Delhi High Court Sets Aside Additional IGST on Re-Imports, Holds Levy Beyond Legislative Mandate
Safiya Malik
The Delhi High Court has set aside a notification that imposed an additional levy on re-imports, ruling that the levy went beyond the legislative framework. The bench comprising Justice Yashwant Varma and Justice Ravinder Dudeja held that the amendments introduced by Notification No. 36/2021-Customs, which sought to impose an additional levy on re-imported goods, were unconstitutional. The court also struck down the Explanation to clause (d) introduced by the notification, declaring it invalid.
The court observed that Notification No. 36/2021 sought to expand the tax net rather than clarify an existing provision. Consequently, Circular No. 16/2021 issued by the Central Board of Indirect Taxes and Customs (CBIC), which reinforced the notification, was also quashed. The court's decision provides relief to the petitioners, who had challenged the legality of the additional levy on re-imports.
The matter revolved around the interpretation and application of customs duties on re-imported goods, particularly under Notification No. 45/2017-Customs, as amended by Notification No. 36/2021-Customs. The petitioners, including InterGlobe Aviation Ltd., contested the imposition of an Integrated Goods and Services Tax (IGST) on re-imports of repaired aircraft parts, arguing that such levies amounted to double taxation.
The petitioners contended that Notification No. 45/2017 only permitted the levy of Basic Customs Duty (BCD) and did not include IGST. However, the Revenue authorities, relying on the subsequent amendment through Notification No. 36/2021, argued that IGST and cess were applicable on the cost of repairs, insurance, and freight for re-imported goods. The petitioners also challenged the validity of Circular No. 16/2021, which sought to justify the IGST levy based on recommendations made by the GST Council.
During the proceedings, the petitioners highlighted that the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) had earlier ruled in their favor, holding that Notification No. 45/2017 did not envisage an additional levy beyond the BCD. The amendments introduced in 2021 were viewed as an attempt to nullify the CESTAT's decision.
The court examined the amendments brought in by Notification No. 36/2021 and found that they did not merely clarify the original notification but substantially altered its scope. It observed:
"The introduction of an Explanation in plenary or subordinate legislation cannot be used as an artifice or a guise to expand or reinvent the original provision. That would clearly amount to a legislative overreach."
The judgment observed that an Explanation or amendment could only be considered clarificatory if it sought to remove ambiguities in the original statute. The court noted that the amendments in question had the effect of imposing a new tax liability, which was beyond the scope of a mere clarification.
Referring to the legislative intent behind the imposition of IGST on re-imports, the court held that taxation under the Integrated Goods and Services Tax Act (IGST Act) must be imposed strictly in accordance with Section 5(1) of the Act. It observed:
"An integrated tax on the import of services can only be imposed under Section 5(1) of the IGST Act. A supply of service once so classified cannot be recharacterized."
Further, the court rejected the argument that the amendments merely reaffirmed existing legal provisions. It noted that the original notification (No. 45/2017) only referred to the levy of BCD and did not contemplate the imposition of IGST. The subsequent amendments sought to introduce a tax liability that was not initially present, which the court found impermissible.
The court issued the following directives:
- Notification No. 36/2021-Customs, to the extent it sought to impose an additional levy over and above the IGST imposed under Section 5(1), was declared unconstitutional and quashed.
- The Explanation to clause (d) introduced by the notification was also declared invalid and set aside.
- Circular No. 16/2021 issued by the CBIC was quashed as it was a consequence of the notification and had no independent legal basis.
- Orders passed by the Commissioner of Customs (Appeals) on November 30, 2022, and December 28, 2023, were also set aside.
- The petitioners were declared entitled to consequential reliefs.
Case Title: InterGlobe Aviation Ltd. v. Principal Commissioner of Customs ACC (Import), New Custom House, New Delhi & Ors.
Neutral Citation: 2025: DHC: 1395 - DB
Case Number: W.P.(C) 934/2023 & connected matters
Bench: Justice Yashwant Varma, Justice Ravinder Dudeja
[Read/Download order]
