Delhi High Court on Friday heard an important case concerning IndiGo, where the airline sought customs refund worth Rs 900 crore. The case comes after a month of duress for the airline that’s been suffering with inconsistent operations since November.
In its petition, IndiGo had alleged that the customs department had forcibly levied the import duties twice on aircraft engines and parts that IndiGo had re-imported into India after being repaired abroad.
The case was initially listed before a division bench comprising Justices Prathiba M. Singh and Shail Jain. However, Justice Shail Jain had to recuse herself from hearing the matter since her son is a pilot with IndiGo.
The conflict led the bench to step aside, and the matter will now be reassigned to another bench as directed by the Chief Justice of the Delhi High Court.
Filed on Friday, the petition raised complex legal questions about how taxes apply when aircraft components return to India after being serviced abroad.
Indigo Delhi HC case: Arguments put forth by the airline
At the heart of IndiGo’s petition is the argument that the customs duty levied on re-imported parts amounts to unconstitutional ‘double taxation.’ According to the airline, the costs associated with repairs constitute a service, not a fresh import of goods, and therefore should only attract Goods and Services Tax (GST) under the reverse charge mechanism and not customs duty.
Appearing for the airline, advocate V Lakshmikumaran told the court that at the time of re-import of aircraft engines and parts after repairs, the airline had paid basic customs duty to the relevant govt bodies without dispute.
Separately, since repair constitutes a service, the airline had also discharged that Goods and Services Tax (GST) on a reverse charge basis. However, customs authorities insisted on levying customs duty again by treating the same transaction as an import of goods.
According to the airline, the issue had earlier been settled by the customs tribunal, which held that customs duty could not be levied again on re-imports following repairs. Even though the customs exemption notification backing IndiGo’s claims was later amended, the airline maintains that the tribunal’s ruling struck down the additional levy as unconstitutional and that amendment should apply prospectively.
This petition comes at a time when IndiGo has been under intense regulatory scrutiny following the cancellations of thousands of flights across airports.
IndiGo crisis: Latest refund update
In an attempt to provide its passengers some relief amid the larger operational crisis, IndiGo has rolled out over Rs 827 crore worth of refunds to passengers who suffered due to flight cancellations in early December and had to miss out on important events like weddings and funerals. As per an ET report, the airline plans to spend a sum of Rs 500 crore in the form of payouts to severely affected passengers as part of a broader response package.
On Tuesday, the civil aviation ministry observed that IndiGo had been unable to operate its winter and summer schedules efficiently and therefore directed the airline to cut its operations by 10% across all sectors. Aviation minister Ram Mohan Naidu said the reduction was necessary to stabilise the airline’s functioning and help bring down the number of cancellations.