TMI Blog2023 (1) TMI 948X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 air ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt (charter) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assenger) services as well as nonscheduled (charter) services subject to Condition No. 104 that is required to be fulfilled by an importer of the aircraft for availing the benefit of the exemption notification. The relevant portion of the said exemption notification is reproduced below: In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 21/2002-Customs, dated the 1st March, 2002 which was published in the Gazette of India, Extraordinary, vide number G.S.R. 118(E) of the same date, namely:- In the 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 Cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toms authority that the aircraft will be used for the specified services, namely non-scheduled (passenger) services or non-scheduled (charter) services. The undertaking should also state that the importer shall pay on demand, the duty payable, in the event of his failure to use the imported aircraft for the specified purpose. 10. The appellant hold permits provided by DGCA for nonscheduled (charter) services. The permit has been renewed from time to time and has been endorsed for the additional aircraft imported by the appellant. Such operations have been carried out by the appellant without any objection from either the DGCA, which had issued the permit or from the MCA. After 03.05.2007, when the conditional exemption notification was issued, the appellant started availing the benefit of the said exemption. The customs authority, however, raised an issue that the operations carried out by the appellant were not covered by the permit that had been granted by the DGCA and, accordingly, a show cause notice was issued to the appellant alleging inter alia that the aircraft was used in violation of the permit, and consequently in violation of the exemption notification. 11. The o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the provisions of exemption notification No. 21/02- cus, as amended, read with the undertaking given by the aircraft importer at the time of importation. Duty demand of Rs. 6,67,18,387/- is, therefore, required to be confirmed and recovered from the aircraft importer by virtue of the undertaking given under condition No. 104 of the exemption notification No. 21/02-cus as amended. xxxxxxxxxxxxx 21. The act of non-compliance of the conditions of exemption notification makes the aircraft Beechcraft King Air B 300 (350), imported vide B/E NO. 219892 dated16.05.07, liable to confiscation under Section 111(o) of the Customs Act, 1962 and also makes the aircraft importer M/s Bharat Hotels Ltd, are liable to penal action under Section 112 of the Customs Act, 1962. 22. So far as imposition of penalty upon Sh. Madhav Sikka is concerned it is seen that he was aware of the fact that the aircraft was being used by the Chairperson other officials of aircraft importer without any payment. By his acts Sh. Madhav Sikka has made himself liable to penal action under Section 112 of the Customs Act, 1962. 23. Mrs. Jyotsna Suri Chairperson MD of aircraft importer company vide he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrent jurisdiction and the customs authority cannot initiate proceedings to invoke the undertaking; (viii) The exemption notification must be interpreted keeping in mind the very purpose for which it was introduced i.e. to encourage the import of aircrafts which could be used for non-scheduled operations; (ix) Public transport means 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. Carriage of persons without remuneration by an air transport undertaking is also considered as 'public transport'. Thus, carriage of Chairman, employees, etc. by the appellant would be considered as 'public transport'. In any case, the remuneration to be charged by the operator can be of any nature, including remuneration in kind and it need not be in cash. Therefore, the consideration for providing air transport service to the employees, including Chairman, Director, etc. is the service they provided to the company in turn; and (x) Once the appellant falls under Public Transport Air ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 . 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 exemption for aircraft imported for training purposes by flying clubs and institutes and for non-scheduled point-topoint and non-scheduled 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) 17. A perusal of the aforesaid statement makes it clear: (i) The exemption was granted on the basis of strong re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e flights undertaken by the aircraft for the Chairman and other employees are private flights and though such flight may be permissible under the Civil Aviation Law but the same cannot be interpreted to be also permissible under the provisions of the exemption notification. The impugned order also holds that duty has been confirmed by virtue of an Undertaking given under Condition No. 104 of the exemption notification. 23. The issue as to whether DGCA is the final authority and the customs authorities are bound by the views expressed by the DGCA has been considered by the Larger Bench of the Tribunal in VRL Logistics. In the paragraphs 91, 92, 93, 95 and 99 of the decision it has been held that customs authority can take action on the basis of the Undertaking submitted by the importer only when the authority under the DGCA holds that the conditions have been violated. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced reliance upon the decisions of the Supreme Court in Zuari Industries Ltd. vs. Commissioner of C. Ex. Customs [2007 (210) E.L.T. 648 (S.C.)], Titan Medical Systems Pvt. Ltd. vs. Collector of Customs, New Delhi [2003 (151) E.L.T. 254 (S.C.)] and Vadilal Chemicals Ltd. vs. State of Andhra Pradesh [2005 (192) E.L.T. 33 (S.C.)]. ***** 95. In Titan Medical Systems, by an exemption notification, certain goods which were imported into India against an advanced licence for the purpose of manufacture 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 ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade an attempt to distinguish the decision of the Larger Bench in VRL Logistics on the ground that the facts in the present case are different. It is not possible to accept this contention. The facts may be different in the sense that in the case of VRL Logistics, the aircraft was to be used for non-scheduled (passenger) services, while in the present case the aircraft is to be used for providing nonscheduled (charter) services but this would not make any difference as it is the law laid down by the Larger Bench that has to be examined and followed. 26. Thus, in view of the aforesaid decisions of the Tribunal, it has to be held that 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. 27. 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. 28. It ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the public. Even otherwise, this cannot be a reason to hold that the air transport service provided by the appellants would fall outside the scope of non-scheduled (passenger) service. (emphasis supplied) 30. As would be seen, the Larger Bench held that even if it is assumed that some flights had been conducted for carriage or persons without remuneration, it would still be a public transport aircraft and not a private transport aircraft and that personnel of companies which are group companies of the appellant would also be members of public. Thus, the aircraft is available for use by the public. In the same manner, the use of the aircraft by the Chairman/Managing Director for non-revenue purpose would not make the aircraft a private aircraft. 31. This apart, as would be seen from the flight details, the aircraft was primarily used for revenue purposes. 32. There is also no restriction on use of aircraft by Chairman/Managing Director under Aircraft Rules and Regulations or under the exemption notification. The Larger Bench of the Tribunal in VRL Logistics also held that: the contention of the department that the appellants have rendered air transport service ..... 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