In the matter of Union of India v. Cosmo Films Ltd. A number of appeals have been filed against the High Court of Gujarat’s decision mandating compliance with the 1992 Foreign Trade (Development & Regulation) Act’s “pre-import condition.” One duty exemption programme made public by the Central Government was the advance authorization (‘AA’) to claim exemption from the Integrated Goods and Services Tax (‘IGST’) and the Goods and Services Tax (‘GST’) Compensation Cess on inputs imported into India to create goods for export from India. It was put into place to control and direct the steps that must be taken to implement the FTP’s requirements and the rules that were created in response to them.
The Directorate of Revenue Intelligence in Kolkata served summonses on numerous manufacturers throughout the nation who were importing products in violation of AAs. The DRI officers conducting the investigation, however, were of the opinion that “pre-import condition” meant that goods had to be imported first, and then the final products manufactured with such imported goods were to be exported. The manufacturers and exporters believed that the scope of the “pre-import condition” was unclear. The “pre-import condition” was satisfied after it was determined that goods imported under a certain AA were employed in the production of completed goods exported to fulfil the export obligation of that authorization. As a result, the respondents challenged the “pre-import condition” before the High Court after being offended by the DRI officers’ approach.
The High Court ruled that the contested “pre-import condition,” which was made known in the FTP, did not pass the reasonableness test and was in violation of the FTP’s design. As a result, the Union Government and Revenue petitioned the Supreme Court after being disappointed with the High Court’s ruling.
Analysis of Apex Court Decision
The adoption of the “pre-import condition” was made to smooth and facilitate the export trade and ensure that finished items intended for export would not suffer a price disadvantage, according to a single bench of the Supreme Court led by Justice S. Ravindra Bhat. A JCdditionally, the Court asserted that the High Court had not addressed this issue and proceeded under the presumption that only a limited number of items were subject to the “pre-import condition.”
The Court read the notification made according to the Customs Act of 1962 and declared that, although the exemption from paying IGST at the time of the import of input materials under AA was granted, it was not unconditional. According to the Court, the limitations included in the aforementioned notification were that the exemption could only be maintained as long as exports performed in accordance with the AAs were physical exports in character and that one had to adhere to the “pre-import condition” to receive such benefits. The Court concluded that the High Court’s reasoning was flawed and that the impugned notices cannot be blamed for being arbitrary. As a result, the Gujarat High Court’s contested decision and directives were reversed. The Court ordered the Revenue to provide the respondent’s permission to claim a refund or input credit, as appropriate, and wherever customs duty was paid.