'No retrospective amendment': SC dismisses CBIC tax demand on IndiGo

Business Standard

14-07-2025

The Supreme Court on Monday dismissed a plea by the Central Board of Indirect Taxes and Customs (CBIC) against InterGlobe Aviation, the parent company of India's largest airline, IndiGo, seeking to impose integrated goods and services tax (IGST) on re-imported aircraft and parts sent overseas for repairs.
The tax demand was based on a 2021 government notification that sought to clarify and retrospectively amend a 2017 exemption. The government had challenged the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) ruling of August 2024, which rejected the retrospective tax demand, stating that it would place an additional burden on airlines.
A bench comprising Justices B.V. Nagarathna and K.V. Viswanathan on Monday refused to admit the customs department's appeal and dismissed it.
Additional Solicitor General (ASG) N. Venkataraman, appearing for the customs department, argued that nearly ₹100 crore in tax revenue was at stake. He also submitted that the interpretation of the 2017 notification is already under challenge before the Supreme Court.
'Even if the 2021 notification is struck down for being retrospective, our case survives because duties of customs under the 2017 notification include IGST. All I am requesting is that if we win on the 2017 notification, the benefit of that ruling should apply to these bills [and] other imports as well,' he said.
The court, however, rejected the argument, stating: 'You can't do it by a retrospective amendment… If the 2017 notification did not cover IGST, you cannot use the 2021 notification to impose it retrospectively.'
The government has announced that a uniform IGST rate of 5 per cent on all aircraft and aircraft engine parts will come into effect from 15 July. Last week, the 53rd GST Council recommended a uniform 5 per cent tax on imports of parts, components, testing equipment, tools, and toolkits of aircraft, irrespective of their HSN code. The aim is to reduce operational costs, resolve tax credit issues, and attract investment.
IndiGo has also challenged the constitutionality of the 2021 notification before the Delhi High Court. On 4 March, the High Court struck down the additional tax imposed on the repair cost of goods re-imported into India after being sent abroad for maintenance.
The airline's parent company argued that it had already paid import duties on overseas repairs as part of the import of services and should not be taxed again upon the re-import of the repaired aircraft parts. IndiGo, which is principally engaged in the transportation of passengers and goods by air within and outside India, sends its goods to maintenance, repair, and overhaul (MRO) service providers outside the country. Once repaired, the goods are re-imported.
S.R. Patnaik, Partner and Head of Taxation Practice at law firm Cyril Amarchand Mangaldas, said the Supreme Court's decision to dismiss the revenue's plea reinforces a vital principle in tax jurisprudence—that retrospective tax demands must pass the test of fairness and legal certainty.
'This ruling provides much-needed reassurance to businesses that tax exemptions, once validly claimed, will not be reopened by retrospective changes. It will likely influence how courts approach other cases involving retrospective levies, and hence, it is expected that the tax authorities shall use their powers in a more restrained manner,' he said.
'This precedent strengthens challenges in sectors like online gaming, where the retrospective levy of GST on the face value of bets is under judicial scrutiny. The ruling signals that tax certainty cannot be achieved by imposing obligations retrospectively, a development that certainly restores hope among taxpayers,' said Karan Sarawagi, an advocate practising in the Bombay High Court.
'The Supreme Court's decision is rooted in the jurisprudential principle that notifications are inherently prospective in nature. Since this was a notification and not a legislative clarification, its applicability should always be considered prospective, starting from the date of its publication in the official gazette,' said Sachin Sharma, Managing Partner of KSV Tax Consultants.