The Bangalore Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the imports made for replacement of aircraft are eligible for customs duty exemption which is intended for servicing, maintenance or repair.
The appeal was filed against the impugned order wherein the Commissioner denied the benefit of the above notification observing that the goods imported were ‘Prototypes’ and not parts of the aircraft intended for servicing, repair or maintenance of aircrafts.
The counsel for the appellant submitted that the period from 11.7.2012 to 11.1.2013, they imported 3 Nos. ‘Prototypes’ of EFI (Engine & Flight Instrument) DPU (Display Processing Unit) under 3 Bills of Entry. As per the details submitted by them vide their letter dated 14.11.2012 and 22.11.2012, they have cleared 1st and 2nd ‘Prototype’ without paying CVD and Cess by availing exemption under Sl. No. 303 of Not. No. 12/2012-C.E. dated 17.3.2012. The 3rd ‘Prototype’ was imported on payment of CVD ‘Under Protest’, in view of the ongoing investigation.
It was further contended that there was no mala fide intention on their part since the impugned goods were brought for the purpose of upgrading the Engine and Flight Instrument System (EFIS) for DARIN III Upgrade Programme for Jaguar Aircraft and is meant for replacement of the conventional Electro – Mechanical Instruments / Sensors of DARIN Jaguar Aircraft and not for any other purpose. In the absence of any mala fide, no penalty is leviable on the notices.
A Two-Member Bench comprising DM Misra, Judicial Member and R Bhagya Devi, Technical Member observed that “since the benefit is being extended to the parts of aircrafts owned by Government of India, these terms must be understood in terms of their usage and practice. Therefore, in order to understand its true meaning under the said Notification, reference must be made to the Aircraft Rules, 1937.”
“The contention of the Revenue is that these goods are meant for replacement and upgradation, which cannot be considered as an activity of servicing, repairing or maintenance and therefore, the appellant is not eligible for the benefit of the Notification No. 12/2012- Cus., dated 17-3-2012, is devoid of merit.”
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