Supreme Court Rejects Customs’ Review Petition Seeking Retrospective Levy of IGST on Repaired Aircraft Parts

In a significant relief to Interglobe Aviation and SpiceJet, the Supreme Court has recently rejected the Customs Department’s plea to levy retrospective integrated goods and services tax (IGST) on the import of aircraft or aircraft parts into India after repairs outside India.

The customs department filed a review petition seeking to charge retrospective IGST on these repaired parts, but the bench led by Justice BV Nagarathna and Justice KV Viswanathan said that there is no error apparent on the face of the record or any merit in these review petitioners, and there was no reason to reconsider the order.

Under a 2017 notification, the airlines only had to pay the basic customs duty on repair, insurance and freight charges. Under this notification, airlines were not required to pay the IGST. However, after the amendments to this notification in 2021, the government directed the airlines to pay the IGST as well as the basic customs duty on the cost of repairs, insurance and freight charges.

The customs department had argued that InterGlobe and SpiceJet must pay the IGST for 2017 to 2021, saying that the 2021 notification had a retrospective effect. The Customs, Excise and Service Tax Appellate Tribunal in August had held that the 2021 notification did not have a retrospective effect.

The court in July had also held that the department cannot apply an amended notification issued in 2021 to collect tax for the years before 2021.

The bench in July said that if the 2017 notification did not include IGST, the customs department cannot use the 2021 notification to impose the IGST retrospectively. The department had filed a plea requesting a review of this judgment. However, the apex court rejected it.