2020 (1) TMI 766 - AT - Customs

Import of new aircraft - Benefit of N/N. 21/2002-cus dated 1.3.2002 as amended - Department got intelligence that the said aircraft had been imported for private use by the appellant under the guise of non scheduled operator (passenger permit) - Whether the appellant herein has violated condition no. 104 (under sl. No. 347 N) of notification no. 21/2002-Cus as amended by notification no. 61/2007-Cus while importing an aircraft vide B/E No. 218981 dated 21.05.2007 by not complying with the undertaking as was given to DGCA at the time of said import? HELD THAT - The scheduled as well as non scheduled air transport services firm (whether for passenger or charter) are open to use by the members of public and as such stands distinguished from what can be called as private use of the aircraft. The another thing which distinguishes scheduled air transport services and non scheduled from being called as the private use of aircraft is being published tariff / hire charges / remuneration against use of the said aircraft by any group but of public. Since the undertaking has been given for using the imported aircraft for NSOP/C services published tariff to the public is still the mandatory requirement. Clause 2 of condition no. 104 of notification no. 21/2002 as amended by 61/2007 lays down the requirement that the importer has to furnish the undertaking to the Customs Department to use the imported aircraft only for an avowed purpose. As mentioned in the said undertaking the purpose of such undertaking is to avail the exemption of customs duty which otherwise were to be paid to the Customs Department except in case of the use of the imported aircraft for the specific purpose in a specified manner as mentioned in the said undertaking. It becomes absolutely clear that any breach of such undertaking will definitely be actionable. The furnishing of undertaking by the importer to the Ministry of Civil Aviation (DGCA) to make the specific use i.e. NSOP/C of the said aircraft is sufficient to permit the import of the aircraft that too with exemption from payment of customs duty. This undertaking binds the importer that he shall use the aircraft for NSOP/C. This indicates that the said use of the aircraft will be possible only after the aircraft is imported pursuant to the said permission of DGCA. Accordingly the nature of use as to whether it is in terms of the undertaking given or not can be appreciated only post import. For seeking the benefit of impugned notification two conditions were required. The former that is taking an approval from Civil Aviation subject to impugned undertaking as a pre import condition and verifying the compliance of the said undertaking as a post import condition. This finding has been corroborated from clause (ii)(b) of Condition no. 104 of the Notification no. 21/2002 as amended by 61/2007 - A perusal makes it abundantly clear that in the event of importer failing to use the imported aircraft for the purpose as is specified in the undertaking that an amount equal to the duty payable on the said aircraft shall be paid by the importer on demand. The amount to be paid apparently and admittedly is the amount of customs duty which was to be paid at the time of import at the undertaking for using the aircraft for the specified purpose i.e. NSOP/C being given. Clause 2A thus clarifies that the correlative right to monitor the manner of use of the aircraft and determine whether it was being used for the said purpose as undertaken vests in Customs Department. In the present case neither the Civil Aviation Rules nor Aircraft Rules empower DGCA to investigate about the compliance of the undertaking. The undertaking is given in furtherance of the notification issued by the Customs Department in compliance of the Statutory Provisions of the Customs Act 1962. The verification as to whether the benefit of exemption from payment of customs duty should continue or not is opined definitely to lie with Customs Department only. The usage of the impugned aircraft post import is not for non scheduled passenger/ charter air transport services but only for private use. The same amount to violation of the undertaking based upon which the exemption was granted to the appellant from paying the customs duty. Consequent to the said violation the appellant has made himself liable to pay the said customs duty as if he has failed to pay the same at the relevant point of time to the jurisdictional customs authority from any point of imagination cannot be ruled out. They are held to vest with the jurisdiction to demand the customs duty. Since the benefit of exemption has been claimed by giving an undertaking whereupon the appellant has failed to stand with the possibility of intent of the appellant to evade said duty at the time of import of the aircraft cannot be ruled out especially when there is no evidence produced on record by the appellant. There are no ambiguity or infirmity in the order under challenge - appeal dismissed.

Summary

Issues Involved:

1. Alleged violation of the conditions of Notification No. 21/2002-Cus as amended by Notification No. 61/2007-Cus.
2. Jurisdiction and authority of the Commissioner (Preventive) to issue the show cause notice.
3. Interpretation of the term "non-scheduled air transport services" and its compliance.
4. Whether the usage of the imported aircraft for private purposes constitutes a violation of the exemption conditions.

Detailed Analysis:

1. Alleged Violation of Notification Conditions:
The appellant imported an aircraft availing an exemption from customs duty under Notification No. 21/2002-Cus, which required the aircraft to be used for non-scheduled air transport services. The Department alleged that the aircraft was used for private purposes, violating the conditions of the exemption. The Tribunal examined the notification, which mandates that the aircraft be used for non-scheduled (passenger) services or non-scheduled (charter) services, and any deviation would necessitate the payment of customs duty.

2. Jurisdiction and Authority of the Commissioner (Preventive):
The appellant contended that the show cause notice issued by the Commissioner (Preventive) was without jurisdiction. The Tribunal, however, upheld the authority of the Commissioner (Preventive) to issue the notice, emphasizing the role of the Customs Department in ensuring compliance with the conditions of the exemption notification, as the exemption pertains to customs revenue.

3. Interpretation of "Non-Scheduled Air Transport Services":
The Tribunal delved into the definitions and requirements under the Civil Aviation Requirement (CAR) and Aircraft Rules, clarifying the distinction between scheduled and non-scheduled air transport services. The Tribunal noted that non-scheduled services must be open to the public and operated against a published tariff. The Tribunal referred to the amendment in the CAR in 2010, which allowed non-scheduled air transport services to include both passenger and charter services, removing the earlier distinction.

4. Usage of Aircraft for Private Purposes:
The Tribunal found that the appellant used the aircraft for private purposes, as evidenced by the passenger logbook and voluntary statements, which indicated usage by the company's officials. This restricted usage was deemed a violation of the undertaking given to avail the exemption. The Tribunal emphasized that the exemption was intended for services open to the public, and any restricted or private use would breach the conditions of the notification.

Conclusion:
The Tribunal concluded that the appellant violated the conditions of the exemption notification by using the aircraft for private purposes. The Customs Department was within its rights to demand the customs duty, and the jurisdiction of the Commissioner (Preventive) was upheld. The appeal was dismissed, and the order under challenge was affirmed, reiterating the necessity for strict compliance with exemption notifications and the role of the Customs Department in monitoring such compliance.