Conditional customs exemption fails when imported helicopter is used for charter-hire contrary to the undertaking given at import.

Conditional customs exemption for an imported helicopter fails where the aircraft is used contrary to the undertaking given at import. The note explains that an NSOP passenger permit did not cover exclusive charter-hire use for transporting third-party personnel, and the notification treated non-scheduled passenger and charter services as distinct categories. Customs may independently verify compliance with the exemption condition and is not bound by the DGCA permit or unproved clarification to enlarge the exemption. It also notes that duty demand based on breach of the post-import condition was not barred by limitation on the facts stated, and that confiscation and penalties may follow where the import and use contravene the exemption terms.

---

---

Issues: (i) Whether the imported helicopter qualified for exemption from customs duty and CVD under the relevant notification when it was imported against an NSOP (passenger) permit but was used under a charter-hire arrangement; (ii) whether the customs authorities were competent to examine breach of the undertaking and deny exemption despite DGCA's permit and any alleged DGCA clarification; (iii) whether the demand of duty was vitiated by limitation or by the manner in which it was raised and confirmed; (iv) whether confiscation under Section 111 and penalties under Section 112 were sustainable.

Issue (i): Whether the imported helicopter qualified for exemption from customs duty and CVD under the relevant notification when it was imported against an NSOP (passenger) permit but was used under a charter-hire arrangement?

Analysis: The exemption was subject to a specific undertaking that the aircraft would be used only for the stated non-scheduled purpose. The DGCA permit and the import documents showed that approval was for non-scheduled passenger services only. The charter-hire agreement showed exclusive use by a private entity for transporting personnel of third-party companies, which was not use in the public domain. The notification treated non-scheduled passenger services and non-scheduled charter services as distinct categories, and the aircraft did not satisfy either category on the facts found. The later amended notification and New CAR were held to be inapplicable retrospectively.

Conclusion: The assessee was not entitled to exemption from customs duty or CVD, and the related SAD exemption also failed.

Issue (ii): Whether the customs authorities were competent to examine breach of the undertaking and deny exemption despite DGCA's permit and any alleged DGCA clarification?

Analysis: The undertaking to customs created a post-importation obligation, and customs retained authority to verify compliance with the exemption condition. The scope of the customs notification could not be read down by relying on aircraft rules or CAR provisions to enlarge the exemption beyond its text. Claimed DGCA clarifications in favour of other importers were not proved to exist in the assessee's favour and could not control the customs adjudication.

Conclusion: The customs authorities had jurisdiction to determine breach of the exemption condition, and DGCA's permit or alleged clarifications did not defeat the customs demand.

Issue (iii): Whether the demand of duty was vitiated by limitation or by the manner in which it was raised and confirmed?

Analysis: The demand was founded on breach of the exemption condition and the undertaking given at import, and the show-cause notice invoked the proper charging provision. The plea of limitation was not substantiated, and the assessee was bound by the earlier court order permitting issuance of the notice. The breach of a post-importation condition also supported the demand independently of the extended period dispute.

Conclusion: The demand was not barred by limitation and was not invalid for the manner in which it was raised.

Issue (iv): Whether confiscation under Section 111 and penalties under Section 112 were sustainable?

Analysis: The helicopter was imported without DGFT licence and was used contrary to the conditions attached to duty exemption, attracting confiscation under clauses relating to prohibited import and breach of exemption conditions. The records also indicated that the assessee intended charter use from the outset despite undertaking otherwise, justifying penalty for contumacious conduct.

Conclusion: Confiscation and penalties under Section 112 were sustainable.

Final Conclusion: The appeals failed in entirety, and the adjudication confirming duty liability, confiscation, and penalties was upheld.

Ratio Decidendi: Where exemption is conditional upon a specific post-import undertaking, customs may independently verify compliance, and use of the imported goods contrary to the condition defeats the exemption even if the importing authority's permit was obtained for a different or narrower purpose.

---