2004 (12) TMI 424 - AT - Customs

ATF on Returning Aircraft Subject to Customs Duty

INDIAN AIRLINES Versus COMMISSIONER OF CUSTOMS, COCHIN/BANGALORE

INDIAN AIRLINES Versus COMMISSIONER OF CUSTOMS, COCHIN/BANGALORE - 2005 (180) E.L.T. 502 (Tri. - Bang.) Issues Involved:1. Levy of Customs Duty on Aviation Turbine Fuel (ATF) onboard returning aircraft.2. Entitlement of ATF to the benefit of exemption under Notification No. 151/94, dated 13-7-1994.Detailed Analysis:1. Levy of Customs Duty on ATF Onboard Returning Aircraft:The primary issue revolves around whether Customs Duty is chargeable on the ATF remaining in the aircraft when it returns to an Indian airport from an international run. The appellants, M/s. Indian Airlines, challenged this levy, arguing that ATF onboard the aircraft cannot be considered as imported goods. They relied on the Supreme Court's interpretation in the case of Burmah Shell Oil Storage and Distributing Co. v. Commercial Tax Officer, which stated that for goods to be considered exported, they must have a foreign destination where they can be said to be imported. The appellants argued that since the ATF onboard is for consumption and not for sale in India, it does not meet the criteria for importation.The Revenue, however, contended that under the Customs Act, 1962, any goods brought into India from a place outside India are considered imported goods, and the definition of 'importer' includes any owner or person holding themselves out to be the importer. They argued that since M/s. Indian Airlines brought ATF into India, they are the importers and liable to pay duty, as the ATF is going to be consumed in India. They also cited Circular No. 65/2001-Cus., dated 19-11-2001, and Circular 33/2002-Cus., dated 25-6-2002, which clarify the leviability of Customs Duty on fuel consumed during domestic extension flights.The Tribunal considered the submissions and judicial pronouncements, noting that the Supreme Court's interpretation of 'export' in the context of sales tax cannot be directly applied to the Customs Act. The Tribunal emphasized that the Customs Act has specific provisions for levy of duty on baggage, ship stores, and postal articles, indicating that these are as much 'imported goods' as commercial cargo for Customs purposes. They concluded that ATF onboard the aircraft is liable to pay duty as imported goods under the Customs Act, and the customs barrier is sacrosanct for effective implementation of customs laws.2. Entitlement of ATF to Exemption under Notification No. 151/94:The appellants also claimed that ATF should be exempt from Customs Duty under Notification No. 151/94, which provides exemption for kerosene used as an illuminant in oil-burning lamps. They argued that kerosene and ATF are technically the same, and the term 'ordinarily used' does not preclude other uses.The Revenue countered that the mere fact that ATF and kerosene fall under the same tariff heading does not mean that exemptions available to kerosene automatically apply to ATF. They referred to the decision in Indian Airlines Ltd. v. CC, Cochin, where it was held that exemptions for kerosene do not extend to ATF.The Tribunal agreed with the Revenue, noting that the issue had already been decided in the appellants' own case, and thus, they did not have a strong case for exemption. However, they acknowledged Notification No. 151/94, which exempts ATF onboard Indian Airlines' aircraft returning to India from Customs Duty equal to the quantity taken out of India. They observed that this point had not been addressed in the impugned Orders-in-Appeal and remanded the cases to the original authorities for re-quantification of duty, giving the benefit of the notification.Conclusion:The Tribunal held that ATF onboard returning aircraft is liable to Customs Duty as imported goods under the Customs Act. They also ruled that the appellants are not entitled to exemption under Notification No. 151/94 without proper re-quantification. The cases were remanded to the original authorities for re-quantification of duty in accordance with the law.