2017 (9) TMI 926 - AT - Customs

Valuation - leftover ATF available in the fuel tank of aircraft landing in India from an international trip - includibility - notional freight charges - Rule 10(2) of Customs Valuation Rules - Held that - 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 remnant fuel is construed to be an imported item for the purpose of customs duty. In the importation of such remnant 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. Rule 10(2) was applied by the lower authority on the ground that the freight of ATF is not ascertainable - there is no freight element involved and hence, there is no application for Rule 10 (2). There is no freight involved with reference to left over fuel in the tank of an operating aircraft. Hence, there is no question such freight being not ascertainable and hence addition of 20% notional freight. Penalty u/s 112 - Held that - The procedure followed by the appellant and regularly intimated to the Department has not been varied by the Revenue. No loss of revenue has been alleged except for non-addition of notional fright in the value of ATF. As such notional additional is not legally sustainable. In view of these observations, there is no sustainable reason for imposing penalty on the appellant under Section 112. Appeal allowed - decided in favor of appellant.

Summary

Issues: Valuation of leftover ATF in aircraft returning from international trips; Application of Rule 10(2) of Customs Valuation Rules; Procedural requirements for filing bill of entry for ATF; Eligibility for exemption under notification no.151/94-Cus; Imposition of penalty under Section 112 of Customs Act, 1962.

Valuation of leftover ATF:
The case involved a dispute over the valuation of Aviation Turbine Fuel (ATF) left in aircraft tanks after international trips. The Revenue contended that a notional freight charge of 20% should be added to the value as per Rule 10(2) of Customs Valuation Rules. However, the Tribunal disagreed, stating that the ATF in the tank is part of the aircraft's operation and not transported as cargo, thus no freight element should be added. The Tribunal cited the Supreme Court's stance on the transactional value of imported goods and ruled that no freight being involved, the addition of notional freight was not applicable.

Procedural requirements and exemption eligibility:
The appellant argued that there was no clear procedure for filing bill of entry for ATF and that they had been complying with customs duty payments based on monthly submissions for years. They also claimed exemption under notification no.151/94-Cus, which was denied due to procedural lapses. The Tribunal found that the appellant's consistent practice of submitting details and duty payments negated any penalty for procedural irregularities.

Imposition of penalty under Section 112:
The Revenue imposed penalties under Section 112 of the Customs Act, 1962, alleging violations in filing bill of entry and valuation of ATF. However, the Tribunal found no legal basis for the penalties as the appellant had followed a regular practice, maintained advance deposits, and provided detailed flight information to Customs Authorities. The Tribunal held that the Revenue's allegations lacked merit, and there was no sustainable reason for imposing penalties.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal in favor of the appellant. The judgment highlighted the importance of assessing the actual circumstances of ATF valuation, the lack of procedural violations by the appellant, and the absence of grounds for penalty imposition under Section 112. The decision emphasized adherence to legal principles in customs valuation and penalty imposition, ensuring fair treatment for the appellant based on the facts presented during the case proceedings.