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; the legal question was whether an aircraft imported for non-scheduled passenger service forfeits exemption when used for non-scheduled charter service. Applying the larger bench precedent in VRL Logistics, the principle of interchangeability governs: non-scheduled passenger use may encompass non-scheduled charter use absent cancellation of civil aviation approval and the customs authority may not re-examine DGCA approval. The impugned order denying exemption, demanding duty, confiscating the aircraft and levying penalties was set aside and exemption upheld for the appellants.

---

---

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).

---