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TMI Blog2023 (1) TMI 1056X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the customs authorities would have the jurisdiction to decide violation of the exemption notification was examined at length by a Larger Bench of the Tribunal in M/S VRL LOGISTICS LTD VERSUS COMMISSIONER OF CUSTOMS, AHMEDABAD [ 2022 (8) TMI 720 - CESTAT AHMEDABAD (LB)] where it was held that the 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. It is not possible to accept the contention of the learned special counsel appearing for the Department that the decision of the Larger Bench of the Tribunal distinguishable on facts. The Larger Bench of the Tribunal in VRL Logistics had arrived at the conclusion after placing reliance upon the decision of the Supreme Court in Titan Medical Systems Pvt. Ltd. vs. Collector of Customs, New Delhi [ 2002 (11) TMI 108 - SUPREME COURT] . It has, therefore, to be held that the customs authorities could have proceeded to recover the duty on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms Appeal No. 55388 of 2013 seeking permission of the Tribunal to introduce a new ground in the appeals, namely that the show cause notice issued by the Additional Director General, Director of Revenue Intelligence was without jurisdiction in the view of the decision of the Supreme Court in Canon India Private Limited vs. Commissioner of Customs [ Civil Appeal No. 1827 of 2018 decided on 09.03.2021 ]. These two Miscellaneous Application were allowed by order dated 28.09.2021 and the appellant was permitted to raise the ground at the time of hearing of the appeals. 4. The Department has filed Miscellaneous Application No. 50087 of 2022 in Customs Appeal No. 55387 of 2013 and Miscellaneous Application No. 50088 of 2022 in Customs Appeal No. 55388 of 2013 with a prayer that the hearing of the appeals may be adjourned for three months as review petitions had been filed by the Department before the Supreme Court for review of the judgment rendered in Canon India. 5. However, at the time of hearing of the appeals, Ms. Madhumita Singh learned counsel for the appellant stated that the appellant will not press the additional ground raised in the applications filed in the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d cleared it by filling Bill of Entries from Air Cargo, New Delhi, ICD, Tuglakabad, New Delhi and Air Cargo, Kolkata. 9. As per Serial No. 347C of the exemption notification, the aircraft parts are entitled to nil rate of customs duty subject to the Condition No. 105 of the exemption notification. Condition No. 105, inter alia, stipulates that parts of aircrafts shall be used for repair and maintenance service of an aircraft used for operating flying training purpose or nonscheduled (charter) service and for the said purpose, the importer has to furnish an Undertaking that if the importer fails to use the imported parts for the specified purpose, an equal amount of duty shall be paid on demand on the said goods but for the exemption under the exemption notification. 10. The licenses granted by DGCA both for training as well as nonscheduled (charter) service were renewed from time to time. 11. To appreciate the issues involved in this appeal it would be appropriate, at this stage, to give the sequence of the events date wise: S. No. Date Sequence of events 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Approval of renewal of Flying Training License by DGCA for 1 year i.e., 07.07.2010 to 06.07.2011 15. 21.04.2011 Renewal of non-scheduled (charter) service Permit No. 16/2009 from 17.04.2011 to 16.04.2013 by DGCA 16. 05.07.2011 Approval of renewal of Flying Training License by DGCA for a period of 3 months i.e., 07.07.2011 to 06.10.2011 17. 07.10.2011 Approval of renewal of Flying Training License by DGCA for a period of 3 months i.e., 07.10.2011 to 06.01.2012 18. 06.12.2011 Approval of renewal of Flying Training License by DGCA for a period of 6 months i.e., 07.01.2012 to 31.07.2012 12. A show cause notice dated 24.01.2012 was issued to the appellant stating therein that the appellant had imported the Aircrafts for the Flying Training Institute at nil rate of duty by claiming exemption under a notification and by specifying and undertaking the end use as flying training but the Aircrafts were also being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng NSOP form the DGCA in May 2009. Further, the Importer appears to have deliberately suppressed the end-use of the spare parts inasmuch as they willingly and intentionally did not disclose the fact before the Customs that the spare parts as detailed in para 4.1 above were being used for maintenance of the aircrafts the end-use of which had been altered to include charter and other non-training services as well . As discussed above, the suppression of facts in this regard continued unabated even after May 2009 and well into 2010 and 2011 even when the importer was fully aware of the violation of end-use. Accordingly, the undertakings executed by the importer were wrong and misleading. Thus, by their above acts of omission and commission, the importer appears to have rendered the said eight aircrafts valued at Rs. 8,00,00,000/- (declared value) liable for confiscation under Section 111 (0) of the Customs Act, 1962. Further, by their above acts of omission and commission, the importer appears to have rendered the said imported spare parts valued at Rs. 1,15,81,061/- (Assessable Value) liable for confiscation under Section 111 (o) of the Customs Act, 1962. 17. In view of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enger/Charter Services. ***** 42. It is pertinent to note that on the date of importation and at the time of filing of Bill of Entry seeking exemption from payment of Customs duty, the importer is required to have first fulfilled the conditions mentioned therein for being eligible for the benefit of exemption The noticee company in this case, M/s. Chimes Aviation Pvt. Ltd. filed the Bill of Entry and claimed exemption from payment of Customs duty under Condition No. 103 and furnished the necessary undertaking to the effect that they shall use the aircraft for specified purposes i.e. Flying Training Purposes only. This makes abundantly clear that despite the fact that they being aware of another Condition No. 104, they did not claim the benefit of exemption for transportation of passengers under Condition No. 104. ***** ***** 45. Against the charge of willful violation of the terms and conditions of the exemption notification and their own undertaking as the noticees neither informed the Customs Department to whom the undertaking was furnished at the time of clearance of goods nor did they inform the DGCA regarding their having furnished and existe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oms Tariff Heading 88 of the First Schedule to the Customs Tariff Act, 1975. The tariff rate of duty till 28.02.2007 on the 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 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 exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elating 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) 347A 8802 (except 8802 60 00) All goods Nil - 103 347B 8802(except 8802 60 00) All Goods Nil - 104 347C Any Chapter Parts (other than rubber tyres or tubes) of aircraft of heading 8802 Nil - 105 xxxxxxxx (B ) in the Annexure, after Condition No. 102 and the entries relating thereto, the following Conditions shall be inserted, namely:- 103. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heduled (charter) air transport operator , for charter or hire of an aircraft to any person, with published tariff, and who is registered with and approved by Directorate General of Civil Aviation for such purposes, and who conforms to the civil aviation requirement under the provision of rule 133A of the Aircraft Rules 1937; Provided that such air charter operator is a dedicated company or partnership firm for the above purposes.. 105 . If,- (i) imported for servicing, repair or maintenance of aircraft imported or procured by Aero Club of India; or (ii) imported for servicing, repair or maintenance of aircraft, which are used for flying training purposes or for operating non-scheduled (passenger) service or nonscheduled (charter) services; (iii) the importer furnishes an undertaking to the Deputy Commissioner of Customs or the Assistant Commissioner of Customs, as the case may be, at the time of importation that:- a. the imported goods shall be used for the specified purpose only; and b. he shall pay on demand, in the event of his failure to use the imported goods for the specified purpose, an amount equal to the duty payable on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the exemption notification as a result of which the customs duty was required to be paid by the appellant in terms of the undertaking. 22. The issue as to whether the customs authorities would have the jurisdiction to decide violation of the exemption notification was examined at length by a Larger Bench of the Tribunal in VRL Logistics and the relevant paragraphs are reproduced below: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were exempted from duty of customs. A show cause notice was, however, issued by the customs to show cause as to why penalty should not be imposed for not having complied with the conditions of the exemption notification. The Supreme Court found that the licencing authority had not taken steps to cancel the licence, and infact the licencing authority did not even claim that there was any misrepresentation. Thus, when an advanced licence had been issued and not questioned by the licencing authority, the customs authorities could not refuse exemption on an allegation that there was a misrepresentation and even if there was any misrepresentation, it was for the licencing authority to take steps. The relevant portion of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly fulfilled. According to the petitioner, the initiation of the investigation was incompetent as a certificate had been issued by the Directorate General of Foreign Trade [ DGFT ] certifying that the obligation in regard to two of the seized cars had been fulfilled. What was sought to be contended on behalf of the writ petitioner was that if the competent authority under the Scheme had interpreted or understood the Scheme in a particular fashion and certified due compliance with the conditions subject to which the imports were made, it was no longer open any other agency of the government to sit in judgment by placing a different interpretation of the Scheme. It is in this context, that the Delhi High Court observed as follows: 12. Two interpretations are thus being offered by the parties to the terms of the policy. The one offered by the petitioner if accepted would mean that once the capital goods are harnessed into the establishment, it is not necessary that the export obligation should be fulfilled only from out of the earning of the said goods. Foreign exchange earned generally by the importer can be used for satisfying the export obligation as had been done in the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ics had arrived at the conclusion after placing reliance upon the decision of the Supreme Court in Titan Medical Systems Pvt. Ltd. vs. Collector of Customs, New Delhi [ 2003 (151) E.L.T. 254 (S.C.) ]. 28. It has, therefore, to be held that the customs authorities could have proceeded to recover the duty on the basis of the undertaking only when the competent authority in the DGCA found as a fact that the appellant had violated the conditions of the permit. In the present case, such a finding has not been recorded and on the other hand, the permits have been renewed from time to time. Customs Appeal No. 55387 of 2013, therefore, deserves to be allowed. 29. Customs Appeal No. 55388 of 2013 has been filed by the Director of the appellant to assail the same order dated 28.09.2012 in so far as it imposes penalty upon the said appellant. As the order on merits is being set aside, no penalty can be imposed upon the Director. 30. Thus, for the reasons stated above, it is not possible to sustain the order dated 25.10.2012. Customs Appeal No. 55387 of 2013 and Customs Appeal No. 55388 of 2013 are, accordingly, allowed. (Order Pronounced on 20.01.2023) - - Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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