Re-import of LUT Exports is IGST-Free if No ITC Benefit Was Claimed.

The Dispute: Re-import vs. Fresh Import

The Conflict: The petitioner exported curcumin to the US under an LUT (Zero-rated supply). Due to a tariff hike, the US buyer refused the shipment, and the goods were brought back to India.

The Revenue’s Stance: The Faceless Assessment Group (FAG) treated the re-import as a standard import and slapped a massive IGST of ₹1,03,46,656 on the Bill of Entry.
The Petitioner’s Stance: They argued that this was a return of their own goods. Since the export was under LUT, no IGST was paid or refunded at the time of export; therefore, no IGST should be levied upon re-entry.

The Judicial Verdict: The “Neutrality” Principle

The Court ruled in favour of the Assessee, setting aside the tax demand based on the following logic:

1. The Scope of Re-import Liability

Under the Customs Act read with IGST notifications, the liability on re-imported goods (which were originally exported under LUT) is strictly limited to:

The reversal of ITC availed on inputs used to manufacture the exported goods, OR
The refund of any export benefits (like Duty Drawback) claimed at the time of export.

2. Absence of a “Taxable Event”

The Court noted that if no ITC was claimed and no IGST refund was taken during export, there is no “revenue loss” to the government. Imposing a fresh IGST on the full value of the goods during re-import would lead to double taxation and violate the spirit of “Zero-rated” supplies.

3. The “Officer Certificate” Solution

The Court held that if the petitioner provides a certificate from their jurisdictional Assessing Officer (AO) confirming that no ITC was availed (or that the ITC has been reversed), the goods must be cleared without any IGST.

Strategic Takeaways for Exporters in 2026

LUT vs. IGST Refund: If you export under LUT, you must be prepared to prove that you haven’t “double-dipped” by claiming ITC on the same goods that are now coming back.
Documentation for Re-import: Always maintain an “ITC Reconciliation Statement” for every export shipment. If a shipment is returned, you will need a Certificate of Non-Availment of ITC from your GST officer to avoid IGST at the port.
FAG Interplay: This case highlights that the Faceless Assessment Group (FAG) often applies automated rules. If you face an incorrect IGST demand on a re-import Bill of Entry, do not just pay it; challenge the query with a formal certificate of ITC reversal.
Customs Notification 45/2017: This is the primary notification governing re-imports. It states that IGST on re-import is only equal to the amount of IGST refund or ITC benefit taken. If that benefit is Zero, the IGST on re-import must also be Zero.

HIGH COURT OF KERALA

Nar Spice Products

Union of India

ZIYAD RAHMAN A.A., J.

WP(C) NO. 5465 OF 2026

MARCH 19, 2026

Jestin Mathew, Joshy Raj R.R., Sachin Zachariah, Smt. Ann Gini Roy and Abhay R. Unnithan, Advs. for the Petitioner. P.R. Sreejith, Adv. for the Respondent.

JUDGMENT

1. The petitioner is a partnership firm and is engaged in the business of processing and exporting spices and food products. As part of the business activities of the petitioner, the petitioner had exported 20 pallets of Curcumin, packed in 260 HDPE drums, to JSA International, USA on 13.07.2025 as evidenced by Ext.P9. During the time when the aforesaid goods were in transit, a policy decision was taken by the US Government to increase the tariff on export of Indian goods upto 50%. Consequently, the JSA International, USA refused to accept the said consignment, and accordingly, the petitioner was constrained to re-import the said consignment. Ext.P10 is the bill of lading dated 14.11.2025 and Ext.P11 is the Check ListBill of Entry for Home Consumption submitted by the clearing agency. Ext.P12 is the Bill of Entry dated 29/12/2025. According to the petitioner, in Ext.P12, the total IGST imposed is Rs. 1,03,46,656/-, which, according to the petitioner was not justifiable in view of the fact that this is only a re-import, where, no taxable event has occurred. The reliefs sought by the petitioner are as follows:

“i)

issue a writ of certiorari, or any other appropriate writ, order or direction to quash A item details- Sl. No. 30, which mentions total duty assessed as Rs. 1,03,46,656/- and B item details, Sl. No. 5, which mentions IGST imposed as Rs. 1,03,46,656/- in Exhibit P12, issued by the 2nd respondent, to the petitioner.

(ii)

to declare that the petitioner is not liable to pay any IGST/duty for the 20 pallets of re-imported goods, as evident from Exhibit P10, P11 and P12.

(iii)

issue such other appropriate writ, order or direction as this Hon’ble Court may deem fit, just, and proper to grant on the facts and circumstances of the case.

(iv)

to dispense with the filing of English translations of the vernacular documents.”

2. In response to the averments contained in the writ petition, a statement has been submitted by the 4^th respondent, wherein, it is averred that, in connection with the processing of the re-import, the FAG officer raised a query on 23.01.2026 seeking clarification from the petitioner as to whether any IGST refund had been claimed from the Jurisdictional Range, since the Shipping Bill was filed under LUT. This query was made to ensure that, the input tax credit, if any, claimed by the petitioner is reversed while re-importing the goods. In response to the aforesaid query, the following reply was given by the petitioner:

“DEAR SIR THE ORIGINAL EXPORT WAS UNDER LUT WITHOUT PAYING IGST THUS NO CLAIM FROM RANGE MADE BY THE EXPORTER UNDER NOTIFICATION 45/2017 THE IGST REQUIRED TO PAY AS PER IMPORT DUTY THAT WAS NOT PAID AT THE TIME OF EXPORT DUTY AND APPLICABLE INTEREST IS PAYABLE AS PER BELOW MENTIONED HENCE, WE KINDLY REQUEST YOU TO ASSESS THE BE APPROPRIATELY TO RELEASE THE CONSIGNMENT AS SOON POSSIBLE. IGST WORKINGS WITH APPLICABLE INTEREST ON AV Rs 52040086/- IGST 18 PERCENTAGE Rs. 9367215/- APPLICABLE INTEREST ON IGST FROM SB DATE 04.07.2025 TO 31.01.2026 -212 DATY RS 979440/-.”

3. According to the respondent, the amount was demanded consequent to the said explanation. It is further averred in the statement that, as per the Notification No.45/2017- Cus., the importer is required to repay the applicable IGST, which may have been claimed as a refund of unutilized input tax credit of CGST,SGST/UTGST and IGST as per Section 16(3) of the IGST Act, 2017, if goods were exported under LUT/Bond.

4. It is also averred in the statement that, in case the petitioner did not avail the input tax credit, they ought to have obtained a certificate to that effect, from the jurisdictional assessing officer to get the goods cleared without paying the IGST amount. If the input tax is claimed, goods could be cleared only upon payment of the amount of input tax credit which they have availed.

5. After hearing the learned counsel for the petitioner and the learned standing counsel for the respondents, I find that apparently there is a mistake on the part of the petitioner or his clearing agent, while completing the process. Evidently, the liablity of the petitioner is confined to reverse the input tax credit, if the petitioner has already availed the same. Therefore, as averred in the statement, it is for the petitioner to establish the said fact by obtaining a certificate from the jurisdictional assessing officer to the effect that, the petitioner did not avail input tax credit. In case, the petitioner has availed the same, the liability of the petitioner shall be confined to the refund of the amount that was availed as input tax credit.

In such circumstances, this writ petition is disposed of permitting the petitioner to submit a fresh response to the query raised by the FAG Officer on 23.01.2026, instead of the reply already given on 27.01.2026. Upon submitting such a response, the officer concerned shall process the same, and upon the petitioner furnishing the necessary certificate from the jurisdictional assessing officer, the same shall be considered and appropriate orders shall be passed within a period of two weeks. To enable the respondents to do so, Ext.P12 is set aside.