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TMI Blog2023 (1) TMI 948X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 (charter) service and an undertaking by the importer to the customs authority that the aircraft would be used only for non-scheduled (charter) 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 customs authority cannot demand duty in the absence of proceedings initiated by DGCA. In the present case, proceedings have not been initiated by DGCA against the appellant and in fact the permits have been renewed time to time - the impugned order also holds that non-revenue flights undertaken by the aircraft carrying Chairman and other employees are private flights and though such flights may be permissible under the Civil Aviation Law but the same cannot be interpreted to be also permissible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter) services. It needs to be noted that the appellant had earlier also imported an aircraft after obtaining a permit on 06.02.2004 from the DGCA to operate non scheduled air transport (charter) services. After importing the second aircraft through the Bill of Entry dated 16.05.2007, the appellant requested the DGCA for inclusion of the newly imported aircraft in the earlier permit dated 06.02.2004 and on being satisfied that the appellant fulfilled the requirements, the DGCA, by a letter dated 04.10.2007, endorsed the newly imported aircraft in the earlier permit. 5. The appellant claims that during the intermittent period from May 2007 to October 2007 it could not use the newly imported aircraft for charter services since the endorsement had not been made by the DGCA in the permit and so the aircraft was used by the Chairperson and Managing Director of the appellant and other employees of the appellant for business purposes only. In other words, the aircraft was used for non revenue flights. The appellant also claims that when the endorsement was made in the permit on 04.10.2007, the newly imported aircraft was used of charter services. Time taken by DGCA for renewal of the perm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said notification,- (A) In the Table,- (i) xxxxxxxx (ii) after S. No. 347 and the entries relating thereto, the following S. Nos. and entries shall be inserted, namely:- S. No. Chapter or Heading No. or Sub-heading No. Description of goods Standard rate Additional duty rate Condition No. (1) (2) (3) (4) (5) (6) 347B 8802(except 8802 60 00) All Goods Nil - 104 xxxxxxxx (B) in the Annexure, after Condition No. 102 and the entries relating thereto, the following Conditions shall be inserted, namely:- xxxxxxxxxx 104. (i) the aircraft are imported by an operator who has been granted approval by the competent authority in the Ministry of Civil Aviation to import aircraft for providing nonscheduled (passenger) services or non-scheduled (charter) services; and (ii) the importer furnishes an undertaking to the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, at the time of importation that:- a. the said aircraft shall be used only for providing nonscheduled (passenger) services or non-scheduled (charter) services, as the case may be; and b. he shall pay on demand, in the event of his failure to use the impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and consequently in violation of the exemption notification. 11. The only issue that arises for consideration in the present appeal is whether there has been any violation of Condition No. 104 of the exemption notification. The relevant findings of the Commissioner on this issue are as follows: "16. It is seen from the arguments of the aircraft importer made in these proceedings that they are trying to defend themselves only on the basis of Rules & Regulations made for the implementation of Civil Aviation requirements. Though department has reservation about non-violation of the condition of NSOP but if on this issue the opinion of DGCA is different then Customs department can not force DGCA to take a particular opinion. However, in these proceedings action is not being taken to cancel NSOP permit given by the DGCA but action is being taken to recover Customs duty & other related issues. 17. So far as demand of duty and taking other actions under the customs law the provision of exemption notification No. 21/02-cus as amended, are required to be implemented by the Customs department. Any noncompliance of the conditions, as brought out clearly in para 3 & 4 of the Show Cause No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hairperson & MD of aircraft importer company vide her letter dated 20.06.08 submitted that Sh. D.V. Batra & Sh. Lalit Bhasin are non working Director & were not involved in the day to day working of the company and she has authorized Sh. Madhav Sikka Senior vice-president of the company to defend the company in the matter. It is further observed that Smt. Jyotsna Suri has signed the undertaking also under the exemption notification filed at the time of importation wherein it has been undertaken that the aircraft will be used for non- scheduled (charter) services only. In spite of giving such an undertaking she kept on using the aircraft for herself & other officials without the aircraft being taken on charter. She is liable to penalty under Section 112 of the Customs Act, 1962." (emphasis supplied) 12. Shri V. Lakshmikumaran, learned counsel appearing for the appellant made the following submissions: (i) The appellant had correctly availed the benefit under the exemption notification dated 03.05.2007. In support of this contention reliance has been placed on the decision of the Tribunal in M/s. VRL Logistics Ltd. vs. Commissioner of Customs, Ahmedabad [Customs Appeal No. 74 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under 'Public Transport Aircraft' category, the question of aircraft being Private Aircraft does not arise as "Private aircraft" means all aircraft other than aerial work aircraft or public transport aircraft. 13. Shri P.R.V. Ramanan, learned special counsel for the Department assisted by Shri Rakesh Kumar, learned authorized representative appearing for the Department made the following submissions: (i) The decision of the Larger Bench of the Tribunal in VRL Logistics is clearly distinguishable; (ii) In the present case, the appellant was granted approval to import the impugned aircraft only for providing 'non-scheduled (charter) services' whereas in the case of VRL Logistics, the importers has been granted approval for providing 'non-scheduled (passenger) services; (iii) The appellant had used the aircraft for flying the Directors, employees on private trips which were non-revenue in nature; (iv) The competent authority of MCA has no role to play on deciding whether the importer has complied with the conditions prescribed in the impugned notification; (v) Liability to customs duty flows from section 12 of the Customs Act and the sovereign power to recover an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong 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 nonscheduled operation. 18. The aforesaid 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 (charter) service and an undertaking by the importer to the customs authority that the aircraft would be used only for non-scheduled (charter) 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. 19. Explanation (b) to Condition No. 104 of the exemption notification defines non-scheduled (charter) services as: 'non-scheduled (charter) services' means services provided by a 'non-scheduled (charter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be complied with for the operations of the nonscheduled 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-scheduled (charter) services under conditions to be specified and recommended by the Civil Aviation Ministry. It is for this reason, as would be apparent from the statement made by the Hon'ble Finance Minister in the Parliament, that the exemption notification dated 03.05.2007 was issued granting 'nil' rate of duty on import of aircraft for non-scheduled (passenger) service as well as non-scheduled (charter) services subject to Condition No. 104. 92. The alleged misuse of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment of the Supreme Court is reproduced below: "13. As regards the contention that the appellants were not entitled to the benefit of the exemption notification as they had misrepresented to the licensing authority, it was fairly admitted that there was no requirement, for issuance of a licence, that an applicant set out the quantity or value of the indigenous components which would be used in the manufacture. Undoubtedly, while applying for a licence, the appellants set out the components they would use and their value. However, the value was only an estimate. It is not the respondents' case that the components were not used. The only case is that the value which had been indicated in the application was very large whereas what was actually spent was a paltry amount. To be noted that the licensing authority having taken no steps to cancel the licence. The licensing authority have not claimed that there was any misrepresentation. Once an advance licence was issued and not questioned by the licensing authority, the Customs authorities cannot refuse exemption on an allegation that there was misrepresentation. If there was any misrepresentation, it was for the licensing aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption notification refers to Aircraft Rules 1937 and thus compliance or noncompliance of Condition No. 104 is required to be examined in the light of the clarification provided by DGCA and not in isolation. The approvals given by the DGCA has necessarily to be examined. 29. The Larger Bench of the Tribunal in VRL Logistics also dealt with scope of 'private flights' and 'flights without remuneration' in the following manner: "86. The definition of "private aircraft" under rule 3(43) of Aircraft Rules, does not warrant the view that if tariff is not published, the use of aircraft would be private. In terms of rule 3(43), private aircraft is other than public transport aircraft. Public transport aircraft is defined in rule 3 (46) as aircraft which effects public transport and public transport is defined in rule 3(45) to mean all carriage of persons or things effected by aircraft for a remuneration of any nature whatsoever, and all carriage of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies is not of any relevance as there is no prohibition in the said definition against any kind of persons to be transported." 33. The impugned order also holds that duty is liable to be confirmed in view of the Undertaking given by the appellant under Condition No. 104 of the exemption notification. 34. The duty could not have been confirmed merely on the basis of the Undertaking. This is what was held by the Tribunal in Reliance Commercial, after relying upon the decision of the Larger Bench of the Tribunal in VRL Logistics, and the relevant paragraph 35 is reproduced below: "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 nonscheduled (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, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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