Supreme Court stays Gujarat HC order on pre-import conditions

The Supreme Court (SC) on Friday agreed to hear the central government’s plea against a Gujarat High Court order quashing government notification which allowed the Directorate of Revenue Intelligence (DRI) to penalise exporters for wrongfully availing Goods and Services Tax (GST) exemption in specific cases where their exports preceded imports.

The apex court, while agreeing to hear the DRI’s plea, also stayed the high court order. This could mean that the department will be again able to start sending notices to importers who violate its norms under the Foreign Trade Policy (FTP), experts said. The SC will next hear the case on November 8.

In February this year, the Gujarat High Court had declared the DRI notice which brought in a "pre-import" condition, that every exporter holding advance authorisation licences must follow to avail duty exemptions, as ‘ultra vires of Constitution’.

“Exporters have been facing a lot of hardship in terms of the working capital issue for which advance authorisation matters had initially gone to Delhi High Court. This is the second round of battle for the pre-import where in the Supreme Court will decide whether the decision of the Gujarat High Court in favour of the exporters is per incuriam”, said Abhishek A Rastogi, advocate for the petitioners.

In October 2017, the Central Board of Indirect Taxes & Custom (CBIC) issued a notification that set certain pre-requisite conditions for exporters who imported input goods after their finished products are exported.

The conditions imposed had the importers up in arms as the pre-GST period had the concept of advance authorisation licence that allowed an exporter to import raw materials used for manufacturing exported goods without payment of taxes on import of raw material used for past exports. After the introduction of GST, the government had amended the clause to say that exemption on Integrated GST (IGST), applicable on inter-state transactions, were to be denied to imports which had taken place after exports.

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