Customs exemption for helicopter imports upheld where non-scheduled passenger service permit remained valid despite charter hire use

Import of a helicopter qualified for customs exemption where the importer held a valid DGCA permit for non-scheduled air transport services and had furnished the undertaking required by the notification. The absence of a published tariff or issued tickets did not disqualify the operation from being treated as non-scheduled (passenger) services, because that expression was to be read with the Aircraft Rules, 1937 and charter-hire use did not by itself make the aircraft private. In the absence of any adverse finding or cancellation by the competent aviation authority, the exemption could not be denied, and the basis for confiscation, redemption fine and penalties also failed.

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Issues: (i) Whether the imported helicopter satisfied the conditions for exemption under Serial No. 347B of Notification No. 21/2002-Customs dated 01.03.2002 as amended by Notification No. 61/2007-Customs dated 03.05.2007; (ii) whether use of the helicopter on charter hire without published tariff or issue of tickets disentitled the importer from claiming non-scheduled (passenger) services; (iii) whether confiscation of the helicopter and penalty under the Customs Act, 1962 were sustainable.

Issue (i): Whether the imported helicopter satisfied the conditions for exemption under Serial No. 347B of Notification No. 21/2002-Customs dated 01.03.2002 as amended by Notification No. 61/2007-Customs dated 03.05.2007.

Analysis: The exemption applied to helicopters falling under heading 8802, subject to Condition No. 104. The importer held a valid DGCA permit to operate non-scheduled air transport services and had furnished the undertaking required by the notification. The permit was in force during the relevant period and the imported helicopter was covered by the exemption entry. The Tribunal also noted that the undertaking had been cancelled by the Customs authorities after end-use certification.

Conclusion: The helicopter satisfied the exemption conditions and the benefit of the notification was available to the importer.

Issue (ii): Whether use of the helicopter on charter hire without published tariff or issue of tickets disentitled the importer from claiming non-scheduled (passenger) services.

Analysis: The notification defined non-scheduled (passenger) services by reference to the Aircraft Rules, 1937. Under Rule 3, air transport service means carriage of persons for remuneration, while scheduled service is only one which operates on a published timetable and is open to use by members of the public. The Tribunal held that absence of a published tariff and non-issuance of tickets are not disqualifying factors for non-scheduled (passenger) services. It further held that charter hire by the importer did not convert the aircraft into a private aircraft, and that Customs could not disregard the DGCA permit in the absence of cancellation or adverse action by the competent aviation authority.

Conclusion: The helicopter remained within the scope of non-scheduled (passenger) services and the exemption could not be denied on the grounds relied upon by Revenue.

Issue (iii): Whether confiscation of the helicopter and penalty under the Customs Act, 1962 were sustainable.

Analysis: Once the exemption was held available and no violation of the DGCA permit was established, the foundation for confiscation and penalty failed. The Tribunal also accepted that the matter was one of interpretation of the exemption notification and not one involving wilful misdeclaration or suppression.

Conclusion: The confiscation, redemption fine and penalties were unsustainable.

Final Conclusion: The appeal succeeded and the importer retained the benefit of duty exemption on the imported helicopter, with the consequential demand, confiscation and penalties set aside.

Ratio Decidendi: For aircraft imported under a DGCA-approved non-scheduled operator permit, non-scheduled (passenger) services are to be construed in accordance with the Aircraft Rules, 1937, and denial of exemption cannot rest merely on absence of published tariff, non-issue of tickets, or charter-hire deployment, unless the competent aviation authority has found a breach of the permit conditions.

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