Tag: #CosmoFilmsLimited

The Issue of Pre-Import Condition under Advance Authorization Scheme
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 14.12.2025

The Issue of Pre-Import Condition under Advance Authorization Scheme

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 “pre-import condition” under the Advance Authorization Scheme has been a significant issue for exporters, particularly for imports made between October 13, 2017, and January 9, 2019. This condition required that goods be imported first and then used for manufacturing export goods, which created operational challenges for exporters. The condition was introduced to regulate exemptions from Integrated Goods and Services Tax (IGST) and GST Compensation Cess under the scheme.

Legal Framework Governing the Issue

1. Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act):
- The FTDR Act, 1992 provides the legal foundation for the formulation and implementation of the Foreign Trade Policy (FTP).
- Section 5 of the FTDR Act empowers the Central Government to formulate and amend the FTP to regulate imports and exports.
- The Advance Authorization Scheme is governed under Chapter IV of the FTP, which is framed under the FTDR Act.
2. Customs Act, 1962:
- The Customs Act, 1962 governs the levy and collection of customs duties on imports and exports.
- Section 25(1) of the Customs Act empowers the Central Government to issue exemption notifications for customs duties.
3. Customs Notification No.  18/2015-Customs (April 1, 2015):
- This notification exempted goods imported under Advance Authorization from various duties, including Basic Customs Duty (BCD), Additional Customs Duty, Anti-Dumping Duty, and others.
4. Customs Notification No.  79/2017-Customs (October 13, 2017):
- This notification amended Notification No. 18/2015-Customs to include exemptions for IGST and GST Compensation Cess, subject to the fulfillment of the pre-import condition.
- Two key conditions were introduced:
  - Exemption from IGST and Compensation Cess was applicable only for physical exports.
  - The exemption was subject to the pre-import condition, meaning goods had to be imported first and then used for manufacturing export goods.
5. Customs Circular No.  16/2023:
- Issued in compliance with the Supreme Court’s judgment, this circular provides a procedure for regularizing imports that failed to meet the ‘pre-import condition’ during the specified period. It allows importers to pay IGST and Compensation Cess along with applicable interest and claim refunds or ITC, subject to eligibility under GST laws.
6. Foreign Trade Policy (FTP) 2023:
- Paragraph 4.03: Governs the Advance Authorization Scheme, allowing duty-free import of inputs physically incorporated into export products.
- Paragraph 4.13: Empowers the Director General of Foreign Trade (DGFT) to impose pre-import conditions for specific inputs.
- Paragraph 4.14: Lists the duties exempted under the Advance Authorization Scheme, including IGST and Compensation Cess, subject to the pre-import condition.
- Paragraph 4.27: Permits exports in anticipation of authorization, allowing exporters to export goods before importing inputs under Advance Authorization.
7. Handbook of Procedures (HBP) 2023:
- Paragraph 4.27(d): States that duty-free authorizations for inputs subject to pre-import conditions cannot be issued.
- Appendix 4J: Lists specific inputs subject to pre-import conditions and their export obligation periods.
Supreme Court Judgment (April 28, 2023):

The Supreme Court upheld the Revenue’s appeal, ruling that the pre-import condition was valid and not arbitrary or unreasonable. Key points from the judgment include:
1. Legality of Pre-Import Condition:
  - The pre-import condition was within the powers of the DGFT under Paragraph 4.13(i) of the FTP and Section 5 of the FTDR Act.
  - The condition was introduced to align the Advance Authorization Scheme with the GST regime, which aimed to create a unified tax structure.
2. Impact of GST:
  - The GST regime introduced IGST and Compensation Cess, which were not part of the original Notification No. 18/2015-Customs. The pre-import condition was introduced to ensure compliance with the new tax framework.
3. Hardship to Exporters:
  - The court acknowledged the operational challenges faced by exporters due to the pre-import condition but emphasized that inconvenience does not render a policy arbitrary or unconstitutional.
4. Legislative Intent:
  - The court recognized the legislative intent behind the pre-import condition as part of broader fiscal reforms under GST.
How DGFT Clarifications Helped Address Discrepancies

The Directorate General of Foreign Trade (DGFT) issued several clarifications and circulars to address the challenges and discrepancies arising from the pre-import condition:

1. Trade Notice No.  07/2023-24 (June 8, 2023):
- In compliance with the Supreme Court judgment, this notice informed exporters that imports made under the Advance Authorization Scheme between October 13, 2017, and January 9, 2019, which could not meet the pre-import condition, may be regularized by making payments as prescribed in Customs Circular No.  16/2023 (dated June 7, 2023).
- Regional Authorities were instructed to guide exporters on the regularization process.
2. Trade Notice No.  27/2023 (September 25, 2023):
- Provided detailed clarifications for specific scenarios:
  - Imports after January 10, 2019: Not subject to the pre-import condition.
  - Imports under Advance Authorization on payment of IGST and Compensation Cess: Not subject to the pre-import condition, irrespective of the date of import.
  - Partially completed imports: Imports made after January 10, 2019, are not subject to the pre-import condition, even if some imports were made before this date.
3. Policy Circular No.  07/2025-26 (November 11, 2025):
- Clarified that the Export Obligation Discharge Certificate (EODC) shall not be withheld if all other requirements are fulfilled in the following cases:
  - IGST paid in cash during the specified period.
  - Non-availing of duty exemptions for IGST, Compensation Cess, or other levies (except Basic Customs Duty).
  - Compliance with pre-import condition and other procedural requirements under the scheme.
Addressing Deficiencies in Advance Authorization Applications

For exporters facing deficiencies due to non-compliance with the pre-import condition, the following steps can be taken:

1. Regularization of Imports:
- As per Trade Notice No.  07/2023-24, imports made between October 13, 2017, and January 9, 2019, which did not meet the pre-import condition, can be regularized by paying the applicable duties and interest to the Customs Authority.
- Exporters should approach the jurisdictional Customs Authority with the required documentation and make the necessary payments.
2. **Claim Refund or Input Tax Credit 

Listen to this on our #YouTube Channel

Source: Supreme Court, DGFT, CBIC

Disclaimer

Handy Download:

“Handy Order and Notifications, Circular for Download”Download

Write to us at office@aadrikaalaw.com

Tel: +91-11-4999 2707 I +91-9999005379

www.aadrikaalaw.com
December 14, 2025
DGFT issues Clarification on Redemption of Advance Authorisations Impacted by Rule 96(10) of CGST Rules in context to the Supreme Court judgement
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 12.11.2025

DGFT issues Clarification on Redemption of Advance Authorisations Impacted by Rule 96(10) of CGST Rules in context to the Supreme Court judgement

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.com or on his Mobile +91-9999005379.

The Directorate General of Foreign Trade (DGFT), under the Ministry of Commerce & Industry, Government of India, has issued Policy Circular No. 07/2025-26 dated November 11, 2025, addressing concerns related to the redemption of Advance Authorisations (AAs) impacted by the erstwhile Rule 96(10) of the Central Goods and Services Tax (CGST) Rules, 2017. This circular provides much-needed clarity for exporters and trade members who faced challenges due to the earlier provisions of Rule 96(10) and its implications on imports made between October 13, 2017, and January 9, 2019.

Background

Rule 96(10) of the CGST Rules, prior to its amendment, restricted the refund of IGST paid on exports in cases where exporters or their suppliers availed specified duty exemptions under Customs Notification No. 79/2017-Customs. This created hurdles for exporters seeking redemption of their Advance Authorisations during the specified period.

To address these issues, the DGFT had earlier issued Notification No. 33/2015-2020 on October 13, 2017, modifying Para 4.14 of the Foreign Trade Policy (FTP) 2015-2020. This notification extended exemptions from payment of duties, including IGST and Compensation Cess, for physical exports under the AA Scheme, subject to a pre-import condition. However, the pre-import condition was later withdrawn through DGFT Notification No. 53/2015-2020 on January 10, 2019, following the issuance of Customs Notification No. 01/2019-Customs.

Supreme Court Judgment and Subsequent Actions

Union of India & ORS. vs Cosmo Films Limited

The Supreme Court of India set aside the Gujarat High Court’s judgment, which had declared the ‘pre-import condition’ in the Foreign Trade Policy (FTP) and customs notifications as arbitrary and unreasonable. The court upheld the validity of the ‘pre-import condition’ introduced by Notification No. 79/2017-Customs and Notification No. 33/2015-2020, stating that it was within legislative discretion and not arbitrary. It emphasized that tax exemptions and refunds are statutory privileges, not constitutional rights, and that economic policies can involve phased implementation and experimentation. The court also ruled that the removal of the ‘pre-import condition’ through a later notification could not be applied retrospectively. While allowing the Revenue’s appeals, the court directed the respondents (exporters) to claim refunds or input tax credit for duties paid during the interim period, subject to verification by the jurisdictional commissioner.

The Hon’ble Supreme Court, in its judgment dated April 28, 2023, upheld the Revenue’s appeal and directed that affected parties be allowed to claim refunds or input tax credit (ITC) wherever applicable. In response, the Customs Authorities issued Circular No. 16/2023-Customs on June 7, 2023, and the DGFT followed suit with Trade Notices No. 07/2023-24 and No. 27/2023, issued on June 8, 2023, and September 25, 2023, respectively.

Key Clarifications in Policy Circular No. 07/2025-26

To further streamline the process and address exporters’ concerns, the DGFT has clarified the following points regarding the issuance of Export Obligation Discharge Certificates (EODC):
1. Payment of IGST in Cash: Exporters who paid IGST in cash at the time of clearing import consignments under the AA Scheme during the specified period will not face any hindrance in obtaining their EODC, provided all other requirements are met.
2. Non-Availing of Duty Exemptions: Exporters who did not avail exemptions from IGST, Compensation Cess, or other levies (except Basic Customs Duty) are eligible for EODC issuance.
3. Compliance with Pre-Import Conditions: Exporters who adhered to the prescribed pre-import and other procedural requirements under the AA Scheme will not face delays in EODC issuance.
Conclusion

This clarification by the DGFT is a welcome move for exporters who were impacted by the earlier provisions of Rule 96(10) of the CGST Rules. By addressing the concerns and providing clear guidelines, the government has ensured smoother processes for the redemption of Advance Authorisations. Exporters are encouraged to review the circular and ensure compliance with the outlined conditions to facilitate the timely issuance of their EODCs.

Source: DGFT, Supreme Court

Disclaimer

Handy Download:

“Handy Order for Download”Download

Write to us at office@aadrikaalaw.com

Tel: +91-11-4999 2707 I +91-9999005379

www.aadrikaalaw.com
November 12, 2025