Duty free shop sales qualify as exports under IGST Act, exempt from GST liability

Bombay HC ruled in favor of duty free shop operator at airport regarding GST liability. Court held that sales from departure duty free shops constitute exports under IGST Act, qualifying as zero-rated supplies exempt from GST. Property in goods passes to passengers only upon reaching final destination, making transactions exports rather than domestic supplies. For arrival duty free shops, goods remain within customs area and don't cross customs frontier, thus no IGST liability arises. Court quashed show cause notices as arbitrary and contrary to constitutional provisions, while directing petitioner to follow prescribed procedure for input tax credit refund claims.

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Issues Involved:
1. Review of the order passed in Criminal Public Interest Litigation No. 14 of 2019.
2. Adjudication order by the Deputy Commissioner of Sales Tax denying refund of input tax credit (ITC) for duty-free shops (DFS) at Mumbai International Airport.
3. GST liability on the consideration paid to Mumbai International Airport Ltd (MIAL) under a concession agreement.
4. Applicability of Article 286 of the Constitution of India and relevant Supreme Court judgments to the DFSs.
5. Eligibility of DFSs for ITC and refund under GST laws.

Issue-wise Detailed Analysis:

1. Review of the Order in Criminal Public Interest Litigation No. 14 of 2019:
The original petitioner sought a review of the order passed on 6th February 2019, which dismissed their PIL. The review was based on an adjudication order by the Deputy Commissioner of Sales Tax denying a refund of ITC for sales from DFSs at the departure area of the airport.

2. Adjudication Order by the Deputy Commissioner of Sales Tax:
The Petitioners in Writ Petition No. 1511 of 2019 challenged the same adjudication order. The Deputy Commissioner denied the refund of ITC for sales from DFSs, claiming that such sales were not exports and thus not zero-rated supplies under GST laws. The court analyzed the statutory provisions and concluded that sales from DFSs to outbound passengers are exports and thus zero-rated, making the petitioner eligible for ITC refund.

3. GST Liability on Consideration Paid to MIAL:
Petitioners in Writ Petition No. 1535 of 2019 sought a declaration that the consideration paid to MIAL under a concession agreement was not liable to GST. The court refrained from issuing a declaration but held that the petitioner is entitled to ITC and can claim a refund by following the procedure in Rule 89.

4. Applicability of Article 286 and Supreme Court Judgments:
The common issue was whether DFSs at MIAL could be taxed despite Article 286 of the Constitution and the Supreme Court's ruling in Indian Tourist Development Corp. Ltd v. CCT. The court held that sales from DFSs to outbound passengers are exports, as the goods are sold before crossing the customs frontiers of India. This position aligns with the Supreme Court's judgment in Hotel Ashoka, which stated that sales at DFSs are outside the customs frontiers and thus not taxable by the state.

5. Eligibility for ITC and Refund Under GST Laws:
The court found that the petitioner is entitled to ITC on input services used in the course of business. The sales to outbound passengers are zero-rated supplies, making the petitioner eligible for a refund of ITC. The court also noted that the petitioner receives ITC refunds for similar sales at other international airports in India, highlighting the principle of "One nation, one tax."

Conclusion:
The court quashed the impugned order and show cause notices, holding that the sales from DFSs to outbound passengers are exports and thus zero-rated supplies under GST laws. The petitioner is entitled to ITC and refund. The criminal application was dismissed as infructuous, and the request for a stay on the judgment was refused.

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