In the matter of Jet Airways India, the Mumbai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that transportation Costs are not included in the value of Remnant ATF for determining assessable value.
M/s Jet Airways India Limited, the assessee is an Air-flight and is operating their Flight from Kolkata Airport to foreign destinations, like Dhaka during the period December 2007 to December 2011. While commencing the journey from Kolkata Airport to abroad, the assessee has lifted duty-free ATF from M/s IOCL and other oil companies and has uplifted ATF from foreign destinations for their return journey to Kolkata. The quantity of such ATF, on arrival at Kolkata Airport and before diverting such aircraft into the domestic sector for the period December 2007 to December 2011, was found to be 13907.68 KL.
The ATF is classifiable under CTH 27101920 and attracts BCD @ 0%, CVD @ 8%, Education Cess + Secondary & Higher Secondary Cess on CVD @ 2% + 1% and Education Cess + Secondary & Higher Secondary Cess on Total duty @ 2% + 1%. The Basic Customs on ATF has been made “Nil” vide amendment Notification No.119/2008-Cus dated 31.10.2008 by inserting a new Sl. No.77C into the Notification No.21/2002-Cus dated 01.03.2002 and CVD @ 8% in terms of Sl. No.22 of Notification No.06/2006-CE dated 01.03.2006 as amended.
The excess fuel on board in the aircraft amounts to import and the importer has failed to file such information in the import manifest as required under Section 30 of the Customs Act, 1962. The assessee has not filed any Bill of Entry for clearance of such ATF before commencing domestic run, which is mandatory under Section 46 of the Customs Act, 1962.
The assessee on arrival from foreign destinations converted the same to domestic run with the imported ATF in storage without payment of duty and utilized the same for home consumption in violation of Section 47 (1) and Section 47 (2) of the Customs Act, 1962, thus, liable to pay import duty along with interest thereon.
The assessee was asked to file a Bill of Entry for clearance of imported ATF and payment of Customs duty. The assessee replied that they have been paying import duty payable by them on the excess ATF on board the aircraft about international flights on conversion from foreign and domestic run periodically.
The assessee disputed the fact that the leviability of 20% as freight and 1.125% as insurance charges respectively in the assessable value of the goods determined in terms of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 as amended is not applicable.
A show-cause notice was issued to the assessee. The assessee has short-paid duty on ATF by not paying duty on notional transportation of 20% and 1.125% as insurance charges on ATF. The demand on account of short payment of duty by not including 20% of the value for transportation charges and 1.125% of the value on account of insurance charges in the assessable value was confirmed. The demand was confirmed along with interest and a penalty of Rs.2.00 Crores was also imposed.
The assessee is in appeal challenging the demand of duty along with interest and imposing penalty and Revenue is in appeal for not holding ATF liable for confiscation and not imposing any redemption fine.
The issue that is to be decided by us is whether the transportation charges in terms of Rule 10 (b) of the Valuation Rules, 2007, are to be includable in the assessable value or not. The said issue has been examined by the Larger Bench of this Tribunal in the assessee’s case wherein held that “no amount towards the alleged transportation cost is required to be included in the value of remnant ATF under Rule 10 of 2007 Rules for determining transportation value under Section 14 (1) of the Customs Act, 1962.”
A two-member bench comprising Ashok Jindal Member (Judicial) and Mr Rajeev Tandon Member held that the transportation cost is not to be included in the value of remnant ATF for determining the assessable value in this case. set aside the demand of duty confirmed against the assessee.
As no demand is sustainable, consequently, no penalty is imposable on the assessee, the CESTAT held that the goods are not liable for confiscation and the Commissioner has rightly held that remnant ATF is not liable for confiscation and refrained from imposing a redemption fine once the assessee.
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