The Delhi High Court overturned an IGST demand on IndiGo’s reimported aircraft parts, acknowledging that these parts had already been subject to tax as an imported service.
Taxpayer, Interglobe Aviation Ltd, was in the transportation of passengers and goods by air, sending goods for repair to Maintenance, Repair, and Overhaul (MRO) service providers outside India. The goods, after repair, were reimported into India. Under Notification No. 50/2017, Basic Customs Duty (BCD) was exempted. The applicant asserted that the reimport must be considered as a service import with IGST already filed.
IGST was due at the time of reimport, based on Section 3(7) of the Customs Tariff Act (CTA) and the IGST Act, the respondents mentioned. Earlier, the applicant had claimed the exemption from IGST based on Notification No. 45/2017, which applied only to BCD.
The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) carried the same position in 2020-21. The Apex court is acknowledging the appeal against such orders at present.
Notification No. 36/2021 amended Notification No. 45/2017 in July 2021, mentioning that IGST is applied on the reimported goods. Therefore, the applicant is exempt from BCD but faces other IGST due to the revisions.
Assessee’s counsel, Mr. Lakshmikumaran, contended that the Integrated Goods and Services Tax (IGST) constitutes a tax on the supply of goods or services under Article 246A of the Constitution, rather than a customs duty under Entry 83 of List I.
He argued that the export and subsequent reimport of aircraft parts for repair should be treated as a supply of services, not goods. Therefore, once taxed as a service, the transaction should not be subject to IGST again as an import.
He contended that designating the identical transaction as both a service and a product import would result in double taxation—first under Section 5(1) of the IGST Act and then under Section 3(7) of the Customs Tariff Act.
He further stated that, while Section 12 of the Customs Act allows for the imposition of basic customs duty, the IGST on imports should not be collected separately if the transaction is already taxed as a service.
The repair services from foreign MROs were imports of services, since the supplier was overseas, the recipient was in India, and the place of supply was India, Mr. Lakshmikumaran claimed.
He added that IGST was imposed u/s 5(1) of the IGST Act, and the proviso applied only to goods, rather than services.
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Section 3(7) of the Customs Tariff Act merely specifies that when the tax must be collected, not a separate charge. He counter-taxed the same services again as goods and cited that there was merely one taxable event; therefore, the aspects theory is not applicable.
The division bench, which included Justice Yashwant Varma and Justice Ravinder Dudeja, decided that the Integrated Goods and Services Tax (IGST) on imported services can only be levied under Section 5(1) of the IGST Act.
A transaction that is designated as a supply of service cannot be taxed twice under the Customs Tariff Act (CTA). The court clarified that Section 3(7) of the CTA applies only to tax collection on imported products, not services.
The court discovered that the 2021 amendment and CBIC clarification go beyond the clarification rather than expanding the tax base. It held that levying an additional duty post-deeming the transaction as a supply of service was unconstitutional and not permissible.
The writ petition was permitted.
| Case Title | Interglobe Aviation Ltd vs. Principal Commissioner of Customs ACC (Import) New Custom House New Delhi |
| Case No.: | W.P.(C) 934/2023 |
| For The Petitioner | Mr. V. Lakshmikumaran, Ms. Jyoti Pal, Mr. Yogendra Aldak, Mr. Agrim Arora, Ms. Anjali Singh and Ms. Aditi Sharma |
| For The Respondents | Mr. Anurag Ojha, Mr. Subham Kumar, Ms. Sonu Bhatnagar, Ms. Apurva Singh and Ms. K.S. Mary Jonet |
| Delhi High Court | Read Order |
