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Issues: Whether the appellants were entitled to exemption under Notification No. 21/2002-Cus. as amended by Notification No. 61/2007-Cus.; whether use of the aircraft for charter operations, carriage of group-company personnel, absence of published tariff, and non-issue of passenger tickets violated Condition No. 104; and whether Customs could deny the exemption on the alleged post-import breach of the undertaking.
Issue (i): Whether the appellants were entitled to exemption under Notification No. 21/2002-Cus. as amended by Notification No. 61/2007-Cus.
Analysis: The exemption under Condition No. 104 applied to aircraft imported by an approved operator for providing non-scheduled (passenger) or non-scheduled (charter) services, subject to an undertaking that the aircraft would be used only for the specified purpose. The Larger Bench had already held that a non-scheduled (passenger) operator is not barred from carrying out charter operations, that carriage by air for remuneration satisfies the definition of air transport service, and that the absence of published tariff or passenger tickets does not by itself defeat the exemption. The aircrafts were used for remunerated air transport, the civil aviation authorities had granted and renewed the permits, and the departmental objections did not disclose any contrary statutory restriction in the notification.
Conclusion: The appellants were entitled to the exemption and the denial of benefit was unsustainable.
Issue (ii): Whether use of the aircraft for charter operations, carriage of group-company personnel, absence of published tariff, and non-issue of passenger tickets violated Condition No. 104.
Analysis: The governing definitions in the Aircraft Rules treated air transport service as carriage by air of persons for remuneration of any kind, and public transport aircraft as one used for carriage for remuneration, or without remuneration if the operator is an air transport undertaking. The Larger Bench had held that chartering is only one mode of rendering passenger air transport service, that non-scheduled passenger service can be rendered by chartering the entire aircraft, and that there is no requirement of published tariff or passenger tickets for such service. It also held that carriage of personnel of group companies did not convert the aircraft into a private aircraft where the operator carried persons for remuneration and functioned as an air transport undertaking. The Tribunal adopted those findings and distinguished the contrary revenue reliance.
Conclusion: These usages did not constitute a breach of Condition No. 104 or convert the aircraft into a private aircraft.
Issue (iii): Whether Customs could deny the exemption on the alleged post-import breach of the undertaking.
Analysis: The notification was treated as containing pre-import conditions satisfied at the time of import and no distinct post-import condition enforceable through Section 28 of the Customs Act, 1962. The Tribunal relied on the Larger Bench view that compliance monitoring lay with the civil aviation authorities, while Customs could act only when the competent aviation authority found a violation of the permit conditions. On the facts, the aviation authorities had not treated the operations as unauthorized and had renewed the permits, so the customs demand, confiscation and penalties could not be sustained under the alleged post-import breach theory.
Conclusion: Customs could not sustain the demand, confiscation or penalties on the alleged post-import breach.
Final Conclusion: The impugned orders were set aside and the appeals were allowed with consequential relief, as the aircrafts were held to have been used within the scope of the exemption and without any actionable violation of the notification conditions.
Ratio Decidendi: Where an exemption notification for aircraft imports covers non-scheduled passenger or charter services, charter operations by a non-scheduled passenger operator and remunerated carriage of persons do not, by themselves, amount to violation of the notification, and Customs cannot deny the exemption on an alleged post-import breach absent a violation found by the competent aviation authority.
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