According to Bar and Bench, InterGlobe Aviation Ltd., the parent company of IndiGo, has petitioned the Delhi High Court for a reimbursement of more than Rs 900 crore in customs tax paid on aircraft engines and parts that were re-imported into India after repairs abroad.
Justices Prathiba M. Singh and Shail Jain made up the Division Bench that heard the case on Friday. Citing a conflict of interest since her son works as a pilot for IndiGo, Justice Jain withdrew from the case. A new bench will now hear the matter.
The key argument of IndiGo’s appeal is that re-importing aircraft and parts after repairs should not be subject to customs tax since it is an import of services rather than new products. According to the airline, imposing customs duty in these situations amounts to double taxation.
Why IndiGo claims the tax is unlawful
Speaking on behalf of IndiGo, senior lawyer V Lakshmikumaran informed the court that as aircraft repairs are regarded as a service, the airline had previously paid basic customs duty at the time of re-import and separately discharged GST under the reverse charge process.
IndiGo claimed that this amounted to a “double tax” on the same transaction since customs officials considered the re-import as a new import of goods and generated extra duty requests.
The airline also cited previous decisions made by the customs tribunal, which concluded that re-imported items after repairs could not be subject to double tax. According to Bar and Bench, IndiGo claimed the tribunal had declared the section allowing extra charge to be unconstitutional, even if the exemption announcement was subsequently modified to clarify future applicability.
Payment of Rs 900 crore “under protest”
IndiGo informed the court that as its aircraft could not be grounded forever, it was required to pay the extra fee. The airline claimed to have used more than 4,000 bills of entry to deposit more than Rs 900 crore in protest.
Customs authorities reportedly insisted on reevaluating each bill of entry separately when it subsequently requested reimbursements. IndiGo said that this kind of demand essentially prevented it from benefiting from the decision, even after a court declared it to be unlawful.
The previous judgment and the future
In a different case involving IndiGo earlier this year, the Delhi High Court decided that re-importing aircraft and parts after repairs constitutes an import of services rather than commodities. A section of the 2021 customs exemption notice that demanded payment of IGST and a cess on repair expenses was declared illegal by the court.
The customs agency has filed a petition with the Supreme Court challenging that decision.
Original context: Due to Indian airlines’ heavy reliance on foreign engine maintenance and leasing agreements, the tax treatment of re-imports is not a one-time controversy but rather a recurrent cost concern for the industry.
