2026 (3) TMI 160 - AT - Customs

Interchangeability of non-scheduled passenger and charter use upheld, so conditional customs exemption remains available and relief granted.

Condition No. 104 of Notification No. 21/2002-Customs grants conditional exemption to imported aircraft for non-scheduled passenger or charter services; ... Scope and applicability of Condition No. 104 of Notification No. 21/2002-Customs (S. No. 347B) - grants conditional exemption to aircraft imported for providing non-scheduled (passenger) or non-scheduled (charter) services, subject to approval by the competent civil aviation authority and an undertaking limiting use to the specified purpose - liability to pay duty - aircraft imported by Privilege and confirmed demand of duty - Whether aircrafts imported for non-scheduled (passenger) service can be used for non-scheduled (charter) service. Use of aircraft imported for non-scheduled (passenger) services for non-scheduled (charter) services - Whether an aircraft imported claiming exemption for non-scheduled (passenger) services could lawfully be used for non-scheduled (charter) services and whether denial of exemption, demand of duty, confiscation and penalties on that basis were justified. - HELD THAT: - The Tribunal, following the reasoning and conclusions in the larger bench decision in VRL Logistics [2022 (8) TMI 720 - CESTAT AHMEDABAD (LB)] held that aircraft imported for non-scheduled (passenger) services can be used for non-scheduled (charter) services. The impugned order denied the exemption under notification No. 21/2002-Cus (S. No. 347B) and imposed demand, confiscation and penalties on the ground that the aircraft was chartered out for exclusive use by another company. Having applied the larger bench authority, the Tribunal found no basis to sustain the finding that use for non-scheduled (charter) services breached Condition 104 and therefore concluded that the consequences imposed in the impugned order were not justified. [Paras 8, 9] The finding that the aircraft's use for non-scheduled (charter) services violated Condition 104 was rejected and the impugned order was set aside with consequential reliefs. Final Conclusion: Applying the larger bench decision in VRL Logistics, the Tribunal concluded that use of the imported aircraft for non-scheduled (charter) services did not disentitle the importer from the conditional exemption under notification No. 21/2002-Cus (S. No. 347B) and therefore set aside the impugned order imposing duty, confiscation and penalties. Issues: (i) Whether aircraft imported claiming exemption under Notification No. 21/2002-Customs (S. No. 347B, Condition No. 104) for non-scheduled (passenger) services can be used for non-scheduled (charter) services without forfeiting the exemption; and whether the impugned order denying the exemption, demanding duty, confiscating the aircraft and imposing penalties can be sustained.Analysis: The matter concerns the scope and applicability of Condition No. 104 of Notification No. 21/2002-Customs (S. No. 347B) which grants conditional exemption to aircraft imported for providing non-scheduled (passenger) or non-scheduled (charter) services, subject to approval by the competent civil aviation authority and an undertaking limiting use to the specified purpose and liability to pay duty if the condition is violated. The larger bench decision in VRL Logistics answered the reference holding that aircraft imported for non-scheduled (passenger) services can be used for non-scheduled (charter) services, that the customs authority cannot re-examine DGCA approval in absence of its cancellation, and that the exemption conditions should be interpreted consistently with the notification's text and related civil aviation regulatory framework. Applying that precedent to the present facts, where the import was under the cited notification and the factual finding was charter use, the larger bench principle governs the legal question of interchangeability of non-scheduled passenger and charter uses under the notification.Conclusion: The impugned order denying exemption and imposing duty, confiscation and penalties is set aside; the exemption under Notification No. 21/2002-Customs (S. No. 347B, Condition No. 104) applies and relief is granted to the appellants (in favour of the assessee).