The Supreme Court on Monday issued a notice to InterGlobe Aviation, the parent company of IndiGo Airlines, in response to a plea filed by the Customs Department challenging a Delhi High Court judgment that had struck down the levy of Integrated Goods and Services Tax (IGST) on reimported aircraft engines and parts sent abroad for repairs and maintenance.
The Delhi High Court, in March this year, had quashed a portion of the government’s July 2021 notification which sought to impose IGST and cess on the cost of repairing reimported aircraft engines and components. The High Court had ruled that the notification—by adding the words “tax and cess” under Section 5(1) of the IGST Act—was unconstitutional and violated the statutory framework.
A bench led by Justice BV Nagarathna heard brief arguments from Additional Solicitor General N. Venkataraman, who appeared for the Customs Department. He contended that the Delhi High Court had overstepped its jurisdiction by declaring the law itself unconstitutional. According to the Customs Department, Section 3(7) of the Customs Tariff Act, 1975 independently authorizes the levy of duties on imported goods, and this provision was unaffected by the IGST notification being quashed. Therefore, InterGlobe Aviation, it argued, remained liable to pay the applicable tax.
Appearing for InterGlobe Aviation, senior counsel L. Lakshmikumaran opposed the Customs plea, arguing that the repair and maintenance of aircraft engines abroad had already been taxed as a service. Once such goods are reimported into India, they cannot again be subjected to IGST as if they were fresh imports of goods. He emphasized that taxing the same goods twice under different heads would amount to double taxation, which is impermissible under law.
The Delhi High Court, while ruling in favour of the airline earlier this year, had observed that the import of services can only be taxed under Section 5(1) of the IGST Act, and once a transaction is classified as a service, it cannot be recharacterized as an import of goods merely upon reentry into India. The court further termed the authorities’ argument of treating the repair and reimport process as two separate taxable events as “untenable,” noting that the nature of the transaction remained one of service and not goods.
The Supreme Court will now take up the matter on November 21 for further hearing.
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