Relief for NRAI: CESTAT finds No 'Actual User' Condition in Exemption Notification, Permits Sale of Imported Arms [Read Order]

The  New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the Exemption Notification No. 146/94-Cus does not impose an 'Actual User' condition and allowed the National Rifle Association of India (NRAI) to sell imported arms and ammunition to affiliated State Rifle Associations and District Clubs.

National Rifle Association of India (NRAI), the appellant, a national sports federation, imported arms and ammunition between November 2005 and December 2009 under an exemption granted for use in national and international championships.

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The Commissioner of Customs (Import & General), New Delhi, issued a demand of Rs. 3.45 crore in customs duty along with an equal penalty, alleging that NRAI violated exemption conditions by selling imported goods instead of using them directly.

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The department stated that the exemption was applicable only if NRAI itself used the arms and ammunition for competitions and that selling the goods to affiliated State Rifle Associations and District Clubs amounted to a violation. The department relied on Sections 111(d) and 111(o) of the Customs Act, 1962, arguing that the imported goods were liable for confiscation.

The appellant’s counsel argued that the Exemption Notification did not impose an 'Actual User' condition nor prohibit the sale of imported arms for use in championships. The imported arms were used for the intended purpose, and both the Sports Authority of India (SAI) and the Director General of Foreign Trade (DGFT) had approved the import. They also argued that the customs duty demand was time-barred, as a similar issue had already been investigated for an earlier period.

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The revenue countered that strict interpretation of exemption notifications was necessary, and any ambiguity should be resolved in favor of the department. They relied on Supreme Court rulings explaining the need for strict compliance with exemption conditions.

The two-member bench, comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member)observed that the exemption notification did not mandate that the importer itself must use the arms but only required their use in approved championships. The tribunal found that there was no 'Actual User' condition and that NRAI's supply to affiliated associations did not violate the exemption.

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The tribunal further determined that confiscation under Sections 111(d) and 111(o) was unjustified, as the import was lawful and the goods were used as intended. The tribunal quashed Rs. 3.45 crore customs duty demand and penalty.

To Read the full text of the Order CLICK HERE

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