2016 (9) TMI 779 - AAR - Customs

Court rules in favor of M/S Prajesh Marketing Limited for customs duty exemption on charter services

M/s Prajesh Marketing Limited, Mumbai Versus Commissioner of Customs (Import)

The court ruled in favor of M/S Prajesh Marketing Limited, holding that they were eligible for exemption under Notification No. 12/2012-Cus for ... Benefit of the Notification No. 12/2012-Cus - import of aircraft for providing charter service - benefit of notification available subject to the Condition No. 77 prescribed in the Notification - Whether the benefit of the Notification No. 12/2012-Cus is available to NSOP holder for the following categories of revenue flights proposed to be undertaken; a) Use by the permit holder’s employees/directors/investors and their family/friends, not necessarily for business purposes. b) Charter the aircraft to group companies for use by their employees/directors/investors and their family/friends, not necessarily for business purposes c) Lease the aircraft to group companies for use by their employees/directors/investors and their family/friends, not necessarily for business purposes? Held that: - the conditions prescribed in the notification, make it clear that approval of competent authority is required for import of aircraft for providing non-scheduled (passenger) services or non-scheduled (charter) services and importer is required to furnish undertaking to the Deputy/assistant Commissioner of Customs at the time of import to the effect that the aircraft shall be used only for providing non-scheduled (passenger) services or non-scheduled (charter) services, as the case may be. The conditions have to be read in conjunction with Explanation 2 to the notification, which clarifies that the use of such imported aircraft by a non-scheduled (passenger) operator for non-scheduled (charter) services or by a non-scheduled (charter) operator for non-scheduled (passenger) services, shall not be construed to be a violation of the conditions of import at concessional rate of duty. It is noticed from the application filed by the applicant at Annexure I that the applicant is proposing to import aircraft for providing non-scheduled (charter) services - applicant may use the aircraft imported for providing non-scheduled (passenger) services or non-scheduled (charter) services. Non-scheduled (charter) services are explained under Explanation 1 and one of the ingredients of non-scheduled (charter) services is that it should conform to CAR, which is issued under Rule 133A of the Aircraft Rules, 1937. Rule 133A of the Aircraft Rules, 1937 authorizes the Director General to issue special directions through notices etc including CAR relating to operation, use, possession, maintenance or navigation of aircraft flying over India or aircraft registered in India. Paragraph 2.5 of CAR inter-alia also allows non-scheduled operator to operate revenue charter flights for a company within its group companies, subsidiary companies, sister concern, associated companies, own employees, including Chairman and members of the Board of Directors of the company and their family members, provided it is operated for remuneration. It is to be observed that CAR does not extend this facility to investors and friends. In view of the above, paragraph 2.5 of CAR issued in pursuance of Rule 133A of the Aircraft Rules, 1937 is regarding operation and use of aircraft and same is part of Explanation I (c) to Notification No. 12/2012-Cus. It also noticed that the subject notification as well as contents of CAR does not debar the use of said aircraft for other than business purposes - aircraft can be used for other than business purposes The intended purpose of the aircraft to be imported in the nature of personal use or public use - Held that: - exemption notification does not cover such conditions; that public interest is always a guiding factor in exemption notification and applicant does not fall within the scope of the notification. The benefit of the Notification No. 12/2012-Cus is available to NSOP (Non Schedule Operator’s Permit) holder for the following categories of revenue flights( with published tariff) proposed to be undertaken; a) Use by the permit holder’s employees/directors and their family, not necessarily for business purposes. b) Charter the aircraft to group companies for use by their employees/directors and their family, not necessarily for business purposes. c) Lease the aircraft to group companies for use by their employees/directors and their family, not necessarily for business purposes. Issues Involved:1. Eligibility for exemption under Notification No. 12/2012-Cus for non-scheduled (charter) services.2. Interpretation of exemption notification in light of Civil Aviation Requirements (CAR).3. Public interest as a guiding factor for exemption notification.Issue-wise Detailed Analysis:1. Eligibility for exemption under Notification No. 12/2012-Cus for non-scheduled (charter) services:The applicant, M/S Prajesh Marketing Limited, sought to import aircraft for non-scheduled (charter) services and charter these aircraft to related companies for use by their top executives, directors, investors, promoters, and their family members/friends. The applicant argued that as long as the aircraft is used for revenue flights and the applicant is remunerated, the benefit of Notification No. 12/2012-Cus (Sr. No. 453) should be available. The applicant emphasized that the Civil Aviation Requirements (CAR) allow non-scheduled operators to operate revenue charter flights for related entities and individuals, provided it is for remuneration.The Revenue contended that the exemption notification should be strictly construed and the use of the aircraft for personal purposes, even if remunerated, does not qualify for the exemption. They argued that the intended use is personal and not in the public interest, thus not covered by the notification.2. Interpretation of exemption notification in light of Civil Aviation Requirements (CAR):The applicant relied on Paragraph 2.5 of the CAR, which permits non-scheduled operators to operate revenue charter flights for related companies and individuals, provided it is for remuneration. The Revenue argued that CAR provisions cannot be invoked to interpret the exemption notification, emphasizing that the notification should be interpreted based on its own wording.The judgment clarified that Explanation 2 to the notification allows the use of imported aircraft for both non-scheduled (passenger) services and non-scheduled (charter) services without violating the conditions of the import at a concessional rate of duty. It was noted that the CAR is part of the notification as per Explanation 1(c), and thus, the provisions of CAR can be invoked.3. Public interest as a guiding factor for exemption notification:The Revenue argued that the intended use of the aircraft is personal and not for public use, which is a necessary condition for the exemption. They asserted that public interest should be a guiding factor in granting exemptions.The judgment observed that the Central Government has the authority to grant exemptions under Section 25(1) of the Customs Act, 1962, if it is in the public interest. The notification in question was issued in public interest, and the benefit of the exemption is extended to operators who fulfill the conditions mentioned therein. Therefore, it was incorrect to state that the applicant does not fall within the scope of the notification.Final Ruling:The benefit of Notification No. 12/2012-Cus is available to NSOP holders for the following categories of revenue flights, provided they are undertaken with published tariffs:a) Use by the permit holder’s employees/directors and their family, not necessarily for business purposes.b) Charter the aircraft to group companies for use by their employees/directors and their family, not necessarily for business purposes.c) Lease the aircraft to group companies for use by their employees/directors and their family, not necessarily for business purposes.The judgment clarified that the intended use of the aircraft, even if not for business purposes, does not disqualify the applicant from availing the exemption, as long as the flights are for remuneration.