Today, On 12th December, InterGlobe Aviation, which operates IndiGo, has moved the Delhi High Court seeking a refund of more than Rs.900 crore paid as customs duty on re-imported aircraft engines and parts. Justice Shail Jain recused, stating, “My son is a pilot with IndiGo.”
InterGlobe Aviation Ltd, the operator of India’s largest airline IndiGo, approached the Delhi High Court seeking a refund of over Rs.900 crore paid in customs duty on aircraft engines and parts that were re-imported into India after repairs conducted overseas.
The case heard on Friday by a Division Bench made up of Justices Prathiba M. Singh and Shail Jain.
IndiGo contended that the imposition of customs duty on these re-imports is unconstitutional, essentially constituting a double charge on the same transaction.
Justice Shail Jain recused herself from the case due to a conflict of interest, as her son is a pilot for IndiGo.
The matter will now be assigned to another Bench as dictated by the Chief Justice’s order.
Advocate V Lakshmikumaran, representing IndiGo, stated that while re-importing the aircraft engines and parts post-repair, the airline paid the basic customs duty without contention. Additionally, because repairs are deemed a service, IndiGo also paid Goods and Services Tax (GST) on a reverse charge basis.
However, customs officials insisted on levying customs duty again, categorizing the transaction as the import of goods.
IndiGo pointed out that this issue had previously been resolved by the customs tribunal, which determined that customs duty should not be re-imposed on re-imports following repairs. Although the relevant exemption notification was later amended, the tribunal clarified that this amendment would only have a prospective effect.
IndiGo informed the High Court that the tribunal had previously indicated that re-applying customs duty on such re-imports was unconstitutional and had nullified the pertinent section of the notification.
Regardless, customs authorities reportedly pressured IndiGo to pay the duty to obtain clearance for the aircraft engines and other essential components.
The airline emphasized that, unlike GST where payments are self-assessed customs clearance requires the approval of officers, and aircraft cannot remain grounded indefinitely.
Consequently, it paid the duty under protest across over 4,000 bills of entry, totaling more than Rs.900 crore.
When IndiGo subsequently filed for refunds, customs authorities denied the requests, claiming that the airline needed to first seek reassessment of each bill of entry. IndiGo countered that it had paid the duty under protest in every instance and that decisions had already been made on the protested assessments, for which appeals were filed.
The airline further argued that the department’s reliance on the Supreme Court’s decision in ITC Ltd. was misplaced, asserting that the ruling pertained to cases where duty was paid voluntarily and later refunded, not to situations involving payments made under protest where a court had already ruled in favor of the taxpayer.
IndiGo informed the Court that despite repeated representations to the Principal Commissioner, no reassessment orders had been issued.
The airline contended that requiring reassessment after the declaration of unconstitutionality amounted to denying it the benefits of the court’s ruling.
In March 2024, the Delhi High Court ruled that the re-importation of aircraft and aircraft parts after overseas repairs qualifies as an import of services rather than goods. It stated that once the transaction was taxed as a service supply under the GST framework, there could be no imposition of an additional duty pursuant to the Customs Tariff Act.
The High Court deemed the notification intending to levy tax and cess on top of IGST unconstitutional and ultra vires the IGST Act.
The matter is currently pending before the Supreme Court.
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