The Bombay High Court refused to restrict the benefit of SEIS with reference to the concept of net foreign exchange.
The Petitioner, Atlantic Shipping Private Limited is a Shipping Agent takes care of all regular and routine tasks of a shipping company, besides arranging / ensuring supply of port and ancillary services, services of essential supplies, crew transfers, customs documentation and waste declarations.
The responsibilities or competencies as well as the remuneration of the petitioner are decided as per contracts with its principles i.e. the ship or vessel owners or foreign clients.
In the case of damage to cargo or the ship, the petitioner also makes the necessary arrangements (at the request of the ship’s master or owner) with the insurance company and for nautical inspections and the services of experts or surveyors.
The petitioner as ‘shipping agent’ enters into an overall Maritime Support Service Agreement with its principal i.e. foreign client to manage various operations at the ports in India, more particularly, with the Mumbai Port Trust and Nhava Sheva Port and in return for such overall management services receives entire consideration in convertible foreign exchange; petitioner sub- contracts the services to actual services providers such as the Port Trust, Stevedores and other port service providers for providing services in connection with port operations; service providers have no privity of contract with the principal / foreign client; service providers are paid directly by the petitioner in Indian Rupees.
The DGFT vide public notice dated March 1, 2015 notified the list of eligible services, rates and conditions for rewards under SEIS vide Appendix 3D in terms of para 3.08(a) of the Foreign Trade Policy, 2015-2020 and vide public notice No.07/2015-2020 dated May 4, 2016 notified the list of services in Appendix 3E in which cases payment when received in Indian Rupees can be deemed as received in ‘Foreign Exchange’ as per the guidelines of the Reserve Bank of India.
It is submitted by the respondents that the benefit is to be construed only in respect of the net foreign exchange which would be calculated after deducting the net foreign exchange agency fee received by the petitioner for the other charges given to the actual service providers by the petitioner.
The coram of Justices Milind N.Jadhav and Ujjal Bhuyan ruled that restricting the benefit of SEIS with reference to the concept of net foreign exchange as canvassed by the respondents as the same would result in an amendment or change in the policy.
Firstly, the court held that Circular Nos. 06/2018 dated May 22, 2018 and 08/2018 dated June 21, 2018 in so far as they seek to add and amend the provisions of the FTP 2015-20 by inserting additional conditions to curtail the rights / benefits claimed by the petitioner as service provider are ultra vires the Foreign Trade Policy for 2015-20.
Secondly, the impugned order of refusal dated October 25, 2018 passed by the Additional Director of Foreign Trade, Mumbai cannot be sustained and is accordingly quashed and set aside.
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