Pre-import Condition in FTP for Availing Benefit of Exemption is not Arbitrary: SC

Case Details: Union of India v. Cosmo Films Limited - [2023] 149 taxmann.com 473 (SC)

Judiciary and Counsel Details

• • S. Ravindra Bhat & Dipankar Datta, JJ.

Facts of the Case

The Directorate of Revenue Intelligence initiated investigation and issued summons to the manufacturers on the ground that exemption claimed from all custom duty levies, including IGST and compensation cess was not admissible. It was argued that exemption was not allowed when goods manufactured were exported first in anticipation of licence/authorisation, with duty-free import against the authorisation having been undertaken later. The assesse approached the High Court against it and challenged the pre-import condition.

The Honorable Gujarat High Court had struck down the ‘pre-import’ condition in Foreign Trade Policy for availing benefit of exemption from levy of integrated tax and GST compensation cess on import under Advance Authorisation (AA) as unconstitutional. The Revenue filed appeal before the Apex Court.

Supreme Court Held

The Honorable Supreme Court noted that inconvenience caused to exporters by paying two duties and claim refunds could not be a ground to hold the ‘pre-import’ condition as arbitrary. Therefore, the Apex Court set aside Gujarat High Court judgment and held that pre-import condition in Foreign Trade Policy for availing benefit of exemption is not arbitrary or unreasonable.

However, the Supreme Court has directed the Revenue to permit the manufacturer-exporters who were enjoying interim orders, till the impugned judgments were delivered, to claim refund or input credit and they shall approach the jurisdictional Commissioner and apply with documentary evidence within six weeks from the date of the judgment.