Supreme Court Recalls Judgment Holding That No Indirect Taxes Can Be Levied On Duty Free Shops At Airports

While allowing the review plea filed by the Commissioner of CGST and Central Excise against the Supreme Court’s verdict in Commissioner of CGST and Central Excise vs Flemingo Travel Retail Ltd [Civil Appeal Diary No. 24336/2022 dated 10.04.2023], the bench comprising Chief Justice of India Dr DY Chandrachud, Justices Sanjay Karol and Manoj Misra observed that while hearing the appeal, none of the submissions of the Union of India had been recorded or considered, and that the judgment only adverts to the submissions of the respondent- assessee.

In the review plea filed before the Supreme Court, it was the case of the Union of India that the applicable regime in regard to goods stands on a distinct footing from the regime applicable to the levy of service tax under IGST.

Additional Solicitor General N. Venkataraman submitted before the top court that the view of the Bombay High Court and Kerala High Court in Sandeep Patil vs Union of India [W.P. No. 1511 of 2019] and CIAL Duty Free and Retail Services Ltd vs Union of India [W.P. (C) No. 12274 of 2020], respectively, which had been referred to by the Apex Court in its judgment, pertain to goods and not to the levy of service tax on the renting of immovable property.

The Bombay and Kerala High Court in the said judgments had held that the duty free shops in the international arrival or departure terminals shall be deemed to be the area beyond the customs frontiers of India.

In view of the same, the court observed, “At this stage, absent such a consideration in the judgment under review and since the issue which is raised would have large consequential ramifications, we are of the considered view that the review should be allowed.”

The court was also informed that 25 other appeals involving the same issue were pending consideration of the Supreme Court.

“We accordingly allow the review by recalling the judgment dated 10 April 2023. Civil Appeal No 2753 of 2023 shall stand restored to the file of the Court. The Civil Appeal shall stand tagged with the above appeals. The Registry shall obtain administrative directions so that all the appeals can be clubbed together and be heard by one Bench expeditiously,” the court said.

The respondent-assessee, Flemingo Travel Retail Ltd is engaged in the business of conducting duty free shops at the arrival and departure terminals at the international airports at Mumbai and Delhi. The CESTAT, Mumbai, vide order dated 10.02.2022, had allowed the assessee’s appeal for refund of service tax in relation to a rental transaction with Mumbai International Airport Limited. The original adjudicating authority vide order dated 05.07.2019 had rejected the refund claims on the ground that payment of service tax on the renting of immovable property of the concerned Duty Free Shops had been rightly levied and was not liable to be refunded as per the provisions of the Finance Act, 1994.

In appeal, the CESTAT had come to the conclusion that Duty Free Shops situated at international airports constitute a global market competing in a tax- exempt environment and that the levy of service tax was bereft of lawful authority.

Upholding the decision of the CESTAT, the Supreme Court had ruled that Duty Free Shops, whether in the arrival or departure terminals, are outside the customs frontiers of India and therefore, they cannot be saddled with any indirect tax burden and any such levy would be unconstitutional. Therefore, if any tax is levied, the same cannot be retained and the Duty Free Shops would be entitled for refund of the same without raising any technical objection including that of limitation, the court had ruled.

Case Title: Commissioner of CGST and Central Excise Mumbai East vs Flemingo Travel Retail Ltd

Citation : 2023 LiveLaw (SC) 673

Counsel for the Petitioner(s): Mr. N. Venkataraman, A.S.G. Mr. Mukesh Kumar Maroria, AOR Ms. Praveena Gautam, Adv. Ms. Priyanka Das, Adv. Mr. Ashok Panigrahi, Adv. Mr. H.R. Rao, Adv. Mr. Zoheb Hussain, Adv.

Counsel for the Respondent(s): Mr. Mukul Rohatgi, Sr. Adv. Mr. Arunabh Chowdhury, Sr. Adv. Mr. Abhay Jadeja, Adv. Mr. Varun Satiya, Adv. Mrs. Ranjeeta Rohatgi, Adv. Mrs. Pragya Baghel, AOR Mr. Karma Dorjee, Adv. Mr. Deechen W. Lachungpa, Adv.

IGST Act, 2017-

The Supreme Court has recalled its Division Bench judgment dated 10 April 2023, where the top court had ruled that Duty Free Shops situated in the arrival or departure terminals of Airports are outside the customs frontiers of India and therefore, they cannot be saddled with any indirect taxes like the Service Tax.

While allowing the review plea filed by the Commissioner of CGST and Central Excise against the Supreme Court’s verdict in Commissioner of CGST and Central Excise vs Flemingo Travel Retail Ltd [Civil Appeal Diary No. 24336/2022 dated 10.04.2023], the court observed that while hearing the appeal, none of the submissions of the Union of India had been recorded or considered, and that the judgment only adverts to the submissions of the respondent- assessee.

Click here to read the order