certificate
was itself dependent upon the question as to whether the
appellant was possessed of a valid oil exploration licence or not.
It is, however, equally true that the right to renewal of a licence
is a valuable right. (SeeD. Nataraja Mudaliar v.State Transport
Authority[(1978) 4 SCC 290 : AIR 1979 SC 1 14] .) The
appellant applied for grant of renewal of the said licence before
its expiry. The said renewal has been granted with retrospective
effect. In law, thus, the appellant had been holding a valid
licence continuously. The factual events as noticed hereinbefore
clearly show that the appellant's application for grant of
essentiality certificate by the Directorate General of
Hydrocarbons was not entertained in the absence of renewal of
the licence. The application was returned only for that purpose.
The appellant filed its application for grant of essentiality
certificate within two days from the date of grant of the licence
with retrospective effect and then thereafter sent several
reminders. The conduct of the appellant must, therefore, be
judged from the factual matrix obtaining therein. We, therefore,
are unable to agree with the opinion of the learned
3 (2006) 7 SCC 403,
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Commissioner that the appellant made any misrepresentation
before this Court or that the Directorate General of
Hydrocarbons had shown any favour to it. Once it is held that
the Ministry of Petroleum had renewed the licence and the
Directorate General of Hydrocarbons had issued the essentiality
certificate, the conditions precedent for obtaining exemption in
terms of the exemption notification stood fully satisfied.
15. This Court, times without number, has construed such
exemption notifications in a liberal manner. [See Commr. of
Customs (Imports) v. Tullow India Operations Ltd. [Commr. of
Customs (Imports) v. Tullow India Operations Ltd., (2005) 13
SCC 789] , Tata Iron & Steel Co. Ltd. v. State of Jharkhand
[(2005) 4 SCC 272], Govt. of India v. Indian Tobacco Assn.
[(2005) 7 SCC 396], CCE v. Hira Cement [(2006) 2 SCC 439 :
JT (2006) 2 SC 369] and P.R. Prabhakar v. CIT [(2006) 6 SCC
86 : (2006) 7 Scale 19 1] .] If, thus, the appellant was entitled to
the same, it should not be denied the benefits thereof. It is
directed accordingly.”
iii) Mangalore Chemicals and Fertilisers Ltd. v. CCT4 :
7.5. In this case while dealing with exemption to new industries, it
was rejected on the ground that exemption was subject to “prior
permission” to be granted by the Deputy Commissioner of Commercial
Taxes. However, appellant's renewal application though filed within
time was not renewed and in the absence of "prior permission" of
renewal Deputy Commissioner of Commercial Taxes the appellant was
held dis-entitled to claim exemption. The Hon'ble Supreme Court while
dealing with the contention that “prior permission” of renewal, was a
condition precedent and in the absence of prior permission, appellant
would not be entitled to the benefit of notification, held that the said
4 (1991) 83 STC 234
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stand taken by the Revenue is wholly technical and that merely because
a benefit / exemption was subject to a condition, it may still be necessary
for the Courts to examine if the above condition is procedural in nature
or substantive or fundamental to exemption. It was also observed that
Courts must be conscious of the distinction between procedural and
technical conditions on the one hand and conditions which are
substantive and necessary to attain the objectives of the policy. Apex
Court found that though the expression used is “prior permission”,
nevertheless permission was being withheld due to inter-departmental
issues and the inaction or the delay in issuing prior permission by
department cannot be a reason for denying appellant the benefit of
exemption. Relevant portion of the judgment reads as under:
"22. Such is not the scope or intendment of the
provisions concerned here. The main exemption is under
the 1969 notification. The subsequent notification which
contains condition of prior permission clearly envisages a
procedure to give effect to the exemption. A distinction
between the provisions of statute which are of substantive
character and were built in with certain specific objectives
of policy on the one hand and those which are merely
procedural and technical in their nature on the other must
be kept clearly distinguished. What we have here is a pure
technicality. Clause 3 of the notification leaves no discretion
to the Deputy Commissioner to refuse the permission if the
conditions are satisfied. The words are that he “will grant”.
There is no dispute that appellant had satisfied these
conditions. Yet the permission was withheld — not for any
valid and substantial reason but owing to certain extraneous
things concerning some inter-departmental issues. Appellant
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had nothing to do with those issues. Appellant is now told,
“We are sorry. We should have given you the permission.
But now that the period is over, nothing can be done”. The
answer to this is in the words of Lord Denning: [ See Wells
v. Minister of Housing and Local Government, (1967) 1
WLR 1000, 1007 : (1967) 2 All ER 1041] “Now I know that
a public authority cannot be estopped from doing its public
duty, but I do think it can be estopped from relying on a
technicality and this is a technicality”.
23. Francis Bennion in his Statutory Interpretation,
(1984 edn.) says at page 683:
“Unnecessary technicality: Modern courts seek to cut
down technicalities attendant upon a statutory procedure
where these cannot be shown to be necessary to the
fulfilment of the purposes of the legislation.
...
25. It appears to us that the view taken of the matter
by the High Court does not acknowledge the essential
distinction between what was a matter of form and what
was one of substance. There was no other disentitling
circumstance which would justify the refusal of the
permission. Appellant did not have prior permission because
it was withheld by the Revenue without any justification.
The High Court took the view that after the period to which
the adjustment related had expired no permission could at
all be granted. A permission of this nature was a technical
requirement and could be issued making it operative from
the time it was applied for.”
(emphasis supplied)
c) Object to promote export – Construction to further the objective
and not defeat the object ought to be adopted :
7.6. It is well-settled that export of goods is in public interest as
valuable foreign exchange is earned. The intention behind grant of
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exemption vide notification No. 153 of 93, was to encourage export so as
to earn foreign exchange. The legislative intent being to extend the
benefit to persons who bring in foreign exchange, it is incumbent on the
Revenue to ensure that the construction placed on such instruments be it
legislative, delegated or subordinate must be to promote the above
objective and not to rely upon technicalities which would frustrate the
object. In this regard, it may relevant to refer to the following judgments:
i) CIT v. Punjab Stainless Steel Industries5 :
“19. ..... the Government wanted to encourage
businessmen, traders and manufacturers to increase the
export so as to bring more foreign exchange in our country.
If the purpose is to bring more foreign exchange and to
encourage export, we are of the view that the legislature
would surely like to give more benefit to persons who are
making an effort to help our nation in the process of
bringing more foreign exchange. If a trader or a
manufacturer is trying his best to increase his exports, even
at the cost of his business in a local market, we are sure that
the Government would like to encourage such a person. In
our opinion, once the Government decides to give some
benefit to someone who is helping the nation in bringing
foreign exchange, the Revenue should also make all possible
efforts to encourage such traders or manufacturers by giving
such business units more benefits as contemplated under
the provisions of law.”
(emphasis supplied)
ii) Sandoz (P) Ltd. v. Union of India6 :
“29. The authorities propounding the FTP were
5 (2014) 15 SCC 129
6 (2022) 16 SCC 176
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obviously conscious of the purport of the provisions of the
1944 Act and the Rules framed thereunder. Despite that,
the subject policy had been propounded with the sole
objective of promoting exports and earning foreign
exchange. At the relevant time, the goal set forth by the
policy makers was to achieve the target of at least one per
cent of the global trade by promoting exports. It is thus
clear that the concessions or so to say, benefits and
entitlements provided under the FTP cannot be constricted
by the provisions of the taxing statute of 1944 and the rules
framed thereunder. To put it tersely, the dispensation
provided under the 1992 Act and the FTP must operate
independently and is thus mutually exclusive in this regard.
Taking any other view would be counter-productive and
whittle down the intent behind formulation of a liberal FTP
for promoting exports.”
(emphasis supplied)
d) Doctrine of Substantial Compliance:
7.7. We have already found appellant had applied for permission
to import the goods in question and the same was also approved by
IMSC subject to approval by CMDA. Appellant had applied to CMDA as
early as on 21.05.2005. Appellant imported Telematic Infrastructural
Equipment. Imports were used for export of Software out of India in
terms of Software Technology Park 100% Export Oriented Scheme. In
other words, goods imported were used for purposes mentioned in the
notification. Value of import was within monetary limit mentioned in
communication dated 22.06.2005 and 29.11.2005 of 1 st respondent.
Appellant in our view has substantially complied with the
requirement/conditions to claim the benefit of exemption on imported
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goods in terms of notification No.153/93. In the circumstances we find
applying the “doctrine of substantial compliance”, to the facts of the
case, the denial of exemption is unjustified. In this regard, it may be
relevant to refer to the Constitution Bench judgment of the Hon'ble
Supreme Court in Commissioner of Customs (Import), Mumbai vs.
Dilip Kumar and Company and Others7, wherein the above doctrine
was explained as under:
Doctrine of substantial compliance and “intended use”
"32. The doctrine of substantial
compliance is a judicial invention, equitable in
nature, designed to avoid hardship in cases
where a party does all that can reasonably be
expected of it, but failed or faulted in some
minor or inconsequent aspects which cannot be
described as the “essence” or the “substance” of
the requirements. Like the concept of
“reasonableness”, the acceptance or otherwise
of a plea of “substantial compliance” depends
upon the facts and circumstances of each case
and the purpose and object to be achieved and
the context of the prerequisites which are
essential to achieve the object and purpose of
the rule or the regulation. Such a defence
cannot be pleaded if a clear statutory
prerequisite which effectuates the object and
the purpose of the statute has not been met.
Certainly, it means that the Court should
determine whether the statute has been
followed sufficiently so as to carry out the
intent for which the statute was enacted and
not a mirror image type of strict compliance.
Substantial compliance means ‘actual
compliance in respect to the substance essential
7 (2018) 9 SCC 1
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to every reasonable objective of the statute’ and
the Court should determine whether the statute
has been followed sufficiently so as to carry out
the intent of the statute and accomplish the
reasonable objectives for which it was passed.
33. A fiscal statute generally seeks to
preserve the need to comply strictly with
regulatory requirements that are important,
especially when a party seeks the benefits of an
exemption clause that are important.
Substantial compliance with an enactment is
insisted, where mandatory and directory
requirements are lumped together, for in such a
case, if mandatory requirements are complied
with, it will be proper to say that the enactment
has been substantially complied with
notwithstanding the non-compliance of
directory requirements. In cases where
substantial compliance has been found, there
has been actual compliance with the statute,
albeit procedurally faulty. The doctrine of
substantial compliance seeks to preserve the
need to comply strictly with the conditions or
requirements that are important to invoke a tax
or duty exemption and to forgive non-
compliance for either unimportant and
tangential requirements or requirements that
are so confusingly or incorrectly written that an
earnest effort at compliance should be
accepted.
34. The test for determining the
applicability of the substantial compliance
doctrine has been the subject of a myriad of
cases and quite often, the critical question to be
examined is whether the requirements relate to
the “substance” or “essence” of the statute, if
so, strict adherence to those requirements is a
precondition to give effect to that doctrine. On
the other hand, if the requirements are
procedural or directory in that they are not of
the “essence” of the thing to be done but are
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given with a view to the orderly conduct of
business, they may be fulfilled by substantial, if
not strict compliance. In other words, a mere
attempted compliance may not be sufficient,
but actual compliance with those factors which
are considered as essential.”
8. For all the above reasons, the writ appeal stands allowed and
the order of the learned Single Judge is quashed and set aside.
Consequently, the order dated 12.12.2018/14.12.2018 impugned in the
writ petition is also quashed. Appellant is entitled for return of the bank
guarantee which has been furnished.
9. Ms.Radhika Chandra Sekhar states that a connected writ
petition, viz., W.P.No.6981 of 2020, is pending before the learned Single
Judge where appellant had impugned the invocation of the bank
guarantee connected with the same import. Ms.Radhika requests that in
view of the finding given by this Court in this writ appeal, the learned
Single Judge may be requested to take up the said writ petition
expeditiously. Appellant may make a request to the learned Single
Judge, who may consider the same as he deems fit.
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There shall be no order as to costs. Consequently, the interim
application stands closed.
(K.R.SHRIRAM, CJ.) (MOHAMMED SHAFFIQ, J.)
15.04.2025
Index : Yes/No
Neutral Citation : Yes/No
sra/pam
To
1. The Secretary,
Union of India,
Ministry of Communication Technolocy
Department of Information & Technology,
No.6, CGO Complex, Lodhi Road,
New Delhi 1 10 003.
2. M/s.Software Technology Park of India,
No.22/2, I Floor, Sardar Patel Road,
Adyar, Chennai 600 029.
3. The Assistant Commisssioner of Customs (EOU),
I Floor, Custom House, No.60, Rajaji Salai,
Chennai 600 001.
4. The Assistant Registrar,
Writ Section,
Madras High Court, Chennai.
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The Hon'ble Chief Justice
and
Mohammed Shaffiq, J.
sra/pam
15.04.2025
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