Facts of the Case

The petitioner, Plus Max Duty Free (Madurai) Pvt. Ltd., a subsidiary of a Malaysian company operating Duty Free Shops at various airports, held premises within Madurai International Airport under a License Agreement dated 05.04.2017 with the Airport Authority of India (AAI), paying a monthly license fee plus conservancy and service charges. The petitioner had initially paid service tax at 15% on this fee, believing it was subject to tax under the Finance Act, 1994, but after the CESTAT's ruling in Commissioner of Service Tax v. Flemingo Duty Free Shop Pvt. Ltd. [2018 (8) GSTL 181] held that no service tax could be levied on Duty Free Shops (being beyond the customs frontier and outside India), the petitioner sought a refund. After the GST regime commenced, the GST Department took the contrary position that sales within the Duty Free Shops constituted an interstate supply liable to IGST, prompting the petitioner to file three connected writ petitions seeking a declaration that no GST is payable on the license fee, a refund of GST already collected, and an injunction against further collection.

Issues Involved

  1. Whether GST is payable on the license fee paid by a Duty Free Shop operator to the Airport Authority of India for premises located within the customs area of an international airport.
  2. Whether Duty Free Shops, being beyond the customs frontier of India, can be subjected to any form of indirect tax at all.

Petitioner's Arguments

  • The petitioner argued that the license fee paid to AAI could not attract GST because the underlying activity — operation of a Duty Free Shop — occurs beyond the customs frontier of India and is therefore outside the scope of any Indian indirect tax, whether service tax or GST.
  • Reliance was placed on the settled position under the earlier service tax regime (Flemingo Duty Free Shop, CESTAT) and, decisively, on the Supreme Court's subsequent ruling on the same question under GST.

Respondent's Arguments

  • The GST Department's position, as recorded, was that the sale taking place within the Duty Free Shops constituted an interstate supply attracting IGST, contrary to the CESTAT's earlier service tax ruling.

Court Order / Findings

  • The Court held that the issue was no longer res integra in light of the Supreme Court's ruling in Commissioner of CGST and Central Excise v. Flemingo Travel Retail Ltd. [Civil Appeal Diary No.24336/2022, dated 10.04.2022], which held that Duty Free Shops, whether in the arrival or departure terminals, being outside the customs frontiers of India, cannot be saddled with any indirect tax burden, and any such levy would be unconstitutional; if any tax is levied, it cannot be retained and the Duty Free Shop is entitled to a refund without any technical objection, including limitation.
  • Applying this binding precedent and Article 286 of the Constitution, the Court allowed all three connected writ petitions as prayed for.
  • The petitioner secured a declaration that no GST is payable on the license fee, a direction for refund of any GST collected, and an injunction restraining the respondents from collecting GST on such payments going forward.

Important Clarification

Duty Free Shops located within the precincts of international airports, being situated beyond the customs frontiers of India, cannot be subjected to any indirect tax — whether service tax under the earlier regime or GST/IGST under the current regime — on license fees or on sales conducted within such shops. Any tax collected in violation of this principle must be refunded without raising technical objections such as limitation, per the Supreme Court's ruling in Flemingo Travel Retail.

Sections Involved

  • Section 7, CGST Act, 2017 read with Section 7, IGST Act, 2017 — provisions determining the scope of "supply" and inter-State supply, held inapplicable to Duty Free Shop transactions occurring beyond the customs frontier.
  • Article 286, Constitution of India — restricts the power of States to impose tax on supplies occurring outside the State/beyond the customs frontier, applied by the Supreme Court to hold such levies unconstitutional.
  • Section 54, CGST Act, 2017 — the refund provision under which the petitioner sought return of GST already collected.

Decision – In Favour of

The decision is in favour of the Assessee. All three writ petitions were allowed as prayed for, with a declaration of non-liability, refund direction, and injunction against future GST collection.

Case Details

Court: Madras High Court, Madurai Bench
Case No.: W.P.(MD) Nos.9591, 9592 and 9593 of 2023
Coram: Justice P. T. Asha
Date of Order: 25.04.2023

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