2023 (2) TMI 47 - HC - Customs

Violation of conditions of exemption notification - import of aircraft - Interpretation of statute - whether used for private purposes and not for providing non-scheduled (passenger) services or non-scheduled (charter) services? - violation of Condition no.104 of the Notification or not. - N/N. 21/2002-CUS, as amended by Customs Notification 61/2007-CUS Whether the learned Tribunal had erred in misinterpreting the Notification and concluding that the appellant had not complied with the conditions for availing duty exemption under the Notification? HELD THAT - In terms of explanation (b) to Condition no. 104 of the Notification, the term non-scheduled (passenger) services is defined to mean air transport service other than scheduled (passenger) air transport service as defined in Rule 3 of the Aircraft Rules, 1937 (hereinafter the Aircraft Rules ). It is, thus, necessary to refer to the Aircraft Rules - In terms of explanation (b) to Condition no.104 of the Notification, 'non-scheduled (passenger) services' would mean air transport service other than the air transport service falling within the aforementioned definition. However, it is essential that the aircraft is used for air transport service. A plain reading of Rule 3(9) of the Air Craft Rules, indicates that the term air transport service is defined in wide terms and would cover transport by air of humans, animals, mails or any other things, animate or inanimate. However, it is necessary that the said service be provided for remuneration . The said definition also clarifies that the service may be for any kind of remuneration. However, for a service to fall within the meaning of air transport service as defined in Rule 3(9) of the Aircraft Rules, it is essential that the same is provided for some kind of remuneration. Clearly, flight service for no remuneration at all would not qualify to be considered as air transport service within the meaning of sub-rule (9) of Rule 3 of the Aircraft Rules - In the facts of the present case, the appellant has used the aircraft for its own use without any remuneration whatsoever, either from the passengers transported by it or from any other person. In the circumstances, it would be difficult to accept that the appellant has used the aircraft for providing air transport service within the meaning of Rule 3(9) of the Aircraft Rules. In the present case, the appellant has not used the aircraft for providing air transport service for remuneration of any kind. Even though it cannot be agreed with the learned Tribunal that the provision of non-scheduled (passenger) services as defined under clause (b) of explanation to Condition no.104 of the Notification, entails providing air transport services to public at large on payment of published tariff; but it is agreed with the conclusion that the appellant has not complied with the Condition no.104 of the Notification. Appeal disposed off.

Issues Involved:
1. Compliance with Customs Notification No. 21/2002-CUS, as amended by Customs Notification 61/2007-CUS.
2. Interpretation of "non-scheduled (passenger) services" and "non-scheduled (charter) services".
3. Legitimacy of the appellant's use of the aircraft under the terms of the Customs Notification and the Aircraft Rules, 1937.
4. Authority of Customs Authorities versus DGCA in determining compliance with the Notification.

Detailed Analysis:

Compliance with Customs Notification No. 21/2002-CUS:
The primary issue was whether the appellant complied with the conditions for duty exemption under the Notification. The Tribunal dismissed the appellant's appeal, holding that the aircraft was used for private purposes rather than for non-scheduled (passenger) services or non-scheduled (charter) services, thus violating Condition no.104 of the Notification.

Interpretation of "Non-Scheduled (Passenger) Services" and "Non-Scheduled (Charter) Services":
The Tribunal found that the appellant did not comply with Condition no.104, which required the aircraft to be used for providing non-scheduled (passenger) services or non-scheduled (charter) services. The Tribunal referred to Civil Aviation Requirement Rules (CAR) and air transport circulars, concluding that non-revenue passenger charter flights, including private aircrafts owned by companies, fall under a different category than those operated by scheduled/non-scheduled operators.

The Tribunal identified three categories of air transport service operators:
1. Scheduled air transport services operators (SOP)
2. Non-scheduled air transport services operators (NSOP/C)
3. Private Operators

The Tribunal held that the exemption under the Notification was not available for private operators, distinguishing them from scheduled and non-scheduled operators who are required to make their services available to the public and publish their tariffs.

Legitimacy of the Appellant's Use of the Aircraft:
The appellant argued that the use of the aircraft for transporting its officials qualified as providing non-scheduled (passenger) services. However, the Tribunal noted that the flights were non-revenue and thus did not qualify as "air transport service" under Rule 3(9) of the Aircraft Rules, which requires the service to be provided for remuneration.

The Tribunal referred to CAR, Section 3, Air Transport Series 'C' Part-III, which allows non-scheduled operators to operate revenue charter flights for related entities, provided the service is for remuneration. Since the appellant's flights were non-revenue, they did not meet this requirement.

The Tribunal also noted that Rule 135 of the Aircraft Rules requires air transport undertakings to publish tariffs, but this applies to scheduled services, not non-scheduled services. Despite this, the Tribunal concluded that the appellant did not comply with the Notification's conditions as the aircraft was not used for providing air transport services for remuneration.

Authority of Customs Authorities versus DGCA:
The appellant contended that only DGCA could determine compliance with the NSOP permit, not the Customs Authorities. However, the Tribunal held that Customs Authorities are entitled to examine whether the conditions for availing exemption under the Notification are satisfied. The Customs Authorities are not required to assess compliance with the DGCA permit but can determine if the undertaking given to Customs has been fulfilled.

Conclusion:
The Tribunal concluded that the appellant did not comply with Condition no.104 of the Notification as the aircraft was not used for providing non-scheduled (passenger) services for remuneration. The Tribunal's decision was upheld, and the appeal was dismissed. The Customs Authorities have the right to examine compliance with the Notification, independent of DGCA's assessment.

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