Delhi High Court - Orders
Genpact India Private Limited & Anr vs Union Of India & Ors on 1 August, 2024
Author: Yashwant Varma
Bench: Yashwant Varma
$~85
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 10599/2024
GENPACT INDIA PRIVATE LIMITED
& ANR. .....Petitioners
Through: Mr. Arvind Datar, Senior
Advocate & Mr. Tarun Gulati,
Senior Advocate with Mr.
Kumar Visalaksh, Mr. Arihant
Tater, Mr. Ajitesh Dayal Singh
& Mr. Devansh Garg,
Advocates
versus
UNION OF INDIA & ORS. .....Respondents
Through: Mr. Nishant Gautam, CGSC,
Mr. Vardhman Kaushik, Ms.
Sanjana Mehrotra, Mr. Vinay
Kaushik, Mr. Mayank Sharma,
Mr. Ajay Kanojia, Mr.
Abhishek (GP) & Mr. Bikash
Kumar, Advocates for R-1
Ms. Sonu Bhatnagar, SSC with
Ms. Nishtha Mittal, Ms. Apurva
Singh & Ms. K.S. Mary Jonet,
Advocates for R-2
Mr. Anurag Ojha, SSC with
Mr. Kumar Abhishek & Mr.
Subham Kumar, Advocates
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE RAVINDER DUDEJA
ORDER
% 01.08.2024 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 07/08/2024 at 20:48:12 CM APPL. 43580/2024 (Exemption) Allowed, subject to all just exceptions.
This application stands disposed of.
W.P.(C) 10599/2024 & CM APPL. 43579/2024 (Stay)
1. Notice. Since the respondents are duly represented, let a reply be filed within a period of four weeks. The petitioners shall have two weeks therefrom to file a rejoinder affidavit.
2. Prima facie and on hearing Mr. Datar and Mr. Gulati, learned senior counsels appearing in support of the writ petition, we find that the matter would merit consideration.
3. From the material placed before us, we find that the issue arises out of the Service Exports from India Scheme ['SEIS'] and the scrips held by the petitioner company in terms thereof. The particulars of the orders in terms of which those scrips came to be granted and the period within which those orders could have been reviewed stand encapsulated in a table which is extracted hereinbelow:-
FY Date of order Limitation for
granting SEIS scrips review of order
2015-16 07.06.2017 06.06.2019
2016-17 03.04.2019 02.04.2021
2017-18 02.07.2019 01.07.2021
2018-19 25.09.2020 24.09.2022
4. The record reflects that on 17 October 2023, the Directorate General of Foreign Trade ['DGFT'] issued a Show Cause Notice ['SCN'] questioning the grant of benefits pursuant to the permissions having been granted to the petitioner company and which had also dealt with the scrips in question. The said SCN proceeded inter alia This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 07/08/2024 at 20:48:12 on certain communications of the Directorate of Revenue Intelligence ['DRI'] which had questioned the classification of services provided by the petitioner company. It becomes pertinent to note that it was the case of DRI that the services rendered by the petitioner company were liable to be classified under Central Product Classification ['CPC'] Division 84 and which pertains to the following services:-
DIVISION 84 COMPUTER AND RELATED SERVICES 841 Consultancy services related to the installation of computer hardware 8410 84100 Consultancy services related to the installation of computer hardware Assistance services to the clients in the installation of computer hardware (i.e. physical equipment) and computer networks.
842 Software implementation services All services involving consultancy services on, development and implementation of software . The term 'software' may be defined as the sets of instructions required to make computers work and communicate. A number of different programmes may be developed for specific applications (application software), and the customer may have a choice of using ready-made programmes off the shelf (packaged software), developing specific programmes for particular requirements (customized software) or using a combination of the two.
8421 84210 Systems and software consulting services Services of a general nature prior to the development of data processing systems and applications. It might be management services, project planning services, etc. 8422 84220 Systems analysis services Analysis services include analysis of the clients' needs, defining functional specification, and setting up the team. Also involved are project management, technical coordination and integration and definition of the systems architecture.
8423 84230 Systems design services Design services include technical solutions, with respect to methodology, quality-assurance , choice of equipment software packages or new technologies, etc. 8424 84240 Programming services Programming services include the implementation phase, i.e. writing and debugging programmes, conducting tests, and editing documentation.
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 07/08/2024 at 20:48:13 8425 84250 Systems maintenance services Maintenance services include consulting and technical assistance services of software products in use, rewriting or changing existing programmes or systems, and maintaining up-to-date software documentation and manuals. Also included are specialist work, e.g . conversions.
843 Data processing services
8431 84310 Input preparation services
Data recording services such as key punching, optical scanning or other methods for data entry.
8432 84320 Data-processing and tabulation services Services such as data processing and tabulation services, computer calculating services, and rental services of computer time.
8433 84330 Time-sharing services This seems to be the same type of services as 84320. Computer time only is bought; if it is bought from the customer's premises, telecommunications services are also bought. Data processing or tabulation services may also be bought from a service bureau. In both cases the services might be time sharing processed. Thus, there is no clear distinction between 84320 and 84330.
8439 84390 Other data processing services Services which manage the full operations of a customer's facilities under contract : computer-room environmental quality control services; management services of in-place computer equipment combinations; and management services of computer work flows and distributions.
844 Database services
8440 84400 Database services
All services provided from primarily structured databases through a communication network.
Exclusions: Data and message transmission services (e.g. network operation services, value-added network services) are classified in class 7523 (Data and message transmission services).
Documentation services consisting in information retrieval from databases are classified in subclass 96311 (Library services).
845 Maintenance and repair services of office machinery and equipment including computers 8450 84500 Maintenance and repair services of office machinery and equipment including computers. Repair and maintenance services of office machinery, computers and related equipment.
849 Other computer services This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 07/08/2024 at 20:48:13 8491 84910 Data preparation services Data preparation services for clients not involving data processing services.
8499 84990 Other computer services n.e.c.
Other computer related services, not elsewhere classified, e.g. training services for staff of clients, and other professional computer services.
5. The scrips, however, had been granted with the petitioner company asserting that its services are liable to be placed under Divisions 86 and 87 of CPC and which deal with the following services:-
"1. The Central Product Classification ('CPC') code 862 pertains to accounting, auditing and bookkeeping services. The relevant portion of CPC code 862 is extracted below for your ready reference:
"Division 86 - Legal, Accounting, Auditing and Book- Keeping Services; Taxation Services; Market Research and Public Opinion Polling Services; Management and Consulting Services; Architectural, Engineering and other Technical Services xxxx xxxx xxxx
32. CPC code 871 pertains to Advertising services. The relevant portion of CPC code 871 is extracted below for ready reference:
"DIVISION 87 BUSINESS SERVICES N.E.C. 871 Advertising services ...
8719 87190 Other advertising services Other advertising services not elsewhere classified, including outdoor and aerial advertising services and delivery services of samples and other advertising material.""
6. The range of services provided by the petitioner company that are asserted to be covered under Divisions 86 and 87 of CPC were set forth in its reply and are extracted hereinbelow:-
"•Accounting, auditing and bookkeeping services; • Advertising services;
• Management and Consulting Services; • Legal services;
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 07/08/2024 at 20:48:14 • Market Research and public opinion polling services; • Investigation and Security services; • Taxation services;
• Services related to management consulting; and • Placement and supply services of personnel."
7. The petitioners appear to have taken various objections to the issuance of the said SCN by the DGFT including that the same was based on a wholly erroneous appreciation of the CPC Divisions and the nature of services rendered. It was also their case that the DGFT had commenced action solely on the basis of an untenable view taken by the Customs authorities.
8. The petitioners also questioned the invocation of Section 9(4) of the Foreign Trade (Development & Regulation) Act, 1992 ['1992 Act']. It was contended that since the scrips had already been utilized, the power to either suspend or cancel would no longer be available to be exercised. It was further urged that the review power which stands comprised in Section 16 of the 1992 Act had also been wrongly invoked since in the instant case the SCN has not been issued by the competent authority. However, and undisputedly, the aforesaid SCN proceedings are yet to be concluded.
9. The Principal Commissioner of Customs following the initiation of action by the DGFT, subsequently issued a SCN dated 14 June 2024. The Customs' SCN seeks to invoke the powers comprised in Section 28-AAA of the Customs Act, 1962 ['Act']. The said SCN is in turn based on the allegation that the IT/IT enabled services provided by the petitioner company are liable to be placed under Division 84 of the CPC.
10. Quite apart from the petitioners asserting that in the absence of any allegation of collusion, wilful misstatement or suppression of facts This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 07/08/2024 at 20:48:14 being established even prima facie, it is further urged that it would clearly be impermissible for the Customs authorities to review or sit in judgment on the aspect of classification of services. It is urged that classification is a subject which lies primarily under the jurisdiction and authority of the DGFT.
11. We note that while dealing with an identical question, we have already entertained W.P. (C) 15314/2022. Accordingly, and following the interim protection operating in the aforesaid writ petition, we provide that till the next date of listing the operation of the impugned SCNs dated 17 October 2023 and 14 June 2024 shall remain stayed.
12. Let the writ petition be called again on 22.11.2024.
YASHWANT VARMA, J.
RAVINDER DUDEJA, J.
AUGUST 1, 2024/RM This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 07/08/2024 at 20:48:15