2014 (3) TMI 119 - HC - Customs

Release of aircraft engines detained - Customs authorities were of the opinion that the bringing of the aircraft engine into India amounts to import and, therefore, attracted duty. They accordingly exercised their rights and detained the engine under Section 110A. - Held that - the rationale for bringing in the engine was to enable it to be fitted to the cannibalized aircraft to fly it. It is not disputed that the aircraft has been allowed to fly out though with the aid of another engine. - to avoid deterioration in the functionality of the engine, it would be in the interest of justice to allow it to be released subject to conditions - petitioner directed to furnished bank guarantee in the sum of Rs. 8 crores and depositing Rs. 1 crore with the Customs Department - After release, the engine shall be allowed to be re-exported. - Decided in favor petitioner.

Summary

Issues:
Release of aircraft engine detained by Customs authorities, dispute over duty drawback entitlement, legality of detention under Customs Act, conditions for release of engine, pending adjudication on the matter.

Analysis:
The petitioner, who had leased aircrafts to M/s. Kingfisher Airlines, sought direction for the release of its aircraft engine detained by Customs authorities. The engine in question was not imported but flown in to be fitted in an aircraft due to cannibalization by M/s. Kingfisher Airlines. Customs authorities detained the engine under Section 110A, considering it as an import subject to duty. The petitioner argued that the engine's detention was unwarranted, claiming entitlement to 98% duty drawback based on certain circulars. However, the Revenue disputed this, asserting the petitioner's liability to pay duty, interest, and potential penalties. The duty amount was stated to be Rs. 8.69 crores, with interest around Rs. 1.30 crores. The Court acknowledged the purpose of bringing in the engine to enable the aircraft to fly and directed its release subject to conditions.

The Court ordered the petitioner to furnish a bank guarantee of Rs. 8 crores and deposit Rs. 1 crore with the Customs Department for the engine's release. It instructed Customs authorities to adjudicate on the proceedings and make appropriate orders after considering all contentions. The petitioner was required to comply with all formalities for the engine's release, including filing necessary documents. Post-release, the engine was permitted to be re-exported, with the order not indicating a stance on the case's merits, preserving parties' rights and contentions. The release was contingent on the final outcome of the adjudication, and the writ petition was disposed of accordingly, canceling any previously set dates.