9911796707
TMI Blog2022 (9) TMI 1270X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.5%. 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 . 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 aircraft for the specified purpose, an amount equal to the duty payable on the said aircraft but for the exemption under the notification. The use of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 nonscheduled (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 14.11.2007 submitted by the appellant for permission to import "Falcon 900EX Easy aircraft" [the aircraft] for operating non-scheduled air transport (passenger) service, the Director, Ministry of Civil Aviation, Government of India, by a letter dated 02.01.2008, granted such permission/No-objection Certificate to import the aircraft for non-scheduled operations. The appellant imported the aircraft and claimed, in respect of the said aircraft, exemption from customs duty under of the exemption notification. The said exemption is subject to Condition No. 104 contained in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 on 03.07.2008 and was thereafter provisionally released against Bond and Bank Guarantee. 11. The appellant filed a reply dated 13.09.2008 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 transport (passenger) service and does not make the use of the aircraft, as a private aircraft. The appellant also submitted that it is not open to Customs to contend that such use in not in accordance with the permit for non-scheduled air transport (passenger) services granted by DGCA, when the DGCA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion; (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 to time. 15. Shri P.R.V. Ramanan, learned special counsel and Shri Rakesh Kumar, learned authorized representative appearing for the Department made the following submissions: (i) The Larger Bench of the Tribunal in VRL Logistics has not dealt with the issue as to whether the invoking of the terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 nonscheduled 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 incentive to the nascent and growing state of the aviation industry. The purpose of granting the exemption was, therefore, to encourage the import of aircraft, which could be used for non-scheduled operation. 19. The aforesaid exemption notification dated 03.05.2007 inserted Condition No. 104 which requires at the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 nonscheduled (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 Condition No.104 contained in the said notification which is to the effect that the aircraft should be imported by an operator who has been granted approval for providing non-scheduled (passenger) services or non-scheduled (charter) services and the importer should furnish an undertaking that the aircraft shall be used only f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaking 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 purpose, the operator would on demand pay the duty. The Larger Bench, thereafter, examined the scope of the expression non-scheduled air transport (passenger) service and also whether chartering of the aircraft and use of the aircraft to provide air transport service for remuneration to personnel of group companies and non-issuance of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 clause (b) of the Explanation are satisfied. It is also not in dispute that the appellants have been granted non-scheduled operator permits, which permits have been renewed from time to time without any objection from the DGCA. 59. It has now to be seen whether the appellants have used the aircraft for providing non-scheduled (charter) se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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 "air transport service" defined in rule 3(9) and is other than "scheduled (passenger) air transport service" defined in rule 3(49), it is a "nonscheduled (passenger) service" within the meaning of clause (b) of the Explanation to the exemption notification. 66. It needs to be noticed that Condition No. 104 specifically refers to the definition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcraft 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 aircraft. 87. Even otherwise, the purpose of having a published tariff is to apprise the public of the rates at which the aircraft would be available. The appellants hire the aircrafts to customers pursuant to tenders/negotiations. The purpose of having a published tariff is, therefore, substantially complied with. 88. Learned special counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 notification dated 01.03.2002 whereby the effective rate of duty on import of aircraft for scheduled air transport service was made 'nil'. As no exemption was granted to non-scheduled air transport service and private category aircraft, the Ministry of Civil Aviation made a strong representation for granting exemption for non-scheduled (passenger) service and non-sched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een 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 of the Tribunal in East India Hotels which holds that it is the Customs department that has to ensure compliance of the undertaking is not correct. The Larger Bench also held that the decision of the Division Bench in King Rotors does not lay down the correct position of law. "Analysis of the division bench decisions 119. The division bench of the Tribunal in King R ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
