2024 (3) TMI 1515 - AAR - Customs

Turbo-jet aircraft engine components treated as aircraft parts for Sl. No. 545 import duty exemption; concessional BCD allowed.

The dominant issue was whether parts of turbo-jet aircraft engines qualify as 'parts of an aircraft' for exemption under Sl. No. 545 of N/N. 50/2017-Cus, ... Applicability of serial number 545 of N/N. 50/2017-Customs dated 30.06.2017 on import of certain parts of the aircraft's engine - HELD THAT:- It is found on a plain reading of the notification, the exemption is extended to 'All Parts of an Aircraft (other than Rubber tyres and tubes)' classifiable under 'Any Chapter'. Further, on the basis of the well settled position of law, the applicant believes that the subject goods ought to be deemed to be part of the machine; hence, in the instant case, engine being 'part of aircraft' and subject goods being 'parts of engine' ought to be considered as part of the aircraft and ought to be eligible for exemption unless specifically restricted. Further, the exemption notification is to be read strictly and interpreted in terms of its language; when language is plain and clear, effect must be given to it; plain reading of the notification shows that all parts (other than rubber tyres and tubes) of aircraft of Heading 8802 or 8806 are eligible for exemption over and above 2.5% of BCD; it appears that the legislative authorities were conscious of the fact that the goods they are listing for exemption fell under different Headings or Chapters of the Customs Tariff and by not writing the Chapter heading into the notification, the exemption become possible for all kinds of parts of aircraft. Noting that there is a specific declaration given by the applicant regarding sole and principal use of the specifically designed parts, in turbo-jet engines of the aircraft and also in light of the catena of judgements by a number of Hon'ble Tribunals and Courts that part of part is part of the whole, it leaves no doubt on admissibility of the said serial number of the notification. Thus, exemption under serial number 545 of Notification No. 50/2017-Customs dated 30.06.2017 is admissible to parts of turbo-jet engines which are particularly used in fighter aircraft. ISSUES PRESENTED AND CONSIDERED 1) Whether spare parts imported for use in turbo-jet engines fitted on aircraft of the relevant headings qualify as 'parts of aircraft' for the purpose of concessional basic customs duty under serial number 545 of the applicable exemption notification, even when such goods are 'parts of an engine' (i.e., 'parts of parts'). 2) Whether eligibility under serial number 545 turns on the tariff classification of the imported goods, or whether the notification applies irrespective of classification because it covers parts of aircraft 'falling under any chapter', subject to the notification's express exclusions. ISSUE-WISE DETAILED ANALYSIS Issue 1: Coverage of 'parts of engine' as 'parts of aircraft' under serial number 545 (parts-of-parts question) Legal framework (as discussed): The Court applied the exemption entry which extends benefit to 'parts (other than rubber tyres and tubes) of aircraft' of specified headings, and expressly states that such goods may fall under 'Any Chapter'. The Court also proceeded on the accepted interpretive approach that an exemption notification is to be read strictly according to its plain language. Interpretation and reasoning: The Court found that the notification's language is plain and broad: it exempts all parts of aircraft (except the stated excluded items) and does not restrict benefit only to parts classified within the aircraft chapter. The Court accepted, for the purpose of the exemption question, that an aircraft engine is a part of an aircraft and that parts meant for such engine can be treated as parts of the aircraft, particularly where the goods are specifically designed, cut to shape/size, and declared to be solely and principally used in the aircraft's turbo-jet engines. The Court considered that the notification's design-by intentionally using 'Any Chapter'-shows awareness that aircraft parts may be classifiable across chapters, supporting coverage of parts of an engine when the engine itself is part of the aircraft. The Court also noted that the goods must not be among the notification's exclusions. Conclusion: The Court conclusively held that parts of turbo-jet engines used in the aircraft in question are eligible for the concessional rate under serial number 545, treating such parts (parts of engine) as covered 'parts of aircraft', where they are specifically designed for such use and not excluded by the entry. Issue 2: Relevance of classification to admissibility of serial number 545 ('Any Chapter' coverage) Legal framework (as discussed): The Court relied on the notification's express text extending benefit to eligible parts 'falling under Any Chapter' and reiterated that interpretation must follow the notification's plain wording. Interpretation and reasoning: Although the applicant asserted a particular tariff classification for the goods, the Court expressly declined to decide classification, holding that the ruling sought concerned only admissibility of the exemption. The Court reasoned that classification across different headings is not determinative for this exemption because serial number 545 grants benefit to aircraft parts irrespective of chapter placement. The 'moot point' identified and decided was whether the goods are specifically designed and intended to be used as aircraft parts (and are not excluded), rather than the precise tariff heading under which they are assessed. Conclusion: The Court conclusively determined that it was unnecessary to adjudicate detailed tariff classification to grant the benefit, since serial number 545 applies to qualifying aircraft parts 'under any chapter'; admissibility depends on the goods being aircraft parts (including parts of an engine that is part of the aircraft) and not falling within the stated exclusions.