Facts of the Case:

In this case, the petitioner was engaged in the export of engineering services to its holding company located abroad. It holds a valid Importer Exporter Code (IEC) and was operating as a Software Technology Park (STP) unit, having obtained approval under the Foreign Trade Policy (FTP).

In terms of Notification No. 52/2003-Customs dated 31 March 2003, the Petitioner had imported capital goods by availing customs duty exemptions available to STP units. Subsequently, the Petitioner sought to exit (de-bond) from the STP scheme and accordingly applied to the Customs authorities. The exit was permitted subject to payment of applicable customs duties on depreciated value in terms of para 6.37 of the Handbook of Procedures (FTP 2015–20).

The Petitioner discharged the entire duty liability through TR-6 challan dated 06.03.2019. Upon such payment, the Deputy Commissioner of Customs issued a No Objection Certificate (NOC) dated 28.03.2019, certifying that all duties had been paid. On the basis of the said NOC, the Petitioner was granted final exit from the STP scheme on 04.04.2019. The IGST paid on debonding was reflected in the Petitioner’s electronic credit ledger, and ITC was availed under Section 16 of the CGST Act.

Subsequently, audit proceedings under Section 65 of the MGST Act were initiated, culminating in the issuance of Form DRC-01A, alleging that IGST paid at the time of debonding did not qualify as “input tax” under Sections 2(62) and 2(63) of the CGST Act, IGST was allegedly paid at a lower rate instead of 18%, differential IGST, interest, and penalty were payable.

The Petitioner contended that IGST had already been assessed and collected by Customs authorities; the same IGST could not be demanded again by State GST authorities.

Issue:

Whether the State GST authorities could re-assess and re-demand IGST already assessed and collected by the Customs authorities at the time of debonding of an STP unit, and whether the Petitioner should be relegated to the appellate remedy under Section 107 of the CGST Act for the remaining disputed demands.

Held that:

The Court noted that the debonding of an STP unit and assessment of duties payable at the time of exit is governed by the Foreign Trade Policy, the Handbook of Procedures, and Notification No. 52/2003-Customs, under which the Customs authorities are the competent and final authority to assess and collect the applicable duties, including Integrated Goods and Services Tax

The Court took cognizance of the affidavit filed by the Commissioner of Customs, which unequivocally stated that the Petitioner had applied for debonding of imported and indigenous capital goods; the depreciated value of such goods was assessed in accordance with the applicable provisions of the FTP and Customs law; total duty liability of ₹45,25,952/-, comprising Basic Customs Duty, Social Welfare Surcharge, and IGST of ₹32,90,108/-, was assessed, approved, and paid by the Petitioner; and No Objection Certificate (NOC) was issued only after full discharge of the assessed duty liability, on the basis of which the Petitioner was granted final exit from the STP scheme.

In light of the above, the Court observed that once the Customs authorities, acting within their statutory jurisdiction, had assessed and collected IGST on debonding, the same transaction could not be subjected to a second levy or re-assessment by the State GST authorities, as such an action would be contrary to the scheme of the GST law and would amount to impermissible duplication of demand.

As regards the remaining components of the demand, i.e. alleged excess availment of Input Tax Credit in relation to debonding of capital goods; and alleged ineligible ITC under Section 17(5) of the CGST/MGST Acts, the Court held that these issues involved mixed questions of fact and law, including examination of documents, eligibility conditions, and factual verification, which are best left to the statutory appellate authority under Section 107 of the CGST Act, 2017.

Case Name: Dar Al Handasah Consultants (Shair and Partners) India Pvt. Ltd. Versus Union of India and Ors. dated 19.01.2026

To read the complete judgement 2026 Taxo.online 171