2022 (8) TMI 720 - AT - Customs

Exemption from Customs Duty - Import of an aircraft that had been granted permit by the Director General of Civil Aviation, DGCA for operating non-scheduled (passenger) services - notification No. 61 of 2017 dated 03.05.2007 - Applicability of CAR 1999 or CAR 2000 - As there was difference of opinion in the two case, the division bench, accordingly referred the matter to a larger bench of the Tribunal to express its view as to which of the two views expressed by the division benches was the correct view. HELD THAT - All the division benches of the Tribunal, except the division benches deciding King Rotors and East India Hotels 2011 (6) TMI 276 - CESTAT, MUMBAI , have followed the earlier decision of the Tribunal in Sameer Gehlot 2010 (11) TMI 85 - CESTAT, NEW DELHI that held that the aircraft operator was entitled to the benefit of the exemption notification. The decision of the Tribunal in Sameer Gehlot was placed before the division benches deciding King Rotors and East India Hotels. In King Rotors it was considered to be per incuriam and in East India Hotels it was found not to apply to the facts of the case. Reliance can be placed in the case of ivision bench of the Tribunal in COMMR. OF CUS. (IMPORT) , ACC, MUMBAI VERSUS AIRMID AVIATION PVT. LTD. 2020 (3) TMI 922 - CESTAT MUMBAI , that was decided on 11.09.2019, considered the entitlement of the aircraft operator for continuance of exemption from duties of customs that had been allowed on import of aircraft against the undertaking given by the operator for complying with the condition of operating non-scheduled (passenger) service, though the aircraft was deployed on charter hire and was considered to be a private aircraft by the department. The adjudicating authority concluded that non issue of tickets to employees of group companies, or even pre dominant use by group companies for their employees did not reduce the aircraft to a private aircraft and that offering of the imported aircraft on charter was not violative of the condition for exemption - The Tribunal, after noticing the earlier division bench decisions of the Tribunal in Sameer Gehlot and Reliance Transport on the one hand, and King Rotors on the other, dismissed the appeal filed by department and observed that The harmonious construct of the finding on obligation of performance, the lack of acceptability of the sole decision relied upon by Revenue, the consistent stand adopted by the Tribunal in all other decisions, the renewal of the permit to operate as non-scheduled passenger service by the competent statutory authority and the clarifications issued by that authority, in general as well as to the Commissioner of Customs, leaves us with no option but to dismiss the appeal of Revenue. In M/s. East India Hotels Ltd. vs. Commissioner of Customs Central Excise and Central GST, New Delhi, 2020 (1) TMI 766 - CESTAT NEW DELHI , which was decided on 14.01.2020, a division bench of the Tribunal examined whether the importer of aircraft who had been granted permit by DGCA for using the aircraft for non-scheduled (passenger) services had violated the conditions specified in the exemption notification while using the aircraft for private use and held that it had violated. The division bench denied the benefit of the exemption notification and it was held that The usage, of the impugned aircraft post import is not for non scheduled passenger/ charter air transport services but only for private use. Aircrafts and helicopters are classified under Customs Tariff Heading 88 of the First Schedule to the Customs Tariff Act, 1975. The tariff rate of duty till 28.02.2007 on the import of aircraft was 3% / 12.5%. Subsequently, pursuant to the proposal made in the Finance Bill 2007, exemption notification no. 20/2009 dated 01.03.2007 was issued inserting Entry 346B and Condition No. 101 in the earlier exemption notification dated 01.03.2002, whereby, the effective rate of duty on import of aircraft for scheduled air transport service was made nil . No exemption was, however, granted to non-scheduled air transport service and private category aircraft. However, with the issuance of the exemption notification dated 03.05.2007, the effective rate of duty on the import of aircraft for non-scheduled air transport service was made nil . This exemption notification was as a consequence of the statement made by the Hon ble Finance Minister in the Parliament - the aforesaid exemption notification dated 03.05.2007 inserted Condition No. 104 which requires at the stage of import, an approval from MCA to import the aircraft for non-scheduled (passenger) service and an undertaking by the importer to the customs authority that the aircraft would be used only for non-scheduled (passenger) services and that the operator would pay on demand, in the event of his failure to use the aircraft for the specified purpose, an amount equal to the duty payable on the said aircraft but for the exemption under the notification. Thus, if a service is covered by air transport service defined in rule 3(9) of the Aircraft Rules and is other than scheduled (passenger) air transport service defined in rule 3(49), it would be a non-scheduled (passenger) service within the meaning of clause (b) of the Explanation to Condition No. 104 of the exemption notification. Whether the aircraft was used by the appellants only for providing non-scheduled (passenger) services as defined in clause (b) of the Explanation to Condition No. 104 of the exemption notification? - HELD THAT - Non-scheduled (charter) services have been defined in clause (c) to mean services provided by a non-scheduled (charter) air transport operator, for charter or hire of an aircraft to any person, with a published tariff, and who is registered with and approved by DGCA for such purposes and who confirms to the Civil Aviation Requirements. An aircraft operator can be said to provide non-scheduled (charter) service only if the service satisfies the requirements of clause (c). The appellants are not registered and approved with DGCA as non-scheduled (charter) air transport operator and in some cases there is no published tariff. The appellants, therefore, cannot be said to have provided non-scheduled (charter) services as defined in clause (c) - The appellants have, therefore, provided non-scheduled (passenger) services, as defined in clause (b) of the Explanation to the exemption notification. Whether, non publication of tariff is violative of Explanation (c) of Condition No. 104? - HELD THAT - Merely because the appellants can also conduct charter operations would not mean that the appellant would becomes a non-scheduled (charter) permit holder and consequently required to have a published tariff. The definition of non-scheduled (passenger) service given in clause (b) of the Explanation, as analyzed above, does not require the publication of tariff. It is also seen that under rule 135 of the Aircraft Rules, 1937, it is only the air transport undertaking offering scheduled air transport services in accordance with rules 134(1) and 134(2) that are required to publish their tariff. Whether the aircraft can be used by members of public? - HELD THAT - The personnel of companies which are group companies of the appellant are also members of public. The aircraft is, therefore, available for used by the public. Even otherwise, this cannot be a reason to hold that the air transport service provided by the appellants would fall outside the scope of non-scheduled (passenger) service. Whether the customs authorities have the jurisdiction to decide violation of the exemption notification? - HELD THAT - It is the jurisdictional authorities under the Civil Aviation Ministry that alone can monitor the compliance of the conditions imposed and the Customs Authorities can take action on the basis of the undertaking submitted by the importer only when the authority under the Civil Aviation Ministry holds that the conditions have been violated. Doctrine of Per incuriam - HELD THAT - There are no difficulty in holding that the division bench in King Rotors was not justified in holding that the decision of the earlier division bench in Sameer Gehlot had been rendered per incuriam as neither it was pointed out that provisions of a Statue or a judicial authority of binding nature had been ignored. Infact, as noticed above, all that the division bench in King Rotors observed was that the post importation nature of the subjects of undertakings was not appreciated by the bench . Analysis of the division bench decisions - HELD THAT - A perusal of the order passed in East India Hotels would indicate that the aircraft had been purchased by East India Hotels on 21.05.2007 and the show cause notice alleging violation of the conditions of the exemption notification was issued on 27.06.2008. This show cause notice was, however, adjudicated upon by order dated 27.07.2010. Thus, it would be the CAR 1999 that would be applicable and not CAR 2010. The two decisions in Sameer Gehlot and King Rotors could not, therefore, have been distinguished for the reason that CAR 2010 would apply and not CAR 1999. The conclusion, therefore, that emerges is that King Rotors does not lay down the correct position of law. The appeals may now be listed before the regular division bench for hearing.

Summary

Issues Involved:
1. Whether the reference to the Larger Bench has become infructuous due to the doctrine of merger.
2. Whether the appellants violated Condition No. 104 of the exemption notification.
3. Whether an aircraft imported for non-scheduled (passenger) services can be used for non-scheduled (charter) services.
4. Classification of the imported aircraft as "private aircraft."
5. Jurisdiction of Customs Authority to examine the validity of DGCA's permission.
6. Requirement of issuing air-tickets for non-scheduled (passenger) services.
7. Retrospective application of CAR 2010.
8. Validity of the decision in King Rotors in holding the decision in Sameer Gehlot as per incuriam.

Detailed Analysis:

1. Doctrine of Merger:
The reference to the Larger Bench has not become infructuous due to the doctrine of merger. The Supreme Court's dismissal of the Civil Appeal against the Tribunal's decision in Reliance Transport does not constitute a declaration of law under Article 141 of the Constitution. The Supreme Court did not address the reasons or the law laid down by the Tribunal, thus the reference remains valid.

2. Violation of Condition No. 104:
The appellants have not violated Condition No. 104 of the exemption notification. The use of the aircraft for non-scheduled (passenger) services satisfies the requirements of clause (b) of the Explanation to Condition No. 104. The appellants have been granted non-scheduled operator permits, which have been renewed without objection from the DGCA.

3. Use of Aircraft for Charter Services:
An aircraft imported for non-scheduled (passenger) services can be used for non-scheduled (charter) services. There is no restriction in the exemption notification, Aircraft Rules, or Civil Aviation Requirements against providing air transport service by chartering the aircraft. The DGCA has clarified that a non-scheduled (passenger) permit holder can conduct charter operations.

4. Classification as Private Aircraft:
The imported aircraft cannot be classified as "private aircraft." The definition of "private aircraft" under rule 3(43) of the Aircraft Rules does not stipulate that non-publication of tariff or non-issuance of tickets would render the aircraft private. The aircraft used for carriage of persons for remuneration remains a public transport aircraft.

5. Jurisdiction of Customs Authority:
The customs authority cannot examine the validity of the permission granted by the DGCA in the absence of cancellation of the permit by the DGCA. The jurisdictional authorities under the Civil Aviation Ministry alone can monitor compliance with the conditions imposed by the DGCA and the Civil Aviation Ministry.

6. Requirement of Issuing Air-Tickets:
It is not mandatory for the importer to issue air tickets for providing non-scheduled (passenger) services. The definitions of 'air transport service' and 'non-scheduled (passenger) service' do not stipulate such a requirement. The Policy Guidelines for Starting Scheduled/Non-Scheduled Air Transport Services issued by the Ministry of Civil Aviation state that non-scheduled operators are not permitted to publish time schedules and issue tickets to passengers.

7. Retrospective Application of CAR 2010:
CAR 2010 merely amalgamates CAR 1999 and CAR 2000 to provide a uniform code for the operation of non-scheduled air transport services. It has restated and codified the position stated earlier by the DGCA through various clarifications and is explanatory in nature.

8. Validity of King Rotors Decision:
The division bench in King Rotors was not correct in holding that the decision of the Tribunal in Sameer Gehlot was rendered per incuriam. The principle of per incuriam applies to decisions given in ignorance of statutory provisions or binding authorities, which was not the case in Sameer Gehlot.

Conclusion:
The Larger Bench concluded that the appellants did not violate the conditions of the exemption notification, the aircraft can be used for charter services, it cannot be classified as a private aircraft, and the customs authority does not have the jurisdiction to examine the validity of DGCA's permission. The requirement to issue air tickets is not mandatory, and CAR 2010 is explanatory in nature. The decision in King Rotors was incorrect in holding that Sameer Gehlot was rendered per incuriam. The appeals are to be listed before the regular division bench for hearing.