2023 (1) TMI 1056 - AT - Customs

Violation of conditions of Exemption notification - flying training' Aircraft - Allegation of misuse for charter service - Confiscation of eight CESSNA 172R Aircrafts with redemption fine imposed - recovery of import duty forgone on the import of eight CESSNA Aircrafts import duty forgone on imports of spare parts for maintenance of the said aircrafts with interest - levy of penalty - acts of omission and commission - Jurisdiction of customs authorities to decide violation of the exemption notification. HELD THAT - the appellant had initially imported Aircrafts for flying training purpose and had given such an undertaking to the customs authorities. The DGCA had also granted permits to the appellant. It is subsequently on 23.04.2009 that the appellant submitted an application before the MCA for grant of a No Objection Certificate to operate non-scheduled (charter) services, which certificate was granted by the MCA on 15.06.2009 and on 28.07.2009 an endorsement was made in the permit. The issue as to whether the customs authorities would have the jurisdiction to decide violation of the exemption notification was examined at length by a Larger Bench of the Tribunal in M/S VRL LOGISTICS LTD VERSUS COMMISSIONER OF CUSTOMS, AHMEDABAD 2022 (8) TMI 720 - CESTAT AHMEDABAD (LB) where it was held that 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. It is not possible to accept the contention of the learned special counsel appearing for the Department that the decision of the Larger Bench of the Tribunal distinguishable on facts. The Larger Bench of the Tribunal in VRL Logistics had arrived at the conclusion after placing reliance upon the decision of the Supreme Court in Titan Medical Systems Pvt. Ltd. vs. Collector of Customs, New Delhi 2002 (11) TMI 108 - SUPREME COURT . It has, therefore, to be held that the customs authorities could have proceeded to recover the duty on the basis of the undertaking only when the competent authority in the DGCA found as a fact that the appellant had violated the conditions of the permit - In the present case, such a finding has not been recorded and on the other hand, the permits have been renewed from time to time. Appeal allowed.

Issues Involved:

1. Confiscation of Aircrafts and Recovery of Import Duty
2. Jurisdiction of Customs Authorities
3. Usage of Imported Aircrafts for Non-Scheduled (Charter) Services
4. Violation of Conditions of Exemption Notification
5. Imposition of Penalty on the Director

Detailed Analysis:

1. Confiscation of Aircrafts and Recovery of Import Duty:
The appellant, Chimes Aviation Pvt. Ltd., imported eleven CESSNA 172R Aircrafts for 'flying training' purposes under an exemption notification. The Commissioner of Central Excise confiscated eight of these aircrafts under Section 111(o) of the Customs Act, 1962, but allowed them to be redeemed on payment of a redemption fine under Section 125. The Commissioner also ordered the recovery of import duty forgone on the aircrafts and spare parts, with interest, and imposed a penalty on the appellant for acts of omission and commission that rendered the aircrafts and spare parts liable to confiscation under Section 114 of the Customs Act.

2. Jurisdiction of Customs Authorities:
The appellant argued that the customs authorities did not have the jurisdiction to demand customs duty for the alleged violation of the exemption notification. They contended that only the competent authority under the DGCA could determine such violations. This argument was supported by the decision of the Larger Bench of the Tribunal in VRL Logistics Ltd. vs. Commissioner of Customs, Ahmedabad, which held that it is the jurisdictional authorities under the Civil Aviation Ministry that alone can monitor compliance with the conditions imposed and that the customs authorities can take action only when the DGCA finds a violation.

3. Usage of Imported Aircrafts for Non-Scheduled (Charter) Services:
The appellant had initially imported the aircrafts for flying training purposes and had given an undertaking to the customs authorities to this effect. However, due to financial constraints, they sought and obtained approval from the DGCA to use the aircrafts for non-scheduled (charter) services as well. The appellant claimed that the usage for charter services was minimal (1.21% of total flying hours) and that the main activity remained flying training. The show cause notice issued by the customs authorities alleged that this change in usage without informing the customs authorities violated the conditions of the exemption notification.

4. Violation of Conditions of Exemption Notification:
The customs authorities alleged that the appellant violated the conditions of the exemption notification by using the aircrafts for charter services without submitting a new undertaking to the customs authorities. The Tribunal, however, referred to the decision in VRL Logistics, which emphasized that only the DGCA could determine such violations. Since the DGCA had renewed the appellant's permits from time to time and had not found any violations, the Tribunal concluded that the customs authorities could not demand the customs duty based on the alleged violation.

5. Imposition of Penalty on the Director:
A separate appeal (Customs Appeal No. 55388 of 2013) was filed by the Director of the appellant, challenging the imposition of a penalty for acts of omission and commission. Since the Tribunal set aside the order on merits, it also concluded that no penalty could be imposed on the Director.

Conclusion:
The Tribunal allowed both appeals, setting aside the order dated 28.09.2012. It held that the customs authorities could not demand customs duty or impose penalties based on the alleged violation of the exemption notification, as the DGCA had not found any such violations and had renewed the permits from time to time.

← Previous Next →