The Delhi High Court has ruled that equipment initially imported into India at a concessional rate for a specific petroleum project, subsequently moved from the Domestic Tariff Area (DTA) to a Free Trade Warehousing Zone (FTWZ), and later brought back into the DTA under a fresh Essentiality Certificate (EC) for a different contract, constitutes a fresh import and not a “re-import” eligible for exemption under Serial No. 5 of Notification No. 45/2017-Cus.
The Bench of Justice Anil Khetarpal and Justice Shail Jain has observed that the identity of the equipment alone cannot transform a subsequent transaction into a re-import when the original contractual deployment has ended and the subsequent return to India is occasioned by an entirely new contract and a fresh EC.
Buy Now: 70+ Judgements Indirect Tax – July 2026 | E-Magazine
The central dispute concerned the interaction between Notification No. 50/2017-Cus. dated June 20, 2017 (NN-50) and Notification No. 45/2017-Cus. dated June 30, 2017 (NN-45).
NN-50 provides a concessional customs regime for specified equipment imported for petroleum operations. In the case of a subcontractor, the benefit is linked to an Essentiality Certificate issued by the concerned licensee, lessee or contractor certifying that the equipment is required for specified petroleum operations.
NN-45, on the other hand, provides exemptions in respect of specified categories of goods that are re-imported into India.
The question before the High Court was whether equipment originally imported under NN-50, moved from DTA into an FTWZ after completion of the original project, and subsequently returned from the FTWZ into DTA pursuant to a fresh EC for another project could simultaneously qualify for the concessional treatment under NN-50 and the re-import exemption under NN-45. The Customs Authority for Advance Rulings (CAAR) had answered the question against the applicants.
The appellants had proposed a particular commercial arrangement for specialised oilfield equipment.
The equipment would initially be imported into India at the concessional rate available under NN-50, with Basic Customs Duty at nil and IGST at 12%, against an Essentiality Certificate issued by the relevant contractor. The equipment would remain under the ownership and operational control of the appellant.
After completion of the particular petroleum contract, if the same equipment was expected to be required for another Indian petroleum project but the next contract had not yet been identified, the equipment would not be physically exported outside India. Instead, it would be moved to an LSP situated within the FTWZ for safekeeping.
Once a new contract was secured and a fresh EC was issued, the very same equipment, without manufacturing or processing, would be brought back from the FTWZ into the DTA. The proposed arrangement contemplated claiming the concessional duty benefit under NN-50 as well as the residuary exemption under Serial No. 5 of NN-45. No duty drawback, rebate or export incentive was proposed to be claimed on the movement from DTA to FTWZ.
Before CAAR, the jurisdictional Customs Commissioner opposed the proposed arrangement. The Department contended, among other things, that NN-45 contemplated actual export and subsequent re-import and that mere warehousing of equipment in an FTWZ could not satisfy that requirement.
CAAR accepted the Department’s position. It held that the concessional benefit under NN-50 was conditional and that the concepts of export, re-export and re-import could not be artificially introduced into the notifications to create an exemption not expressly provided for.
CAAR further reasoned that the statutory meanings of export and import under the Special Economic Zones Act, 2005 could not simply be treated as interchangeable. It also noted that Rule 18(5) of the SEZ Rules deals with goods held by a unit for subsequent dispatch and that the movement from FTWZ to DTA could not automatically be characterised as a re-import for NN-45 purposes.
CAAR also considered the second proviso to NN-45, which excludes certain goods exported by a 100% EOU or a unit in a FTWZ from the exemption. The Authority concluded that the proposed arrangement did not fall within the intended scope of the re-import exemption.
Before the High Court, the appellants argued that the SEZ legal framework treats an SEZ as being outside the customs territory for specified purposes. Consequently, movement from DTA to FTWZ could be treated as export and the subsequent movement from FTWZ to DTA as import.
Reliance was placed particularly on Section 30 of the SEZ Act, under which goods removed from an SEZ to the DTA are chargeable to customs duties as applicable to imported goods.
The appellants contended that once the legislation treats clearance from an SEZ to DTA as an import for customs purposes, the return of goods that had previously been imported into India should logically qualify as a re-import. They also relied upon Rule 48(3) of the SEZ Rules, 2006, which refers to goods procured from the DTA by a unit and subsequently supplied back to the DTA as “re-imported goods.”
They further argued that denying the NN-45 exemption would result in repeated taxation of the same equipment and put equipment routed through an FTWZ in a less favourable position than equipment directly imported from outside India. The appellants also relied upon CBIC Circular No. 21/2019-Customs, contending that the circular recognised the availability of residuary re-import exemption in appropriate circumstances.
The Customs authorities maintained that the proposed return of the equipment to the DTA was not a re-import but a fresh import transaction.
According to the Department, the original import under NN-50 was tied to a specific contract and EC. Once that contract ended and the equipment was moved to the FTWZ, the original transaction stood concluded. A subsequent clearance into the DTA based on a fresh EC for a new contract therefore represented a new transaction.
The Department also emphasised that merely keeping the equipment in an FTWZ did not convert the subsequent movement into a re-import. It argued that the appellant could not use the SEZ statutory fiction to create a tax-neutral cycle under which the same equipment could repeatedly move between DTA and FTWZ while obtaining successive fiscal concessions.
The High Court attached considerable importance to the structure of Condition No. 48 of NN-50.
The Court observed that the concessional rate under NN-50 is not an unconditional or permanent benefit attached to the equipment. Instead, it is a conditional fiscal concession linked to specified petroleum operations and supported by an Essentiality Certificate.
The Court noted that Condition No. 48 creates a comprehensive framework dealing with the post-import treatment of the equipment. It addresses continued use, transfer to another eligible specified person and eventual disposal. In particular, Condition No. 48(c) provides a mechanism for transfer of equipment from one specified person to another, with the transferee assuming the obligations under NN-50.
This provision became central to the Court’s reasoning.
The High Court held that where concessionally imported equipment is genuinely required for another eligible petroleum operation, NN-50 itself provides a mechanism for continued deployment.
Condition No. 48(c) permits transfer of the equipment to another specified person, subject to the prescribed safeguards, including intimation to Customs and assumption of the relevant obligations by the transferee.
The Court therefore found no justification for creating an additional FTWZ-based route under which the equipment could be moved to an FTWZ and subsequently brought back into the DTA under a fresh EC while simultaneously obtaining the benefit of NN-45.
According to the Court, the notification itself supplies the legal mechanism connecting one eligible petroleum deployment with another. The FTWZ route could not be used merely to create an additional fiscal benefit that the notification does not expressly provide.
One of the most significant observations of the judgment concerns the meaning of “re-import.”
The Court noted that the Customs Act and SEZ Act do not provide an exhaustive statutory definition of “re-import.” The expression must therefore be understood in its ordinary legal and commercial context, particularly in light of the purpose of NN-45.
The Court held that the fact that the equipment is physically the same equipment that was earlier in India is not sufficient by itself to establish re-import.
There must also be sufficient continuity between the earlier outward movement and the subsequent return. A genuine re-import ordinarily involves goods going out and subsequently being brought back in circumstances representing a restoration or reversal of the outward movement.
In the present case, that continuity was missing because the equipment was proposed to be returned to the DTA only after a new domestic contract had been secured and a fresh EC had been issued.
The Court treated the original EC and the subsequent EC as relating to separate contractual transactions.
The initial EC supported the original import for a specified petroleum operation. Once that contractual deployment was completed, the original transaction came to an end. The subsequent requirement arose only when another domestic contract was secured.
The Court therefore rejected the proposition that the physical identity of the equipment could merge the two transactions into one continuing transaction.
It held that a re-import exemption requires continuity between the export and return. Here, the movement into the FTWZ functioned as a bridge between two separate domestic commercial arrangements rather than as the outward leg of a transaction whose return constituted a genuine re-import.
The High Court also rejected the attempt to assign two different legal characters to the same movement.
The appellants sought to treat the FTWZ-to-DTA movement as an “import” under NN-50 for obtaining the concessional petroleum-equipment benefit and simultaneously as a “re-import” under NN-45 for securing the residuary exemption.
The Court held that the two notifications operate on fundamentally different legal premises. NN-50 applies to goods imported for specified petroleum operations, whereas NN-45 concerns re-imported goods.
The same inward movement cannot be characterised as an import for one exemption and a re-import for another merely to obtain separate fiscal concessions. The legal character of the transaction must be determined first; the fiscal consequence follows from that character.
The Court was particularly concerned about the practical consequences of accepting the appellants’ interpretation.
If the proposed interpretation were accepted, the same equipment could be used for one contract, moved into an FTWZ, brought back into the DTA against a second EC, and then—after completion of the second contract—again moved into the FTWZ and brought back against a third EC.
The Court observed that such an interpretation could effectively create a perpetual tax-neutral cycle for concessionally imported equipment.
According to the Court, the statutory fiction governing SEZ transactions could not be used as a vehicle to create a benefit that was not contained in the exemption notifications.
The Court further held that the proposed FTWZ movement could not be equated, in substance, with the export contemplated upon completion of the original petroleum project.
The equipment was not being sent outside India because the original commercial transaction had been reversed or because an overseas transaction had failed. Rather, it remained available for domestic deployment and was parked in an FTWZ pending identification of another Indian contract.
The Court therefore refused to allow the SEZ statutory fiction to convert the substantive export requirement attached to the original concessional import into a mere procedural formality.
The High Court also rejected reliance on CBIC Circular No. 21/2019-Customs dated July 24, 2019.
The Court noted that the circular dealt with goods that were actually sent outside India for specified temporary purposes, such as exhibition or consignment, and subsequently returned in circumstances addressed by the circular.
The present case was materially different because the equipment remained within India and was moved into an FTWZ under the special SEZ framework. Its subsequent return was triggered by a fresh domestic contract and a fresh EC.
The factual and legal foundation of the circular therefore could not be extended to the proposed FTWZ arrangement.
The Delhi High Court categorically held that the proposed movement of equipment from FTWZ into DTA pursuant to a subsequent EC constitutes a fresh import and not a re-import under Serial No. 5 of Notification No. 45/2017-Cus.
The Court further held that the original transaction, based on the original EC and the corresponding contractual deployment, stood concluded once that deployment was completed. A subsequent EC for another contract gives rise to a distinct transaction, notwithstanding that the same physical equipment is involved.
The Court also reiterated that the appellants could not attribute two inconsistent legal characters to the same movement—import under NN-50 and re-import under NN-45—in order to secure separate fiscal exemptions.
Consequently, the batch of four appeals was dismissed, and the pending applications were disposed of. The judgment was pronounced on August 19, 2026.
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.
Read More: Pendency Of Writ Petition Did Not Bar Customs Adjudication: Delhi High Court
