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2023 (1) TMI 948 - AT - CustomsConfiscation of imported aircraft - non-scheduled operator permit (charter) issued by the Directorate General of Civil Aviation [DGCA] - levy of customs duty and penalty under section 112 of the Customs Act - HELD THAT:- Aircrafts and helicopters are classified under Customs 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 nonscheduled 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 (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 under the exemption notification. Thus a demand can be made under the Undertaking only when DGCA finds that the use of the aircraft is not in accordance with the permit granted by the DGCA. In the present case, DGCA has not initiated any proceedings against the appellant and in fact has renewed the permit from time to time - Once it is held that the demand could not have been confirmed, the penalties imposed upon the Chairman/Managing Director and the Vice President of the appellant cannot also be sustained. Appeal allowed.
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