Non-scheduled passenger use: chartered aircraft carriage for remuneration remains permissible absent a scheduled service or permit breach finding.

An exemption for imported aircraft limited to use in non-scheduled passenger services permits charter-based carriage for remuneration, including transport of personnel of a group company, where the operation is not a scheduled air transport service with published timetables and open public use. The commentary states that such use is not private use merely because the passengers are from group entities or the flights are chartered. It also notes that Customs may invoke the importer's undertaking to pay duty only after the competent civil aviation authority records a breach of permit conditions; absent a DGCA finding of violation, the duty demand is unsustainable.

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Issues: (i) Whether carriage of personnel of a group company for remuneration by chartering an aircraft imported for non-scheduled passenger services violated the exemption condition restricting use to non-scheduled passenger services. (ii) Whether Customs could demand duty under the importer's undertaking without a finding by the DGCA that the aircraft had been used in breach of the permit.

Issue (i): Whether carriage of personnel of a group company for remuneration by chartering an aircraft imported for non-scheduled passenger services violated the exemption condition restricting use to non-scheduled passenger services.

Analysis: The relevant exemption condition required the aircraft to be imported by an approved operator and to be used only for non-scheduled passenger services. "Air transport service" was understood as transport of persons for remuneration, while "scheduled air transport service" required operation between the same places, according to a published timetable or regular systematic flights, and open use by the public. A service satisfying the first definition but not the second remained non-scheduled passenger service. Chartering of the aircraft was held permissible within that regime, there being no prohibition in the notification, the Aircraft Rules, or the applicable civil aviation requirements against charter-based operations or carriage of personnel of group companies for remuneration. The use was not private use merely because the passengers were from group entities or because the flights were not on a published timetable.

Conclusion: The use of the aircraft did not violate the exemption condition, and the appellant's use remained within non-scheduled passenger services.

Issue (ii): Whether Customs could demand duty under the importer's undertaking without a finding by the DGCA that the aircraft had been used in breach of the permit.

Analysis: The exemption scheme tied compliance monitoring to the civil aviation authorities, whose approval and permit formed part of the condition for the exemption. The undertaking to pay duty on failure to use the aircraft for the specified purpose became actionable only when the competent civil aviation authority found a breach of the permit conditions. Since the DGCA had not found any violation and had renewed the permit from time to time, Customs could not independently treat the undertaking as breached and invoke the duty demand on that basis.

Conclusion: Customs could not demand duty in the absence of a breach found by the DGCA, and the invocation of the undertaking was unsustainable.

Final Conclusion: The confiscation, duty demand, fine, and penalty were not sustainable, and the relief granted by the Tribunal went in favour of the importer and the co-appellant.

Ratio Decidendi: Where an exemption for imported aircraft is conditioned on non-scheduled passenger use and compliance is linked to approval by the civil aviation authority, charter-based carriage for remuneration remains within non-scheduled passenger service if it is not scheduled service, and Customs may invoke the importer's undertaking only after the competent civil aviation authority records a breach of the permit conditions.

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