2026-VIL-11-AAR-CU
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CUSTOMS Advance Ruling Authority

Customs AAR - Eligibility to DFIA exemption to import of non-sensitive inputs without establishing correlation between the quality, technical characteristics etc. of imported goods and inputs used in export goods - Binding nature of DFIA licence conditions - Strict construction of exemption notifications - Whether the applicant is entitled to claim Exemption from payment of Customs Duty against Custom Notification No.25/2023-Cus dated 01.04.2023 r/w Board Circular No.20/2025-Cus dated 24.07.2025 under Transferable DFIAs without adherence to certain conditions, particularly with regard to value restrictions and the "actual user" condition - HELD - The exemption under Notification No. 25/2023-Cus is conditional upon strict compliance with the DFIA scheme framework. On that framework, correlation of technical characteristics, quality and specifications is required only for sensitive inputs specified in Para 4.29 of the Foreign Trade Policy, 2023. In the case of inputs falling under Paras 4.12 and 4.28, only the specific name or description and quantity used in the export product are required to match the shipping bill and authorisation – Further, the CBIC Circular No. 20/2025-Cus, dated 24.07.2025, clarified that only in respect of inputs specified in para 4.29 of the Foreign Trade Policy, 2023, a correlation of technical characteristics, quality and specification of the inputs with the export product is required to be established under the DFIA Scheme. Such correlation is not required to be established in case of other inputs - The condition sheet forming part of the DFIA licence is integral to the authorisation and derives its authority from the Foreign Trade Policy and SION norms framed under the Foreign Trade (Development & Regulation) Act, 1992 - The applicant is entitled to avail exemption under Notification No. 25/2023-Cus dated 01.04.2023 for non-sensitive inputs without establishing correlation of quality, technical characteristics and specifications, subject to the goods being covered by the DFIA, SION norms and the conditions attached thereto, and any deviation including violation of actual user condition, wherever applicable, would render the benefit inadmissible – Ordered accordingly - Binding nature of DFIA licence conditions - "actual user" condition and value cap restrictions – HELD - The Rajasthan High Court in Nrapen Shanker Acharya has not struck down the SION amendments nor has it held that conditions incorporated in SION or DFIA licences are invalid. On the contrary, the judgment reinforces the principle that formulation and modification of policy conditions fall within the executive domain. Therefore, the reliance placed by the applicant to contend that conditions endorsed in the DFIA licence are unenforceable is misplaced and devoid of merit - The condition sheet forming part of the DFIA licence is integral to the authorisation and derives its authority from the Foreign Trade Policy and SION norms framed under the Foreign Trade (Development & Regulation) Act, 1992. Such conditions, including value caps, exclusions and "actual user" requirements wherever specified, constitute binding stipulations governing the import - The "actual user" condition, where incorporated in SION norms, is valid and enforceable; the conditions endorsed in the DFIA licence are binding on the importer as well as Customs authorities; Customs authorities cannot add to or subtract from the licence conditions.
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