TaxTMI 
TaxTMI 
2023 (1) TMI 948
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.... to confirm the customs duty in terms of the undertaking given by the appellant at the time of importation and also imposes penalty under section 112 of the Customs Act. 2. Customs Appeal No. 61 of 2010 has been filed by the Jyotsna Suri, Chairman and Managing Director of the appellant to assail the penalty of Rs. 25 lakhs imposed upon her under section 112 of the Customs Act. 3. Customs Appeal No. 62 of 2010 has been filed by the Madhav Sikka, Senior Vice President of the appellant to assail the imposition of penalty of Rs. 5 lakhs imposed upon him under section 112 of the Customs Act. 4. The appellant had imported the aircraft claiming customs duty exemption under Notification No. 61 of 2017 dated 03.05.2007 [the exemption notification] that amended the earlier Exemption Notification No. 21 of 2002 dated 01.03.2002. Prior to importing the aircraft, the appellant had obtained the no objection certificate from DGCA on 08.02.2007 to operate the aircraft for non scheduled air transport (charter) services. It needs to be noted that the appellant had earlier also imported an aircraft after obtaining a permit on 06.02.2004 from the DGCA to operate non scheduled air transp....
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....he appellant. The appellant filed a reply dated 01.09.2008. The submissions made by the appellant in the reply were not accepted by the Commissioner and an order dated 20.11.2009 was passed, which order has been assailed in these appeals. 8. The exemption notification dated 03.05.2007, on which revolves the entire controversy, grants 'nil' rate of duty on import of aircraft for non-scheduled (passenger) services as well as nonscheduled (charter) services subject to Condition No. 104 that is required to be fulfilled by an importer of the aircraft for availing the benefit of the exemption notification. The relevant portion of the said exemption notification is reproduced below: "In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 21/2002-Customs, dated the 1st March, 2002 which was published in the Gazette of India, Extraordinary, vide number G.S.R. 118(E) of the same date, n....
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....ondition No. 104 would show that at the stage of import, the importer should have an approval from the competent authority in the Ministry of Civil Aviation [MCA] and the importer should, at the time of importation, also furnish an undertaking to the customs authority that the aircraft will be used for the specified services, namely non-scheduled (passenger) services or non-scheduled (charter) services. The undertaking should also state that the importer shall pay on demand, the duty payable, in the event of his failure to use the imported aircraft for the specified purpose. 10. The appellant hold permits provided by DGCA for nonscheduled (charter) services. The permit has been renewed from time to time and has been endorsed for the additional aircraft imported by the appellant. Such operations have been carried out by the appellant without any objection from either the DGCA, which had issued the permit or from the MCA. After 03.05.2007, when the conditional exemption notification was issued, the appellant started availing the benefit of the said exemption. The customs authority, however, raised an issue that the operations carried out by the appellant were not cover....
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....applied to the interpretation of the provision of Customs Notification when no linking clause has been provided in the language of the Notification No. 21/02-cus as amended. xxxxxxxxxxx 20. In view of the above there is a noncompliance of the post importation conditions as per the provisions of exemption notification No. 21/02- cus, as amended, read with the undertaking given by the aircraft importer at the time of importation. Duty demand of Rs. 6,67,18,387/- is, therefore, required to be confirmed and recovered from the aircraft importer by virtue of the undertaking given under condition No. 104 of the exemption notification No. 21/02-cus as amended. xxxxxxxxxxxxx 21. The act of non-compliance of the conditions of exemption notification makes the aircraft Beechcraft King Air B 300 (350), imported vide B/E NO. 219892 dated16.05.07, liable to confiscation under Section 111(o) of the Customs Act, 1962 and also makes the aircraft importer M/s Bharat Hotels Ltd, are liable to penal action under Section 112 of the Customs Act, 1962. 22. So far as imposition of penalty upon Sh. Madhav Sikka is concerned it is seen that he was aware of the fac....
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....e dropping of the demand under section 28 of the Customs Act and at the same time confirming the demand as per the Undertaking is beyond the scope of the show cause notice and in any case could not have been rectified by the impugned order; (vii) The 'principal of comity' is applicable to the present notification since the DGCA has concurrent jurisdiction and the customs authority cannot initiate proceedings to invoke the undertaking; (viii) The exemption notification must be interpreted keeping in mind the very purpose for which it was introduced i.e. to encourage the import of aircrafts which could be used for non-scheduled operations; (ix) 'Public transport' means all carriage of persons or things effected by aircraft for a remuneration of any nature whatsoever, and all carriage of persons or things effected by aircraft without such remuneration if the carriage is effected by an air transport undertaking. Carriage of persons without remuneration by an air transport undertaking is also considered as 'public transport'. Thus, carriage of Chairman, employees, etc. by the appellant would be considered as &#....
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....toms 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 nonscheduled 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 additional customs duty on import of aircraft excluding imports by Government and scheduled airlines. Ministry of Civil Aviation has made a strong representation in favour of exemption for aircraft imported for training purposes by fly....
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....s advanced by the learned counsel for the appellants, as also the learned special counsel appearing for the Department have to be considered. 22. The impugned order records a finding that if the opinion of DGCA is different from customs authority regarding non-violation of condition of the exemption notification, then customs authority cannot force the DGCA to take a particular opinion but customs authority can take action to recover the duties. The impugned order also holds that private non-revenue flights undertaken by the aircraft for the Chairman and other employees are private flights and though such flight may be permissible under the Civil Aviation Law but the same cannot be interpreted to be also permissible under the provisions of the exemption notification. The impugned order also holds that duty has been confirmed by virtue of an Undertaking given under Condition No. 104 of the exemption notification. 23. The issue as to whether DGCA is the final authority and the customs authorities are bound by the views expressed by the DGCA has been considered by the Larger Bench of the Tribunal in VRL Logistics. In the paragraphs 91, 92, 93, 95 and 99 of the decision it has be....
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....thorities, 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.)]. ***** 95. In Titan Medical Systems, by an exemption notification, certain goods which were imported into India against an advanced licence for the purpose of manufacture were exempted from duty of customs. A show cause notice was, however, issued by the customs to show cause as to why penalty should not be imposed fo....
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....sioner of Customs (Preventive), New Customs House, Delhi [Customs Appeal No. 640 of 2010 decided on 08.09.2022] and the relevant portion is reproduced below: "35. ...... In the present case, the DGCA has not found the use of the aircraft by appellant to be in violation of permit for non-scheduled (passenger) service and in fact has renewed the permit year after year. There is, therefore, no violation of the undertaking and, therefore, Customs cannot demand duty in terms of the undertaking." 25. Learned special counsel appearing for the Department, however, made an attempt to distinguish the decision of the Larger Bench in VRL Logistics on the ground that the facts in the present case are different. It is not possible to accept this contention. The facts may be different in the sense that in the case of VRL Logistics, the aircraft was to be used for non-scheduled (passenger) services, while in the present case the aircraft is to be used for providing nonscheduled (charter) services but this would not make any difference as it is the law laid down by the Larger Bench that has to be examined and followed. 26. Thus, in view of the aforesaid decisions of the Tribunal, it ....
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.... would be an air transport undertaking and if such an undertaking also uses the aircraft to effect carriage of persons without remuneration, it would still be public transport aircraft and not a private aircraft. Therefore, even assuming that some flights are conducted for carriage of persons without remuneration, it would be still be a public transport aircraft and not a private transport aircraft. ***** 90. In the first instance, personnel of companies which are group companies of the appellant are also members of public. The aircraft is, therefore, available for used by the public. Even otherwise, this cannot be a reason to hold that the air transport service provided by the appellants would fall outside the scope of non-scheduled (passenger) service." (emphasis supplied) 30. As would be seen, the Larger Bench held that even if it is assumed that some flights had been conducted for carriage or persons without remuneration, it would still be a public transport aircraft and not a private transport aircraft and that personnel of companies which are group companies of the appellant would also be members of public. Thus, the aircraft is available for use by th....