Customs may independently test exemption-condition compliance while charter aircraft can still qualify as non-scheduled passenger services.

Customs authorities may independently examine compliance with an undertaking attached to an exemption notification and are not bound by the DGCA's view; that issue was decided in favour of Revenue. However, an aircraft operated for remuneration under a valid DGCA permit may still fall within non-scheduled (passenger) services for the notification condition, and the absence of a published tariff does not by itself establish non-compliance; that issue was decided in favour of the assessee. The result was that Customs could scrutinise fulfilment of Condition 104, while the substantive finding that the respondent satisfied the exemption requirement was upheld.

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Issues: (i) Whether the Customs authorities can examine compliance with Condition 104 of the exemption notification independently of the DGCA's view; (ii) Whether the imported aircraft, used for remuneration under the DGCA permit, satisfied the requirement of non-scheduled (passenger) services under Condition 104.

Issue (i): Whether the Customs authorities can examine compliance with Condition 104 of the exemption notification independently of the DGCA's view.

Analysis: Compliance with an undertaking furnished under the exemption notification is a matter within the Customs authorities' domain. The Customs authorities are not bound by the DGCA's determination, and they may independently examine whether the condition attached to the exemption has been fulfilled.

Conclusion: In favour of Revenue. The Customs authorities can examine compliance with Condition 104.

Issue (ii): Whether the imported aircraft, used for remuneration under the DGCA permit, satisfied the requirement of non-scheduled (passenger) services under Condition 104.

Analysis: The aircraft was used in accordance with the DGCA permit and was operated for remuneration. Absence of a published tariff did not by itself show non-compliance with the notification. The use of the aircraft for charter operations did not take it outside the scope of non-scheduled (passenger) services for the purpose of the exemption condition.

Conclusion: In favour of the assessee. The respondent satisfied the condition of providing non-scheduled (passenger) services.

Final Conclusion: The appeal succeeded only to the limited extent of permitting Customs to examine the exemption-condition compliance, while the finding that the respondent met the substantive notification requirement was upheld.

Ratio Decidendi: Compliance with an exemption-condition undertaking can be independently examined by Customs, and an aircraft operated for remuneration under a valid permit may still qualify as non-scheduled (passenger) services for the purpose of the exemption.

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