Why the Supreme Court recalled its own order in the Flemingo duty free case.

The judgment that wasn't there: Why the Supreme Court recalled its own order in the Flemingo duty free tax case

When Flemingo Travel Retail Ltd. walked into the Supreme Court in April 2023, it had already won before the tax tribunal. The company operates duty free shops at Mumbai and Delhi international airports. It had paid service tax on rent charged by Mumbai International Airport for the period October 2011 to June 2017, then applied for a refund. The tax authorities said no. The Commissioner (Appeals) said no. But CESTAT, Mumbai, said yes — and the Supreme Court, on 10 April 2023, affirmed that decision.

There was just one problem. The Court never recorded or considered a single argument the government had made.

On 18 August 2023, a three-judge bench led by Chief Justice Dr. Dhananjaya Y. Chandrachud did something rare: it recalled its own judgment. The stakes were enormous — not just for Flemingo, but for 25 companion appeals involving the same issue, and for the broader question of whether duty free shops at Indian airports are exempt from service tax on rent.

What the case was actually about

Flemingo Travel Retail Ltd. operates duty free outlets at Chhatrapati Shivaji Maharaj International Airport, Mumbai, and Indira Gandhi International Airport, Delhi. The company paid service tax on the rent it was charged by the airport operator for the period from October 2011 to June 2017. Then it filed a refund claim, arguing that duty free shops are located outside the customs frontiers of India — and therefore, the renting of immovable property for such shops is not subject to service tax under the Finance Act, 1994.

The refund claim was made under Notification No. 41/2012-Service Tax dated 29 June 2012. The adjudicating authority — the CGST and Central Excise, Mumbai East — rejected the claim. The Commissioner (Appeals) affirmed that rejection. But CESTAT, Mumbai (West Zonal Bench), on 10 February 2022, allowed Flemingo's appeal. The tribunal relied on the Supreme Court's decision in Indian Tourist Development Corporation Ltd. v. Assistant Commissioner of Commercial Taxes (2012) 3 SCC 204, holding that duty free shops at international airports constitute a global market in a tax-exempt environment, and that the levy of service tax lacked lawful authority.

The judgment that forgot the government

The Union of India, through the Commissioner of CGST and Central Excise, Mumbai East, appealed to the Supreme Court. The appeal — Civil Appeal No. 2753 of 2023 — was heard and dismissed on 10 April 2023. The Court's order was brief. It noted that the SLP against a Bombay High Court decision in Al Cuisine Pvt Ltd v. Union of India (Writ Petition No. 8034 of 2018, decided on 28 November 2018) had been dismissed by the Supreme Court on 14 December 2018. It also referred to decisions of the Kerala High Court in CIAL Duty Free and Retail Services Ltd v. Union of India and the Bombay High Court in Sandeep Patil v. Union of India. On that basis, the Court affirmed CESTAT's order and dismissed the appeal.

But the judgment did something the government said was fatal: it did not record or consider any of the submissions made by the Additional Solicitor General on behalf of the Union. The ASG had argued that the cases relied upon by the Court — CIAL and Sandeep Patil — dealt with the taxation of goods sold at duty free shops, not with the service tax on renting of immovable property. The two regimes, the ASG contended, are fundamentally different. The goods regime concerns customs duties and the Customs Act; the service tax regime concerns the Finance Act, 1994 and, after GST, the Integrated Goods and Services Tax Act, 2017. The Court's judgment, the government said, had conflated the two.

What the government argued in review

The Union filed Review Petition (Civil) No. 1017 of 2023. The grounds were stark. First, the Court's judgment of 10 April 2023 did not record or consider any of the submissions advanced on behalf of the Union. Second, the decisions relied upon by the Court — CIAL and Sandeep Patil — pertained to the taxation of goods, not services. Third, there were 25 companion appeals involving identical issues that were pending before the Court, and the judgment in Flemingo's appeal had been rendered in isolation, without hearing those appeals together.

The ASG also raised a more fundamental point: the question of whether duty free shops are outside the customs frontiers of India for the purpose of service tax on rent is a substantial question of law that remains debatable. The goods regime and the service tax/IGST regime are distinct, and the Court's earlier judgment had not addressed this distinction at all.

The Supreme Court's response: a rare recall

The three-judge bench — Chief Justice Dr. Dhananjaya Y. Chandrachud, Justice Sanjay Karol, and Justice Manoj Misra — did not mince words. The Court observed that the judgment of 10 April 2023 had failed to record or consider the submissions of the Union. The issue raised had "large consequential ramifications" — not just for Flemingo, but for the entire duty free retail sector and for the tax treatment of airport concessions.

The Court also noted that 25 companion appeals involving identical issues were pending. The interests of consistency and judicial economy required that all these appeals be heard together. A judgment that proceeded in isolation, without addressing the submissions of one party and without considering the broader context of pending appeals, could not stand.

The Court declined to enter a finding on whether there had been a breach of natural justice — specifically, whether counsel for the Union had been heard at all before the judgment was pronounced. The parties disputed this point, and the Court chose to allow the review on the narrower ground of non-consideration of submissions rather than non-hearing.

The operative order was clear: review allowed; judgment dated 10 April 2023 recalled; Civil Appeal No. 2753 of 2023 restored to the file; the appeal to be tagged with 25 companion appeals; the Registry to obtain administrative directions for clubbing all matters before one bench. And critically, the Court directed that no coercive steps be taken for recovery of dues pending disposal of the appeal.

The doctrine that mattered: when a judgment must be recalled

The ratio decidendi of this review order is straightforward but important. Where a judgment of the Supreme Court fails to record or consider the submissions of one party, and the issue raised has large consequential ramifications, the judgment is liable to be recalled on review. This is not a new principle — it is a fundamental requirement of procedural fairness. But the Court's willingness to apply it here, and to recall its own judgment, sends a clear signal.

The second ratio is equally significant: where multiple appeals involving identical issues are pending, the interests of consistency and judicial economy require them to be heard together. A judgment that proceeds in isolation, without considering companion appeals, risks inconsistency and undermines the authority of the Court's own precedents.

THE PLAY: If the Supreme Court's judgment in your case does not record or consider your submissions — and the issue has large ramifications — file a review petition. The Court will recall its judgment and hear you afresh.

Why this matters in practice

For advocates, this judgment is a reminder that the Supreme Court's review jurisdiction is not as narrow as it is sometimes thought to be. The Court will recall its own judgment if it finds that a party's submissions were not considered, especially when the issue has wide implications. The fact that the Court did not require a finding of breach of natural justice — and allowed the review on the narrower ground of non-consideration — makes this a more accessible remedy.

For CFOs and founders of companies operating duty free shops at Indian airports, this judgment is a reprieve. The refund of service tax on rent for the period October 2011 to June 2017 remains alive. The Supreme Court will now hear the appeal afresh, along with 25 companion appeals. The direction that no coercive steps be taken for recovery of dues pending disposal means that companies can continue their operations without the threat of immediate tax recovery.

For the tax department, this judgment is a setback — but also an opportunity. The Court has signalled that the goods vs. services distinction for duty free shops raises substantial grounds on law that are debatable and require substantial consideration. The merits of the case remain entirely open. The government will now have a full hearing on its arguments.

The bottom line

The Supreme Court recalled its own judgment because it had not considered the government's submissions — and in doing so, it restored 26 appeals for a fresh hearing on whether duty free shops at Indian airports are exempt from service tax on rent, a question that will now be decided on its merits, not on a procedural oversight.