2008 (1) TMI 375 - AAR - Customs

Court ruling: Exemption on aircraft parts import granted, some restrictions apply

IN RE: ONE STOP AIRLINE

The court ruled in favor of the applicant for issues regarding exemption from basic and additional customs duty on import of parts for servicing aircraft ... Lubricants and oils used in servicing/repairing of Aircraft would not constitute the raw material, hence not exempt u/not. 21/02-Cus. - Nuts, bolts, rivets, screws, washers, couplings etc. used in the process of servicing/repairing an aircraft engine can be treated as parts of aircraft as they are specially meant for use therein - they are therefore exempt from additional Customs duty u/not. 6/2006-C.E – Re-import of repaired components for replenishing the regional pool are exempt u/not. 21/02 – Engine modules cannot be considered as raw material so exemption not available u/not. 21/02-Cus. and 6/06-C.E. Issues Involved:1. Exemption from basic customs duty on import of consumables and parts for servicing aircraft engines.2. Exemption from additional customs duty on import of parts for servicing aircraft engines.3. Exemption from basic customs duty on re-import of engine modules for Indian airline companies.4. Exemption from additional customs duty on re-import of engine modules for Indian airline companies.5. Exemption from basic customs duty on re-import of engine modules for foreign airline companies.6. Exemption from additional customs duty on re-import of engine modules for foreign airline companies.7. Exemption from basic customs duty on import of aircraft components for 'Home Base Services'.8. Exemption from additional customs duty on import of aircraft components for 'Home Base Services'.9. Exemption from basic customs duty on import of aircraft components for 'Regional Pool'.10. Exemption from additional customs duty on import of aircraft components for 'Regional Pool'.11. Exemption from basic customs duty on re-import of repaired components for 'Regional Pool'.12. Exemption from additional customs duty on re-import of repaired components for 'Regional Pool'.13. Exemption from basic customs duty on import of components for sale to airlines in India.14. Exemption from additional customs duty on import of components for sale to airlines in India.15. Exemption from basic customs duty on import of components for lease to foreign airlines.16. Exemption from additional customs duty on import of components for lease to foreign airlines.Detailed Analysis:Issue 1: Exemption from Basic Customs Duty on Import of Consumables and Parts for Servicing Aircraft Engines- The applicant sought exemption under Entry 348 of Notification No. 21/2002-Cus. for consumables such as lubricants, oils, greases, and similar goods.- The court ruled that consumables like lubricants, oils, and greases are not 'raw materials' and thus do not qualify for exemption under Entry 348.Issue 2: Exemption from Additional Customs Duty on Import of Parts for Servicing Aircraft Engines- The applicant claimed exemption under Entry 54B of Notification No. 6/2006-CE for nuts, bolts, rivets, screws, clamps, couplings, and similar items.- The court ruled that these items can be treated as parts of aircraft if they are specifically meant for use therein, thus qualifying for exemption from additional customs duty under Entry 54B.Issue 3: Exemption from Basic Customs Duty on Re-import of Engine Modules for Indian Airline Companies- The applicant claimed exemption under Entry 346D of Notification No. 21/2002-Cus. for re-import of engine modules necessary for servicing Indian airline companies.- The court ruled in favor of the applicant, stating that engine repair directly contributes to the maintenance of aircraft, thus qualifying for exemption.Issue 4: Exemption from Additional Customs Duty on Re-import of Engine Modules for Indian Airline Companies- The court extended the reasoning from Issue 2 and ruled that additional customs duty is also exempt for re-import of engine modules for Indian airline companies.Issue 5: Exemption from Basic Customs Duty on Re-import of Engine Modules for Foreign Airline Companies- The applicant claimed exemption under Entry 346D of Notification No. 21/2002-Cus. for re-import of engine modules for servicing foreign airline companies.- The court ruled against the applicant, stating that the applicant does not satisfy the requirements of Condition No. 102, as the applicant is not directly concerned with the maintenance/repair of aircraft, and a foreign airline does not come within the ambit of 'scheduled air transport service' or 'scheduled air cargo service.'Issue 6: Exemption from Additional Customs Duty on Re-import of Engine Modules for Foreign Airline Companies- The court ruled against the applicant for the same reasons as in Issue 5.Issue 7: Exemption from Basic Customs Duty on Import of Aircraft Components for 'Home Base Services'- The applicant sought exemption under Entry 346D of Notification No. 21/2002-Cus. for importation of aircraft components for 'Home Base Services.'- The court ruled in favor of the applicant, stating that the activity is in the nature of a joint enterprise directly aimed at the proper maintenance of aircraft.Issue 8: Exemption from Additional Customs Duty on Import of Aircraft Components for 'Home Base Services'- The court extended the reasoning from Issue 7 and ruled that additional customs duty is also exempt for importation of aircraft components for 'Home Base Services.'Issue 9: Exemption from Basic Customs Duty on Import of Aircraft Components for 'Regional Pool'- The applicant sought exemption under Entry 346D of Notification No. 21/2002-Cus. for importation of aircraft components for setting up a 'Regional Pool.'- The court ruled in favor of the applicant, stating that the activity is similar to 'Home Base Services' and thus qualifies for exemption.Issue 10: Exemption from Additional Customs Duty on Import of Aircraft Components for 'Regional Pool'- The court extended the reasoning from Issue 9 and ruled that additional customs duty is also exempt for importation of aircraft components for 'Regional Pool.'Issue 11: Exemption from Basic Customs Duty on Re-import of Repaired Components for 'Regional Pool'- The court ruled in favor of the applicant, stating that the reasons given for Issue 9 also apply to re-importation of repaired components for 'Regional Pool.'Issue 12: Exemption from Additional Customs Duty on Re-import of Repaired Components for 'Regional Pool'- The court extended the reasoning from Issue 11 and ruled that additional customs duty is also exempt for re-importation of repaired components for 'Regional Pool.'Issue 13: Exemption from Basic Customs Duty on Import of Components for Sale to Airlines in India- The court ruled against the applicant, stating that the sale of imported aircraft parts does not qualify for exemption under the relevant notifications.Issue 14: Exemption from Additional Customs Duty on Import of Components for Sale to Airlines in India- The court extended the reasoning from Issue 13 and ruled against the applicant.Issue 15: Exemption from Basic Customs Duty on Import of Components for Lease to Foreign Airlines- The court ruled against the applicant, stating that the parts imported for the purpose of building up a regional pool cannot be diverted for leasing out to foreign airlines.Issue 16: Exemption from Additional Customs Duty on Import of Components for Lease to Foreign Airlines- The court extended the reasoning from Issue 15 and ruled against the applicant.Summary of Conclusions:- Questions 1(b), 2(a) & (b), 4(a) & (b), 5(a) & (b), and 6(a) & (b) are answered in favor of the applicant.- The remaining questions are answered against the applicant.