The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal ruled that demand can be made under Undertaking only when Director General of Civil Aviation (DGCA) finds that use of aircraft not in accordance with permit granted
The appellant, Bharat Hotels, had imported the aircraft claiming customs duty exemption under Notification No. 61 of 2017 dated 03.05.20075 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 transport (charter) services.
According to the department, the appellant had used the aircraft for charter purposes only for fifty hours out of the total 244.9 flown hours and, therefore, the appellant had violated Condition No. 104 of the exemption notification. A show cause notice therefore, issued to the appellant.
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 non-scheduled (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.
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”.
The Bench comprising Justice Dilip Gupta, President and PV Subba Rao, Technical Member observed that “Thus a demand can be made under the Undertaking only when DGCA finds that the use of the aircraft is not in accordance with the permit granted by the DGCA. In the present case, DGCA has not initiated any proceedings against the appellant and in fact has renewed the permit from time to time.”
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