Supreme Court Revises Verdict on Duty Free Shops’ Tax Exemption; Government Appeals with 16 Other Similar Cases
The Supreme Court made a significant development on Friday as it recalled its previous verdict regarding the tax exemption of duty free shops at arrival and departure terminals in international airports. The court had previously ruled that these shops were not subject to customs law and should be exempt from indirect taxes like service tax.
The decision to recall the verdict came after a special bench consisting of Chief Justice D Y Chandrachud and justices J B Pardiwala and Manoj Misra heard the arguments of Additional Solicitor General N Venkatraman representing the Centre and the Commissioner of Central Goods and Services Tax (CGST) and Central Excise of Mumbai East. The bench agreed with the contention that there was a breach of the principle of natural justice, as the government department was not given a hearing.
As a result of the verdict being recalled, M/s Flemingo Travel Retail Limited (FTRL), which operates duty free shops at the Mumbai and Delhi International Airports, will not be able to pursue its claim for a refund of service tax worth Rs 200 crore from the government. However, the appeal of the government department, along with 16 other similar pleas, will be heard again collectively.
The issue at hand initially arose when the Customs Excise and Service Tax Appellate Tribunal (CESTAT) in Mumbai allowed FTRL’s appeal for a service tax refund related to its transactions with Mumbai International Airport Limited from October 2011 to August 2017. The government department subsequently filed an appeal in the Supreme Court, which was dismissed on April 10 by a bench of justices Krishna Murari and Sanjay Karol.
The bench in the previous judgement had taken into account previous rulings and the tribunal’s order and concluded that duty free shops, whether in arrival or departure terminals, should not be burdened with indirect taxes as they are situated outside the customs frontiers of India. The bench further stated that any tax levied on them would be deemed unconstitutional, and if already collected, should be refunded. The CESTAT had also opined that duty free shops in international airports should be considered areas beyond the customs frontiers of India.
The recall of the verdict by the Supreme Court marks a new chapter in the ongoing legal battle over the tax exemption for duty free shops. The court’s forthcoming hearing of the government’s appeal, along with the 16 other similar cases, will provide an opportunity to readdress the issues and arrive at a just resolution.
