Win for Air India: CESTAT Rules CBIC Circular on IGST for Repaired Goods Re-Imports based on GST Council Minutes Unsustainable [Read Order]

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), New Delhi, ruled that the CBIC Clarification Circular No. 16/2021-Customs on IGST for repaired goods re-imports, which was based on GST Council minutes was unsustainable.

Air India Ltd., the appellant, challenged the retrospective application of Notification No. 36/2021-Customs, which amended Notification No. 45/2017-Customs. The original exemption notification, issued on June 30, 2017, provided relief from customs duty on goods re-imported after being exported for repairs.

Read More: How Income Tax Officials May Access Your Emails, Social Media, and Cloud Data: Clause 247 Explained

The amendment in July 2021 introduced IGST and Compensation Cess liability on such imports. The Commissioner of Customs (Appeals) upheld the tax demand, relying on the CBIC circular and GST Council’s recommendations.

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

The appellant’s counsel argued that the amendment was not clarificatory but substantive, as it introduced a new tax liability that was not previously applicable. The appellant’s counsel argued that under Section 25(4) of the Customs Act, 1962, exemption notifications are presumed to be prospective unless expressly stated otherwise. Notification No. 36/2021-Customs did not provide for retrospective effect so it could not be applied to transactions before its issuance.

Read More: Relief to Standard Chartered Bank: CESTAT rules Mere Expense Allocation from SCB-UK to SCB-India not a Taxable Service [Read Order]

The department countered that the GST Council had always intended IGST and Compensation Cess to apply on re-imported repaired goods and that the amendment merely clarified this position. The department relied on the CBIC Circular No. 16/2021-Customs, which stated that the exemption never covered IGST and Compensation Cess and that the amendment was issued to remove ambiguity.

The two members comprising Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) observed that the pre-amendment notification explicitly mentioned "duty of customs" and that the tribunal had previously ruled in InterGlobe Aviation Ltd. v. Commissioner of Customs, New Delhi that IGST was not covered under this term.

Read More: No Tax No Beats: Indore Mayor Mandates Entertainment Tax Payment Before Approving Honey Singh’s Concert

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

The tribunal explained that the mere usage of "for removal of doubts" in an amendment does

 not automatically make it clarificatory. IGST was not originally leviable so the amendment could not be retrospectively enforced.

The tribunal observed that its previous ruling in InterGlobe Aviation Ltd. (2020) was binding and had correctly interpreted the exemption notification and the CBIC Circular based on the GST Council Minutes could not override the legal provisions of the Customs Act. The appeal was allowed.

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