TaxTMI 
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2023 (5) TMI 49
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.... imposes penalties on all the appellants on the ground that the main appellants herein had improperly availed the benefit of exemption under Notification No. 21/2002-Cus. as amended by Notification No. 61/2007-Cus. Since the issue involved in all these appeals are common and identical, all the appeals are taken up together for final disposal. 02. A division bench of this tribunal while hearing all these customs appeals noticed that two contradictory view had been expressed by divisions benches of the tribunal in case of CC, New Delhi v. Sameer Gehlot - 2011 (263) E.L.T. 129 (Tri.-Del.) has taken a view that the benefit of Notification 21/2002-Cus. is available to the assessee and another co-ordinate Bench of the Tribunal in the case of King Rotors & Air Charter Pvt. Ltd. - 2011 (269) E.L.T. 343 (Tri.-Mum.) has taken a opposite view and denied the benefit of exemption notification to the assessee. Accordingly, the division bench of this tribunal referred the matter to Larger Bench. 2.1 The Larger Bench of the Tribunal vide Interim Order No. 3-23/2022 dated 08.08.2022 answered the question regarding admissibility of exemption Notification No. 21/2002-Cus, dated 1-3-2002 in respect ....
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.... evasion of duty. However each of the aforesaid grounds is untenable in law in view of the decisions dated 08.08.2022 of the Hon'ble Larger Bench of Tribunal. 3.1 He Submits that Sr. No. 347B of Notification No. 21/2002- Cus. granted exemption from customs duty to aircrafts subject to fulfillment of Condition No. 104. The said condition is accordingly two-folds viz. one, it requires that the importer should be an Operator as defined in clause (a) of Explanation, who has been granted approval by the DGCA to import the aircraft for providing Non-Scheduled (Passenger) Services or Non-Scheduled (Charter) Services as defined in Clauses (b) and (C) respectively of the Explanation and two, it requires the importer to furnish an undertaking to Customs that the aircraft shall be used only for providing Non- Scheduled (Passenger) Services or Non-Scheduled (Charter) Services (as defined in the Explanation), as the case may be and in event of failure to so use the aircrafts, to pay the exempted amount of duty. There is no dispute that the Appellants are "Operator" as defined in clause (a) of Explanation. There is also no dispute that the Appellants have been granted approval by DGCA to import....
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....g a published tariff. It is further held that merely because the Appellants can also conduct charter operations would not mean that the Appellant becomes a non-scheduled (charter) permit holder. Since the Appellants cannot be said to have become non-scheduled (charter) permit holder there was not requirement for the appellant to have published tariff. 3.4 He also argued that in the present case there is no dispute that the aircraft has been used by the appellant to provide air transport service for remuneration, to group companies by carrying their personnel as well as to provide air transport services for remuneration charged for providing air transport services to clients who are not appellant's group companies. Once it is not is dispute that aircraft has been used to provide air transport service for remuneration, it clearly constitutes public transport, which is defined in Rule 3(45) of the Aircraft Rules, 1937. 3.5 He also submits that it is clarified by the DGCA in CAR dated 1st June 2010, that a Non-Scheduled operator is allowed to operate revenue charter flights for a company within its group companies, subsidiary companies, sister concerns, associated companies own emplo....
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....relates back to 18.06.2008, when the letter was issued recommending the grant of the permit. The very fact that the Civil aviation authority has not objected to the operation of the aircraft for the period 18.06.2008 to 07.08.2008 and in facts granted the formal permit on 07.08.2008 in terms of the recommendation dated 18.06.2008, itself established that the use of the aircrafts for hire and reward during that period was neither unauthorized nor can be considered to be otherwise than for non-scheduled passenger service. 3.8 He further argued that admittedly in the present case the DGCA has not found that the use of the Air craft by the Appellants is not for Non-Scheduled Passenger Service and the DGCA has from time to time renewed the permit granted to the Appellant for Non-Scheduled (Passenger) Service. It cannot therefore be said that the Appellant has violated the undertaking to use the air craft for Non-Scheduled (passenger) service. He placed reliance on the decisions of Hon'ble Supreme Court in the case of Titan Medical Systems Pvt. Ltd. Vs. CCE- 2003(151)ELT 254 (SC) 04. Shri Ajay Jain, learned Special Counsel appearing on behalf of the revenue reiterates the submission ma....
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....ons or things effected by aircrafts without such remuneration if the carriage is effected by an air transport undertaking. In terms of Rule 3(9A), an air transport undertaking means an undertaking of cargo for hire or reward. Thus from the combined reading of definition of public transport and air transport undertaking, it is clear that for a transport of passengers to be public transport, such transportation should either be for remuneration or for hire or reward. In the present case, the transportation for non-charter purpose for both the periods was for the use of Chairman , Family members and officials. There was neither any remuneration nor any reward or hire for such flights. Thus it is clear the use was not for public transport and hence for private use. The selective reading of the Larger Bench order is misleading, as the Larger Bench had nowhere stated that some of the flights conducted without remuneration can also be without hire or reward. As these non-charter flights were without remuneration or hire or reward, the same will be private flights and in contravention of the undertaking given at the time of importation. 4.3 He argued that the contention of the appellants ....
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....which category, they were permitted to fly during the period before they were issued the NSOP. There is nothing on record. Hence in the absence of any evidence submitted by them, this use of aircraft during the period when they were not is possession of NSOP has to be treated as private use or operation other than non scheduled operation. 4.6 He also submits that a disclosure of any information to civil aviation authorities and subsequent renewal by those authorities does not mean that the Appellant have got a blanket immunity from the consequence of all contraventions. Further the adjudication authority has given cogent reason in support of his decision to lift the corporate veil, but the appellants have not given any legal argument. Hence the conclusion drawn by the Commissioner are correct and the Appellants have violated the conditions of the exemption Notification. 4.7 As regard the appeals of Deccan Charters and Co-appellant (Appeal No. C/21-23,28/2012) he submits that in the grounds of appeals appellant have stated that merely because one flight where the Chairman accompanied the business delegate, was used by the company, it cannot be considered as breach of exemption Not....
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....the civil aviation requirement 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." 5.1 The case of the revenue is that Appellants have violated the conditions of above exemption notification hence not eligible for benefits of the above exemption notification. The revenue contended that appellants are granted permit for 'Non-Scheduled Air Transport Service (Passenger), whereas the appellants provided Charter services. As per revenue an operator who has been granted a permit by the DGCA to operate non-schedule (passenger) services cannot be permitted to carry out charter services for the reason that this would be in violation of the terms of the exemption notification and the undertaking given by the operator. However in this context we find that after discussing the relevant provision the Larger Bench of Tribunal in interim order dated 08.08.2022 observed that the above exemption notification does not prohibit a non-scheduled (passenger) service permit holder to use the Aircraft for charter operations. The relevant para of Larger Bench's order is reproduced as bel....
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.... (iii) Each flight must be open to use by members of the public. 57. If any of the aforesaid three conditions is not satisfied in respect of a passenger air transport service, the same cannot be termed as scheduled air transport service and, therefore, would be a non-scheduled (passenger) service as defined in clause (b) of the Explanation to Condition No. 104 of the exemption notification. In the present case, the aforesaid conditions are not satisfied and, therefore, the air transport service rendered by the appellants would be other than scheduled (passenger) air transport service. 58. Thus, both the requirements of clause (b) of the Explanation are satisfied. It is also not in dispute that the appellants have been granted non-scheduled operator permits, which permits have been renewed from time to time without any objection from the DGCA. 59. It has now to be seen whether the appellants have used the aircraft for providing non-scheduled (charter) services as defined in clause (c) of Condition No. 104 of the Explanation to the exemption notification. 60. Non-scheduled (charter) services have been defined in clause (c) to mean services provided by a non-scheduled (chart....
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....pointed out that reliance placed on clause 9.2 of CAR 1999, by which a non-scheduled (passenger) operator can also use the aircraft for charter services, was not accepted by the division bench of the Tribunal in King Rotors for the reason that the two categories namely, non-scheduled (passenger) services and non-scheduled (charter) services are distinct services. Learned special counsel also submitted that an exemption notification has to be strictly construed as was pointed out by the Supreme Court in Dilip Kumar. 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 the definition in clause (b) of the Explanation to Condition No. 104 of the exemption notification, makes the following position quite clear: (a) The expression "air transport service" covers service for the transport by air of person for any kind of remuneration whatsoever. The service may be individually for each seat or by chartering the entire aircraft and the remuneration may be of any kind whatsoe....
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....craft 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. 70. This apart, a perusal of the definition of non-scheduled (passenger) services contained in the Explanation to Condition No.104 would show that it includes within its scope all air transport services other than scheduled (passenger) air transport services. Therefore, all services which are not scheduled services are permitted non-scheduled (passenger) services. Thus, also non-scheduled(passenger) permit holders can perform air transport services either by selling individual seat or by hiring out the entire aircraft for non-scheduled operations. 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. 72. This issue can be examined from another aspect. A comparison of the definition of non-scheduled (passenger) services with non-s....
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....tariff is violative of Explanation (c) of Condition No. 104 83. Learned special counsel for the department placed reliance on the definition of 'non-scheduled (charter) services' contained in Explanation (c) of Condition No. 104 to the exemption notification to contend that the condition of the exemption notification has not been fulfilled by the appellant. 84. Learned counsel appearing for the appellants submitted that it is only while defining 'non-scheduled (charter) services' that reference has been made to published tariff and, therefore, it cannot be termed as a condition to the exemption notification. The submission is that while defining 'non-scheduled (passenger) services' in clause (b) of the Explanation, there is no requirement of having a published tariff. 85. The submission advanced by learned counsel for the appellants deserves to be accepted. Merely because the appellants can also conduct charter operations would not mean that the appellant would becomes a non-scheduled (charter) permit holder and consequently required to have a published tariff. The definition of non-scheduled (passenger) service given in clause (b) of the Explanation, as analyzed above, does ....
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....ot a private transport aircraft. 87. Even otherwise, the purpose of having a published tariff is to apprise the public of the rates at which the aircraft would be available. The appellants hire the aircrafts to customers pursuant to tenders/negotiations. The purpose of having a published tariff is, therefore, substantially complied with. 88. Learned special counsel appearing for the department submitted that the aircraft is being provided for private use and is not available to use by the public. 89. Learned counsel for the appellants submitted that the aircraft is available not only to group companies but also to other customers. 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 use 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." 5.4 In view of above, after analyzing various legal provisions the Larger Bench of Tribunal has taken a reasonable view in this regard and the same cannot be faulted especially in the absence of a....
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....rent from the statement made by the Hon'ble Finance Minister in the Parliament, that the exemption notification dated 03.05.2007 was issued granting 'nil' rate of duty on import of aircraft for non-scheduled (passenger) service as well as non-scheduled (charter) services subject to Condition No. 104. 92. The alleged misuse of the aircraft, as suggested by the customs authority, has repeatedly been clarified by DGCA and the Civil Aviation Requirements relating to non-scheduled (passenger)services. It is the DGCA which is empowered to issue the Civil Aviation Requirements under rule 133A of the Aircraft Rules. The DGCA has not complained of 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 and others 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 wh....
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....pellants set out the components they would use and their value. However, the value was only an estimate. It is not the respondents case that the components were not used. The only case is that the value which had been indicated in the application was very large whereas what was actually spent was a paltry amount. To be noted that the licensing authority having taken no steps to cancel the licence. The licensing authority have not claimed that there was any misrepresentation. Once an advance licence was issued and not questioned by the licensing authority, the Customs authorities cannot refuse exemption on an allegation that there was misrepresentation. If there was any misrepresentation, it was for the licensing authority to take steps in that behalf. (emphasis supplied) 96. Learned special counsel for the department has, however, placed reliance upon the decision of a larger bench of the Tribunal in Bombay Hospital Trust. The conditional notification in issue provided that the importer of the Hospital Equipment must provide free treatment to 40% of the outdoor patients and reserve 10% beds for free treatment of patients with family income of less than Rs.500/-. Examination of ....
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....hen the authority under the Civil Aviation Ministry holds that the conditions have been violated. From the above, it can be seen that all the issues raised by the learned Special counsel by the revenue during the hearing and in his submission has been considered by the larger bench hence, no substantial different material was brought to deviate from the answers given by the Hon'ble Larger Bench. We further find that the post hearing learned special counsel made a submission dated 10th February, 2023 wherein, he heavily relied upon the recent decision of Hon'ble Delhi High Court in the case of East India Hotel Ltd. Vs. Commissioner of Customs Delhi which is reproduced below:- "39. The contention that it would not be open for the Customs Authorities to question the use of the aircraft as the DGCA has not raised any allegation that the appellant has violated the terms of its permit, is unmerited. The Customs Authorities are required to examine whether the conditions for availing exemption under the Notification are satisfied. In terms of the Notification, the appellant has also furnished an undertaking as required under clause (ii) of condition no 104 of the Notification. This unde....
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....d. and the present case is entirely different for the reason that as per the records produced by the appellant, both before the learned Commissioner and before us clearly indicate that the appellant had declared to the world at large that the said aircraft is available for charter hire for remuneration. In the present facts it is not possible to hold that aircraft was used without any remuneration or whatsoever as in the case of East India Hotels Ltd. the aircraft was never used for remuneration and was always used for private use. In any event, the aircraft is permitted to be used from the date of its import till the date for Non-Scheduled chartered operations and permission granted to the appellant is being renewed from time to time till date. This also supports our views that aircraft is not used for private use. 5.8 We further find that the appellant's business includes the carriage by air of passenger for hire or reward, the appellant is Air Transport undertaking within the meaning of Rule 3(9A) of Aircraft Rules. In view of the undisputed fact on record that the appellant did provide Air Transport Service for reward once, we find that the appellant is an Air Transport undert....
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....arned Commissioner, the department has proceeded on the basis that the use of aircraft, post importation was in breach of undertaking given by the appellant, the confiscation of the aircraft and demand of duty and imposition of penalties is on the footing that the appellant has contravened post import conditions. In Sameer Gehlot case reported at 2011 (263) E.L.T. 129 (Tri.-Del.), the tribunal has held as under:- 10. The impugned exemption under consideration before us has only pre-import conditions and there is no separate post-import condition. The pre-import conditions requiring an approval from DGCA and an undertaking to be furnished at the time of importation have already been fulfilled and thereafter, the exemption has been granted at the time of import. The respondents, therefore, cannot be charged with violation of a pre-import condition at a later point of time. If the Government wanted that the customs authorities should monitor the subsequent use of the aircraft, then it would have provided a suitable post-import condition in the exemption notification. Of course, the Department can proceed in terms of the undertaking executed for violation of the terms of the undertak....
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....ssue was whether the aircraft was meant for private use as no remuneration was charged. In that case the Hon'ble Delhi High Court distinguished its own earlier judgment in the case of East India Hotels Ltd. and hence on merit held in favour of the importer and dismissed the department's appeal. In the East India Hotels Ltd. case the Hon'ble High Court of Delhi held that there is not "Air Transport Service" as per Rule 3(9) of Aircraft Rules because as per the definition it was mandatory to charge any kind of remuneration. On this ground Hon'ble Delhi High Court in East India Hotels Ltd. also distinguished its decision both in JAGDISH CANCER AND RESEARCH CENTRE and SAMEER GEHLOT case. In other words East India Hotels Ltd. was not concerned with the conflict in the case of King Rotors & Air Charter P. Ltd. and hence the subject matter was different from the issues before the larger bench. In East India Hotels Ltd. on its own peculiar facts that no remuneration was charged consequently, in M/S. GLOBAL VECTRA HELICORP LTD. case, the Hon'ble Delhi High Court applied the ratio of East India Hotels Ltd. in favour of the importer only because M/s. GLOBAL VECTRA HELICORP LTD. remuneration w....