Exemption from Customs Duty — Law of Taxation Notes

Exemption from Customs Duty

Life-saving drugs, defence equipment, goods for a disaster relief effort — the Government often wants these to enter India without the burden of duty. Section 25 is the power that lets it grant such relief, either as a broad public exemption or a one-off order in a special case.

The power to exempt (s.25)

Section 25 — power to grant exemption from duty. Where the Central Government is satisfied that it is necessary in the public interest, it may exempt goods from customs duty:

1. General exemption (s.25(1)) — by notification in the Official Gazette, it may exempt generally (either absolutely or subject to conditions) goods of any specified description from the whole or any part of the duty. These are the standard exemption notifications (e.g. concessional/nil duty on specified capital goods, life-saving drugs).
2. Special exemption (s.25(2)) — by a special order (not a general notification), in circumstances of an exceptional nature stated in the order, it may exempt specific goods from duty (e.g. a one-time relief for goods imported for a particular relief operation).

Section 25(1): “If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions … as may be specified in the notification goods of any specified description from the whole or any part of duty of customs leviable thereon.”

Features: the exemption may be absolute (unconditional) or conditional; a conditional exemption applies only if the conditions are met; and the Government may also fix an effective rate lower than the tariff rate. Exemption notifications are strictly construed — the importer must show he squarely falls within the notification (the burden is on the person claiming the exemption).

🧩 WORKED EXAMPLE — Claiming a conditional exemption

Facts. A notification under s.25(1) exempts specified medical equipment from duty if imported by a registered hospital for its own use; a hospital imports such equipment.

Rule. A conditional exemption under s.25 applies only if the conditions are satisfied, and the notification is strictly construed against the claimant.

Apply. The hospital must prove it is registered and that the equipment is for its own use, exactly as the notification requires; if it satisfies the conditions, the import is duty-free.

Conclusion. The equipment is exempt because the hospital meets the notified conditions — but if any condition failed, the full duty would apply, since exemptions are read strictly.

In Simple Terms: Section 25 lets the Central Government waive customs duty in the public interest — either by a general notification (s.25(1), for a class of goods, absolutely or on conditions) or by a special order (s.25(2), for particular goods in exceptional cases). Conditional exemptions apply only if the conditions are met, and are read strictly.

flowchart TD
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    ROOT --> A["General exemption s.25(1)<br/>notification, absolute or conditional"]:::leaf
    ROOT --> B["Special exemption s.25(2)<br/>special order, exceptional circumstances"]:::leaf
    ROOT --> C["Strictly construed; burden on the claimant"]:::sub
    classDef root fill:#FFF8DC,stroke:#000,stroke-width:1px,color:#000;
    classDef leaf fill:#E6F3FF,stroke:#1E3A8A,color:#000;
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Case Laws

• Commissioner of Customs v Dilip Kumar & Co. (2018) — an exemption notification must be construed strictly, and any ambiguity is resolved in favour of the revenue (the claimant must clearly qualify).

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