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Kundan Care Products Limited vs. Union of India & Anr. and connected matters

Writ Petition (Civil) · 2026:DHC:7845-DBDecided 9 Sept 2026New Delhi Bench
W.P.(C) 432/2024, W.P.(C) 433/2024, W.P.(C) 434/2024, W.P.(C) 435/2024CNR: DLHC010007412024
Justice Prathiba M. Singh · Justice Vikas Mahajan

Background

In July 2023, the government reclassified gold jewellery import from "Free" to "Restricted" through a DGFT notification, but allowed a transitional exemption for importers who had established an Irrevocable Commercial Letter of Credit (ICLC) before the notification. The petitioner, a gold and precious-metals trading company, had already placed orders with an Indonesian supplier and paid over 90% of the invoice value (roughly USD 20.75 lakh out of its share) as advance payment before the notification came out, but had not used an ICLC, so the government refused to let the pending shipments through under the old "Free" policy.

Decision Breakdown

The Court held that while the government's policy change itself was a valid exercise of its authority (justified by a genuine spike in gold imports that was eroding trade-agreement benefits), the real question was whether the petitioner's situation deserved the same protection given to ICLC-holders. The Court reasoned that an advance payment of over 90% of the contract value is actually a stronger, more certain financial commitment than an ICLC (which is merely a bank's promise to pay upon future proof of shipment), so denying the same transitional benefit to bona fide advance-paying importers, while granting it to ICLC-holders, would defeat the policy's real purpose of protecting genuine pre-existing commitments. After the petitioner filed affidavits proving its regular, ongoing business in gold and the genuineness of the transactions, the Court directed that the transitional benefit be extended to the specific shipments in question, allowing the import to proceed under the pre-notification policy.

Lesson Learnt

When a government trade policy changes suddenly, an importer who has already made a substantial, bona fide advance payment for goods, even without a formal Letter of Credit, may still be entitled to the benefit of transitional/grandfathering provisions, since courts will look at the real economic substance of the commitment rather than just its technical form.

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