The Supreme Court on Tuesday asked the revenue department to provide details of the total number of show-cause notices issued for availing of the goods and services tax (GST) exemption in instances where exports have preceded imports, and where high courts (HCs) have granted interim orders.

The apex court has sought details, while reserving the order on the central government’s plea against a Gujarat HC order.

The HC had in 2019 held that the “pre-import” condition is ultra vires the advance authorisation scheme under the foreign trade policy.

The government had moved a special leave petition (SLP), challenging the HC order the same year.

While agreeing to hear the revenue department’s plea, the apex court also stayed the HC order.

In the SLP, the revenue department holds the view that a pre-import condition would mean goods have to be imported first and final products manufactured from such imported goods have to be exported.

Exporters, however, resisted the pre-import condition rule.

“The imposition of a pre-import condition defeats the objectives of the advance authorisation scheme that aims at providing working capital benefit to Indian exporters,” argued Abhishek Rastogi, counsel on behalf of exporters.

The revenue department is of the view that a pre-import clause requires the imported material to be used for the manufacture of finished goods, which, in turn, are required to be exported towards the discharge of an export obligation. The same is possible only when exports happen after the commencement of imports, thereby allowing reasonable time for the manufacture of finished goods.

Therefore, when the law demands a pre-import condition on the input material to be imported, the same cannot simultaneously enjoy the benefit of export in anticipation of authorisation.

The revenue department in the SLP also pointed out that importers/exporters have been availing of the benefit of the said provision without exception and that export goods are made out of domestically or otherwise procured materials and the duty-free import goods used for a purpose other than the manufacture of export goods.

“There is a lack of intelligible differentia to deny the benefit of exemption to that class of exporters, which had already exported the goods and received the authorisation after exporting such goods,” observed Rastogi.