LI Network
Published on: 20 August 2023 at 19:17 IST
The Supreme Court has taken a significant step by recalling its Division Bench judgment issued on 10 April 2023. This judgment had established that Duty Free Shops located within the arrival or departure terminals of airports are deemed to be beyond the customs frontiers of India. As a result, these shops were not subject to indirect taxes, including the Service Tax.
The review plea, brought forward by the Commissioner of CGST and Central Excise, contested the verdict presented in the case of Commissioner of CGST and Central Excise vs. Fleminga Travel Retail Ltd dated 10.04.2023.
The bench, consisting of Chief Justice of India Dr. DY Chandrachud, along with Justices Sanjay Karol and Manoj Misra, noted that the original judgment had only taken into account the arguments made by the respondent-asseesee and had not considered any of the submissions from the Union of India.
In this regard, it was argued on behalf of the Union of India that the taxation rules applicable to goods were distinct from those governing the levy of service tax under IGST.
Additional Solicitor General N. Venkataraman pointed out that the references made by the Apex Court to judgments from the Bombay High Court and Kerala High Court, namely Sandeep Patil V. Union of India and CIAL Duty Free and Retail Services Ltd Vs. Union of India , respectively, were relevant to goods and not to the imposition of service tax on property rentals.
Both the Bombay and Kerala High Courts had ruled that duty free shops located in international arrival or departure terminals should be considered as being situated beyond the customs frontiers of India. Given the absence of a comprehensive analysis of these considerations in the original judgment, and recognizing the far-reaching implications of the issue at hand, the Supreme Court decided to allow the review.
Furthermore, the court acknowledged that there were 25 other pending appeals that addressed the same matter and awaited consideration.
As a result, the court not only allowed the review but also recalled the judgment issued on 10 April 2023. Civil Appeal No. 2753 of 2023 was reinstated on the Court’s docket and grouped together with the other appeals for expedited joint consideration.
The court directed the Registry to obtain administrative guidance to ensure that all these appeals were heard efficiently by a single bench.
The respondent-asseesee in this case, Flemingo Travel Retail Ltd, operates duty free shops in the arrival and departure terminals of international airports in Mumbai and Delhi.
The CESTAT, Mumbai, had previously granted the company’s appeal for a service tax refund related to a rental transaction with Mumbai International Airport Limited.
The original adjudicating authority had denied the refund claims, asserting that the service tax on property rentals for the Duty Free Shops had been correctly levied and was not eligible for refund under the provisions of the Finance Act, 1994.
The CESTAT upheld the claim that Duty Free Shops at international airports operate within a tax-exempt global market, rendering the imposition of service tax legally invalid. This decision was supported by the Supreme Court, which established that Duty Free Shops, whether located in arrival or departure terminals, were situated outside the customs frontiers of India.
Consequently, these shops could not be subjected to indirect tax burdens, and any such taxation would be deemed unconstitutional. If any taxes were levied, they were to be refunded to the Duty Free Shops without any procedural hindrances, including limitations.
This case is titled “Commissioner of CGST and Central Excise Mumbai East vs. Flemingo Travel Retail Ltd” Various legal counsels have represented both the petitioner and respondent parties in this matter, and the case holds significant implications for the taxation framework regarding duty free shops at airports under the IGST Act, 2017.