Bombay High Court Directs Emirates To Pursue GST Appeal In Air Cargo Services Tax Dispute

The Bombay High Court recently disposed of a writ petition filed by Emirates challenging a GST demand order passed by the Maharashtra State Tax Department over taxation of air cargo transportation services.

The airline argued that transportation of goods by aircraft from India to destinations outside India, along with ancillary services, formed part of a composite supply exempt from GST under a Central Government notification issued in 2018 granting exemption to export air cargo transportation services.

A Division Bench of Justice G.S. Kulkarni and Justice Aarti Sathe observed that the petitioner had raised several contentions against the order-in-original, including reliance on various judicial decisions. However, the Court held that such issues should appropriately be examined in statutory appeal proceedings. The Bench observed:

"In our opinion, it would be appropriate for the Petitioner to assert such contentions by availing of the remedy of a statutory appeal, as available to the Petitioner to be filed before the Commissioner of Appeals. We are accordingly not inclined to examine all such issues raised in the present petition, which needs to be decided in the appeal proceedings.”

The court said it was not inclined to examine the issues raised in the writ petition and directed Emirates to pursue the statutory appeal remedy. It also directed that if the appeal is filed within four weeks, the appellate authority shall decide it without raising an objection regarding limitation, considering the bona fide prosecution of the writ petition before the High Court.

The dispute concerned Entry 20A of Notification No. 2/2018 dated January 25, 2018, which grants GST exemption to services involving transportation of goods by aircraft from a customs station in India to a destination outside India.

Emirates challenged the order-in-original passed by the Assistant Commissioner of State Tax, which confirmed tax demand along with interest and penalty. The airline contended that the Department's approach was contrary to the exemption notification because ancillary services forming part of the composite supply were sought to be separately taxed, thereby defeating the intended exemption.

According to the airline, transportation of goods by aircraft together with connected ancillary services constituted a single composite supply eligible for exemption, and such ancillary services could not be separately subjected to GST.

The State opposed the plea. 

After hearing both sides, the bench noted that several issues and contentions had been raised by the petitioner in challenge to the order-in-original, including reliance on various judicial decisions.

The court, however, held that such issues ought to be examined by the appellate authority in statutory appeal proceedings rather than in the writ petition.

The court therefore kept all contentions on merits expressly open to be raised before the appellate authority. It also clarified that all contentions raised in the writ petition were kept open to be asserted in accordance with law.

Accordingly, the High Court disposed of the writ petition while granting liberty to Emirates to file a statutory appeal within four weeks and directed that, if such appeal is filed within the prescribed period, it shall be decided in accordance with law without objection on the ground of limitation.

For Petitioner: Senior Advocate Rohan Shah, along with. Advocates Mohammed Anajwalla, along with advocate Renita Alex instructed by India Law Alliance

For Respondents: Addl. G.P. Jyoti Chavan,