2014 (2) TMI 18 - AT - Customs

Recovery of duty, interest and penalties - General Exemption Notification No.21/2002, as amended by Notification No.61/2007 - Import of aircraft - Held that - Each of the assessees/appellants herein has also furnished a bank guarantee to cover the extent of the adjudicated liability to duty, as assessed. It is also requires to be noticed the DGCA vide letter dated 1.9.2009 had clarified that an operator having a non-scheduled passenger operation clearance from DGCA can conduct non-scheduled charter operations of the Civil Aviation requirements - petitioners/ appellants have made out a strong prima facie case; and we therefore grant waiver of pre-deposit and stay all further proceedings for realization of the respective adjudicated liability, pending disposal of the appeals. The petitioner/appellants shall however keep the bank guarantees alive during pendency of the appeals - Conditional stay grnated.

Summary

Issues:
Conflict of precedents regarding the interpretation of Customs Notification No.21/2002-Cus as amended by Notification No.61/2007-Cus.

Analysis:
The judgment revolves around the conflict of precedents regarding the interpretation of Customs Notification No.21/2002-Cus as amended by Notification No.61/2007-Cus. The appellant imported aircraft approved by DGCA for non-scheduled passenger services but used them for non-scheduled charter services, availing customs duty exemption under the General Exemption Notification. Customs authorities initiated proceedings for recovery of duty, interest, and penalties, alleging a transgression of conditions of the exemption Notification. The conflict arises from two Division Benches of the Tribunal holding contrasting views on the matter.

One Division Bench, in the case of C.C., New Delhi vs. Sameer Gehlot, ruled that the exemption Notification only incorporates pre-import conditions, and no separate post-import condition is mentioned. The Bench emphasized that the exemption was granted at the time of import, and any violation post-import does not constitute a breach of pre-import conditions. Another reason cited was that since the exemption covered both types of aircraft usage, there was no violation in using the imported aircraft for non-scheduled charter services.

In contrast, another Division Bench in King Rotors & Air Charter P. Ltd. v. C.C. (ACC & Import), Mumbai, interpreted the Notification differently. They concluded that the subjects of the undertaking, such as using the aircraft only for non-scheduled passenger services and paying customs duty on demand if the aircraft is not used as specified, are future obligations. The violation of these conditions post-import was deemed significant, and the Bench criticized the earlier decision for not appreciating the post-import nature of these obligations.

The judgment clarifies the concept of "per incuriam," emphasizing that even if a court's conclusion is erroneous, it cannot be considered per incuriam if the court applied its mind to the relevant statutes or instruments. The conflicting interpretations in Sameer Gehlot and King Rotors & Air Charter are acknowledged, with both parties agreeing that these decisions are under appeal before the Supreme Court, indicating a potential resolution of the conflict.

Additionally, references to other cases, such as Deccan Charterers Ltd. v. C.C., Allahabad, and Malaysia Airline System Behhad v. C.S.T., Delhi, highlight the established principle that conflicting views on the same subject matter present an arguable case warranting waiver of pre-deposit and stay of proceedings. The judgment ultimately grants waiver of pre-deposit and stays further proceedings pending appeal, with the appellants required to maintain bank guarantees during the appeal process.