CESTAT quashes customs duty demand and penalties against IndiGo over aircraft generator imports.

May 11, 2026 : InterGlobe Aviation Ltd., the operator of IndiGo Airlines, has secured major relief from the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, in a high-value customs classification dispute involving aircraft integrated drive generators and starter generators. The Tribunal set aside customs duty demands exceeding Rs. 17 crore, along with penalties imposed on the airline and its customs broker, holding that the imported aircraft components were wrongly classified by customs authorities under a higher tax category.

The dispute arose from the classification of “integrated drive generators” (IDGs) and “starter generators” imported by InterGlobe Aviation for use in aircraft engines. Customs authorities had alleged that the components were wrongly declared under Customs Tariff Heading (CTH) 8501 and 8502, attracting Integrated GST (IGST) at 18%, whereas the department argued that the goods fell under CTH 8511, which carried a higher IGST rate of 28%. Based on this interpretation, the department issued show cause notices demanding differential duty along with interest and penalties under Sections 28AA and 114A of the Customs Act, 1962.

A Bench comprising Justice Dilip Gupta, President, and P.V. Subba Rao, Member (Technical), examined the functioning and technical nature of the imported equipment in detail. The Tribunal noted that integrated drive generators are aircraft power generation systems that provide electrical energy to various aircraft systems, including lighting, air conditioning, and control systems. Starter generators, meanwhile, perform a dual function by initially acting as motors to start aircraft engines and later switching to generator mode to supply electrical power during flight operations.

The customs department had argued that because the generators were used in conjunction with turboprop and turbofan engines, which it treated as internal combustion engines, the goods were specifically covered under CTH 8511 dealing with electrical ignition or starting equipment for internal combustion engines. According to the department, the Harmonized System of Nomenclature (HSN) explanatory notes supported this interpretation since the heading referred to equipment used with “internal combustion engines of any kind.”

InterGlobe Aviation, however, contended that the imported goods were essentially electrical generators and therefore appropriately classifiable under CTH 8501. The airline further argued that turbofan and turboprop engines are gas turbine engines classified separately under CTH 8411 and cannot be equated with spark-ignition or compression-ignition internal combustion engines covered under CTH 8511. The airline also maintained that even if some imports had initially been declared under CTH 8502, it was legally entitled to seek correction of classification during reassessment proceedings.

Accepting the airline’s arguments, the Tribunal held that CTH 8501 broadly covers electric motors and generators, whereas CTH 8511 applies only to generators used with spark-ignition or compression-ignition internal combustion engines. The Bench observed that turboprop and turbofan engines are distinct gas turbine engines and function differently from conventional reciprocating internal combustion engines.

The Tribunal specifically observed, “Since the goods are not used in conjunctions with either spark-ignition or compression ignition IC engines they will be classifiable under CTH 8501 and not CTH 8511 by application of Rule I of GRI.”

The Bench also rejected the customs department’s interpretation of the phrase “IC engines of any kind.” According to the Tribunal, the HSN explanatory notes used the phrase only to distinguish between “piston type” and “other types” of internal combustion engines, and not to include gas turbine engines within the scope of Heading 8511.

In a significant clarification for aviation imports, the Tribunal held that integrated drive generators would fall under Customs Tariff Item (CTI) 8501 62 00, while starter generators would fall under CTI 8501 32 20. The Bench further noted that the imported goods were supplied without prime movers and therefore could not be treated as “generating sets” under CTH 8502.

The order also addressed the issue of limitation under Section 28(4) of the Customs Act. The department had invoked the extended limitation period alleging suppression and misclassification by the importer. However, the Tribunal ruled that mere disagreement over tariff classification does not automatically establish suppression or intent to evade duty.

The Bench observed, “The classification adopted by the importer even if ultimately found to be not correct would not mean that the import by misclassifying the goods was with an intention to evade payment of duty.”

Since the extended limitation period was held to be wrongly invoked, the Tribunal also quashed the penalty imposed on InterGlobe Aviation under Section 114A of the Customs Act. It further set aside the penalty imposed on customs broker C.G. Logistics under Section 117, observing that a customs house agent merely acts on the basis of documents and instructions provided by the importer and cannot be penalized solely because of classification disputes.

The ruling is expected to have wider implications for the aviation industry and aircraft component imports in India. The decision clarifies the customs classification framework applicable to sophisticated aircraft electrical systems and may influence similar disputes involving aerospace equipment, aviation maintenance imports, and IGST liability on aircraft parts. The judgment also reinforces the legal principle that classification disputes alone do not justify invocation of the extended limitation period or penal consequences without evidence of fraud, wilful misstatement, or suppression.

With this ruling, CESTAT allowed all three appeals filed by InterGlobe Aviation and C.G. Logistics and completely set aside the impugned orders passed by the Principal Commissioner of Customs.

Case Reference : Interglobe Aviation Ltd. vs Principal Commissioner of Customs, Final Order Nos. 50857-50859/2026, Customs Appeal Nos. 55094 of 2023, 54697 of 2023 and 50050 of 2023, decided on May 11, 2026, CESTAT New Delhi.