Exporters Not Using Letters Of Credit Cannot Be Denied Rice Export Duty Exemption: Chhattisgarh High Court Directs ₹2.1 Crore Refund
The Chhattisgarh High Court has held that exporters who do not carry out exports through Letters of Credit (LoCs) cannot be denied exemption from export duty on parboiled rice solely on the ground that they failed to satisfy an LoC-related condition in a temporary exemption notification.A Division Bench of Chief Justice Ramesh Sinha and Justice Bibhu Datta Guru delivered the ruling while...
The Chhattisgarh High Court has held that exporters who do not carry out exports through Letters of Credit (LoCs) cannot be denied exemption from export duty on parboiled rice solely on the ground that they failed to satisfy an LoC-related condition in a temporary exemption notification.
A Division Bench of Chief Justice Ramesh Sinha and Justice Bibhu Datta Guru delivered the ruling while allowing the writ petition filed by a Ludhiana-based exporter engaged in the export of parboiled rice. The petitioner had challenged the levy and collection of 20 per cent export duty on its rice consignments during the brief period between 25 August 2023 and 15 October 2023.
The petitioner-Eastman International's consignments had entered the customs station prior to the cut-off date, and it had fully realised the export proceeds. However, the exporter did not conduct its trade through LoCs, instead using other recognised modes of payment.
Customs authorities denied the benefit of exemption on the ground that both sub-conditions under Condition No. 6 had to be satisfied together, and collected over ₹2.01 crore as export duty, which the petitioner paid under protest.
The Central Government had imposed the 20 percent export duty on parboiled rice through Notification No. 49/2023-Customs dated 25 August 2023. On the same day, the government also issued Notification No. 50/2023-Customs granting exemption from the duty, subject to fulfilment of certain conditions. Condition No. 6 of the exemption required that the goods should have entered the customs station before 25 August 2023 and that the exports should be backed by irrevocable Letters of Credit opened before that date.
Challenging this action, the exporter argued that export through LoCs is not mandatory under law and that the LoC-related condition could not be applied to exporters who do not transact through that mechanism. It was further contended that the objective behind the condition, ensuring realisation of export proceeds stood fully achieved in the petitioner's case.
The Chhattisgarh High Court observed that where there is no LoC to start with, the very idea of a cut-off date is entirely meaningless and out of place. This incidentally, shows that the said second sub-condition was not designed to be applicable to the parties like the present Petitioner. This also shows that the stand of the respondent Department is against the doctrine of narrow interpretation. This also shows that their stand leads to absurdity and anomaly, which is constitutionally infirm.
The High Court further noted that exemption conditions must be interpreted purposively and in a manner consistent with constitutional guarantees. It held that denying exemption to exporters who had otherwise fulfilled the substantive requirements and realised export proceeds would amount to elevating form over substance and could result in arbitrary discrimination.
Allowing the writ petition, the court directed the authorities to refund the export duty of ₹2,01,28,295 collected from the petitioner, along with interest in accordance with law, within eight weeks.
Case Title: M/s Eastman International v. Union of India & Ors
Case Number: WPT No. 228 of 2023Counsel for Petitioner:Ajay Aggarwal, Naveen Bindal and Katyayani Vishnupriya
Counsel for State: Anmol Sharma and Anumeh Shrivastava
Citation: 2026 LLBiz HC (CHH) 1