TaxTMI 
TaxTMI 
2011 (6) TMI 276
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....(iii) Special Additional Duty of Customs under Notification No. 20/2006-Cus., dated 1-3-2006 (serial No. 1). The assessee is also aggrieved by the confiscation of the goods ordered by the Commissioner under Section 111 of the Customs Act (with option for redemption against payment of fine of Rs. 10 lakhs) as also by the penalty of Rs. 2.5 lakhs imposed under Section 112 of the Act. The appeal of Capt. (Retd.) K.N.G. Nair, Managing Director of the company, is directed against the penalty of Rs. 2.5 lakhs imposed on him by the adjudicating authority under Section 112 of the Act. Facts of the Case 2. M/s. Bell Helicopter Asia (Pte) Ltd. (Singapore) had sold the helicopter to M/s. Brics Leasing & Finance International Ltd. (Ireland), from whom the assessee obtained lease of the aircraft. Accordingly, the assessee imported it in dismantled condition and filed the aforesaid Bill of Entry for its clearance through Air Cargo Complex, Sahar, Mumbai. The assessable value was declared to be Rs. 37,56,04,380/- equivalent to $ 91,09,148/- as per the relevant invoice. "No Objection" Certificate dated 13-3-2008 from the Director-General of Civil Aviation (DGCA), which stated that DGCA had ....
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....ement dated 14-4-2008 entered into between them (assessee) and M/s. Heligo Charters Pvt. Ltd. (Heligo, for short). Upon completion of these preliminary investigations, the helicopter was seized under panchanama dated 11-9-2008 at Rajamundri Airport under Section 110 of the Customs Act by the officers concerned on the reasonable belief that it was liable to confiscation under Section 111 of the Act. It was handed over to the importer under superdnama dated 11-9-2008 for safe custody. However, on 15-9-2008, it was released to the assessee on the basis of a bond for value of Rs. 9 crores executed by them in terms of the Hon'ble High Court's interim order dated 12-9-2008 in Writ Petition No. 2184 of 2008. 4. The CIU recorded a statement of the Managing Director under Section 108 of the Customs Act on 10-10-2008, wherein he stated, inter alia, (i) that the company was engaged in providing helicopter services to other companies on charter basis, (ii) that the helicopter in question was on charter-lease to Heligo under an agreement, (iii) that Heligo was maintaining logbook for flight operation, obtaining the necessary permission/approval from DGCA, paying salary to the pilots and a....
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....unal for final decision on merits without pre-deposit. The operative part of the High Court's order reads thus : "....................... Matter is remitted back to the Tribunal with direction to consider the minimum requirements engrafted in Exh. U dated 1st June, 2010 with other contentions since all rival contentions on merits are kept open. If necessary, it would be open for the appellant to amend their appeal memo and/or application for pre-deposit to raise contention based on the minimum requirements laid down in Exh. U dated 1st June 2010, by the Director General of Civil Aviation..................." 7. On the strength of the Hon'ble High Court's order, the assessee filed a Miscellaneous Application to amend the memorandum of appeal, which this Tribunal allowed by order dated 15-10-2010 and, accordingly, paragraphs (dd) to (gg) came to be added to the grounds of the appeal. Amended copies of the memorandum of appeal were filed by the counsel for the appellant on 28-2-2011. Subsequently, the appeal was heard with the connected appeal on 17-3-2011. The counsel for the appellants filed "written submissions" on 23-3-2011 and the JCDR filed his "submissions/argument notes" ....
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....uirement under the provision of Rule 133A of the Aircraft Rules 1937 : Provided that such Air charter operator is a dedicated company or partnership firm for the above purposes." 9. DGCA has the authority under Rule 133A of the Aircraft Rules, 1937 to issue, through publication entitled "Civil Aviation Requirements", special directions not inconsistent with the Aircraft Act, 1934 or the Rules, relating to the operation, use, possession, maintenance or navigation of aircraft flying in or over India or of aircraft registered in India. In exercise of this authority, DGCA issued "Civil Aviation Requirements, Section 3, Air Transport Series 'C', Part III" w.e.f. 8th October, 1999, laying down "minimum requirements for grant of permit to operate non-scheduled air transport services (passenger)". These Civil Aviation Requirements ["CAR" for short] will hereinafter be referred to as "Passenger CAR". Part V of Civil Aviation Requirements laying down "minimum requirements for grant of permit to operate non-scheduled air transport services (charter operation)' was issued w.e.f. 17th May, 2000, and the same will hereinafter be referred to as "Charter CAR". A new/revised Part III was iss....
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....) letter dated 15-7-2009 to the Commissioner of Customs in the case of import of helicopter by M/s. Escorts Ltd. clarifying that "operation of charter services is permissible by NSOP (passenger) holder under this paragraph" (para 9.2); (iii) letter dated 8-8-2008 to M/s. Global Vectra Helicorp Pvt. Ltd. clarifying that "the lease/charter of aircraft and its operation are not merely a financial leasing, the activities are considered to be within the privileges of non-scheduled operator's permit (NSOP) granted to you." This last letter also indicated that the NSOP granted to the party was NSOP (passenger operations). The learned counsel went on to argue that condition No. 104 of Notification 21/2002-Cus. treated non-scheduled air transport services (charter operations) on par with non-scheduled air transport services (passenger) and either would satisfy the condition. In this connection, the learned counsel referred to clause (ii)(a) of condition No. 104 and argued that the same should be read as : "the said aircraft shall be used only for providing non-scheduled services". According to him, this clause was not incorporated to prohibit charter operations by a non-scheduled air transp....
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....3 per cent, which is the WTO bound rate, on all private import of aircraft including helicopters. Such import will also attract countervailing duty and additional customs duty." Mr. Shroff argued that non-scheduled (charter) service was a species of non-scheduled (passenger) services and, therefore, it was open to the assessee to operate non-scheduled air transport services (charter) with the imported helicopter under NSOP (passenger) issued by DGCA. Therefore, the charter operations under the assessee's Charter-Hire Agreement with Heligo were in conformity with the definition of non-scheduled (passenger) service. The counsel opined that it was grossly incorrect to equate the charter operations to private use. 13. It was also claimed by the counsel that DGCA had clarified in writing to the Customs authorities that the charter operations of the assessee were within the privileges of the permit issued to them for non-scheduled air transport services (passenger). He expected the department to produce a copy of the relevant communication of DGCA. It was also pointed out that the assessee themselves had written to DGCA on 17-2-2009 for a clarification on the point and the latter'....
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....3-2011. The learned counsel referred to the newly added Explanation 2 to condition No. 104 attached to serial No. 347B ibid and submitted that this Explanation being clarificatory in nature had retrospective effect and, consequently, use of the imported helicopter for non-scheduled (charter) services under NSOP (passenger) issued by DGCA was not to be construed to be a violation of the said condition for duty-free import. A copy of Notification 21/2011-Cus., dated 1-3-2011 was also produced by the Advocate. 17. Further, it was submitted by the learned counsel that a co-ordinate Bench of this Tribunal had, of late, allowed the benefit of exemption under Notification 21/2002-Cus., dated 1-3-2002 (serial No. 347B) to another importer, viz. M/s. Airmid Aviation Services (P) Ltd. on a similar set of facts. The learned counsel also produced copies of Final Order No. C/170-174/2010 dated 12-11-2010 passed by the Tribunal in appeal Nos. C/493 to 497/09 [Commissioner of Customs, New Delhi v. Sameer Gehlot - 2011 (263) E.L.T. 129 (Tri.-Del.)]. The counsel expressed the view that this Bench was bound by the above decision of the co-ordinate Bench. Submissions for respondent 18. T....
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....tion No. 21/2002-Cus. as amended by Notification No. 61/2007-Cus. JCDR sought to attach great significance to "published tariff' figuring in the text of clause (c) of Explanation to condition No. 104. He submitted that private charter operations did not require publication of tariff. Hence the requirement of tariff to be published by a non-scheduled (charter) air transport operator claiming the benefit of the Exemption Notification would clearly show that the charter operations were intended to benefit members of the public. The learned JCDR argued that, in the absence of a published tariff, the chartered flight services were to be considered as private and hence did not qualify for the exemption. 20. The learned JCDR submitted that, to be eligible for exemption in the category of non-scheduled (charter) services, the assessee had to fulfil two basic conditions stipulated in clause (c) of Explanation to condition No. 104. Firstly, they must have a permit for non-scheduled (charter) services conforming to the provisions of 'Charter CAR' and, as per clause (2.1) of this 'CAR', the maximum seating capacity of a twin-engined aircraft for non-scheduled charter operations must not ....
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....e helicopter imported by them vide Bill of Entry No. 520260 dated 5-4-2008 wherein they claimed exemption from BCD under serial No. 347B of Notification 21/2002-Cus. as amended by Notification 61/2007-Cus. [A decision on this issue must also be applicable to CVD as condition No. 21 attached to Notification No. 6/06-C.E. (entry 54A) as amended is, substantially, not different from condition No. 104 attached to the said entry 347B of Notification No. 21/02-Cus. as amended]. The Notification, at serial No. 347B thereof, prescribed "nil" rate of duty for "all goods falling under Heading 8802 (except SH 8802 60 00)" subject to condition No. 104. The text of this condition has already been included vide para (8) of this order. In compliance with clause (i) of this condition, the importer produced DGCA's "no objection for import" in respect of the helicopter and the same authority's permit for using the aircraft to operate "non-scheduled air transport services (passenger)". In terms of clause (ii) of the condition, they furnished an undertaking to the Deputy Commissioner of Customs. 24.2 There is no room for doubt as to the scope of the permit issued to the assessee by DGCA. The per....
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....icopter, and not charter services. 24.3 In any case, the appellants have not produced any clarification of DGCA to the contra. They claim to have requested the said authority by letter dated 17-2-2009 for a clarification on the point, but they are yet to obtain any. Any clarification issued by DGCA to third parties on the particular facts of their cases cannot be pressed into service in the appellants' case. We have also seen assertive averments in the assessee's appeal to the effect that the Customs authorities themselves received DGCA's clarification in the appellant's favour on the scope of the subject permit. But these assertions are yet to be substantiated. They remain ipse dixit. Nobody has stood in the way of the appellants themselves obtaining similar clarification from DGCA or in the way of their gathering information from DGCA under the Right to Information Act regarding the clarification which is said to have been given to Customs authorities. The onus to prove that DGCA has clarified in favour of the appellants is on them and none else as per the maxim : affirmanti non neganti incumbit probatio. No prudent mind can expect DGCA, who laid down "Charter CAR", to say ....
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....ir Charters Pvt. Ltd. Sd/- Authorised Signatory" [underlinings added] Obviously, the assessee undertook to use the helicopter only for providing non-scheduled passenger services. They also undertook to pay on demand the necessary duties of customs in the event of non-compliance. 24.6 The question now to be considered is whether the assessee used the imported helicopter for the avowed purpose. It is not in dispute that, under a "charter-hire agreement" dated 14-4-2008 with Heligo, the assessee allowed the helicopter to be used by Heligo for the purpose of mobilizing and demobilizing of personnel of third party companies and for movement of their freight and/or equipment. Under the agreement, Heligo would reimburse the actual costs incurred by the assessee in sourcing and acquiring spares for maintenance of the helicopter. The necessary infrastructure....
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....c = the people as a whole; community at large [New World Dictionary of the American Language] * public = people collectively [The New Shorter Oxford English Dictionary] * public = ordinary people in general; the community [Concise Oxford English Dictionary - Indian Edition] * the public = ordinary people in society in general; [Oxford Advanced Learner's Dictionary of Current English, 7th Edition] Members of the public are natural persons and cannot be juristic persons like the third party companies which chartered the aircraft from Heligo. 24.7 "Non-scheduled passenger services" has been defined in clause (b) of Explanation to condition No. 104 and the same means "air transport services other than scheduled (passenger) air transport services as defined in Rule 3 of the Aircraft Rules, 1937." [Incidentally, we note that the expression "non- schedu....
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....d non- scheduled services. It would follow that, like scheduled air transport service (passenger), non-scheduled air transport service (passenger) also should be open to use by members of the public. As the flight operations in this case were not open to the public, the helicopter cannot be held to have been used for "non-scheduled (passenger) services". 24.8 As condition No. 104 itself refers to Rule 3 of the Aircraft Rules, 1937 in the context of defining the expression "non-scheduled (passenger) services", it is permissible to take aid of the said Rule in ascertaining the connotation of the word "passenger" used in the expression "non-scheduled (passenger) services". Rule 3(39) defines "passenger aircraft" as aircraft which effects public transport of passengers. "Public transport" is also seen defined under Rule 3(45). In the instant case, it is not the claim of the appellants that they used the helicopter for public transport of passengers. They only allowed Heligo to hire the aircraft for a remuneration and use it for transporting employees of Oil & Gas/allied companies between Vishakapatnam airport and offshore oil/gas fields under contracts awarded to Heligo by those ....
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....ement of published tariff implies that the charter operations must also be open to members of the public. The assessee did not have a published tariff as alleged in the SCN and rightly found by the adjudicating authority. [The submission in the assessee's appeal that there was no such allegation in the show-cause notice is factually incorrect]. Moreover, "Charter CAR" did not permit a 13-seater helicopter to be used for non-scheduled (charter) services. Therefore the air transport operations undertaken with the helicopter would not fit in the definition of "non-scheduled (charter) services" under clause (c) of Explanation to condition No. 104. The argument of the assessee's counsel that clause (c) of the Explanation is irrelevant is fallacious inasmuch as it is their own case that the scope of non-scheduled (passenger) services is wide enough to include non-scheduled (charter) operations undertaken with the imported helicopter. Condition No. 104 is a substantive condition attached to entry No. 347B of the Exemption Notification and the same has to be considered and construed in its entirety including the said clause (c). The interpretation of such a condition of Exemption Notificat....
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....are of the opinion that the adjudicating authority correctly interpreted condition No. 104 of the Exemption Notification in its exclusive jurisdiction and that DGCA cannot have any say in this matter. The cases of Bombay Chemicals [1982 (10) E.L.T. 171 (Bom.)] and Honeywell Technology [2008 (231) E.L.T. 592 (Tribunal)] relied on by the assessee were correctly distinguished by the learned Commissioner. In our view, where "non-scheduled (passenger) services" and "non-scheduled (charter) services" have been defined in the Notification and the mutual exclusivity of these services has also been clearly spelt out therein, it is not permissible to borrow the definitions or other provisions from the Aircraft Rules or any "CAR" issued thereunder, for reading down the provisions of the Notification issued under Section 25 of the Customs Act. The Hon'ble Bombay High Court's decision in Dimexon's case (vide supra) lends support to this view. Para (5) of the High Court's judgment is reproduced below :- "5. When there be two Acts, may be both Special Acts what has first to be examined is the field that they cover. Duty is payable pursuant to the Customs Act. The Import and Export Act regul....
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....t) and that the Customs authorities have no jurisdiction to do so. The learned counsel has also argued vehemently to the same effect. We have already noted that DGCA's permit fulfils clause (i) of condition No. 104. The permit was for providing non-scheduled (passenger) services. In terms of clause (ii) of the said condition, the importer undertook to the Customs department to use the imported helicopter for the said purpose only. As we have already observed, the correlative right to monitor the manner of use of the aircraft and determine whether it was being used for the said purpose as undertaken vested in the Customs department. The DGCA's authority to monitor the manner of utilization of the permit is, subtly, another thing which can, in no way, affect the above jurisdiction of the Customs department. In the case of Sheshank Sea Foods Pvt. Ltd. (vide supra), the Hon'ble Supreme Court was considering a somewhat analogous question, i.e., whether the jurisdiction of Customs authorities under Ministry of Finance to investigate into the alleged domestic disposal of the imported (exempt) material in violation of a condition of Exemption Notification No. 116/88-Cus. was affected by th....
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....ansport service as defined in para 3.2 above, being operated for carriage of passengers, mail and goods, and includes charter operations."                   [underlining added] The learned counsel has highlighted the underlined provisions (supra) and has argued that, by virtue of clause 3.3 ibid, the charter operations undertaken by the assessee are also covered by the expression "non-scheduled (passenger) service" and, therefore, condition No. 104 should be held to have been satisfied by them. The plea of retrospective operation of "New CAR" is untenable as this 'CAR' does not say that it has retrospective effect. The document on its face indicates that the provisions are effective from 1st June 2010 ("Effective: Forthwith"). Moreover, it appears from clause (2.7) ibid that a holder of NSOP issued prior to 1-6-2010 has to comply with the requirements of clause 4.2(b) of "New CAR" within six months from the date of effectivity (1-6-2010) of this "CAR" if he wants this CAR to be applicable to his permit. Clause 4.2(b) requires the NSOP holder to have a minimum paid-up capital as prescribe....
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....ilure to use the imported aircraft for the specified purposes, an amount equal to the duty payable on the said aircraft but for the exemption under this notification. Explanation :- 1. For the purposes of this entry, - (a) 'operator' means a person, organization, or enterprise engaged in or offering to engage in aircraft operation; (b) 'non-scheduled (passenger) services' means air transport services other than Scheduled (passenger) air transport Services as defined in rule 3 of the Aircraft Rules 1937. (c) 'non-scheduled (charter) services' mean services provided by a non-scheduled (charter) air transport operator, for charter or hire of an aircraft to any person, with published tariff, and who is registered with and approved by Directorate General of Civil Aviation for such purposes, and who conforms to the civil aviation requirement under the provision of rule 133A of the Aircraft Rules 1937: 2. For the purposes of this exemption, use of such imported aircraft by a non-scheduled (passenger) operator for non-scheduled (charter) services or by a non-scheduled (char....
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....d be used only for non-scheduled (charter) services. The two permits were not allowed to be used interchangeably. In other words, NSOP (passenger) could not be used for non- scheduled (charter) services and NSOP (charter) could not be used for non-scheduled (passenger) services. It was with the coming into force of 'New CAR' on 1-6-2010 (Part III (Amended), Section 3, Air Transport Series 'C', Civil Aviation Requirement) that charter operations also came to be included in the definition of "non-scheduled air transport service operated for carriage of passengers, mail and goods vide para 3.3 of "New CAR". [Incidentally, the appellants' "theory of passenger/charter dual operations" under para (9.2) of "Passenger CAR" came to be demolished with the coming into force of para (3.3) of "New CAR" on 1-6-2010]. The Central Government, apparently, took note of the changed scenario and issued Notification No. 21/2011-Cus. deleting the expression "as the case may be" from clause (ii)(a) of condition No. 104 and adding a new Explanation to the said condition. As the import in question took place during the previous regime, the importer cannot claim the benefit of the amending Notification 21/2....
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....k the view that the exemption Notification did not provide a post-importation condition. It opined that the Customs authorities were not expected to monitor the aircraft operations to find out whether the operator violated the permit granted by the Civil Aviation authority. Where the DGCA had granted permit for non-scheduled (passenger) operations and had renewed it from time to time and did not report to the Customs authorities that the importer had violated the terms of the permit, it was not open to the Customs authorities to take a different view and deny exemption to the importer on the ground that the latter had used the aircraft for charter operations in violation of the permit issued by DGCA. In the result, the benefit of exemption was held to be admissible to the importer. 24.19 With great respect, we have to say that we are unable to persuade ourselves to follow Sameer Gehlot (supra) as a binding precedent, for the following reasons :- (a) The decision in that case holding the importer (AASPL) to be eligible for exemption from payment of duty of customs on the helicopter under Notification 21/2002-Cus. (serial No. 347B) as amended by Notific....
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....evance to the matter in hand; such a mistake is again such incuria as to vitiate the decision. Even a lower court can impugn a precedent on such grounds." In Sameer Gehlot's case (AASPL's case), the post-importation nature of the subjects of undertaking was not appreciated by the Bench while taking the view that the requirement of undertaking to be made by the importer was a pre- importation condition. The mistake vitiated the decision. This is the reason why, with great respect, we consider the decision in AASPL's case as having been rendered per incuriam. (b) That case is also distinguishable on facts from the present case. (I) In that case, the department had not proceeded in terms of the undertaking executed by M/s. AASPL. Per contra, in the present case, the department took positive action to find out whether the undertaking given by the assessee was being honoured by them. By examining the terms of the 'charter-hire agreement' between the assessee and Heligo and by conducting scrutiny of connected documents and by collecting further information from the assessee in relation to the flight operations conducted under the said agreement, the department a....
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....bsp; On account of the above violation, the assessee is not eligible for exemption from BCD under Notification No. 21/02-Cus. (entry No. 347B) as amended by Notification No. 61/07-Cus or for exemption from CVD under Notification No. 6/06-C.E., dated 1-3-2006 (entry 54A) as amended by Notification No. 6/07-C.E., dated 1-3-2007. Consequently, they cannot, also, claim the benefit of Notification No. 20/2006-Cus., dated 1-3-2006 (entry No. 1) in respect of SAD. * Amendments brought to Condition No. 104 ibid by Notification No. 21/2011 dated 1-3-2011 are not applicable to this case. * Decision in AASPL's (Sameer Gehlot's) case cannot be followed as precedent. Therefore we hold that the assessee is liable to pay duties of customs totaling to Rs. 8,68,53,254/- (with interest under Section 28AB of the Customs Act) on the helicopter imported by them vide Bill of Entry No. 520260 dated 5-4-2008. Other issues 25. As to manner of demand of duty: The appellants find fault with the demand of duty raised by the adjudicating authority in terms of the bond executed by them. It is submitted that no demand of thi....
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.... by the appellants is only trivial. In any case, the question can be answered only in favour of the Revenue in view of judicial decisions to the effect that a demand of duty is not vitiated by wrong provision of law being invoked to confirm it vide Endress + Hauser case (supra) wherein J.K. Steel v. UOI - 1978 (2) E.L.T. J355 (S.C.) was followed. 26. As to limitation; (i) The show-cause notice, which was issued beyond the normal limitation period of six months, invoked the extended period of limitation under the proviso to Section 28(1) of the Customs Act on the ground that the assessee had availed duty exemption by "willfully misstating and suppressing the facts regarding the intended use of the said helicopter leading to non-levy of appropriate duty of customs". In the reply to the notice, it was submitted that there had been no violation of the permit issued by DGCA or the Aviation Laws or condition No. 104 of the Exemption Notification and, therefore, there was "no question of demanding any duty or interest in the extended period of issue of notice available under Section 28 as alleged". In the impugned order, a reference to time-bar is seen in para (32) which reads....
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....show-cause notice was accordingly issued on 9-2-2009. The appellants, having accepted the above order of the Hon'ble High Court, are estopped from raising the plea of time-bar against the demand of duty raised in the notice. 27. As to confiscation : The aircraft was confiscated in terms of clauses (d) and (o) of Section 111 of the Customs Act. There is no valid ground against the confiscation in these appeals. It is not in dispute that the assessee-company is not in the category of persons who were unconditionally permitted under DGFT's Notification No. 2 (RE2006)/2004-09 dated 7-4-2006 to import aircrafts/helicopters without import licence. For a person who had obtained DGCA's permit for operating scheduled or non-scheduled air transport services, the Notification allowed conditional permission to import aircraft/helicopter without DGFT's import licence, the condition being that the import and use of the aircraft/helicopter should be in accordance with the permit. The appellants imported the helicopter in question without DGFT's licence and caused it to be used in violation of the terms of DGCA's permit. Such user of the helicopter rendered it liable to confiscation under S....