Export Duty Exemption Can’t Be Denied for Exports Without Letters of Credit of Parboiled Rice: Chhattisgarh High Court

The Chhattisgarh High Court has held that exporters who do not conduct trade through Letters of Credit (LoCs) cannot be denied exemption from export duty merely for non-fulfilment of LoC-related conditions, when such exporters have otherwise complied with the substantive requirements and realised export proceeds. The Bench of Chief Justice Ramesh Sinha and Justice Bibhu Datta Guru has observed that export transactions can lawfully be conducted through multiple recognised channels such as documentary collections, open accounts, wire transfers, and cash-based mechanisms. The export through LoC is neither compulsory nor statutorily mandated. The case arose in the backdrop of the Central Government’s decision to impose a 20% export duty on parboiled rice with effect from 25 August 2023, through Notification No. 49/2023-Customs. Simultaneously, the Government issued Notification No. 50/2023-Customs, granting exemption from this export duty subject to certain conditions, notably Condition No. 6. Condition No. 6 required that the goods must have entered the customs station before 25 August 2023 without a Let Export Order (LEO), and the export must be backed by an irrevocable Letter of Credit opened prior to the cut-off date. The exemption was applicable only for a limited period—from 25 August 2023 to 15 October 2023—after which the duty was unconditionally exempted. Eastman International contended that it had been exporting rice since 2012 and realised export proceeds through legitimate modes such as cash upon delivery, without using Letters of Credit. The firm argued that export through LoC is not mandatory under law. The second sub-condition of Condition No. 6 presupposed the existence of an LoC and was therefore inapplicable to exporters who never used that mechanism. The purpose of the LoC condition—ensuring realisation of export proceeds—stood fully satisfied, as export proceeds had already been received in India. The exporter had paid over ₹2.01 crore in export duty under protest to avoid delay in shipment and sought a refund with interest. The Customs Department argued that Condition No. 6 had to be satisfied concurrently, stressing that the word “and” made both sub-conditions mandatory. Since the petitioner did not export goods backed by an irrevocable LoC, the exemption was denied. The Department also defended the notification as a policy decision taken under emergency powers and claimed it was beyond judicial scrutiny. The High Court held that the LoC-related condition cannot be mechanically applied to exporters who do not operate through that mode. The Court noted that Condition No. 6(ii) is predicated on the existence of an LoC. Where no LoC exists at all, the question of complying with such a condition does not arise. Interpreting the condition otherwise would amount to rewriting the notification and imposing a requirement never intended by the Government. The Bench relied on the Supreme Court’s ruling in Mangalore Chemicals and Fertilizers Ltd. v. Deputy Commissioner, reiterating that not all conditions in exemption notifications are equal and that procedural or technical conditions cannot defeat substantive entitlements. The Court also noted that strict interpretation does not mean an interpretation that leads to absurd or impossible results. While primarily deciding the matter on statutory interpretation, the Court also observed that insisting on LoC-based exports for availing exemption—despite full realisation of export proceeds through other legal modes—would be arbitrary and unreasonable, raising concerns under Articles 14 and 19(1)(g) of the Constitution. The High Court concluded that Clause (ii) of Condition No. 6 was inapplicable to the petitioner, denial of exemption on this ground was unsustainable. The petitioner was entitled to exemption from export duty and consequential relief, including refund of duty paid under protest. Case Details Case Title: M/s Eastman International Versus UOI Case No.: WPT No. 228 of 2023 Date: 12/12/2025 Counsel For Petitioner: Ajay Aggarwal, Mr. Naveen Bindal and Ms. Katyayani Vishnupriya Counsel For Respondent: Anumeh Shrivastava Click Here To Read Order Read More: GST Assessment Against Deceased Person Invalid, S. 93 Doesn’t Permit Determination After Death: Allahabad HC

Export Duty Exemption Can’t Be Denied for Exports Without Letters of Credit of Parboiled Rice: Chhattisgarh High Court

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