The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that allowed the duty exemption under customs duty exemption notification since the aircraft was not used for private purposes in breach of undertaking.
Vrl Logistics Ltd, the appellant challenged the respective impugned orders which confirm the differential Customs duty and impose 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.
It was submitted that the Commissioner has denied the exemption and confirmed the duty because appellants were granted Permit for “Non-Scheduled Air Transport (Passenger)” and not for “Non–Scheduled Air Transport Service (Charter)”. Appellants did not provide Passenger services but provided Charter Services to its clients.
The appellants did not issue passenger tickets and did not have a Published Tariff. It was submitted that the aircraft was used to provide air transport services, on a charter basis, for carriage of the Chairman and Directors of the Appellant’s Group companies and other staff of companies and that the Chartering of the aircraft to outside persons was for negligible duration. It was held by the Commissioner that providing air transport services to Personnel of Group Companies is nothing but a corporate veil created for evasion of duty.
It was submitted that Sr. No. 347B of Notification No. 21/2002- Cus. granted exemption from customs duty to aircraft subject to fulfilment 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 approved 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.
Secondly, 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), and in the event of failure to so use the aircraft, to pay the exempted amount of duty.
The revenue contended that Appellants have violated the conditions of the above exemption notification hence not eligible for benefits of the above exemption notification. The revenue contended that appellants are granted permits for „Non-Scheduled Air Transport Service (Passenger), whereas the appellants provided Charter services
The two-member bench comprising Mr Ramesh Nair,(Judicial)and Mr Raju, (Technical)held that the aircraft is not used for private purposes in breach of the undertaking and conditions of the notification.
It was evident that the Civil Aviation Authority has not treated the operation of the aircraft for the period 05.01.2008 to 04.04.2008 and May to August 2008 as being private aircraft and issued the permit on 04.04.2008 for Non- Scheduled operations in terms of recommendations dated 23.03.2007 and renewed such permits from time to time till date supports the case of the appellant that the aircraft was used for nonscheduled operations for hire or reward.
The Court observed that the department has proceeded on the basis that the use of aircraft, post importation was in breach of an 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.
It was observed that 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 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 cannot be charged with violation of a pre-import condition at a later point in 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.
After considering the judgments of East India Hotels Ltd and M/s. Global Vectra Helicorp Ltd., the Court held that there was no contravention of any of the conditions of the exemption notification in question. While allowing the appeal, the Court set aside the impugned order and held that the appellants are legally eligible for exemption notification.
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