Customs Excise & Service Tax Appellate Tribunal (CESTAT) has held that IGST (Integrated Goods and Services Tax) levy on import of goods is under IGST Act and not under the Custom Tariff Act.

The matter is related to 346 appeals filed by InterGlobe Aviation, which operate IndiGo airlines. The issue raised in the appeals is about the availability of IGST exemption for aircraft and parts thereof that are re-imported into India after repairs. The company prayed for quashing all these orders passed by the Commissioner of Customs (Appeals), who had upheld the orders of assessment of Bills of Entry, as a result of which all the appeals have been dismissed by the first level of the appellate authority.

The company imported aircraft and when the engines/auxiliary power units or other parts of the aircraft began to develop defects, they were exported out of India for repairs to Pratt & Whitney, an American maintenance and repair company specialising in maintenance of parts/aircraft.

The repaired parts/aircraft are thereafter re-imported into India and at the time of re-import, Bills of Entry are filed. These Bills of Entry are assessed to basic customs duty and integrated tax at the applicable rates. The dispute in all these appeals is as to whether the Appellant is justified in claiming exemption of integrated tax under the Exemption Notification on re-import of repaired parts/aircraft into India during the period from August, 2017 to March, 2019.

There is no dispute on claiming exemption at the time of re-import from payment of basic customs duty for aircraft/parts, but the dispute is in regard to the levy of integrated tax on the re-import of aircraft/parts. The company had claimed exemption from IGST for the reason that the importer is required to only pay duty of customs on the fair cost of repairs and the cost of insurance and freight charges, both ways.

The Customs Authorities, however, did not agree on this issue with the Appellant, as according to them the Appellant was not entitled to full exemption from integrated tax since the phrase duty of customs, according to Exemption Notification, includes both the basic customs duty and integrated tax. Accordingly, exemption was disallowed.

“Absence of mention of integrated tax and compensation cess in column (3) under serial no. 2 of the Exemption Notification would mean that only the basic customs duty on the fair cost of repair charges, freight and insurance charges are payable and integrated tax and compensation cess are wholly exempted,” the appellate authority said. Also, it noted duty of customs referred to in the condition of the Exemption Notification would not include integrated tax.

“Appellant is entitled to exemption from payment of integrated tax under the Exemption Notification on re-import of repaired parts/ aircraft into India,” it said while setting aside all orders.

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