Defence import exemption under trade law upheld where Indian Navy supplies followed a settled prior clearance pattern.

Imports made exclusively under a tender for Indian Navy defence requirements were treated as eligible for the statutory benefit under Section 3(1) of the Foreign Trade (Development and Regulation) Act, 1992. Denial of that benefit was found unjustified where the goods were not for general consumer use or resale, earlier consignments had been cleared on the same basis, and the importer had acted on an established treatment pattern. The reasoning emphasises fairness and prior notice before changing a settled position affecting defence-related imports, and concludes that the proposed confiscatory and penal consequence could not be sustained on that denial.

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Issues: Whether the importer was entitled to the benefit of Section 3(1) of the Foreign Trade (Development and Regulation) Act, 1992 for defence imports meant exclusively for the Indian Navy, and whether denial of that benefit justified the impugned confiscatory and penal order.

Analysis: The appellant imported the goods pursuant to a tender process for supply exclusively to the Indian Navy, and the imports were not meant for general consumer use or sale to others. The decision notes that the appellant had already cleared earlier consignments and that, if they had been made aware that the statutory benefit would be denied, they would not have entered into the contractual arrangement on behalf of the Central Government. The reasoning also takes into account the requirement of fairness in treatment where past practice had been followed and the imports were for defence requirements.

Conclusion: The appellant was entitled to the claimed benefit, and the refusal to extend it was unjustified.

Ratio Decidendi: Where imports are made exclusively for defence requirements under a tender process and the importer has acted on an established treatment pattern, denial of the statutory benefit cannot be sustained without prior notice of the changed position.

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