THE SECRETARY, MINISTRY OF COMMERCE & ORS. versus M/S VINOD AND COMPANY on 11 July 2019

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SUPREME COURT REPORTS

[2019] 10 S.C.R.

ATHE SECRETARY, MINISTRY OF COMMERCE & ORS.

v.

M/S VINOD AND COMPANY

(Civil Appeal No.5399 of 2019)

BJULY 11, 2019

[DR. DHANANJAYA Y CHANDRACHUD ANDM.R. SHAH, JJ.]

Consumer Protection Act, 1986 – s. 2(d), 2(g) and 2(o) –Respondent applied for the grant of an REP licence for which itCwas entitled to a premium on the amount of exports under the scheme– Scheme for the issuance of REP licence was discontinued –Consequently, the premium was not paid to the respondent –Additional Chief Controller of imports and exports passed an orderholding in abeyance the grant of premium – Respondent filed aDclaim before the District Consumer Disputes Redressal Forum – TheDistrict forum allowed the claim of the respondent – Appeal beforethe State Commissioner was rejected – This was confirmed in revisionby the National Consumer Disputes Redressal Commission (NCDRC)– On appeal, held: The Exim policy is an incident of the fiscal policyof the State and of its overall control over foreign trade – As anEincident of its policy, the State may provide a regime of incentives –The provision of those incentives does not render the State a serviceprovider or the person who avails of the incentives as a potentialuser of any service – Thus, there was absence of jurisdiction in theDistrict forum to entertain a complaint under the Act in regard to aFclaim arising out of and founded on an REP licence governed bythe Exim policy – Accordingly, judgment of the NCDRC set aside.

The respondent carried out exports from 1988 to 1993.The respondent applied for the grant of an REP licence in thef.o.b. value of Rs 6,16,116 for which it was entitled to a premiumGof 20 per cent on the amount of exports under the scheme. Sincethe scheme for the issuance of REP licence was discontinued,the premium of Rs. 1,23,223 was not paid. Additional ChiefController of imports and exports passed an order holding inabeyance the grant of premium.Thereafter, respondent filed a H

claim before the District Consumer Disputes Redressal Forum.The District forum allowed the claim and directed payment ofRs. 1,23,223 to the respondent. The appeal before the StateConsumer Disputes Redressal Commission was rejected. Thiswas confirmed in revision by the National Consumer DisputesRedressal Commission. Hence, the present appeals.

Allowing the appeal, the Court

HELD: 1. The objects of the Exim policy are essentially tostimulate industrial growth by providing easy access to importedcapital goods, raw materials and components, to substituteimports and promote self-reliance and to provide an impetus toexports by improving the quality of incentives. The Exim policyis an incident of the fiscal policy of the State and of its overallcontrol over foreign trade. As an incident of its policy, the Statemay provide a regime of incentives. The provision of thoseincentives does not render the State a service provider or theperson who avails of the incentives as a potential user of anyservice. The State, in exercise of its authority to utilise and collectrevenue, puts in place diverse regulatory regimes under the law.The regime may provide for modalities for compliance, penaltiesfor breach and incentives to achieve the purpose of the policy.The grant of these incentives does not constitute the State as aservice provider. [Para 16] [567-C-E]

2. In Bihar School Examination Board v. Suresh PrasadSinha it was held that the Board is not a service provider and astudent who takes an examination is not a consumer. By analogy,the same principle must govern the present case. For the abovereasons, this Court comes to the conclusion that there was anabsence of jurisdiction in the District Forum to entertain acomplaint under the Act in regard to a claim arising out of andfounded on an REP licence governed by the Exim policy.[Paras 19, 20] [568-F-H]

Vikram Sales Corporation & Anr v. Commissioner ofCommercial Taxes(1996) 4 SCC 433 : [1996] 2 Suppl.SCR 204 ;Bihar School Examination Board v.Suresh Prasad Sinha(2009) 8 SCC 483 – relied on.

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ACase Law Reference

[1996] 2 Suppl. SCR 204 relied onPara 8

(2009) 8 SCC 483 relied onPara 8

CIVIL APPELLATE JURISDICTION : Civil Appeal No.5399Bof 2019

From the Judgment and Order dated 04.04.2012 of the NationalConsumer Disputes Redressal Commission, New Delhi in RevisionPetition No. 375 of 2007

D. L. Chidanand, Nachiketa Joshi, Sayooj Mohandas M.,CMs. Anil Katiyar, B. Krishna Prasad, Advs. for the Appellants.

Shivendra Dwivedi, Rajesh Mahale, Advs. for the Respondent.

The Judgment of the Court was delivered by DR DHANANJAYA Y CHANDRACHUD, J.D1. Delay condoned.

2. Leave granted.

3. This appeal raises an interesting issue as to whether a personwho has made a claim under an REP licence issued in terms of theEimport and export policy[1] - in this case, the policy for April 1988 toMarch 1991 – is a consumer within the meaning of Section 2(1)(d) ofthe Consumer Protection Act, 1986[2]. Allied to this issue is whether inproviding benefits under the terms of the Exim policy, the governmentrenders a ‘service’ so as to make it amenable to the jurisdiction of theconsumer fora established under the Act.F

4. The facts, insofar as they are material, are that the respondentcarried out exports from 1988 to 1993. The respondent applied for thegrant of an REP licence in the f.o.b. value of Rs 6,16,116 for which itwas entitled to a premium of 20 per cent on the amount of exports underthe scheme. Since the scheme for the issuance of REP licence wasGdiscontinued, the premium of Rs 1,23,223 was not paid. The respondentreceived an intimation that the Additional Chief Controller of Importsand Exports had passed an order on 3 September 1991 holding inabeyance the grant of premium from February 1988 to August 1992

1 Exim policyH2 “Act”

which was further extended to 31 March 1993. The respondent filed anappeal before the Appellate Committee of the Ministry of Commerce.The respondent made unsuccessful attempts for the release of thepremium and was informed that the scheme had been closed as a resultof which the claim could not be entertained.

5. This led to the institution of proceedings before the DistrictConsumer Disputes Redressal Forum[3] at Delhi. The District Forumallowed the claim by directing that an amount of Rs 1,23,223 be paidover to the respondent together with compensation for mental agonyand towards legal expenses.

6. The appellants were set down ex-parte before the DistrictForum. Their appeal before the State Consumer Disputes RedressalCommission[4] was rejected on 9 October 2006. This was confirmed inrevision by the National Consumer Disputes Redressal Commission[5] on4 April 2012.

7. The principal issue that was canvassed before the SCDRCand in revision was that the consumer fora had no jurisdiction to entertaina consumer complaint on the ground that no service is rendered by theUnion government when it provides incentives under the Exim policy.

8. Mr. D L Chidanand, learned counsel appearing on behalf ofthe appellant assailed the decision of the fora on the following grounds:

(i) The Exim policy is formulated in pursuance of and as an incidentof the fiscal policy of the Union government and its regulatorycontrol over foreign trade;

(ii) The purpose and object of the Exim policy is to encourage exportsand to regulate imports by laying down regulatory measures inpursuance of which a scheme of incentives is also made availableto exporters;

(iii) The benefits which are granted to an exporter do not constitute aservice within the meaning of the Act.

9. In support of the submission, reliance has been placed on thedecisions of this Court in Vikram Sales Corporation & Anr vs 3“District Forum”

4 “SCDRC”5“NCDRC”

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ACommissioner of Commercial Taxes[6 ]and Bihar SchoolExamination Board vs Suresh Prasad Sinha[7].

10. On the other hand, Mr. Shivendra Dwivedi, learned counselappearing on behalf of the respondent supported the decision of theconsumer fora leading to the judgment of the NCDRC on the groundBthat as an exporter, the respondent was entitled to a premium against theREP licences which constituted a benefit provided and hence is a part ofthe services rendered by the Union government to an exporter.

11. In order to appreciate the rival submissions, it would benecessary to advert to some of the definitions which are contained inCSection 2 of the Act. The expression “complainant” is defined in Section2(b)(i) to mean inter alia a ‘consumer’.

12. Section 2(d) defines the expression “consumer” thus:

“(d)”consumer” means any person who—

D(i) buys any goods for a consideration which has been paid orpromised or partly paid and partly promised, or under any systemof deferred payment and includes any user of such goods otherthan the person who buys such goods for consideration paid orpromised or partly paid or partly promised, or under any systemof deferred payment when such use is made with the approval ofEsuch person, but does not include a person who obtains such goodsfor resale or for any commercial purpose; or D

(ii) hires or avails of any services for a consideration which hasbeen paid or promised or partly paid and partly promised, or underany system of deferred payment and includes any beneficiary ofFsuch services other than the person who ‘hires or avails of theservices for consideration paid or promised, or partly paid andpartly promised, or under any system of deferred payment, whensuch services are availed of with the approval of the first men-tioned person but does not include a person who avails of suchservices for any commercial purposes; G

Explanation.— For the purposes of this clause, “commercialpurpose” does not include use by a person of goods bought and 6(1996) 4 SCC 433H7(2009) 8 SCC 483

used by him and services availed by him exclusively for thepurposes of earning his livelihood by means of self-employment;”

Section 2(e) defines the expression “consumer dispute” :

“(e)”consumer dispute” means a dispute where the person againstwhom a complaint has been made, denies or disputes the allegationscontained in the complaint.”

The expression “defect” is defined in Section 2(f) :

“(f) “defect” means any fault, imperfection or shortcoming in thequality, quantity, potency, purity or standard which is required tobe maintained by or under any law for the time being in forceunder any contract, express or implied or as is claimed by thetrader in any manner whatsoever in relation to any goods;”

The expression “deficiency” is defined in Section 2(g) :

“(g)”deficiency” means any fault, imperfection, shortcoming orinadequacy in the quality, nature and manner of performance whichis required to be maintained by or under any law for the timebeing in force or has been undertaken to be performed by a personin pursuance of a contract or otherwise in relation to any service;”

Finally, it would be necessary to refer to the expression “service”which is defined in Section 2(o):-

“(o)”service” means service of any description which is madeavailable to potential users and includes, but not limited to, theprovision of facilities in connection with banking, financinginsurance, transport, processing, supply of electrical or other energy,board or lodging or both, housing construction, entertainment,amusement or the purveying of news or other information, butdoes not include the rendering of any service free of charge orunder a contract of personal service;”

Under Section 2(d)(ii), a consumer is a person who hires or availsof any service for a consideration. It includes a beneficiary of a serviceother than the person who hires or avails of the service. The considerationfor the hire or for availment of the service may be either paid or promisedor partly paid and partly promised or under any system of deferred A

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Apayment. The exclusion applies to a person who avails of a service for acommercial purpose in which event such a person is not a consumer.

Section 2(g) which defines the expression “deficiency”, advertsto a fault, imperfection, shortcoming or inadequacy in the quality, natureor manner of performance which is required to be maintained by orBunder any law or which is contractually assumed to be performed by aperson in pursuance of a contract or otherwise in relation to any service.

Section 2(o) has defined the expression “service” to mean aservice of any description. The issue essentially is whether in formulatingthe Exim policy and in providing a regulatory regime, the governmentCperforms a service of any description.

Since in the present case the relevant Exim policy is for the periodfrom April 1988 to March 1991, it would be instructive to extract thepurpose and object of the policy as contained in the foreword to thedocument; D“The Import and Export Policy plays a crucial role in the economyas a whole and in particular the industrial and export sectors.The main objectives of the new Policy are -

(i) to stimulate industrial growth by providing easy access toessential imported capital goods, raw materials and componentsto industry and to sustain the movement towards modernisation,Etechnological upgradation and make the industry progressivelycompetitive internationally.

(ii) to promote efficient import substitution and self-reliance;

(iii) to give a fresh impetus to export promotion by improving theFquality of incentives and their administration; and

(iv) to simplify and ratioinalise Police and Procedures.

These objectives are sought to be achieved keeping in view theconstraints of both domestic and external resources.”

Chapter XIX provided for the Duty Exemption Scheme underGwhich paragraph 239 provided for a special REP facility in the followingterms:- “Special REP Facility

239. (1) The licence holder under this scheme would be eligible toan REP licence after he has fulfilled the export obligation and the H

DEEC has been discharged. The value of the REP licence wouldbe equal to 10 per cent of the value addition achieved (f.o.b. valueof exports minus c.i.f. value of imports). The value of the REPlicence so calculated would be further limited to the REPentitlement on the total f.o.b. value of exports, as per Appendix17 or as per para 166(2) (For Residual Products) of this policy, asthe case may be. The REP licence so issued will be valid for theimport of the items as allowed against the relevant export productin Appendix 17 or para 166(2) of this Policy, at the time of issue ofthe licence.”

The objects of the policy are essentially to stimulate industrialgrowth by providing easy access to imported capital goods, raw materialsand components, to substitute imports and promote self-reliance and toprovide an impetus to exports by improving the quality of incentives.The Exim policy is an incident of the fiscal policy of the State and of itsoverall control over foreign trade. As an incident of its policy, the Statemay provide a regime of incentives. The provision of those incentivesdoes not render the State a service provider or the person who avails ofthe incentives as a potential user of any service. The State, in exerciseof its authority to utilise and collect revenue, puts in place diverseregulatory regimes under the law. The regime may provide for modalitiesfor compliance, penalties for breach and incentives to achieve the purposeof the policy. The grant of these incentives does not constitute the Stateas a service provider.

Before a three judge Bench of this Court in Vikas SalesCorporation (supra), the issue for consideration was whether thetransfer of an REP licence or Exim scrip to another constitutes a sale ofgoods within the meaning of state sales tax legislation. Explaining theobjectives of the import policy, the Court held:

“4. …..The objective behind the licences was to provide to theregistered exporters the facility of importing the essential inputsrequired for the manufacture of the products exported. Theessential idea was to encourage exports and for that purpose importlicences called REP Licences were issued equal to the prescribedpercentage of the value of exports. These licences were madefreely transferable. It was provided that the transfer such licencesdid not require any endorsement or permission from the licencing AB

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authority. It was clarified that such would be: “governed by theordinary law”. It only required a letter from the transferor recordingand evidencing the transfer. On that basis, the transferee; becamethe due and lawful holder of the licence and could either import A

the goods permitted thereunder or sell it to another in turn.”

BIn Bihar School Examination Board (supra) which was decidedby a Bench of two judges, the issue was whether the Board ofExaminations governed by state law is amenable to the jurisdiction ofthe District Forum under the Consumer Protection Act, 1986. Answeringthe question in the negative, this Court held:

C“12. When the Examination Board conducts an examination indischarge of its statutory function, it does not offer its “services”to any candidate. Nor does a student who participates in theexamination conducted by the Board, hire or avail of any servicefrom the Board for a consideration. On the other hand, a candidatewho participates in the examination conducted by the Board, is aDperson who has undergone a course of study and who requeststhe Board to test him as to whether he has imbibed sufficientknowledge to be fit to be declared as having successfullycompleted the said course of education; and if so, determine hisposition or rank or competence vis-a-vis other examinees. TheEprocess is not, therefore, availment of a service by a student, butparticipation in a general examination conducted by the Board toascertain whether he is eligible and fit to be considered as havingsuccessfully completed the secondary education course. Theexamination fee paid by the student is not the consideration foravailment of any service, but the charge paid for the privilege ofFparticipation in the examination.”

In the circumstances, it was held that the Board is not a serviceprovider and a student who takes an examination is not a consumer.

We are of the view that by analogy, the same principle must governGthe present case for the reasons that we have indicated.

For the above reasons, we allow the appeal having come to theconclusion that there was an absence of jurisdiction in the District Forumto entertain a complaint under the Act in regard to a claim arising out ofand founded on an REP licence governed by the Exim policy.

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SECRETARY, MINISTRY OF COMMERCE & ORS. v.M/S VINOD AND CO. [DR. DHANANJAYA Y CHANDRACHUD, J.]The judgment of the NCDRC dated 4 April 2012 is accordinglyset aside. However, there shall be no order as to costs.Pending application(s), if any, shall stand disposed of.

Ankit Gyan

Appeal allowed.

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