The appeals arose from a judgment of the Gujarat High Court which had set aside the “pre-import condition” imposed through Notification No. 79/2017-Customs and Notification No. 33/2015-2020, both dated 13 October 2017. These notifications made the exemption from Integrated Goods and Services Tax (IGST) and GST Compensation Cess on inputs imported under the Advance Authorisation (AA) Scheme conditional upon fulfilling a “pre-import” requirement—i.e., that inputs be imported before export of finished goods. The High Court held that this condition was unreasonable and contrary to the Foreign Trade Policy (FTP) 2015-2020.

The Union of India contended that the AA Scheme inherently required import before export because inputs must be physically incorporated in the final goods, and that the DGFT was empowered under paragraph 4.13(i) of the FTP to impose such conditions. The exporters argued that the condition was impractical for continuous manufacturing cycles and violated Articles 14 and 19(1) (g) of the Constitution.

The Supreme Court allowed the appeals filed by the Union of India and upheld the validity of the “pre-import condition.” It held that paragraph 4.13(i) of the FTP expressly empowered the DGFT to impose such a condition on any inputs and that the power was exercised lawfully through the impugned notifications. The Court observed that the Advance Authorisation Scheme was a statutory exemption, and no importer had a vested right to exemption without complying with its terms.

The Court found that the High Court erred in assuming the “pre-import condition” applied only to specific goods listed in Appendix-4J. It clarified that the DGFT could extend the condition to all goods as a matter of policy. The introduction of GST represented a fundamental overhaul of the indirect tax system, and the transitional conditions for IGST exemption were legitimate fiscal measures. The deletion of the condition in 2019 did not render its earlier imposition invalid or retrospective.

Accordingly, the Supreme Court upheld the notifications dated 13 October 2017 and set aside the Gujarat High Court’s judgment.