2021 (12) TMI 971 - AT - Customs

Valuation of imported goods - fuel on board aircraft returning to India on completion of international leg - inclusion of insurance, freight and landing charges in the assessable value - benefit of notification no. 151/194-Cus dated 13th September 1994 - period from 1st April 2010 to 15th October 2014 - HELD THAT - The appellant had discharged duty liability on the fuel available on board upon arrival in India after foreign run and the claim of eligibility to set off the fuel available on board upon conversion to foreign run before departure from India was raised for the first time in the course of proceedings for recovery of duties of customs over and above that discharged by the appellant herein. Neither has any claim for refund of this component of the duties been filed nor is there any demand of duty following denial of the benefit of the set off provided in notification no. 151/1994-Cus dated 13th July 1994. It would, therefore, appear that this was a plea for mitigation in the event of the enhancement of the assessable value of fuel on which duty had already been discharged in accordance with the extant instructions. The demand in the impugned order has incorrectly taken recourse to rule 10 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and, therefore, must be set aside - Appeal allowed.

Summary

Issues:
1. Dispute over confirmation of demand and penalty under Customs Act, 1962.
2. Applicability of rule 10 of Customs Valuation Rules, 2007.
3. Eligibility for exclusion of fuel on board before conversion for international run.

Analysis:
1. The appeal by M/s Jet Airways contested the demand confirmation of &8377; 8,70,64,405 under Customs Act, 1962, and the penalty imposed under section 114A. The dispute arose from the duty liability on fuel on aircraft returning to India after an international leg. The appellant claimed to have discharged duty from September 2004 and availed benefits under notification no. 151/194-Cus. The period under dispute was from 1st April 2010 to 15th October 2014.

2. The dispute involved the unique procedure for scheduled operators carrying passengers and baggage on domestic and international sectors regarding fuel on board aircraft returning to India. The assessment for duty liability on foreign-origin fuel on domestic flights was challenged due to the difficulty in segregating fuel by source. The determination of fuel value faced hurdles due to commercial imperatives, leading to two alternatives for assessment. The special procedure was justified due to air transportation's nature and safety standards.

3. The appeal was heard previously but referred to a Larger Bench due to disagreements with precedent decisions. The Larger Bench clarified the applicability of rule 10 of Customs Valuation Rules, 2007, regarding the addition of transportation costs to the assessable value. The decision excluded the addition of freight, insurance, and landing charges to the cost of supply by M/s Indian Oil Corporation Ltd for duty liability on fuel post-international leg.

4. The eligibility for exclusion of fuel claimed to be on board before conversion to an international run was discussed. The appellant's plea for mitigation regarding the set-off of fuel available on board before the conversion was not entertained as no refund claim was filed or duty demand made. The demand in the impugned order was found to have incorrectly applied rule 10 of Customs Valuation Rules, 2007, and was set aside based on the decision of the Larger Bench.

5. The appeal was allowed in part, and miscellaneous applications were disposed of, with the order pronounced on 21/12/2021.