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TMI Blog2023 (5) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... nts provided Charter services - demand of differential Customs duty alongwith penalty - HELD THAT:- After discussing the relevant provision the Larger Bench of Tribunal in interim order M/S VRL LOGISTICS LTD VERSUS COMMISSIONER OF CUSTOMS, AHMEDABAD [ 2022 (8) TMI 720 - CESTAT AHMEDABAD (LB)] observed that the above exemption notification does not prohibit a non-scheduled (passenger) service permit holder to use the Aircraft for charter operations. By following the above finding of Larger Bench of Tribunal, it is found that contention of revenue in the present case that the appellants were issued a permit for providing non-scheduled (passenger) services but the imported aircraft has been put to non-scheduled (charter) services and therefore, the exemption should be denied is without substance. When exemption is available for use under either category, such an objection by the Department is without merit particularly when evidence has been provided by the Appellants that the Civil Aviation Requirements (CAR) permit such use vide DGCA s clarifications and the DGCA authorities have not taken any action against such use. The letter dated 08.08.2008 issued by DGCA states that a non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellants are legally eligible for exemption notification. Accordingly, the impugned orders are set aside - Appeal allowed. - MR. RAMESH NAIR, MEMBER (JUDICIAL) AND MR. RAJU, MEMBER (TECHNICAL) Shri J C Patel along with Shri Hardik Modh, Shri Amit Laddha, Shri S J Vyas Shri Prakash Shah Shri Tanmay Banthia (Advocates) appeared for the appellants Shri Ajay Jain, Special Counsel (AR) for the Respondent ORDER All these appeals are filed against the respective impugned orders which confirms the differential Customs duty and imposes penalties on all the appellants on the ground that the main appellants herein had improperly availed the benefit of exemption under Notification No. 21/2002-Cus. as amended by Notification No. 61/2007-Cus. Since the issue involved in all these appeals are common and identical, all the appeals are taken up together for final disposal. 02. A division bench of this tribunal while hearing all these customs appeals noticed that two contradictory view had been expressed by divisions benches of the tribunal in case of CC, New Delhi v. Sameer Gehlot - 2011 (263) E.L.T. 129 (Tri.-Del.) has taken a view that the benefit of Notific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovide Passenger services but provided Charter Service to its clients. Appellants did not issue passenger tickets and appellants did not have Published Tariff. That the aircrafts was used to provide air transport services, on charter basis, for carriage of Chairman and Directors of the Appellant s Group companies and other staff of companies and that the Chartering of the aircraft to outside persons was for negligible duration. It is held by the Learned Commissioner that providing air transport services to Personnel of Group Companies is nothing but a corporate veil created for evasion of duty. However each of the aforesaid grounds is untenable in law in view of the decisions dated 08.08.2022 of the Hon ble Larger Bench of Tribunal. 3.1 He Submits that Sr. No. 347B of Notification No. 21/2002- Cus. granted exemption from customs duty to aircrafts subject to fulfillment of Condition No. 104. The said condition is accordingly two-folds viz. one, it requires that the importer should be an Operator as defined in clause (a) of Explanation, who has been granted approval by the DGCA to import the aircraft for providing Non-Scheduled (Passenger) Services or Non-Scheduled (Charter) Servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per seat basis and not by chartering or about the category or class of persons to be transported. The Larger Bench in the said order dated 08.08.2022 held that a Non-Scheduled Passenger Service Operators is entitled to conduct Charter Operations. 3.3 He further argued that the Hon ble Larger Bench has, in para 100 to 105 of the said order dated 08.08.2022, clearly held that there is no requirement of issue of Passenger Tickets by a Non-Scheduled Passenger Service Operator. The Hon ble Large Bench also in Paras 83 to 85 of the said Order held that there was no requirement of having a published tariff. It is further held that merely because the Appellants can also conduct charter operations would not mean that the Appellant becomes a non-scheduled (charter) permit holder. Since the Appellants cannot be said to have become non-scheduled (charter) permit holder there was not requirement for the appellant to have published tariff. 3.4 He also argued that in the present case there is no dispute that the aircraft has been used by the appellant to provide air transport service for remuneration, to group companies by carrying their personnel as well as to provide air transport servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis that CAR stood fully complied. Only after compliances and recommendation only, the aircraft could be operated. The very facts that the airport authority/ civil aviation authority permitted operation, taking off and landing of the aircraft would itself show that it was fully compliant with the requirements of Non-scheduled operations. The mere facts that the formal permit was issued on 07.08.2008 cannot make the operation between 18.06.2008 to 07.08.2008 to be unauthorized or for a purpose other than non-scheduled operations and clearly the formal grant of the permit on 07.08.2008 relates back to 18.06.2008, when the letter was issued recommending the grant of the permit. The very fact that the Civil aviation authority has not objected to the operation of the aircraft for the period 18.06.2008 to 07.08.2008 and in facts granted the formal permit on 07.08.2008 in terms of the recommendation dated 18.06.2008, itself established that the use of the aircrafts for hire and reward during that period was neither unauthorized nor can be considered to be otherwise than for non-scheduled passenger service. 3.8 He further argued that admittedly in the present case the DGCA has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was predominantly used for non-charter or private purposes. This is in complete contravention of the undertaking given at the time of importation that the aircraft will be used for only non-scheduled passenger services. 4.2 He further submits that a public transport aircraft is one which effects public transport {as per Rule 3(46) of said Rules}. Therefore, the definition of public transport become important. As per Rule 3(45) of said Rules, public transport means (i) all carriage of persons or things effected by the aircraft for remuneration of any nature whatsoever and (ii) all carriage of persons or things effected by aircrafts without such remuneration if the carriage is effected by an air transport undertaking. In terms of Rule 3(9A), an air transport undertaking means an undertaking of cargo for hire or reward. Thus from the combined reading of definition of public transport and air transport undertaking, it is clear that for a transport of passengers to be public transport, such transportation should either be for remuneration or for hire or reward. In the present case, the transportation for non-charter purpose for both the periods was for the use of Chairman , Family me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Operators. As can be seen this circular is not applicable to domestic sector. 4.5 As regard the Appellant M/s Karnavati Aviations and Co-Appellant (Appeal No. C/114-120/2010) he submits that the import of Aircraft was on 11.06.2008. The NSOP i.e. the permit to operate Non Scheduled Passenger Services was issued on 07.08.2008. One of the allegation in the SCN is that during the period 11.06.2008 to 06.08.2008, the imported aircraft was used for providing Non Scheduled services without possession of NSOP and the use was for private purposes. Appellant could not provide any document to identify as to in which category, they were permitted to fly during the period before they were issued the NSOP. There is nothing on record. Hence in the absence of any evidence submitted by them, this use of aircraft during the period when they were not is possession of NSOP has to be treated as private use or operation other than non scheduled operation. 4.6 He also submits that a disclosure of any information to civil aviation authorities and subsequent renewal by those authorities does not mean that the Appellant have got a blanket immunity from the consequence of all contraventions. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes of this entry, - (a) operator means a person, organization, or enterprise engaged in or offering to engage in aircraft operation; (b) non-scheduled (passenger) services means air transport services other than scheduled (passenger) air transport services as defined in rule 3 of the Aircraft Rules, 1937; (c) non-scheduled (charter) services means services provided by a non-scheduled (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. 5.1 The case of the revenue is that Appellants have violated the conditions of above exemption notification hence not eligible for benefits of the above exemption notification. The revenue contended that appellants are granted permit for Non-Scheduled Air Transport Service (Passenger), whereas the appellants provided Charter services. As per reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aircraft Rules defines scheduled air transport service to mean an air transport service undertaken between 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing for the department is that an operator who has been granted a permit by the DGCA to operate non-scheduled (passenger) service cannot be permitted to carry out charter services for the reason that this would be in violation of the terms of the exemption notification and the undertaking given by the operator. Learned special counsel pointed out that non-scheduled (charter) services means services provided by a non-scheduled (charter) air transport operator who is registered with and approved by DGCA for such purpose. Thus, an operator who is not registered with and approved by the DGCA for operating charter services cannot be permitted to operate charter services. Learned special counsel further pointed out that reliance placed on clause 9.2 of CAR 1999, by which a non-scheduled (passenger) operator can also use the aircraft for charter services, was not accepted by the division bench of the Tribunal in King Rotors for the reason that the two categories namely, non-scheduled (passenger) services and non-scheduled (charter) services are distinct services. Learned special counsel also submitted that an exemption notification has to be strictly construed as was pointed out by the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ators can conduct charter/non- scheduled operations for transportation by air of persons, mail or goods. In such operations, the operators shall not publish their time schedules as the operations are of non- scheduled nature. 68. It is, therefore, clear that an operator providing non-scheduled(passenger) services can always provide such services either on individual seat basis or by chartering the entire aircraft and such restriction is not contained either in Condition No. 104 or Aircraft Rules or the Civil Aviation Requirements. 69. It also needs to be remembered that charter is one way in which passenger services can be rendered; the only difference is that instead of individual seats, all the seats of an aircraft are hired out to one person. It is, therefore, difficult to conceive that by chartering the aircraft, non-scheduled (passenger) services would not be rendered as even in such a case an operator transport passengers. 70. This apart, a perusal of the definition of non-scheduled (passenger) services contained in the Explanation to Condition No.104 would show that it includes within its scope all air transport services other than scheduled (passenger) air tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided by the Appellants that the Civil Aviation Requirements (CAR) permit such use vide DGCA s clarifications and the DGCA authorities have not taken any action against such use. The letter dated 08.08.2008 issued by DGCA states that a non-scheduled (passenger) permit holder can conduct charter operation and such operation would be within the purview of the non-scheduled (passenger) services permit holders. 5.3 We also find that for denial the benefit of above notification department in the present matter also contended that Appellant have not Published Tariff, therefore importer has violated the conditions of the notification. The findings on these issue by the Larger Bench of Tribunal are as follows: Whether, non publication of tariff is violative of Explanation (c) of Condition No. 104 83. Learned special counsel for the department placed reliance on the definition of non-scheduled (charter) services contained in Explanation (c) of Condition No. 104 to the exemption notification to contend that the condition of the exemption notification has not been fulfilled by the appellant. 84. Learned counsel appearing for the appellants submitted that it is only whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 air craft 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 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 appearing for the department submitted that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. 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. 346 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 the aircraft, as suggested by the customs authority, has repeatedly be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., the condition of the Customs Notification which was in issue was that the exempted goods shall not be sold, loaned, transferred or disposed of in any manner. The Supreme Court held that customs had jurisdiction to investigate whether said condition was violated. Verification of compliance with the said condition was one purely of fact, namely whether the goods had been sold or otherwise transferred, and did not involve any interpretation of the provisions of another enactment. This decision will also, therefore, not help the respondents. 99. It, therefore, follows that it is 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. From the above, it can be seen that all the issues raised by the learned Special counsel by the revenue during the hearing and in his submission has been considered by the larger bench hence, no substantial different material was brought to deviate from the answers given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to public at large for use thereof and in fact used by the various customers of the appellant. The appellant had published tariff for charter service, the appellant has produced advertisement in various media and invoices raised on various customers for use of aircraft to support its case that the aircraft was used for remuneration and was used for providing Air Transport Service . This is not a case where aircraft is not allowed to be used for any remuneration or whatsoever which is duly supported by the invoices produced by the appellant. 5.7 We further find that the larger bench as in Paragraph 86 observed that therefore, even assuming that some flights are conducted for carriage of persons without remuneration it would still be public transport aircraft and not private aircraft. The facts of the East India Hotels Ltd. and the present case is entirely different for the reason that as per the records produced by the appellant, both before the learned Commissioner and before us clearly indicate that the appellant had declared to the world at large that the said aircraft is available for charter hire for remuneration. In the present facts it is not possible to hold that aircr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clearly support the contention of the appellant that the aircraft was used for remuneration which is not disputed by the department. 5.10 As per our above discussion, we are of the view that the aircraft is not used for private purpose in breach of the undertaking and conditions of the notification. Further, we find that the Civil Aviation Authority has not treated the operation of the aircraft for the period 05.01.2008 to 04.04.2008 and May to August 2008 as being private aircraft and in fact issued permit on 04.04.2008 for Non- Scheduled operations in terms of recommendations dated 23.03.2007 and renewed such permits from time to time till date supports the case of the appellant that the aircraft was used for non-scheduled operations for hire or reward. 5.11 We further find from the show cause notice and impugned order of the learned Commissioner, the department has proceeded on the basis that the use of aircraft, post importation was in breach of undertaking given by the appellant, the confiscation of the aircraft and demand of duty and imposition of penalties is on the footing that the appellant has contravened post import conditions. In Sameer Gehlot case reported at 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court judgment in the case of JAGDISH CANCER AND RESEARCH CENTRE in which it is held that Section 28 does not apply to violating to post import condition. 5.13 We find that the Hon ble Delhi High Court subsequent to passing of the EAST INDIA HOTELS LTD. judgment, delivered further judgment on the identical issue in the case of M/s. GLOBAL VECTRA HELICORP LTD. vide order dated 06.04.2023. There were two issues before the Hon ble Delhi High Court the first issue was that with regard to jurisdictional Customs Authority to examine whether condition of exemption notification are fulfilled or not. Though this issue is decided in favour of the department but this issue however is not in conflict with the larger bench of this tribunal. The second issue is on merit, here the Hon ble Delhi High Court held that the decision in East India Hotels Ltd. the issue was whether the aircraft was meant for private use as no remuneration was charged. In that case the Hon ble Delhi High Court distinguished its own earlier judgment in the case of East India Hotels Ltd. and hence on merit held in favour of the importer and dismissed the department s appeal. In the East India Hotels Ltd. case the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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