The Madras High Court has dismissed the Union Government’s appeal challenging GST refund directions issued to Flemingo Duty Free Shop Pvt. Ltd., operating at the Chennai International Airport.
The Bench of Chief Justice K.R. Shriram and Justice Mohammed Shaffiq while upholding the earlier order of the single judge, emphasizing that revenue neutrality is a valid consideration where zero-rated supplies are involved, ruled that the collection of GST from the duty-free shop operator, only to be refunded later, was an exercise in futility. The Union of India had sought to overturn the single judge’s direction that GST paid between January 2018 and June 2018 be refunded, and that GST need not be collected for July 2019 to March 2021 due to the revenue-neutral nature of the transaction.
The petitioner, Flemingo Duty Free Shop Pvt. Ltd. is a company incorporated under Companies Act, 1956. Petitioner is stated to be the first private entity in India to be engaged in the business of operation and management of Duty Free Shops (DFS), which sell and/or deal in duty free goods at airports and seaports in India.
The Petitioner entered into a concession agreement with Airports Authority of India for operation of DFS at Chennai International Airport. Petitioner was issued a Special Bonded Warehouse License under Section 58A of the Customs Act, 1962, by the Commissioner of Customs for storage of Duty Free Goods. Petitioner has been running DFS since 2016 and sells perfumes, alcohol, confectionery, cosmetics etc. These products are procured by petitioner from foreign suppliers for sale at DFS inside the airport. These are first kept in customs bonded warehouses and later transferred to DFS for sale.
The petitioner argued that the supplies made from their bonded warehouse at the international terminal were zero-rated under Section 16 of the IGST Act, being beyond the customs frontiers of India. While the Airport Authority of India continued to issue invoices inclusive of GST, the company paid under protest and sought judicial relief.
The High Court noted that even the Revenue had conceded during arguments that the supplies in question were zero-rated. The Court drew upon Supreme Court precedents to reinforce that when tax paid would ultimately be refunded, thereby causing no loss to the exchequer, insisting on payment followed by refund serves no practical purpose.
“The order of the Judge directing refund on the ground that payment of taxes followed by refund is a revenue-neutral exercise is not seriously disputed,” the Court observed, adding that authorities are nonetheless free to verify if actual revenue loss occurred for the relevant period.
Case Details
Case Title: Union of India Versus Flemingo Duty Free Shop Private Limited
Case No.: W.A. No.674 of 2023 and C.M.P. No.6753 of 2023
Date: 29.04.2025
Counsel For Petitioner: A.P.Srinivas Senior Standing Counsel
Counsel For Respondent: V.Sridharan Senior Counsel
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