COLUMBIA ASIA HOSPITALS PRIVATE LIMITED V. UNION OF INDIA

WP/33966/2014

AI Insights

The case involves Columbia Asia Hospitals Private Limited, an Indian company, which sought to quash an order that denied them benefits under the 'Served from India Scheme' (SFIS) as per the Foreign Trade Policy, 2004-2009. The petitioner argued that their services, although part of a chain with international presence, were rendered in India and thus eligible for SFIS benefits. The respondents contended that the petitioner, being part of a foreign chain, did not promote the Indian brand and was therefore ineligible. The court found that the respondents did not adequately consider the petitioner's submissions and failed to provide a reasoned order, leading to the quashing of the impugned order.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 722284 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 05-07-2019
• Assessment Year: misc
• Laws Referred To: Articles 226 & 227 of the Constitution of India, Foreign Trade (Development & Regulation) Act, 1992, Foreign Trade Policy, 2004-2009
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K S ANASUYA DEVI
• Assessee Lawyers: BHARATH MURALIDHARA
• Keywords: Audit Memo; Corporate Veil; Foreign Trade Policy; Foreign Trade Policy; Indian Company; Served from India scheme; Writ of Certiorari; Duty Free Credit Entitlement Certificate
• Section: 5; 226; 227

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 05TH DAY OF JULY 2019 BEFORE THE HON'BLE Mr. JUSTICE B.VEERAPPA WRIT PETITION NO.33966/2014 (GM-RES) Between: Columbia Asia Hospitals Private Limited, Rep. by Srivathsa.C.S, “The Icon”, 2nd Floor, No.8, 80 Feet Road, HAL 3rd Stage, Indiranagar, Bengaluru-560 075. ... Petitioner (By Sri. Bharath Muralidhara, Advocate) And: 1. Union of India, Represented by Principal Secretary to the Government, Ministry of Commerce & Industry, Department of Commerce, Udyog Bhawan, H-Wing, Gate No.02, Maulana Azad Road, New Delhi-110 011. 2. The Directorate General of Foreign Trade, Udyog Bhawan, H-Wing, Gate No.02, Maulana Azad Road, New Delhi-110 011. 2 3. The Zonal Joint Director of Foreign Trade, O/o The Zonal Joint Director General of Foreign Trade, Central Licensing Area, “A” Wing, I.P.Bhavan, I.P.Estate, New Delhi-110 002. 4. The Additional Director General of Foreign Trade, “A” Wing, I.P.Bhavan, I.P.Estate, New Delhi-110 002. 5. The Accountant General of Central Revenue, AGCR Building, IP Estate, New Delhi-110 002. ... Respondents (By Smt.K.S.Anasuya Devi, CGC) This Writ Petition is filed under Articles 226 & 227 OF the Constitution of India, praying to quash the impugned order passed by the respondents at Annex-A dated 13.02.2014 and etc., This petition coming on for Preliminary Hearing in ‘B’ Group, this day, the Court made the following:- O R D E R The petitioner has filed the present writ petition seeking writ of certiorari to quash the impugned order passed by the respondents as per Annexure – A dated 13.02.2014 made in F.No.05/50/71/097/AM12 and to direct the respondents to issue a fresh certificate for unused value of the said DFCECs to the amount of 3 Rs.7,81,925/- with renewed validity and to direct the respondents to consider applications of the petitioner, pending consideration by the respondents on the same ground raised in the impugned order by the respondent. 2. It is the case of the petitioner that the petitioner is a Indian Company, incorporated under the provisions of the Indian Companies Act, 1956, having registered its registered office at “The Icon”, 2nd Floor, # 8, 80 Feet Road, HAL, 3rd Stage, Indiranagar, Bengaluru – 560 075. It is engaged in providing healthcare services at its hospital facilities to patients to patients in India and also to patients, who come to the petitioner’s hospital for medical treatment in India from abroad. The petitioner being an eligible ‘status holder’ under the ‘Served from India Scheme’ (hereinafter referred to “SFIS”) to avail benefits enumerated in the “Foreign Trade Policy, 2004-2009’ of the Government of India, (hereinafter referred to as ‘said policy’) has filed an application on 22.03.2012 for issue of Duty Free Credit Entitlement Certificate (hereinafter for brevity “DFCEC”) 4 in respect of eligible transactions of the petitioner during the period between 01/04/2008 and 31/03/2009 along with relevant documents. In pursuance of the said application, as per Annexure – J the officer of respondent No.4 issued a deficiency letter dated 02.04.2013 to the petitioner stating that your firm is a chain of hospital in Asia, based in Kualalumpur, Malaysia and was founded in 1994 and not promoting the Indian Brand. Please clarify as to how the services not originating from India would be entitled for SFIS benefits? In pursuance of the said deficiency letter, on 08.04.2013, the petitioner wrote to respondent No.4 contending that we render healthcare services to various international patients in India and are therefore entitled to avail benefits under Served from India Scheme in terms of Para 9.53(ii) which reads as: “ Supply of a Service from India to service consumer of any other country in India”. Thereafter as per Annexure – E1, respondent No.4 issued a letter dated 15.05.2013 to the petitioner stating that in terms of the Audit memo 5 dated 30.01.2013 received from the Audit party of AGCR, New Delhi wherein, they have pointed out that your firm is not identified as Indian Brands. M/s. Columbia Asia Hospital Pvt. Ltd. Is a chain of hospitals in Asia, with 16 medical facilities across India, Malaysia, Vietnam and Indonesia. The company is based in Kualalumpur, Malaysia, and was founded in 1994 and hence you are not eligible for benefit under SFIS Scheme. In response to the said letter, on 12.06.2013, the petitioner again addressed to respondent No.4 and in detail mentioned at paragraphs a to h and subsequently contended that further it is even more significant to note that in 2008-09 despite the Objective being the same as per Para 3.6.4.1, All Service Provides were eligible in terms of Para 3.6.4.2 of the FTP 2004-09. Hence, it is clear that even foreign Service Providers were eligible for the benefits. In view of the above submissions, it is clear that the issues raised by the Audit section are not correct and our Services are eligible for the benefits issued under Served 6 from India Scheme, thus surrender of the above mentioned Scrip does not arise. We request you to kindly take up the matter suitably with the Audit Section. In spite of the said order passed, respondents have proceeded to pass the impugned order dated 13/02/2014 as per Annexure – A. Hence, the writ petition. 3. I have heard the learned counsel for the parties to the lis. 4. Sri. Bharath Muralidhara, learned counsel for the petitioner has contended with vehemence that the impugned order passed by respondent No.4 without considering the detailed representation along with details made by the petitioner on 12.06.2013 wherein it is stated that the petitioner is entitled under the SFIS Scheme. 5. He further contended that the documents submitted by the petitioner in reply to letter dated 15.05.2013 at Annexure – E1, the petitioner is an 7 Indian Company duly incorporated and validly functioning under the laws of the Republic of India. The actions of respondent No.4 in holding the petitioner as a foreign entity has the effect of applying the principles of ‘lifting of corporate veil’. The position of law in India on such interpretation is very clear and states that the application of the principle of lifting of corporate veil can be used only in cases of prima facie fraud committed by any company or the stakeholders of a company. In the present matter, no issue pertaining to any fraud or criminal acts or intent whatsoever has been made out by the respondents as against the petitioner and hence the impugned order is bad in law. 6. He further contended that the impugned order is not a speaking order and fails to explain the basis in law for the change in stance of the respondents, from accepting the application for the issue of the said DFCECs (at Annexure – D1 and D2) and the declarations thereof in the first instance and the subsequent refusal to accept the legal standing of the 8 petitioner as an Indian Company. Further it is contended that the intent of the said policy was to promote a ‘served from India’ brand and not promotion of Indian brands. The policy preamble clearly states that the twin objectives of the said policy was doubling of India’s share in global trade in the five years following the declaration of the said policy and making trade an effective instrument of economic growth by giving thrust to employment generation. Therefore, the petitioner is entitled under the scheme of ‘Served From India Scheme’ (SFIS). The same has not been considered. Therefore, he sought to allow the writ petition. 7. Per contra, Smt. K.S. Anasuya Devi, CGC for the respondents filed the objections to the writ petition and has contended that the documents produced by the petitioner with regard to SFIS Duty Scrip has been forwarded to the DG, AGCR audit for settlement of Audit para. The DG, AGCR audit has stated that it is seen that the Company is one of the first health care companies to enter India through Foreign Direct 9 Investment (FDI) route. As the Foreign Trade Policy is to encourage brand India and not to incentivize any brand which is created outside India. Hence, the recovery raised by the Audit stands to be made and the same is in accordance with law. She further contended that according to the provisions of Section 5 of the Foreign Trade (Development & Regulation) Act, 1992 (No.22 of 1992) read with paragraph 1.2 of the Foreign Trade Policy, the Central Government notifies the Foreign Trade Policy for the duration as specified in paragraph 1.2 of the Foreign Trade Policy. The Foreign Trade Policy for 2004-2009 was notified in the Official Gazette on 31.08.2004, which came into force from 01.09.2004. Likewise, the Foreign Trade Policy for the period 2009-2014 was notified on 27.08.2009, which came into force with effect from 27.08.2009. Incidentally, it is pertinent to point out that the benefits under SFIS for Telecom sector in the Foreign Trade Policy 2009-2014 has been withdrawn. She further contended that in order to be eligible for SFIS benefits, 10 an applicant has to qualify as Service Provider as defined under Foreign Trade Policy. In terms of Para 9.53 of the FTP, “Service Provider” means a person providing- (i) Supply of a ‘service’ from India to any other country; (ii) Supply of a ‘service’ from India service consumer of any other country in India; (iii) Supply of a ‘service’ from India through commercial or physical presence in territory of any other country; (iv) Supply of a ‘service’ in India relating to exports paid in free foreign exchange or in Indian Rupees which are otherwise considered as having being paid for in free foreign exchange by RBI.” 8. Admittedly, the petitioner has not come under the terms of the provisions of Para 9.53 of FTP, “Service Provider”. Impugned Annexure-A issued by the fourth respondent is in accordance with law. Therefore, she sought to dismiss the writ petition. 9. Having heard the learned counsels for the parties, it is undisputed fact that the petitioner is an 11 Indian Company, incorporated under the provisions of the Indian Companies Act, 1956, which is engaged in providing healthcare services at its hospital to patients to patients in India and also to patients who come to the petitioner’s hospital for medical treatment in India from abroad. It is the specific case of the petitioner that in pursuance to ‘Served from India Scheme’ to avail benefits enumerated in the “Foreign Trade Policy, 2004- 2009’ of the Government of India has filed an application on 22.03.2012 for issue of Duty Free Credit Entitlement Certificate in respect of eligible transactions of the petitioner during the period between 01/04/2008 and 31/03/2009 along with relevant documents. Based on the policy and application filed, the petitioner received a deficiency letter dated 02.04.2013, which reads as under: “Your firm is a chain of hospital in Asia, based in Kualalumpur, Malaysia and was founded in 1994 and not promoting the Indian Brand. Please clarify as to how the 12 services not originating from India would be entitled for SFIS benefits? You are requested to remove above deficiencies within a period of 30 days from the date of issue of this letter, otherwise your case will be treated as closed.” 10. On the basis of the said letter, the petitioner- Company by their reply dated 08.04.2013 specifically stated how they are entitled to avail benefits under “Served from India Scheme” which reads as under: “1. Columbia Asia Hospitals Pvt. Ltd. is an Indian Company having a Corporate Identification No.U85110KA2003PTC033055. 2. Under the Companies Act 1956, we are registered with the Registrar of Companies dated 22.12.2003 – A copy of the Certificate issued by ROC, along with the Online ROC Certificate is enclosed herewith, which clearly highlights the Company Subcategory as “Indian Non-Government Company” 13 3. The hospital services provided by us are rendered in India & thus are originating from India. 4. We render healthcare services to various international patients in India and are therefore entitled to avail benefits under Served from India Scheme in terms of Para 9.53 (ii) which reads as; “Supply of a Service from India to service consumer of any other country in India” In view of the above, our explanation may kindly be accepted and the DFCE may be issued at the earliest.” Inspite of the said reply made, the respondent No.4 again issued notice with Audit Memo to the petitioner dated 15.05.2013, wherein along with Audit Memo it is stated that they have pointed out that the petitioner’s firm is not identified as Indian Brands. M/s Columbia Asia Hospital Pvt. Ltd is a chain of hospitals in Asia with 16 medical facilities across India, Malaysia, Vietnam and Indonesia and hence, the petitioner is not eligible for benefit under SFIS Scheme. 14 11. The petitioner has responded to the letter dated 15.05.2013 by its letter dated 12.06.2013, where it has specifically stated that they are entitled for the benefit and how they are entitled for the same is given below: “a. At the outset, we insist on the fact that the “Objective” cannot be considered to be the deciding factor of eligibility or ineligibility of a particular Service. It is the “Eligibility” para specifically mentioned in the FTP which has to be considered. b. The eligibility in the current Foreign Trade Policy mentioned in Para 3.12.2 reads as: “Indian Service Providers, listed in Appendix 41 of HBPv1, who have free foreign exchange earning of at least Rs.10 lacs in current financial year will be eligible for Duty Credit Scrip.” c. Also, Para 3.6.1 of HBPv1 2009-14 specifically mentioning the Ineligible Remittances and Services for SFIS scheme does not include any mention of any 15 particular brand being either eligible or ineligible. With reference to the same, we have also submitted the declaration in ANF 3B as well as in a separate letter. The declaration states that FEE from Services ineligible under Para 3.6.1 of HBPv1 2009-14 are not considered for the benefits under Served From India Scheme. d. In the context of the Indian Service Providers, we wish to submit the following self-certified documents to your office which clarifies and confirms that the entity “Columbia Asia Hospitals Pvt. Ltd.” is an Indian Company and hence merits the eligibility of being an Indian Service Provider; a. Memorandum of Association & Certificate of ncorporation b. Online ROC Copy issued by the Ministry of Corporate Affairs which signifies that “Columbia Asia Hospitals Pvt. Ltd.” is an “Indian Non-Government Company” c. PAN Card Copy d. Income Tax Return for ASSESSMENT YEAR 2012-13 16 e. The Audit Memo provided by your good office has wrongly derived a nexus between Columbia Asia Hospitals in Malaysia and Columbia Asia Hospitals Pvt. Ltd which is an Indian entity. f. As confirmed by the documents submitted above, Columbia Asia Hospitals Pvt. Ltd. has been complying with all the statutory requirements, which an Indian Company is supposed to comply with, i.e. ROC updation, Filing of Income Tax Returns etc. g. Finally to conclude, even if we assume without admitting, that the findings in the Audit Memo is true, we wish to state that our SFIS Application is against the Foreign Exchange Earned in the year 2008-09 which pertains to the Foreign Trade Policy Period 2004-2009, and thus Para 3.12.2 will not be applicable in our case. h. Further it is even more significant to note that in 2008-09 despite the Objective being the same as per Para 3.6.4.1, All Service Providers were eligible in terms of Para 3.6.4.2 of the FTP 2004-09. Hence, it is clear that 17 even foreign Service Providers were eligible for the benefits. In view of the above submissions, it is clear that the issues raised by the audit section are not correct and our Services are eligible for the benefits issued under Served from India Scheme, thus surrender of the above mentioned Scrip does not arise. We request you to kindly take up the matter suitably with the audit section.” 12. Inspite of the details and information furnished by the petitioner, the fourth respondent proceeded to pass the impugned order at Annexure-A, dated 13.02.2014. 13. A careful perusal of Annexure-A clearly indicates that the fourth respondent before passing the order has not considered the details furnished by the petitioner as per Annexures F & K, absolutely no discussion is made about the documents and information furnished by the petitioner and also the fourth respondent has not considered the details 18 mentioned and documents produced along with the reply letter made by the petitioner as per Annexure-K, dated 08.04.2013 and as per Annexure-F, dated 12.06.2013. Absolutely no discussion is made with regard to contentions raised by the petitioner that how they are not entitled for the benefits under “Served From India Scheme”. 14. If the fourth respondent has considered the reply made by the petitioner along with the documents, the fourth respondent ought to have given an opportunity of being heard instead of passing the order which is not a speaking order. Therefore, the impugned order passed by the fourth respondent cannot be sustained. 15. For the reasons stated above, writ petition is allowed. The impugned order passed by the fourth respondent i.e., Annexure-A, dated 13.02.2014 is hereby quashed. The matter remanded to fourth respondent with a direction to provide an opportunity of 19 hearing and after considering the entire material on record, documents and objections filed, pass an appropriate speaking reasoned order strictly in accordance with law. Ordered accordingly. Sd/- JUDGE VBS/SMJ "