2018 (4) TMI 785 - AT - Customs

Tribunal Rules in Favor of Air Transport Business in ATF Valuation Dispute

M/s Air India Limited Versus CC, New Delhi

The Tribunal overturned the Commissioner of Customs, New Delhi's order-in-original, ruling in favor of the appellant, an air transport business, in a ... Levy of customs duty - leftover ATF available in the fuel tank of aircraft landing in India from an international trip - Held that: - identical issue decided in the case of M/s. Inter Globe Aviation Limited Versus CC, New Delhi [2017 (9) TMI 926 - CESTAT NEW DELHI], where it was held that The fuel in the tank is part of aircraft in operation. Fuel cost is calculated, and apparently, forms part of commercial consideration while fixing ticket charges for transporting aircraft. No freight element is attributable to fuel in the tank, the usage of which varies on different parameters - customs duty cannot be levied - appeal allowed - decided in favor of appellant. Issues:- Valuation of leftover Aviation Turbine Fuel (ATF) in aircraft tanks after international trips.- Application of Rule 10(2) for adding notional freight to assessable value.- Interpretation of freight element in the context of ATF in aircraft tanks.- Comparison with the decision in InterGlobe Aviation Limited vs. CC, New Delhi.- Application of Supreme Court ruling in Wipro Ltd. (2015) 14 SCC 161 on valuation of imported goods.- Consideration of Commissioner's instructions on valuing ATF for international flights.- Assessment of penalty under Section 112 for alleged customs duty evasion.Analysis:The appeal was filed against an order-in-original by the Commissioner of Customs, New Delhi, regarding the valuation of leftover Aviation Turbine Fuel (ATF) in aircraft tanks after international trips. The appellant, engaged in air transport business, faced a demand for customs duty on the ATF remaining in the aircraft upon return from foreign trips. The main dispute revolved around the valuation of this ATF, specifically whether a notional freight should be added to its assessable value. The Tribunal referred to a similar case involving InterGlobe Aviation Limited and emphasized that the ATF in the tank should not be considered as cargo or goods for freight purposes. It was noted that the application of Rule 10(2) to add notional freight was incorrect as there was no ascertainable freight element involved.The Tribunal cited the Supreme Court ruling in Wipro Ltd. (2015) 14 SCC 161, which emphasized determining the transactional value of imported goods based on actual costs paid or payable. In this case, since there was no actual freight involved with the leftover fuel in the aircraft tank, the addition of notional freight was deemed inappropriate. Additionally, the Tribunal considered instructions from the Commissioner of Airport, Mumbai, suggesting using the price at which Indian Airlines purchase ATF for international flights for valuation purposes, further supporting the decision to reject the addition of notional freight.Regarding the penalty under Section 112 for alleged customs duty evasion, the Tribunal found that the appellant had been consistently following procedures and submitting required details, making the penalty imposition unjustified. The Original Authority's conclusion of customs duty evasion was deemed legally unsustainable, especially considering the appellant's compliance history and the absence of revenue loss apart from the disputed notional freight addition. Consequently, the impugned order was set aside, and the appeal was allowed, indicating a favorable decision for the appellant.