2019 (11) TMI 1503 - AT - Customs

Valuation - leftover ATF available in the fuel tank of aircraft landing in India from an international trip - inclusion of freight element on notional basis to arrive at the value of such ATF - HELD THAT - The aircraft requires ATF for its propulsion. As per the Civil Aviation Regulation requirements and also for safety aircraft caries adequate amount of fuel in its flight. The consumption of fuel depends on various factors. Factually when the aircraft completes the inward journey to reach the Indian Airport certain quantity of fuel is left in the tanks - We are not in agreement that there should be a freight element attributable to such fuel in the tank. In other words the aircraft did not transport the fuel as a cargo or goods for the purpose of freight. Such interpretation will be a result of hyper-technical approach to the facts of the case. Admittedly the remanant fuel is construed to be an imported item for the purpose of Customs duty. In the importation of such remanant fuel we could not discern any separate freight element which can be added in the assessable value. The fuel in the tank is part of aircraft in operation. Fuel cost is calculated and apparently forms part of commercial consideration while fixing ticket charges for transporting aircraft. No freight element is attributable to fuel in the tank the usage of which varies on different parameters. The aircraft did not transport ATF on which a freight element can be attributed. The plain meaning Freight is goods that are transported by ships planes trains or lorries/trucks; the system of transporting goods in this way (OXFORD Advanced Learners Dictionary 7th ed. - on this basis it cannot be said that fuel in the tank of aircraft used for propulsion can be considered as cargo/goods with attributable cost of freight. Further Rule 10(2) was applied by the lower authority on the ground that the freight of ATF is not ascertainable. Dealing with addition of loading and handing charges at 1% on notional basis as per Rule 9 of Valuation Rules the Apex Court in the case of WIPRO LTD. VERSUS ASSISTANT COLLECTOR OF CUSTOMS OTHERS 2015 (4) TMI 643 - SUPREME COURT held that when the actual costs towards handling charges are available notional addition is not legally tenable. It was held to be violative of Article 14 of the Constitution - In the present case there is no freight involved with reference to leftover fuel in the tank of an operating aircraft. Hence there is no question of such freight being not ascertainable and hence addition of 20% notional freight - there is no freight element involved and hence there is no application for Rule 10(2). Appeal dismissed - decided against Revenue.

Summary

Issues: Valuation of leftover ATF in aircraft fuel tank upon arrival from international trip; Applicability of freight charges on notional basis.

The judgment involves an appeal against an Order-in-Appeal passed by the Commissioner of Customs regarding the valuation of leftover Aviation Turbine Fuel (ATF) in an aircraft's tank upon arrival from an international trip. The appellant, an airline, had been paying Customs duty on the remnant ATF in the tank on a monthly basis. The Customs authorities assessed duty liability by adding freight charges at 20% on a notional basis. The appellant also claimed the benefit of a Notification exempting fuel in the tanks of aircraft from duty payment. The Commissioner of Customs (Appeals) found that the freight element was not attributable to the leftover fuel in the tank, citing a Tribunal case where it was held that no separate freight element could be discerned for such fuel. The Commissioner set aside the freight leviable and remanded the matter for re-examination, emphasizing the principle of natural justice.

The Revenue filed an appeal against the Order-in-Appeal, arguing that the decision lacked due consideration of facts, failed to appreciate evidence properly, and was conditional due to pending cases. The Revenue also highlighted a Civil Appeal in the Supreme Court related to a similar matter. The Appellate Tribunal noted that the main dispute was the valuation of the leftover ATF in the aircraft's fuel tank upon arrival, with duty liability not in question. The Tribunal disagreed with the notion of adding a freight element on a notional basis, stating that the aircraft did not transport the fuel as cargo for freight purposes. The Tribunal emphasized that the remnant fuel was part of the aircraft in operation and could not be considered as goods with attributable freight cost. Referring to a Supreme Court case, the Tribunal held that when no actual freight costs were involved, adding notional freight was not legally tenable. Therefore, the Tribunal upheld the Commissioner (Appeals) order, finding no justifiable reason to interfere.

In conclusion, the Tribunal dismissed the appeals, maintaining the decision of the Commissioner (Appeals) regarding the valuation of leftover ATF in the aircraft's fuel tank upon arrival from an international trip and the inapplicability of freight charges on a notional basis.