2015 (6) TMI 151 - AT - Customs

Whether the appellant - importer of helicopters, has breached Condition No. 104 contained in Customs Notification No. 21/2002 (as amended by Notification No. 61/2007) rendering it liable to payment of duty on the import of the 2 helicopters, for which it had previously claimed exemption from duty in terms of the said Notification - Held that - there is no violation by the importer-appellant to the post import condition No. 104 of Notification No. 21/07, as amended. Accordingly, under the undertaking given by the importer, it was required to offer only non-scheduled passenger service. Such service has been defined in Explanation (b) of the said Notification as Air Transport Service other than a Scheduled Air Transport (Passenger) Services with reference to Rule 3 of the Aircraft Rules, 1937. Hence, the one and only source of definition and strictly interpreting the exemption Notification, reliance has to be placed on the said Rule 3, and no other material. The finding of the Revenue that the service provided was not a passenger service as the appellant did not print passenger ticket nor the flights were opened to public is erroneous. We hold that offering the service to public at large includes entering into agreement for providing regular service to a few members of the public on a regular basis over a period of time. The expression person includes the company under various tax laws. Further, company also forms part of the general public. The members of the public (company included) due to requirement of its business enters into the agreement with the service providers for providing of service over an extended period of time, may be weeks, months or years, it cannot be said that the service was not provided to public. Further, printing of ticket is not an essential element and such a requirement is not there, where the services are provided on the basis of published tariff or agreement wherein the hourly charges and flying charges along with other charges are mentioned for providing service for extended period of time. Accordingly, we hold that the services provided by the importer are in the nature of non-scheduled passenger service. In view of the clarification dated 8.8.2008, given by the licensing authority DGCA, while interpreting the importers permit, have clarified that the services offered by the appellant under its various contracts is within the scope of NSOP for passenger permit. DGCA being the appropriate licensing authority, is the best judge to decide as to whether the activity of the importer comes within the ambit of the license issued to the appellant by it. - in the case of the appellant unlike in the case of King Rotors case(2011 (6) TMI 276 - CESTAT, MUMBAI), there is no surrender of the helicopter in question and all the activities as the service provider, such as maintenance/insurance, salaries to the Pilot etc. have been carried out by the appellant importer. Thus, the facts in this case are clearly distinguishable from the facts in the King Rotors case and as such, we hold that the learned Commissioner has erred in relying on the earlier ruling of the Tribunal in the case of King Rotors case (supra). - Decided in favour of assessee.

Issues Involved:
1. Whether the appellant-importer breached Condition No. 104 of Customs Notification No. 21/2002 (as amended by Notification No. 61/2007).
2. Whether the appellant-importer is liable to pay duty, interest, and penalties for the import of helicopters.
3. Whether the services provided by the appellant-importer qualify as "non-scheduled (passenger) services" or "non-scheduled (charter) services".
4. Whether the adjudicating authority correctly interpreted the exemption notification and the relevant Aircraft Rules.
5. Whether the penalty should include the interest component as per Section 114A of the Customs Act.

Issue-wise Detailed Analysis:

1. Breach of Condition No. 104 of Customs Notification No. 21/2002:
The core issue is whether the appellant-importer breached Condition No. 104 of the Customs Notification No. 21/2002, which requires that imported aircraft be used solely for non-scheduled (passenger) services or non-scheduled (charter) services. The appellant claimed exemption from customs duty under this notification, asserting compliance with the conditions. The adjudicating authority found that the appellant was offering non-scheduled (charter) services instead of non-scheduled (passenger) services, thereby breaching the condition.

2. Liability to Pay Duty, Interest, and Penalties:
The adjudicating order dated 28/5/2012 held the appellant liable for duty of Rs. 13,95,21,783/- with an equal amount of penalty under Section 114A, and the helicopters were held liable for confiscation under Section 111(d) of the Customs Act, with an option to redeem at Rs. 9 crores. The appellant contested this, arguing that their services met the definition of non-scheduled (passenger) services.

3. Classification of Services Provided:
The appellant argued that their services met the definition of non-scheduled (passenger) services as per the Aircraft Rules, 1937, and the exemption notification. They contended that their services did not operate on a published timetable and were not open to the public in a systematic manner, thus fitting the definition of non-scheduled (passenger) services. The DGCA's clarification dated 8.8.2008 supported their claim, stating that their activities were within the scope of their Non-Scheduled Operator's Permit (NSOP).

4. Interpretation of Exemption Notification and Aircraft Rules:
The appellant argued that the adjudicating authority erred by not strictly interpreting the exemption notification and the Aircraft Rules. They emphasized that the definitions in the notification and the Aircraft Rules should be the sole basis for interpretation. The appellant also relied on the Supreme Court ruling in Titan Medical Systems (P) Ltd. vs. Commissioner of Customs, which held that the licensing authority's interpretation should prevail over the customs authority's interpretation.

5. Inclusion of Interest Component in Penalty:
The Revenue's cross-appeal argued that the penalty under Section 114A should include the interest component. The CBEC circular clarified that the penalty should be equivalent to the duty and interest determined. The appellant contested this, arguing that the adjudicating authority's interpretation was incorrect.

Judgment:
The Tribunal found no violation of Condition No. 104 by the appellant-importer. The services provided by the appellant met the definition of non-scheduled (passenger) services as per the Aircraft Rules, 1937. The Tribunal held that the DGCA's clarification supported the appellant's claim, and the adjudicating authority erred in relying on the King Rotors case, which had distinguishable facts. The Tribunal allowed the appeals of the appellant-importer and its director, set aside the impugned order, and dismissed the Revenue's appeal regarding the penalty on the interest component.

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