IGST and Compensation Cess on goods re-imported after being exported for repairs would be wholly exempt

The Delhi High Court has ruled that Interglobe Aviation Limited is exempt from paying IGST and Compensation Cess on aircraft and spare parts re-imported into India after undergoing repairs abroad. The court found that the relevant exemption notification only permitted the levy of Basic Customs Duty (BCD) on the cost of repairs, insurance, and freight, not IGST or Compensation Cess. This decision provides relief to businesses facing financial losses due to the incorrect levying of these taxes.

M/s Interglobe Aviation Limited v. Union of India & Anr. [W.P.(C) 5617/2021 dated June 1, 2021]

The assessee was a scheduled airline operator engaged in the business of transportation of passengers and goods by air within and outside India. It was re-importing the aircraft and spare parts sent outside India for repairs and maintenance. It claimed exemption under Notification No. 45/2017 - Customs dated June 30, 2017 ("the Exemption Notification") from the payment of IGST on goods reimported by it in India after repair. The Customs authorities refused the same on the ground that IGST was leviable on the fair cost of repairs and cost of insurance and freight.

The Hon'ble CESTAT Principal Bench, New Delhi on analysis of the Exemption Notification, interpreted that, intention of the legislation was only to impose BCD on the fair cost of repair charges, freight and insurance charges on such imports of goods after repair. Held that, IGST and Compensation Cess on such goods would be wholly exempt.

Subsequently, the assessee was still being compelled to clear goods on payment of IGST resulting in financial losses. Thus, this petition was before the Hon'ble Delhi High Court.

The Hon'ble Delhi High Court observed that in the absence of specific mention of IGST and Compensation Cess in the Exemption Notification, only the BCD on the fair cost of repair charges, freight and insurance charges would be payable. The IGST and Compensation Cess would be wholly exempted. Therefore, the assessee could not be denied such exemption on reimport of repaired air-crafts and spare parts.

However, an appeal has been preferred by the Revenue Department before the Hon'ble Supreme Court against the said Order. The final order of the Hon'ble Supreme Court is awaited.