Madras High Court
M/S. Rithwik Softex vs Software Technology Parks Of India ... on 10 October, 2014
Author: V.Ramasubramanian
Bench: V.Ramasubramanian
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 10.10.2014 CORAM THE HONOURABLE MR.JUSTICE V.RAMASUBRAMANIAN Writ Petition No.20360 of 2014 M/s. Rithwik Softex rep. by Proprietrix Priya Rajshekhar RR Towers III, 8th Floor Thiru Vi Ka Industrial Estate Guindy, Chennai 600 032. .. Petitioner Vs. Software Technology Parks of India (STPI) rep. by Director, STPI-Chennai No.5, 3rd Floor, Rajiv Gandhi Salai Taramani, Chennai 600 113. .. Respondent ----- Petition under Article 226 of the Constitution of India praying for a writ of Certiorari calling for the records pertaining to the Clarificatory Communication STPIC/G1396/2014-15/269 dated 07.7.2014 issued by the respondent to the petitioner herein (read in consonance with Communication STPIC/G1396/2013-14/1037 dated 25.3.2014) and quash the same. ----- For Petitioner : Mr.Vaibhav R.Venkatesh For Respondent : Mr.Puhazh Gandhi.P ----- Reserved on : 24.9.2014 Pronounced on : 10.10.2014 ----- O R D E R
The petitioner has come up with the above writ petition challenging an opinion given by the respondent, by way of clarification, on a query posed by the petitioner.
2. Heard Mr.Vaibhav R.Venkatesan, learned counsel for the petitioner and Mr.Puhazh Gandhi, P., learned counsel for the respondent.
3. The petitioner is a proprietary concern, established in the year 2005, with the object of providing a full range of professional and technical services, on Financial Control and Accounting Systems, Back Office, Remote Data Entry, etc. The petitioner obtained approval, otherwise known as Letter of Intent/Letter of Permission way back on 23.11.2005, from the respondent herein, to set up a 100% Export Oriented Unit. Incidentally, the respondent is an autonomous body, established by the Government of India, Department of Electronics, in the year 1991, with the object of encouraging, promoting and boosting technology, software and electronic hardware exports from India. The respondent was vested with the power to grant approval/Letters of Permission to 100% Export Oriented Units, as per the Foreign Trade Policy of the Government of India.
4. It is only in accordance with the Foreign Trade Policy of the Government of India that the respondent granted a Letter of Permission to the petitioner on 23.11.2005. An agreement was also entered into on 09.01.2006 by the petitioner with respondent. In pursuance of the said agreement, the petitioner obtained warehouse license on 04.3.2006.
5. During the proceedings for assessment of income tax for the assessment year 2011-12, the Assessing Officer appears to have pointed out that the approval/Letter of Permission obtained by the petitioner as an Export Oriented Unit, was valid for a period of five years from 23.11.2005 and that the status of EOU was not available thereafter. Immediately, the petitioner sent a letter to the respondent on 09.4.2014 seeking a clarification as to the period of validity of the Letter of Permission. In response, the respondent issued a reply dated 07.7.2014, informing the petitioner that as per Clause 6.6.1 of the Foreign Trade Policy, the Letter of Permission was valid only for a period of five years from the date of commencement of production. The respondent clarified that 100% EOU status of the petitioner expired on 22.11.2010.
6. Aggrieved by the clarification so issued, the petitioner has come up with the above writ petition, contending inter alia that as per Clause 6.6 of the Foreign Trade Policy, read with Clause 9 of the Sanction Order dated 04.3.2006, a period of three years is given to Software Technology Park Units to commence production and that the period of validity of five years would commence only from the date of commencement of production.
7. The respondent has filed a counter affidavit, raising preliminary objection to the maintainability of the writ petition. The maintainability is questioned on the ground that the respondent merely gave a reply to a clarification sought by the petitioner and that the petitioner has challenged the same, with a view to thwart the assessment order passed by the Income Tax Officer, Ward IV(3), Chennai 34, dated 28.3.2014. It is also stated in the counter affidavit that the Letter of Permission was granted to the petitioner on 23.11.2005 and that the same expired on 22.11.2010, as per the Foreign Trade Policy. The respondent has also produced a status report of the petitioner concern, indicating the date of submission of the annual performance reports for the years 2005-06 to 2010-11. According to the respondent, the petitioner claimed to be a Software Export Unit and that unlike other units which have huge manufacturing process requiring a period of three years to commence production, the petitioner did not require any such time.
8. I have carefully considered the pleadings and the submissions.
9. A careful look at the Letter of Permission/approval dated 23.11.2005 issued by the respondent would show that the respondent extended all the facilities and privileges admissible under the Foreign Trade Policy 2004-09, for the establishment of manufacturing unit. The item of manufacture was indicated to be computer software. It was clearly stipulated in paragraph 2(i) of the Letter of Permission that the Unit should export its entire production as per the provisions of Foreign Trade Policy, for a period of five years. The Unit was also given the option to renew its EOU status or de-bond for production of domestic market in the light of the industrial policy. Paragraph 2(iv) of the Letter of Permission shows that the petitioner projected an export turnover of Rs.40.00 Lakhs in the first year, Rs.60.00 Lakhs in the second year, Rs.80.00 Lakhs in the third year, Rs.100.00 Lakhs in the fourth year and Rs.120.00 Lakhs in the fifth year and in view of the same, the petitioner proposed to import capital goods to a tune of Rs.50.00 Lakhs and to procure indigenous capital goods to a tune of Rs.30.00 Lakhs.
10. It is true that as per paragraph 3 of the Letter of Permission, the petitioner was given three years to commence production. It was stipulated that if the petitioner failed to commence commercial production, the Letter of Permission would automatically lapse. However, there was a possibility for extension of the validity. It was also made mandatory as per the Letter of Permission to submit quarterly reports.
11. In pursuance of the Letter of Permission, the petitioner also entered into an agreement with the respondent on 09.01.2006. Under Clause 1 of the said agreement, the petitioner was obliged to intimate the date of commencement of production for 100% export within one month of such date to the concerned Director. Under Clause 3, the petitioner was also obliged to submit quarterly reports. In pursuance of the said agreement, the premises of the petitioner was licensed under Section 58(1) of the Customs Act, 1962, as a private bonded warehouse. The license was to remain in force only for a period of five years from 04.3.2006 to 03.3.2011. Consequently, the very permission to carry on the manufacturing process was limited only up to 03.3.2011 under Clause 9 of the In Bond Manufacture Sanction Order dated 04.3.2006.
12. In the light of the above, what happened was that the Income Tax Officer sent a letter to the respondent on 04.3.2014, requesting the respondent to send the annual report of the petitioner for the year 2010-11. The information was sought in terms of Section 133(6) of the Income Tax Act, 1961. Therefore, the respondent sent a letter dated 25.3.2014 to the Income Tax Officer, pointing out that the petitioner had not submitted the annual report for the year 2010-11 and that they had submitted export declaration forms only for the years 2006-07 and 2007-08. The respondent also indicated that the period of validity of the Letter of Permission expired on 22.11.2010.
13. Therefore, it is clear that there are two hurdles that the petitioner had to cross. The first is that in view of the order passed by the Customs Authorities under Section 58(1) of the Customs Act, 1962, the period of validity of the approval is up to 03.3.2011. The second hurdle to be crossed is that they complied with the terms and conditions, including the submission of quarterly reports and the export declaration forms.
14. Though the first hurdle that the petitioner faces could, to some extent be resolved legally in terms of the Foreign Trade Policy, the second hurdle is completely based upon facts. Therefore, the petitioner was obliged only to fight it out before the Income Tax Officer. The question as to whether the petitioner fulfilled all the terms and conditions subject to which Letter of Permission was granted, is a question of fact. Moreover, what is impugned in this writ petition is not an order. The petitioner posed a question to the respondent about the period of validity of the Letter of Permission. The respondent gave a reply. It is not an order in the strict sense of the term, to enable the petitioner to challenge the same.
15. Therefore, the objection taken by the respondent that the writ is not maintainable has to be upheld.
16. Accordingly, the writ petition is dismissed. However, it will be open to the petitioner to establish before the Income Tax Authorities, all issues including the issue of validity of the period of license and their compliance with all the terms and conditions of approval. No costs. Consequently, M.P.No.1 of 2014 is closed.
Index : Yes/No 10.10.2014. Internet : Yes/No kpl V.RAMASUBRAMANIAN,J. kpl Order in W.P.No.20360 of 2014. 10.10.2014.