TaxTMI 
TaxTMI 
2022 (9) TMI 1270
X X X X Extracts X X X X
X X X X Extracts X X X X
....king given by the appellant at the time of importation of the aircraft but since the aircraft was released provisionally, the bank grantee furnished at the time of provisional release of the aircraft has been directed to be invoked. The order also imposes of penalty upon the appellant under section 112(a) of the Customs Act. The duty demand made against M/s. Reliance Industries Limited [RIL] has, however, been dropped. 2. Customs Appeal No. 641 of 2010 has been filed by Sudhir Nayak, Vice-President of the appellant to assail the aforesaid order dated 31.08.2010 passed by the Commissioner to the extent it imposes a penalty of Rs. 20,000,00/- upon the said appellant under section 112(a) read with section 140 of the Customs Act. 3. The appellant claims to be engaged in providing "non-scheduled air transport (passenger) service". Sudhir Nayak is the Vice President, Commercial of the appellant. 4. The issue involved in these appeals is whether the use of aircraft imported by the appellant with benefit of exemption from customs duty under serial 347B of notification no. 21/2002-Cus dated 01.03.2002, as amended by notification no. 61 of 2017 dated 03.05.2007 [the exemption notifi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vice for a minimum of 400 hours per annum. 7. Pursuant to the said agreement, the appellant provided passenger air transport service to RIL and/or its nominees. According to the appellant, such provision of passenger air transport service is neither between the same two places, nor is it in accordance with a published time table and the same, therefore, does not satisfy the requirements of "scheduled air transport service" and is consequently non-scheduled air transport (passenger) service. The same would, therefore, be in accordance with the conditions of the said exemption notification. 8. RIL also claims to have paid the appellant, in accordance with the said agreement dated 24.01.2008, the remuneration/ charges in respect of the said non-scheduled (passenger) service provided by the appellant to RIL or the nominees. 9. In June 2008, the Office of the Commissioner of Customs (Preventive), New Delhi commenced investigations in respect of the import of the said aircraft, which culminated into issuance of a show cause notice dated 18.07.2008. By the said notice, it was contended that the use of the aircraft, pursuant to the said agreement with RIL, did not constitute publi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....w in view of the order dated 08.08.2022 of a Larger Bench of the Tribunal in M/s. VRL Logistics Ltd. vs. Commissioner of Customs, Ahmedabad [Reference answered in Customs Appeal No. 74 of 2010 on 08.08.2022] ; (ii) Chartering operations are permissible under nonscheduled (passenger) service; (iii) There is no dispute that the appellant is "operator" as defined in clause (a) of the Explanation. There is also no dispute that the appellant has been granted approval by DGCA to import the aircraft for providing non-scheduled (passenger) service, as defined in clause (b) of the Explanation. The first requirement of Condition No. 104 is, therefore, satisfied. There is also no dispute that the appellant has furnished undertaking to Customs that the imported aircraft shall be used only for providing nonscheduled (passenger) services, as defined in clause (b) of the Explanation and in event of failure to so use the aircraft, to pay the duty. Therefore, the second requirement of Condition No. 104 is also fulfilled; (iv) The appellant has used the aircraft only for providing non-scheduled (passenger) services, as defined in clause (b) of the Explanation; (v)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r the Department as also the learned authorized representative appearing for the Department have been considered. 17. Aircrafts and helicopters are classified under Customs Tariff Heading 88 of the First Schedule to the Customs Tariff Act, 1975. The tariff rate of duty till 28.02.2007 on the import of aircraft was 3% / 12.5%. Subsequently, pursuant to the proposal made in the Finance Bill 2007, exemption notification no. 20/2009 dated 01.03.2007 was issued inserting Entry 346B and Condition No. 101 in the earlier exemption notification dated 01.03.2002, whereby, the effective rate of duty on import of aircraft for scheduled air transport service was made 'nil'. No exemption was, however, granted to non-scheduled air transport service and private category aircraft. However, with the issuance of the exemption notification dated 03.05.2007, the effective rate of duty on the import of aircraft for non-scheduled air transport service was made 'nil'. This exemption notification was as a consequence of the statement made by the Hon'ble Finance Minister in the Parliament and it is reproduced: "Honourable Members are aware that I had proposed to levy customs duty, CVD and additi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ind of remuneration whatsoever, whether such service consists of a single flight or series of flights." 23. "Scheduled air transport service" is defined in rule 3(49) of the Aircraft Rules as under: "Scheduled air transport service" means an air transport service undertaken between the same two or more places and operated according to a published time table or with flights so regular or frequent that they constitute a recognizably systematic series, each flight being open to use by members of the public." 24. The term 'scheduled (passenger) air transport services' has to be interpreted according to this definition, and applied to passenger travel in contradistinction to carriage of goods or mail. 25. Thus, if a service is covered by 'air transport service' defined in rule 3(9) of the Aircraft Rules and is other than 'scheduled (passenger) air transport service' defined in rule 3(49), it would be a nonscheduled (passenger) service within the meaning of clause (b) of the Explanation to Condition No. 104 of the exemption notification. 26. At the time when Condition No. 104 was inserted on 03.05.2007, Civil Aviation Requirement dated 08.10.1999 [1999 CAR] dealing w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....GCA. 29. The Commissioner has held in the impugned order dated 31.08.2010 that the appellant, by entering into an agreement with RIL for providing passenger air transport service upon payment by RIL, had chartered the aircraft to RIL which is not permissible when an aircraft is imported for non-scheduled air transport (passenger) services. The order also holds that as a non-scheduled operator, the appellant was required to issue passenger tickets which had not been done and that the use of the aircraft to carry personnel of a group company amounts to private use of the aircraft. 30. The submission advanced by the learned counsel for the appellant is that each of these aspects have been considered and answered in favour of the appellant by the Larger Bench of the Tribunal in VRL Logistic. Learned Counsel pointed out that the Larger Bench held that chartering of aircraft is permissible under nonscheduled (passenger) service; that an operator of non-scheduled (passenger) service is not required to issue passenger tickets; and that so long as the aircraft is used to provide air transport service for remuneration (as is in the present case), it would not be a private aircraft even....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ir transport service as defined in rule 3 of the Aircraft Rules. 55. 'Air transport service' has been defined in rule 3 (9) of the Aircraft Rules to mean service for transport by air of persons for any kind of remuneration whatsoever. There is no dispute that the appellants have used the aircraft for the transport of persons for remuneration. There is no stipulation or restriction or a condition in the said definition that a tariff should be published or that such service should be rendered only on per-seat basis and not by chartering or about the category or class of persons to be transported. Thus, the contention of the department that the appellants have rendered 'air transport service' to their group companies by carrying personnel of their group companies is not of any relevance as there is no prohibition in the said definition against any kind of persons to be transported. 56. Rule 3 (49) of the Aircraft Rules defines 'scheduled air transport service' to mean an air transport service undertaken between the same two or more places and operated according to a published time table or with flights so regular or frequent that they constitute a recognizably system....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the Explanation to the exemption notification. Non-scheduled (passenger) operator can carry out charter service 62. It would now have to be seen whether there is any restriction or prohibition against providing air transport service by way of charter of aircraft, while providing non-scheduled (passenger) services. 63. As noticed above, the definitions of air transport service and non-scheduled (passenger) service do not stipulate any restriction or impose a condition that such service should be rendered only on per-seat basis and not by chartering nor is there any stipulation in CAR 1999 issued by DGCA for grant of permits to operate non-scheduled air transport (passenger) services. In fact paragraph 9.2 of CAR 1999, which deals with non-scheduled air transport (passenger) services, categorically provides that a non-scheduled operator can conduct charter operations. ***** 65. What needs to be noticed is that the exemption notification does not prohibit a non-scheduled (passenger) service permit holder to use the aircraft for charter operations. A conjoint reading of the definitions contained in the Aircraft Rules, as have been adopted in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f individual seats, all the seats of an aircraft are hired out to one person. It is, therefore, difficult to conceive that by chartering the aircraft, non-scheduled (passenger) services would not be rendered as even in such a case an operator transport passengers. ***** 71. In this view of the matter, the contention of the learned special counsel for the department that a charter permit is required for carrying out charter operations cannot be accepted. In fact, the prohibition is on a non-scheduled (charter) holder to carry out (passenger) operations. ***** Whether the aircraft can be used by members of public 86. The definition of "private aircraft" under rule 3(43) of Aircraft Rules, does not warrant the view that if tariff is not published, the use of aircraft would be private. In terms of rule 3(43), private aircraft is other than public transport aircraft. Public transport aircraft is defined in rule 3 (46) as aircraft which effects public transport and public transport is defined in rule 3(45) to mean all carriage of persons or things effected by aircraft for a remuneration of any nature whatsoever, and all carriage of persons or things....
X X X X Extracts X X X X
X X X X Extracts X X X X
....service should be rendered only on perseat basis. Nor is there any stipulation in the said definitions for issuance of passenger tickets. The Policy Guidelines for Starting Scheduled/ Non-Scheduled Air Transport Services issued by the Ministry of Civil Aviation clearly state that non-scheduled operation means an air transport service other than scheduled air transport service and that it may be on charter basis and/or non-scheduled basis and that such operator is not permitted to publish time schedule and issue tickets to passengers. A operator of non-scheduled passenger service is, therefore, not required to issue tickets to passengers. 101. Learned special counsel for the department has, however, placed reliance upon paragraph 9.7 of CAR 1999 to contend that non-issue of passenger tickets would amount to not rendering non-scheduled (passenger) service. 102. This contention cannot not be accepted. Paragraph 9.7 of CAR 1999 provides that non-scheduled operators shall issue passenger tickets in accordance with the provisions of the Carriage By Air Act 1972 and any other requirements which may be prescribed by DGCA. As noticed above, the Policy Guidelines for starti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f any violation by the non-scheduled (passenger) services operator and in fact has been renewing the permits from time to time. It is only when the competent authority under the Director General of Civil Aviation Ministry finds as a fact that the permit holders have violated the conditions that it would be open to the customs authorities, in terms of the undertaking given by the permit holders, to require payment of the duty, which otherwise was exempted by the notification. 93. Learned counsel for the appellants have submitted that whenever a fiscal benefit is granted on the basis of a certificate issued by another statutory authority, it is only that statutory authority which is empowered to monitor compliance of the conditions of the certificate and to initiate action, in case of non compliance. In this connection learned counsel have placed reliance upon the decisions of the Supreme Court in Zuari Industries Ltd. vs. Commissioner of C. Ex. & Customs [2007 (210) E.L.T. 648 (S.C.)], Titan Medical Systems Pvt. Ltd. vs. Collector of Customs, New Delhi [2003 (151) E.L.T. 254 (S.C.)]and Vadilal Chemicals Ltd. vs. State of Andhra Pradesh [2005 (192) E.L.T. 33 (S.C.)]. ....