9911796707
TMI Blog2022 (9) TMI 807X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r) service . Sudhir Nayak is the Vice President, Commercial of the appellant. 4. The issue involved in these appeals is whether the use of aircraft imported by the appellant with benefit of exemption from customs duty under serial 347B of notification no. 21/2002-Cus dated 01.03.2002, as amended by notification no. 61 of 2017 dated 03.05.2007, the exemption notification, for providing passenger air transport service to its group company by carrying personnel of the group company for remuneration would amount to violation of Condition No.104 of the said exemption notification and whether it is open to Customs to contend that such use in not in accordance with the permit for non-scheduled (passenger) services granted by Director General of Civil Aviation, DGCA when the DGCA has not found such use to be in violation of such permit and had renewed the permit from time to time. 5. In response to the application dated 18.07.2007 submitted by the appellant for permission to import Airbus A319-115, the aircraft for operating non-scheduled air transport (passenger) service, the Director, Ministry of Civil Aviation, Government of India, by letters dated 24.07.2007 and 26.10.2007, gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ominees. 9. In June 2008, the Office of the Commissioner of Customs (Preventive), New Delhi commenced investigations in respect of the import of the said aircraft, which culminated into issuance of a show cause notice dated 26/27.06.2008. By the said notice, it was contended that the use of the aircraft, pursuant to the said agreement with RIL, did not constitute public use and that the same amounted to private/personal use and so the appellant had not used the said aircraft for non-scheduled (passenger) service in accordance with the No-objection Certificate and permit granted to the appellant by the DGCA. The show cause notice was, accordingly, issued proposing to deny the said exemption. The show cause notice also proposed confiscation of the aircraft and imposition of penalty. 10. The aircraft was seized and was thereafter provisionally released against Bond and Bank Guarantee. 11. The appellant filed a reply dated 23.08.2008 to the show cause notice inter alia submitting that the use of the aircraft for providing passenger air transport service for remuneration to a group company by carrying personnel of the group company is within the scope of non-scheduled air trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (b) of the Explanation and in event of failure to so use the aircraft, to pay the duty. Therefore, the second requirement of Condition No. 104 is also fulfilled; (iv) The appellant has used the aircraft only for providing non-scheduled (passenger) services, as defined in clause (b) of the Explanation; (v) While providing non-scheduled (passenger) service, as defined clause (b) of the Explanation, there is no prohibition against providing the said service by way of charter of the aircraft; (vi) There is no requirement of issue of passenger tickets by a non-scheduled (passenger) service operator; (vii) The appellant has not used the aircraft as a private aircraft. The very fact that the DGCA has for the aircraft in question issued permits and renewed them from time to time under the classification of non-scheduled (passenger) service would mean that the said aircraft cannot be classified as private aircraft; and (viii) It is open to Customs to contend that use of aircraft is not in accordance with the permit for non-scheduled (passenger) services granted by DGCA, when the DGCA has not found the use to be in violation of such permit and renewed the permit from time t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and it is reproduced: Honourable Members are aware that I had proposed to levy customs duty, CVD and additional customs duty on import of aircraft excluding imports by Government and scheduled airlines. Ministry of Civil Aviation has made a strong representation in favour of exemption for aircraft imported for training purposes by flying clubs and institutes and for non-scheduled point-to-point and non-scheduled charter operators under conditions of registration to be specified and recommended by that Ministry. Since civil aviation is a nascent and growing industry, it has been decided to accept this request and exempt these categories also from the duties. (emphasis supplied) 18. A perusal of the aforesaid statement makes it clear: (i) The exemption was granted on the basis of strong representation made by the Ministry of Civil Aviation; (ii) The exemption was subject to the conditions of registration to be specified by the Ministry of Civil Aviation; and (iii) The exemption was granted to give an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e within the meaning of clause (b) of the Explanation to Condition No. 104 of the exemption notification. 26. At the time when Condition No. 104 was inserted on 03.05.2007, Civil Aviation Requirement dated 08.10.1999, 1999 CAR dealing with non-scheduled (passenger) services as well as Civil Aviation Requirement dated 17.05.2000, 2000 CAR, dealing with scheduled (passenger) services, which had been issued under rule 133A of the Aircraft Rules, were in force. The expression non-scheduled air transport services (passenger) has been defined, both under the 1999 CAR as also the 2000 CAR, as follows: Non-scheduled air transport services (passenger) means air transport services other than scheduled air transport services as defined in the rule 3 of the Aircraft Rules, 1937. 27. It is not in dispute that the appellant had submitted an application for permission to import the aircraft for operating non-scheduled (passenger) services and a permit had been granted by the DGCA to import the aircraft for non-scheduled (passenger) services. The appellant imported the aircraft and claimed exemption from customs duty under the exemption notification. The said exemption is subject to C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired to issue passenger tickets; and that so long as the aircraft is used to provide air transport service for remuneration (as is in the present case), it would not be a private aircraft even if such service for remuneration is rendered to a group company. Learned counsel, therefore, contended that there has been no breach of the undertaking given by the appellant in terms of the notification that the aircraft shall be used for non-scheduled (passenger) services only. 31. The contention of learned special counsel appearing for the Department is that the Larger Bench of the Tribunal has not considered the issue of invoking the undertaking. 32. It is not possible to accept the contention advanced by the learned special counsel for the Department. The Larger Bench of the Tribunal noted that furnishing of undertaking to Customs that the aircraft shall be used only for non-scheduled air transport (passenger) services is a condition of the notification and that Condition No. 104 of the notification requires furnishing of the said undertaking that the aircraft would be used only for non-scheduled (passenger) services and in the event of failure to use the aircraft for the specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same two or more places and operated according to a published time table or with flights so regular or frequent that they constitute a recognizably systematic series, each flight being open to use by members of the public. Thus, for an air transport service to qualify as scheduled air transport service , it must satisfy all the following three conditions: (i) It must be undertaken between the same two or more places; (ii) It must be operated according to a published time table or the flights must constitute a recognizable systematic series; and (iii) Each flight must be open to use by members of the public. 57. If any of the aforesaid three conditions is not satisfied in respect of a passenger air transport service, the same cannot be termed as scheduled air transport service and, therefore, would be a non-scheduled (passenger) service as defined in clause (b) of the Explanation to Condition No. 104 of the exemption notification. In the present case, the aforesaid conditions are not satisfied and, therefore, the air transport service rendered by the appellants would be other than scheduled (passenger) air transport service. 58. Thus, both the requirements of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int reading of the definitions contained in the Aircraft Rules, as have been adopted in the definition in clause (b) of the Explanation to Condition No. 104 of the exemption notification, makes the following position quite clear: (a) The expression air transport service covers service for the transport by air of person for any kind of remuneration whatsoever. The service may be individually for each seat or by chartering the entire aircraft and the remuneration may be of any kind whatsoever, such as seat-wise or daily or weekly or monthly or annual basis. There is no restriction on the mode and manner of fixing or charging the remuneration either in the exemption notification or in the Aircraft Rules; (b) Scheduled (passenger) air transport service only means that air transport service which has the essential features mentioned in the definition in rule 3 (49) of Aircraft Rules, namely, it must be undertaken between the same two or more places, operated according to a time table or with flights so regular or frequent that they constitute a recognizable systematic series, each flight being open to use by the members of the public ; and (c) If a service is covered by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons or things effected by aircraft without such remuneration if the carriage is effected by an air transport undertaking. Air transport undertaking is defined in rule 3(9A) to mean an undertaking whose business includes the carriage by air of passengers or cargo for hire or reward. It would follow from the aforesaid definitions that where the aircraft is used for carriage of persons for a remuneration it is a public transport aircraft and not a private aircraft. There is no stipulation in the said definitions that if tariff is not published, the use of aircraft would be as a private aircraft. Admittedly, in the present case, the appellants have used the aircraft for carriage of persons for remuneration. Further, where the business of an undertaking includes carriage by air of persons it would be an air transport undertaking and if such an undertaking also uses the aircraft to effect carriage of persons without remuneration, it would still be public transport aircraft and not a private aircraft. Therefore, even assuming that some flights are conducted for carriage of persons without remuneration, it would be still be a public transport aircraft and not a private transport aircr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... air transport services issued by Ministry of Civil Aviation provide that non-scheduled operator is not permitted to publish time schedule and issue tickets to passengers. There is, therefore, no obligation on the part of the appellants to issue tickets to passengers. ***** (emphasis supplied) 34. It is also not possible to accept the contention of the Department that Larger Bench did not examine the issue of demand of duty in terms of the undertaking. This issue was examined at length by the Larger Bench and the findings are as follows: Whether the customs authorities have the jurisdiction to decide violation of the exemption notification 91. A perusal of the exemption notification clearly shows that it merely requires the conditions set out by the DGCA and the conditions imposed by the Civil Aviation Ministry be complied with for the operations of the non-scheduled operators. It, therefore, follows that it should be the jurisdictional authorities under the Civil Aviation Ministry which alone can monitor the compliance. As stated above initially by exemption notification dated 01.03.2007, entry no. 346B and Condition No. 101 was introduced in the exemption notif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. (emphasis supplied) 35. It is seen that the Larger Bench held that the undertaking to use the aircraft for non-scheduled (passenger) service can be said to have been violated only when the DGCA finds that the use of the aircraft is not in accordance with the permit granted by DGCA for non-scheduled (passenger) service and only in that event the Customs authority can demand duty in terms of undertaking. In the present case, the DGCA has not found the use of the aircraft by appellant to be in violation of permit for non-scheduled (passenger) service and in fact has renewed the permit year after year. There is, therefore, no violation of the undertaking and, therefore, Customs cannot demand duty in terms of the undertaking. 36. It also needs to be noted that the Larger Bench of the Tribunal specifically held that the decision of the Division Bench o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
