2026 (2) TMI 331 - AT - Central Excise

Aviation turbine fuel exemption and warehouse removals allowed for supply to foreign aircraft, order recovering duty set aside

Interpretation of exemption notifications: the notification requiring ATF to be 'supplied as fuel to foreign going aircraft' was read purposively rather ... Exemption from excise duty - supply as fuel to foreign going aircraft - warehousing without payment of duty - proviso excluding Aviation Turbine Fuel from application of Rule 19 - interpretation of notification - strict versus purposive construction of exemption notifications - liability for duty on removal to warehouse - penalty and interest under the Central Excise Act - scope of show cause notice / travelling beyond notice - HELD THAT:- It needs to be noted that a Notification No. 47/2001 dated 26.06.2001 was issued under sub-rule (1) of rule 20 of the Central Excise Rules, 2001 which is identical to rule 20 of the 2002 Rules. The Central Government extended the facility of removal of all excisable goods specified from the factory of production to a warehouse, or from one warehouse to another warehouse without payment of duty. In the instant case, it is seen that the Notification No. 08/2022 dated 30.06.2022 does not mention that ATF should be directly supplied from the place of manufacture to the foreign going aircraft and it cannot be supplied through the warehouses of the appellant. The only requirement contained in Notification No. 08/2022 is that the fuel must be “supplied as fuel to foreign going aircraft”. The Notification does not mention that exemption will be granted to ATF supplied from the place of manufacture “only” when it is supplied from the place of manufacture to the foreign going aircraft. It has, therefore, to be held that the appellant would be entitled to the benefit of the Notification No. 08/2022. The Principal Commissioner has also held that Notification No. 47/2001 dated 26.06.2001 was superseded by Notification No. 17/2004 dated 04.09.2004 w.e.f. 06.09.2004 and so the facility of removal of ATF without payment of duty from the factory of production to a warehouse or one warehouse to another warehouse was withdrawn. In the first instant, the show cause notice issued to the appellant does not refer to this aspect and, therefore, the Principal Commissioner travelled beyond the show cause notice to record this finding. In any view of the matter, the appellant has been held to be entitled to exemption from payment of excise duty on removal of ATF from the factory to the warehouse for supply to ATF to foreign going aircrafts in terms of Notification No. 08/2022 dated 30.06.2022. The impugned order dated 27.11.2024 passed by the Principal Commissioner for recovery of excise duty from the appellant with interest and penalty cannot, therefore, be sustained and is set aside. The appeal is, accordingly, allowed. Issues: Whether the appellant was entitled to exemption under Notification No. 08/2022 dated 30.06.2022 (as amended by corrigendum dated 07.07.2022) for Aviation Turbine Fuel cleared from the refinery to separately registered warehouses and ultimately supplied as fuel to foreign-going aircraft during the period July 2022 to March 2023; and whether the demand of central excise duty with interest and penalty imposed by the Principal Commissioner could be sustained.Analysis: The exemption in Notification No. 08/2022 applies where goods are ATF and are 'supplied as fuel to foreign going aircraft'; the text does not require direct clearance from manufacturer to aircraft. Relevant rules and notifications governing warehousing (rule 20 / rule 16 and Notifications Nos. 46/2001, 47/2001 and 17/2004) and clarificatory circulars (including Circular No. 804/01/2005 and Circular No. 798/31/2004) show that intermediate bonded warehouses registered under rule 9 were recognised for supplying ATF to foreign going aircraft subject to documentary procedures. The proviso inserted into rule 19 by Notification No. 02/2022 excludes ATF from rule 19, but Notification No. 08/2022 confers exemption when ATF is supplied as fuel to foreign-going aircraft and contains no limitation that the supply must be directly from the place of manufacture. Principles from precedent require that where a notification confers an exemption without wording such as 'only' or 'exclusively', the benefit should not be denied on the basis of intermediate steps that do not defeat the core eligibility. Applying purposive and practical construction of the exemption provision and the documentary framework for warehousing and eventual supply to foreign aircraft, the removals from refinery to the appellant's registered warehouses that culminated in supply as fuel to foreign-going aircraft satisfy the eligibility for exemption under Notification No. 08/2022.Conclusion: The appellant is entitled to the benefit of Notification No. 08/2022 dated 30.06.2022 (as amended by corrigendum dated 07.07.2022) for ATF cleared from the refinery to registered warehouses and ultimately supplied as fuel to foreign-going aircraft for the period July 2022 to March 2023; the demand of central excise duty, interest and penalty imposed by the Principal Commissioner is set aside and the appeal is allowed.