The Delhi High Court has held that the return of petroleum operations equipment from a Free Trade Warehousing Zone (FTWZ) to the Domestic Tariff Area (DTA) pursuant to a fresh contract and a subsequent Essentiality Certificate (EC) constitutes a fresh import and not a re-import.

The division bench of Justices Anil Kshetarpal and Shail Jain held that merely because the equipment was physically the same as that which had earlier been imported into India, it could not be treated as a re-import.

“A re-import exemption presupposes a sufficient continuity between the export and the return. The present arrangement contains no such continuity. The first transaction is brought to an end by completion of the original contractual deployment and the export to FTWZ; while the second transaction begins only when a new domestic requirement arises. The two transactions are connected only by the identity of the equipment; they are not, in law, so connected as to make the subsequent movement a return leg of the earlier transaction,” it observed.

The court dismissed four appeals filed by oilfield services companies against advance rulings denying them exemption under a Customs notification.

Appellants submitted equipment was imported for specified petroleum operations under concessional customs duty benefits and upon completion of a contractual deployment, they proposed to move the equipment to an FTWZ for safekeeping instead of physically exporting it out of India, where it would remain until a fresh domestic contract was secured.

Once a new contract was obtained and a fresh EC issued, the appellants proposed to bring the same equipment back from the FTWZ into the DTA. They sought to avail the concessional duty benefit under a 2017 Customs notification as “re-imported” goods.

The High Court noted that although “re-import” was not exhaustively defined under the relevant statutes, the expression necessarily carried the idea of goods having gone out and thereafter being brought back. The mere identity of the goods, it held, was not sufficient.

“There must also be the requisite continuity between earlier export and the subsequent return. The return must bear the character of a restoration or reversal of the outward movement, rather than constituting the commencement of an independent transaction having an entirely different commercial and legal basis,” the Court observed.

In the present case, the Court found that such continuity was absent. The equipment was proposed to be placed in the FTWZ after completion of the original contractual deployment, while its subsequent clearance into the DTA would take place only after a new contract was secured and a fresh EC issued.

Thus, the intervening movement did not reverse the earlier transaction but separated one completed contractual deployment from another.

“The character of the transaction must precede and govern the fiscal consequence; it cannot be moulded separately to suit each exemption claimed,” the Court said.

Holding that the proposed movement from the FTWZ to the DTA pursuant to the subsequent EC was a fresh import and not a re-import, the Court dismissed the appeals.

For Appellant: Senior Advocate Tarun Gulati, Advocates Tushar Joshi, Daliya Singh

For Respondents: Harpreet Singh, SSC

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Case Title :  Baker Hughes Oilfield Services India Pvt Ltd & Ors v. Customs Authority for Advance Rulings & AnrCase Number :  CUSAA 43/2023 and connected mattersCITATION :  2026 LLBiz HC (DEL) 850
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