Transitional import benefit cannot be refused mechanically where a genuine pre-existing contract and partial performance are shown.

A transitional import benefit under the Foreign Trade Policy could not be denied mechanically where the importer showed a genuine pre-existing contract entered before the policy change, Customs registration, and partial performance; the absence of an irrevocable letter of credit was not by itself decisive. The refusal communication was also unsustainable because it contained no reasons and showed no proper application of mind to the facts or the object of the transitional clause. The rejection was therefore set aside and the request was remitted for fresh consideration on the merits of the transitional arrangement.

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Issues: (i) Whether the petitioners were entitled to transitional benefit under paragraph 1.5 of the Foreign Trade Policy 2004-2009 notwithstanding the absence of an irrevocable letter of credit, when the import contract pre-dated the restriction and had been partly performed. (ii) Whether the refusal communication rejecting the request for transitional arrangement was sustainable in law.

Issue (i): Whether the petitioners were entitled to transitional benefit under paragraph 1.5 of the Foreign Trade Policy 2004-2009 notwithstanding the absence of an irrevocable letter of credit, when the import contract pre-dated the restriction and had been partly performed.

Analysis: The transitional arrangement was intended to protect bona fide pre-existing transactions and to prevent the use of backdated documents to defeat a later restriction. The contract had been entered into before the policy change, was registered with Customs, substantial imports had already been made, and the remaining contractual obligation was still to be performed. On those facts, the absence of an irrevocable letter of credit by itself was not decisive, because the genuineness of the transaction was otherwise established.

Conclusion: The petitioners were entitled to consideration of transitional relief on the merits of a genuine pre-existing contract, and the mere absence of an irrevocable letter of credit did not justify rejection.

Issue (ii): Whether the refusal communication rejecting the request for transitional arrangement was sustainable in law.

Analysis: The impugned communication gave no reasons and did not disclose any application of mind to the facts or to the object of the transitional clause. A rejection affecting vested contractual expectations under the policy could not rest on a bare conclusion without a reasoned evaluation of the request.

Conclusion: The refusal communication was unsustainable and was quashed, with the matter remitted for fresh consideration.

Final Conclusion: The petition succeeded to the extent that the rejection of transitional benefit was set aside and the matter was sent back for reconsideration on the petitioners' request under the amended policy framework.

Ratio Decidendi: A transitional import benefit meant to prevent abuse by backdated documentation cannot be denied mechanically where the importer shows a genuine pre-existing and partly performed contract; refusal must also be supported by reasons and a proper application of mind.

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