Major Relief for InterGlobe Aviation: Delhi HC exempts IGST on Re-Imported Aircraft Parts after Repairs [Read Order]

In a recent judgment, the Delhi High Court struck down the levy of Integrated Goods and Services Tax (IGST) on aircraft parts re-imported after being sent abroad for repairs, providing significant relief to airlines. The court ruled that imposing IGST on the repair cost, insurance, and freight of such re-imported parts was unjustified and amounted to double taxation.

InterGlobe Aviation Ltd., which operates IndiGo, had filed a writ petition challenging the tax demand imposed under Notification No. 36/2021-Customs and Circular No. 16/2021. The airline argued that the levy was unconstitutional as IGST had already been paid at the time of the original import of the aircraft parts, and taxing the same transaction again upon re-import violated the principles of GST law.

Looking for a Detailed, Line-by-Line Breakdown of Every Section in the CGST Act? Click Here

On the other hand, the government, in its defense, argued that the tax was applicable only on the value-added portion, such as repair charges and freight, and was a legitimate levy under the Customs Tariff Act. The government also invoked the aspect theory claiming that a single transaction could be taxed under different provisions based on distinct taxable aspects.

The bench comprising Justices Yashwant Varma and Ravinder Dudeja rejected this argument, stating that IGST applies to a “supply” rather than mere re-import of goods post-repairs. The court observed that treating the re-imported aircraft parts as a new taxable event contradicted the composite supply principle under GST.

The Court referenced the Supreme Court's ruling in the Mohit Minerals case, which explained that once tax has been levied on a transaction, the same cannot be taxed again under a different head.

The Court observed that the amendments introduced through Notification No. 36/2021 and the CBIC clarification were clearly designed to expand the tax net, rather than being merely clarificatory.

The Court clarified that the original notification was unambiguous in restricting the levy to Basic Customs Duty (BCD), and the 2021 amendment sought to drastically alter this position. The court held that levying an additional duty on a transaction already taxed as a supply of service was unconstitutional and could not be sustained.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates