2018 (8) TMI 1300 - AT - Customs

Valuation - extra fuel required to be maintained in the aircraft for safety of passengers which remains on the board of the aircraft after its return from the international run - demand of Customs duty on such remaining fuel - Held that - The issue is covered by the decision in the case of M/S. INTER GLOBE AVIATION LIMITED VERSUS CC NEW DELHI 2017 (9) TMI 926 - CESTAT NEW DELHI where it was held that The fuel in the tank is part of aircraft in operation. Fuel cost is calculated and apparently forms part of commercial consideration while fixing ticket charges for transporting aircraft. No freight element is attributable to fuel in the tank the usage of which varies on different parameters. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand confirmation under Customs Act, 1962 along with interest and penalty under Section 114A challenged in appeal.

Analysis:
The appeal was against an order confirming a demand of ?7,34,622 along with interest and imposing a penalty under Section 114A of the Customs Act, 1962. The appellant, a government-owned air carrier, uplifted bonded and duty-paid fuel for its operations to Male from Thiruvananthapuram. The Customs Department demanded duty on the remaining fuel in the aircraft after its return from an international run. The appellant argued that the impugned order contradicted binding judicial precedent and cited a previous Tribunal order that favored them on a similar issue.

The Tribunal considered the arguments of both parties. It noted that in a previous case involving the appellant, the Tribunal had allowed the appeal based on a decision in another case. The main dispute revolved around the valuation of leftover ATF in the aircraft's fuel tank after an international trip. The Tribunal found that no freight element could be attributed to the fuel in the tank as it was part of the aircraft in operation and not transported as cargo. The Tribunal referred to a Supreme Court decision emphasizing the actual price paid for imported goods and rejected the addition of notional freight in this case.

Additionally, the Tribunal highlighted a clarification by the Commissioner of Airport, Mumbai regarding the valuation of ATF in the absence of an invoice. It found that adding a notional freight of 20% was not justified. The Tribunal also addressed the issue of penalty under Section 112, concluding that the appellant's practices were consistent and no violation of procedure or loss of revenue was evident. Therefore, the penalty was deemed unwarranted.

Ultimately, the Tribunal set aside the impugned order, citing the precedent and legal analysis provided in the decision. The order was pronounced in favor of the appellant on 09/07/2018.