ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 17.01.2026
CESTAT Chennai Sets Aside Duty Demand on Re-Import; Holds Temporary Export Not a βSupplyβ Under GST
This Article has been written by Shri Ravi Shekhar Jha, Advocate based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.comor on his Mobile +91-9999005379.
The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Chennai recently delivered a significant judgment in the case of M/s. NTC Logistics India Pvt. β Ltd. vs. Commissioner of Customs, Chennai-II (Imports). β This case revolved around the interpretation of customs duty exemptions under Notification No. β 45/2017-Customs dated 30.06.2017, particularly concerning the re-import of goods exported for temporary use abroad. β The judgment, delivered on January 9, 2026, provides clarity on the applicability of exemption provisions and the concept of “supply” under the GST framework.
Case Background
M/s. NTC Logistics India Pvt. β Ltd., the appellant, is a logistics and transportation service provider with operations both within and outside India. β The company undertook a project in Sri Lanka for Vestas Asia Pacific A/s, Denmark, which involved setting up a 103 MW Wind Power Project. β To execute the project, the appellant transported specialized equipment such as cranes, trailers, trucks, and tools from India to Sri Lanka. β These goods were exported under shipping bills filed with “No Foreign Exchange” (NFE) and GR waiver, and the appellant claimed exemption from customs duties under Sl. β No. 5 of Notification No. β 45/2017-Customs.
The exemption under Sl. No. 5 of the notification applies to goods of Indian origin that are exported otherwise than by way of supply and re-imported within three years. β The appellant argued that the movement of goods to Sri Lanka did not constitute a “supply” under Section 7 of the Central Goods and Services Tax Act, 2017, as there was no transfer of ownership or consideration involved. β The goods remained the property of the appellant, and the only payment received was for transportation services, which were declared as “export of services” in their GST returns. β
The Dispute
The controversy arose when the Customs Department conducted a post-clearance audit and noticed that the shipping bills mentioned a Letter of Undertaking (LUT). β Based on this, the department assumed that the goods had been exported under Bond or LUT without payment of Integrated Goods and Services Tax (IGST). β Consequently, the department issued an Audit Consultative Letter proposing the demand for IGST on the re-imported goods, along with Basic Customs Duty (BCD), Social Welfare Surcharge (SWS), and penalties. β
The appellant contended that the movement of goods to Sri Lanka was not a “supply” and therefore did not attract IGST at the time of export. β They argued that the mention of LUT in the shipping bills was a procedural requirement and did not alter the nature of the transaction. β Despite these explanations, the Commissioner of Customs issued a Show Cause Notice and passed an Order-in-Original confirming the demand for customs duties, confiscation of goods, redemption fines, and penalties. β
Key Issues Examined by the Tribunal β
The tribunal identified three core issues for consideration:
- Does the temporary movement of goods from India to Sri Lanka for the appellant’s own use in executing a service contract constitute “supply”? β
- Is the re-import of such goods eligible for exemption under Sl. β No. 5 of Notification No. β 45/2017-Customs?
- Has the Commissioner proven “suppression” to invoke the extended period of limitation? β
Tribunal’s Observations and Judgment
- Temporary Movement of Goods as “Supply”: β The tribunal held that the movement of goods from India to Sri Lanka did not constitute a “supply” under GST laws. β Section 7 of the CGST Act defines “supply” as an activity made for consideration and in the course of business, subject to certain exceptions. β Since the goods were moved without consideration, without transfer of ownership, and solely for the appellant’s own use in providing transportation services, the transaction did not meet the definition of “supply.” β The tribunal also referred to CBIC Circular No. β 80/54/2018-GST, which clarified that inter-State movement of equipment by a service provider for their own use does not constitute “supply.” β
- Exemption Under Sl. β No. 5 of Notification No. β 45/2017-Customs: β The tribunal found that the appellant’s re-import of goods met the conditions of Sl. β No. 5 of the notification. β The goods were of Indian origin, exported otherwise than by way of supply, and re-imported within the prescribed three-year period. β The tribunal clarified that Sl. β No. 5 is a distinct and independent entry in the notification, and its conditions cannot be conflated with those of Sl. β No. 1(d), which applies to goods exported under Bond or LUT without payment of IGST. β The tribunal emphasized that the mention of LUT in the shipping bills was a procedural requirement and did not affect the substantive eligibility for exemption. β
- Suppression and Extended Period of Limitation: β The tribunal rejected the Commissioner’s claim of suppression, stating that the appellant had disclosed all material facts through statutory documents. β The mention of LUT in the shipping bills was not a deliberate act to evade duty but a procedural necessity. β The tribunal cited several Supreme Court judgments to emphasize that suppression must involve a deliberate act to evade duty, which was not the case here. β
Conclusion
The tribunal set aside the impugned order, allowing the appeal with consequential benefits. β It held that the appellant was entitled to exemption under Sl. β No. 5 of Notification No. β 45/2017-Customs and that the denial of exemption based on procedural declarations was legally unsustainable. β The tribunal also ruled that the extended period of limitation was wrongly invoked and that the confiscation of goods was unwarranted. β
Key Takeaways
- Clarification on “Supply”: The judgment reinforces the principle that mere movement of goods without consideration or transfer of ownership does not constitute “supply” under GST laws. β
- Exemption Notifications: Exemption notifications must be interpreted strictly but not in a manner that defeats their legislative intent. β Procedural declarations cannot override substantive eligibility for exemptions. β
- Extended Limitation Period: The burden of proving suppression or fraud lies with the Revenue, and mere procedural errors cannot justify invoking the extended period of limitation. β
- Circulars vs. Notifications: Circulars cannot override or amend statutory notifications. β The tribunal emphasized that the legislative provisions in the notification take precedence over any circulars. β
This judgment is a significant development in the interpretation of customs and GST laws, providing clarity on the treatment of temporary movement of goods for service contracts abroad and the applicability of exemption notifications. It serves as a reminder that taxation must be based on clear statutory provisions and not on procedural technicalities or assumptions.
Source: CESTAT Chennai
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