Notional freight cannot be added to leftover aircraft fuel valuation, and consequential penalty fails.

Leftover aircraft fuel remaining in the tank as part of the aircraft's operation had no separate freight element, so notional freight could not be added to its customs assessable value and the resulting demand failed. The accompanying penalty was also unsustainable because the appellant had consistently declared flight arrival, fuel reconciliation, and duty payment details, the department had accepted that practice for years, and the authority did not clearly identify a specific basis for penalty. With the valuation addition rejected, the consequential penalty could not survive.

---

---

Issues: (i) Whether notional freight could be added to the value of leftover aircraft fuel for customs valuation; (ii) whether penalty was sustainable on the alleged procedural lapse.

Issue (i): Whether notional freight could be added to the value of leftover aircraft fuel for customs valuation.

Analysis: The leftover fuel in the aircraft tank was not transported as cargo or goods for freight purposes but remained part of the aircraft's operation. No separate freight element was attributable to such fuel, and the absence of an ascertainable freight did not justify a notional addition under the valuation rules. The valuation had to remain close to the actual transaction value, and notional enhancement was not sustainable where no freight component existed.

Conclusion: Notional freight could not be added, and the customs demand based on such addition was unsustainable.

Issue (ii): Whether penalty was sustainable on the alleged procedural lapse.

Analysis: The appellant had been regularly declaring flight arrival details, fuel reconciliation, and duty payment particulars, and the department had accepted this practice for years. Since the core duty demand itself failed, the allegation of duty evasion or procedural violation could not support penalty. The authority also had not clearly identified the specific basis for invoking penalty.

Conclusion: Penalty was not sustainable.

Final Conclusion: The impugned order was set aside and the appeal succeeded, as the valuation addition and consequential penalty were both held unsustainable.

Ratio Decidendi: Where imported fuel remains in the aircraft tank as part of its operation and no independent freight element exists, notional freight cannot be added to its assessable value, and consequential penalty cannot survive.

---