Legal principle

No appeal need be preferred — and an appellate court will not interfere — where the tax effect is revenue neutral, without prejudice to the authorities' liberty to verify whether the exercise is in fact revenue neutral and to proceed in accordance with law if any loss of revenue is found.

Court decision

The Division Bench (Shriram, CJ. and Shaffiq, J.) disposed of the writ appeal without interfering with the single judge's order, holding that since the finding of revenue neutrality for the period prior to 01.04.2021 was not seriously disputed by the revenue and no appeal need be preferred where the tax effect is revenue neutral, there was no reason to interfere. It clarified that the authorities remain at liberty to examine whether the tax effect is in fact revenue neutral for the pre-01.04.2021 period or whether there is any loss of revenue, and to proceed in accordance with law if it is not; the direction that the petitioner pay GST on the concession fee from 01.03.2021 and claim refund under Section 54 CGST stands undisturbed; and AAI's refund application is to be processed and finalised within four weeks with applicable interest. The result was effectively against the Union's challenge.

Facts

Flemingo Duty Free Shop Private Limited, stated to be the first private entity in India operating duty free shops, ran DFS at Chennai International Airport under a concession agreement with the Airports Authority of India, holding a Special Bonded Warehouse Licence under Section 58A of the Customs Act, 1962 for storage of duty free goods. Its stock — perfumes, alcohol, confectionery, cosmetics — was procured from foreign suppliers, kept in customs bonded warehouses, then transferred to the DFS for sale. AAI raised invoices inclusive of CGST/SGST on the minimum guarantee/revenue share ('license fees for exclusive concession') payable by Flemingo, which challenged the levy on the ground that the DFS are beyond the customs frontiers of India and the supplies are zero rate under Section 16 of the IGST Act. The learned single judge, by order dated 30.03.2021 in W.P.No.4055 of 2018, directed refund of GST paid for 01.01.2018 to 30.06.2018 and non-collection of GST for July 2019 to March 2021 on the premise that payment followed by refund is revenue neutral; the Union of India filed this writ appeal against those directions.

Key provisions

• Section 58A, Customs Act, 1962 — Licensing of special warehouses