The Madras High Court has held that a provision in the Foreign Trade Policy making the Directorate General of Foreign Trade’s interpretation final cannot take away the jurisdiction conferred on the Customs, Excise and Service Tax Appellate Tribunal by Parliament.
A Division Bench comprising Chief Justice Sushrut Arvind Dharmadhikari and Justice G. Arul Murugan dismissed a public interest litigation seeking restrictions on duty-free imports under the Duty Free Import Authorisation scheme, inquiries against customs officers, and declarations limiting CESTAT’s authority to interpret the Foreign Trade Policy.
Buy Now: Indirect Tax Judgments E-Compilation – October 2026
The Bench also declined to order a sweeping inquiry against unnamed officers and importers, noting that the petition did not identify a single transaction supporting the alleged misuse.
The petition concerned the DFIA scheme under Chapter 4 of the Foreign Trade Policy. As explained in the order, DFIA is a post-export scheme available for products covered by notified Standard Input Output Norms. The authorisation is transferable and allows its holder to import inputs duty-free.
The dispute arose from DGFT Public Notice No.41 dated November 2, 2016, which amended the norms for certain food products by introducing value caps for some inputs and an actual user condition for others.
The petitioner sought directions requiring customs authorities to record satisfaction regarding compliance with these conditions before allowing duty-free clearances. He also wanted an inquiry into officers who had permitted imports without such verification and show cause notices against importers, exporters and transferees who had benefited.
The petitioner referred to two CESTAT decisions concerning duty-free imports.
In Frunuts Exim LLP, Final Order No.85184/2026 dated January 27, 2026, the Mumbai Bench allowed duty-free import of dried cranberries. In Global Exim, Final Order No.75721/2026 dated June 18, 2026, the Kolkata Bench allowed duty-free import of citric acid.
According to the High Court’s account, both Benches held that the value cap and actual user condition, imposed through a public notice, could not be used to deny the exemption. Those decisions relied on the Supreme Court’s ruling in Viraj Impex Pvt. Ltd. v. Union of India, 2026 INSC 80, and decisions of the Bombay and Rajasthan High Courts.
The petitioner nevertheless argued that the DGFT could prescribe procedures, including value caps and actual user conditions, and that its interpretation of policy was final. Counsel relied on Sections 9 and 19 of the Foreign Trade (Development and Regulation) Act, 1992, and Paragraphs 1.03, 2.04 and 2.58 of the Foreign Trade Policy.
Rejecting the request for a declaration that CESTAT lacked jurisdiction to interpret the Foreign Trade Policy, the High Court explained that the Tribunal’s orders were judicial decisions rendered in appeals under Section 129A of the Customs Act, 1962.
The issue before the Tribunal was whether a customs exemption was available. Resolving that issue required it to read the Foreign Trade Policy.
The Bench held that a declaration that CESTAT could never interpret the policy would be far too wide. Paragraph 2.58, which makes the DGFT’s interpretation final, was itself a policy provision and could not displace jurisdiction granted by Parliament.
The ruling thus recognises CESTAT’s authority to interpret the policy when deciding customs appeals within its statutory jurisdiction.
The Court noted that the department had been a party to the proceedings before CESTAT. If aggrieved by the Tribunal’s decisions, it could pursue the appellate remedy provided under Chapter XV of the Customs Act.
Although the Union of India was the first respondent in the PIL, it had not stated that it was aggrieved by those orders. The petitioner, a stranger to those proceedings, could not use a public interest petition to pursue a challenge that the Union itself had not chosen to bring.
The importers who had succeeded before the Tribunal were also not parties to the High Court proceedings.
The Bench found substantial deficiencies in the factual foundation of the petition.
The petitioner, a 26-year-old Chennai resident, stated in his affidavit that he had learnt about the alleged misuse through reports on the internet. However, he did not name any importer, cite any bill of entry, or quantify the alleged revenue loss.
His assertion that regular imports were taking place through Chennai Port was unsupported by even one identified instance. He also admitted that he had made no representation to any respondent before approaching the Court.
Further, the two Tribunal decisions on which he relied arose from Mumbai and Kolkata, rather than Chennai.
The Court observed that public interest litigation requires good faith, carefully pleaded facts and relief that the court can properly grant. It cannot be used to settle policy questions or reopen decisions of other forums.
The Bench held that a writ of mandamus requires a clear legal duty. It declined to direct officers to enforce conditions whose legal force was itself in serious doubt.
If the Central Government or the DGFT considered such restrictions necessary to protect revenue, they could issue the appropriate notification, the Court said. Whether to do so was a policy decision, and the judiciary could not direct the executive to frame that policy.
The order therefore declined the requested enforcement directions; it did not itself introduce fresh restrictions on DFIA imports.
The Court separately rejected the prayer for an inquiry against customs officers because no individual officer had been named.
It also found the request for notices to all importers excessively broad. Recovery of customs duty must follow the Customs Act and requires a notice issued by the proper officer to a particular person on specific facts.
A public interest petition could not support a roving inquiry against unidentified persons.
The petition also questioned eligibility for benefits under the Remission of Duties and Taxes on Export Products scheme.
The petitioner contended that Notification No.70/2023 extended RoDTEP benefits to exports by Advance Authorisation holders, Export Oriented Units and Special Economic Zone units, but did not mention DFIA exporters. He alleged that DFIA exporters were nevertheless claiming RoDTEP and receiving a double benefit.
He further relied on a DGFT communication stating that DFIA exports were not eligible for RoDTEP, which, according to the petition, CBIC circulated to field officers through a letter dated September 7, 2026.
The petitioner sought a declaration that the DGFT, rather than the RoDTEP Committee, was the final authority on exporter eligibility, notwithstanding Paragraphs 4.55A and 4.55B of the Foreign Trade Policy.
These were the petitioner’s assertions and requested reliefs. While dismissing the petition, the Court did not separately determine the substantive eligibility of DFIA exports for RoDTEP benefits.
The High Court dismissed the writ petition without costs and closed the connected miscellaneous petition.
Membership Required to Access Case Details & Order Copy
To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.
