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 than strictly, so removals from factory to warehouse for later supply to foreign aircraft qualify for exemption; outcome - appellant entitled to Notification No. 08/2022 benefits. Effect of supersession and procedural scope: a later notification claimed to withdraw warehouse removal facility, but that point was not raised in the show cause notice and the adjudicator exceeded the notice's scope; outcome - that finding was procedurally infirm. Consequence: recovery with interest and penalty set aside and appeal 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.

---