2025-VIL-210-DEL-CU
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CUSTOMS High Court Cases

Customs/IGST - Scope of phrase ‘duty of customs’ as appearing in Notification No. 45/2017-Customs dated 30.06.2017 – Whether the phrase 'Duty of Customs' would only mean BCD and not include IGST and compensatory cess - Petitioners are engaged in the air transportation business, send aircraft engines and parts for repair to Maintenance, Repair and Overhaul Service (MRO) providers located outside India –demand of Integrated tax (IGST) on the re-import of aircrafts/ parts - Whether the import of repaired aircraft engines and parts are liable to IGST under Section 5(1) of the IGST Act as a supply of services or can the respondents also levy an additional duty under Section 3(7) of the Customs Tariff Act, 1975 treating it as an import of goods - HELD - The transaction involving the re-import of repaired aircraft engines and parts should be treated as a supply of services under the CGST and IGST Acts, 2017 and cannot be re-characterized as an import of goods for the purpose of levying an additional duty under Section 3(7) of the CTA, 1975 - the Constitution Amendment Act, 2016 introduced a paradigm shift by conferring concurrent power on the Union and States to levy a goods and services tax, with the Union having exclusive power to levy tax on interstate supplies of goods or services. Article 246A and Article 269A empower the Union to classify a supply as either goods or services, and the CGST and IGST Acts conclusively determine the nature of the transaction based on the Schedules - it would be impermissible for the respondents to re-characterize a transaction that has been classified as a supply of services under the CGST and IGST Acts. The Proviso to Section 5(1) of the IGST Act, which provides for the levy of IGST on imported goods in accordance with Section 3 of the CTA, does not apply to the import of services – Further, the amendments introduced by Notification No. 36/2021, which sought to expand the levy under Notification No. 45/2017 to include "tax and cess" in addition to customs duty, cannot be treated as a mere clarification or explanation. Such amendments, intended to widen the tax net, cannot be given retrospective effect – mere use of terms like ‘Explanation’ or ‘removal of doubt’ neither results in an automatic validation of an amendment nor does its mere labelling as such make it clarificatory. For an amendment to be legitimately classified as an ‘Explanation’ or a ‘removal of doubts’ provision, it must be demonstrably evident that the position it seeks to clarify was already incorporated, contained or rooted in the original statute or the notification or even intended to be as such - The Notification No. 36/2021 is unconstitutional and ultra vires the IGST Act, 2017 to the extent it sought to levy an additional duty over and above the IGST and the Explanation to clause (d) as introduced by the aforesaid notification is also declared as invalid and set aside. Circular No. 16/2021 issued by the CBIC is consequentially quashed – The writ petitions are allowed
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