Relief for IndiGo: Delhi HC Quashes IGST Demand on Reimported Aircraft Parts Taxed as Service Import [Read Order]

The Delhi High Court,granted relief to IndiGo by quashing the Integrated Goods and Services Tax (IGST) demand on reimported aircraft parts that were previously taxed as a service import.

Interglobe Aviation Ltd,petitioner-assessee,was involved in the transportation of passengers and goods by air, sending goods for repair to Maintenance, Repair, and Overhaul (MRO) service providers outside India. After repair, the goods were reimported into India. While Basic Customs Duty (BCD) was exempt under Notification No. 50/2017, the petitioner claimed the reimport should be treated as a service import, with IGST already paid.

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The respondents, however, argued that IGST was due at the time of reimport, based on Section 3(7) of the Customs Tariff Act (CTA) and the IGST Act. The petitioner had previously claimed exemption from IGST based on Notification No. 45/2017, which applied only to BCD. This position was upheld by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in 2020-2021. However, the Supreme Court is currently considering appeals against these orders.

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In July 2021, Notification No. 36/2021 amended Notification No. 45/2017 to clarify that IGST would apply on reimported goods. As a result, the petitioner continued to be exempt from BCD but faced additional IGST due to the amendments.

The assessee's counsel, Mr. Lakshmikumaran, argued that IGST was a tax on the supply of goods or services under Article 246A of the Constitution and not a customs duty under Entry 83 of List I. He maintained that the export and reimport of aircraft parts for repair was a supply of service, not goods, and once taxed as a service, it could not be taxed again as an import.

He submitted that treating the same transaction as both a service and a goods import would result in double taxation—once under Section 5(1) of the IGST Act and again under Section 3(7) of the Customs Tariff Act. He also pointed out that while Section 12 of the Customs Act allowed for basic customs duty, IGST on imports could not be separately levied when the transaction had already been taxed as a service.

Mr. Lakshmikumaran argued that the repair services from foreign MROs were import of services, as the supplier was abroad, the recipient was in India, and the place of supply was India. He said IGST was rightly charged under Section 5(1) of the IGST Act, and the proviso applied only to goods, not services.

He added that Section 3(7) of the Customs Tariff Act only indicated when tax should be collected, not a separate charge. He opposed taxing the same service again as goods and said there was only one taxable event, so the aspects theory didn’t apply.

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The division bench of Justice Yashwant Varma and  Justice Ravinder Dudeja held that IGST on import of services could only be levied under Section 5(1) of the IGST Act. Once a transaction was treated as a supply of service, it could not be taxed again under the CTA. It ruled that Section 3(7) of the CTA only dealt with tax collection on imported goods, not services.

The court found that the 2021 amendment and CBIC clarification went beyond mere clarification and instead expanded the tax base. It held that imposing an additional duty after treating the transaction as a supply of service was unconstitutional and not permissible.

In short,the writ petition was allowed.

To Read the full text of the Order CLICK HERE

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