Rebate under Rule 18 granted for aviation turbine fuel remaining on board aircraft on international flights; earlier orders quashed

HC allowed the petition holding that rebate under Rule 18, Central Excise Rules, 2002, could be granted for aviation turbine fuel remaining on board aircraft on international flights. The court found the issue not res integra in light of the respondent's concession that rebate is allowable for the quantity remaining on board. The orders of 31.3.2023 and 5.4.2023 by the Principal Commissioner & Ex-Officio Additional Secretary are quashed and set aside; petition allowed.

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ISSUES PRESENTED AND CONSIDERED

1. Whether supplies of Aviation Turbine Fuel (ATF) to a foreign-going aircraft as "stores" fall within the definition of "export" under the Central Excise Rules and thereby attract rebate of excise duty under the rebate notifications and Rule 18.

2. Whether rebate is admissible for the portion of ATF consumed during the domestic leg of an international flight, or is confined to the quantity remaining on board after completion of the internal flight but prior to reversion to foreign run.

3. Whether the department's concession on the legal position (that rebate is admissible to the extent provided under the Notifications and Rule 18) renders the issue no longer res integra and justifies quashing of impugned administrative orders refusing rebate.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Scope of "export" and entitlement to rebate for ATF supplied as stores to foreign-going aircraft

Legal framework: Rule 18 of the Central Excise Rules (and corresponding rebate notifications) defines "export" to include goods "supplied to a foreign going aircraft" as stores; Customs Act definitions treat "stores" to include fuel. Notifications grant rebate of excise duty on mineral oil products exported as stores for consumption on board an aircraft on foreign run.

Precedent treatment: The Court notes consistent governmental practice and continuity of wording in successive notifications permitting rebate for fuel supplied as stores to aircraft on foreign run; no fresh precedent in the judgment was treated as overturning that position.

Interpretation and reasoning: The Court interprets the statutory and notification language literally and purposively: where ATF is supplied to a foreign-going aircraft as stores for consumption on board during a foreign run, such supply is to be treated as export and eligible for rebate. The statutory definitions of "foreign-going aircraft" and "stores" expressly include fuel; notifications and prior rules consistently recognized the rebate in such circumstances. Evidence that duty burden was borne by the supplier and certification/letters confirming supply towards a foreign destination were relevant to establish the factual foundation for rebate.

Ratio vs. Obiter: Ratio - A supply of ATF to a foreign-going aircraft as stores qualifies as export under Rule 18/notifications and is prima facie eligible for rebate of excise duty when factual prerequisites (supply to foreign-going aircraft, duty paid by supplier, relevant certification) are satisfied.

Conclusions: The Court concludes that ATF supplied to a foreign-going aircraft as stores is within the statutory meaning of "export" and falls within the rebate regime; denial of rebate on that ground was incorrect.

Issue 2 - Admissibility of rebate for fuel consumed on the domestic leg of an international flight

Legal framework: Notification language (as reproduced and applied) prescribes a "special procedure for stores for consumption on board an aircraft on foreign run" and provides that "rebate shall be granted for such quantity of the products as remain on board the aircraft after completion of an internal flight but prior to its reversion to foreign run"; Customs circulars and subsequent notifications affect scope.

Precedent treatment: The Government/departmental analysis relied on the Notification No. 19/2004 (and its predecessors) and a Circular; the appellate authority's allowance was examined in light of the notification text. The Court did not invoke any contrary judicial precedent but relied on the department's own interpretation in its order.

Interpretation and reasoning: The Court accepts the plain wording of the notification: rebate is to be calculated on the quantity that remains on board after completion of any internal/domestic flight and before the aircraft resumes foreign run. Consequently, fuel actually consumed during a domestic leg of an international itinerary does not qualify for rebate. The department's own finding identified the core dispute as the admissibility of rebate for fuel consumed during domestic run and correctly observed that the notification excludes such consumption from rebate entitlement, mandating verification and recalculation by the original authority.

Ratio vs. Obiter: Ratio - Rebate is not admissible for ATF consumed during the domestic leg of an international flight; rebate is confined to the quantity remaining on board after the internal flight and before reversion to foreign run.

Conclusions: The Court accepts that rebate cannot be allowed for fuel consumed on domestic legs; the proper course is verification and computation of the rebateable quantity in accordance with the notification and certification by the concerned officer.

Issue 3 - Effect of departmental concession on remedy and final relief

Legal framework: Judicial review under constitutional writ jurisdiction permits quashing of administrative orders that are contrary to law or based on untenable positions; an admissible departmental concession as to legal position can render the controversy no longer res integra and justify relief.

Precedent treatment: The Court relied on the department's own recorded concessions in its orders recognizing (a) that rebate for stores to foreign-going aircraft is admissible and (b) that the outstanding issue relates only to the quantum attributable to domestic consumption - thereby narrowing the dispute.

Interpretation and reasoning: Given the department's concession that rebate may be granted for the quantity remaining on board for foreign run, the Court found no live legal controversy on entitlement generally. The administrative orders under challenge denying rebate were inconsistent with that concession and the correct interpretation of the notification. Accordingly, the Court exercised supervisory jurisdiction to quash and set aside the impugned orders and remitted the matter for computation/verification consistent with the notification's requirement.

Ratio vs. Obiter: Ratio - A clear departmental concession acknowledging the legal entitlement under the relevant rules and notifications can be determinative and support quashing administrative rejections inconsistent with that concession; remaining issues of quantum should be remitted for verification in accordance with the statutory/notification procedure.

Conclusions: The Court held that, on the conceded legal position, the impugned administrative orders refusing rebate were unsustainable. It quashed those orders to the extent of the conceded entitlement and directed that consequential benefits be granted within a specified period, while leaving verification of amounts (particularly to exclude domestic consumption) to the original authority as required by the notification.

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