Interglobe Aviation LTD. Vs Commissioner of Customs (CESTAT Delhi)
Conclusion: Assessee was justified in claiming exemption of integrated tax under the General Exemption Notification No. 45/2017 dated June 30, 20173, as amended by Corrigendum Notification dated July 22, 2017 on re-import of repaired parts/ aircrafts into India during the period from August, 2017 to March, 2019 as the absence of mention of integrated tax and compensation cess in column (3) under serial no. 2 of the Exemption Notification would mean that only the basic customs duty on the fair cost of repair charges, freight and insurance charges were payable and integrated tax and compensation cess were wholly exempted.
Held: Assessee-company was a scheduled airline operator, engaged in the business of transportation of passengers and goods by air. In order to carry out the scheduled operations in India, it imported aircrafts and it is stated that when the engines/ auxiliary power units or other parts of the aircrafts began to develop defects, they were exported out of India for repairs to M/s P, which was a maintenance and repair organisation specializing in maintenance of parts/ aircrafts. The repaired parts/ aircrafts were thereafter reimported into India and at the time of re-import, Bills of Entry were filed. These Bills of Entry were assessed to basic customs duty and integrated tax at the applicable rates. The dispute in all these appeals was as to whether assessee was justified in claiming exemption of integrated tax under the Exemption Notification on re-import of repaired parts/ aircrafts into India during the period from August, 2017 to March, 2019. It was held that Notification No. 94/96 dated December 16, 1996 refers to the duties of customs leviable thereon which was specified in the said first schedule, the additional duty leviable thereon under section 3 of the Tariff Act and special duty of customs leviable under section 68(1) of the Finance Act, whereas the instant General Exemption Notification No. 45/2017 dated June 30, 2017, as amended by Corrigendum Notification dated July 22, 2017 refers to duty of customs leviable thereon which is specified in the said First Schedule and the integrated tax, compensation cess leviable thereon respectively under sub-sections (7) and (9) of section 3 of the Tariff Act. Thus, the additional duty leviable thereon under Section 3 of the Tariff Act and special duty of customs leviable under section 68(1) of the Finance Act had been replaced by the integrated tax under section 3(7) and compensation cess under section 3(9) of the Tariff Act. It could not, therefore, be contended that “duty of customs” referred to in the condition against serial no. 2 of the Exemption Notification would include integrated tax. Thus, in the absence of mention of integrated tax and compensation cess in column (3) under serial no. 2 of the Exemption Notification would mean that only the basic customs duty on the fair cost of repair charges, freight and insurance charges were payable and integrated tax and compensation cess were wholly exempted.
FULL TEXT OF THE CESTAT DELHI ORDER
1. All these 415 appeals have been filed by M/s Interglobe Aviation Limited1. The issue raised in all these appeals is about the availability of Integrated Goods and Service Tax2 exemption provided at serial no. 2 in the General Exemption Notification No. 45/2017 dated June 30, 20173, as amended by Corrigendum Notification dated July 22, 2017, to aircrafts and parts thereof that are re-imported into India after repairs.
2. The Appeals seek the quashing of the 415 orders passed by the Commissioner of Customs (Appeals)4 that uphold the orders of assessment of Bills of Entry, as a result of which all the appeals have been dismissed by the Commissioner (Appeals).
3. The records indicate that the Commissioner (Appeals) had passed the following three main orders, while deciding the 415 Appeals that had been filed :
(i) The order dated November 22, 2019 upholding the orders of assessments of 368 Bills of Entry. This order, therefore, has led to the filing of 368 appeals before the Tribunal bearing numbers from C/50246 to 50613/2020.
(ii) The order dated November 22, 2019 upholding the order of assessment of 19 Bills of Entry. This has resulted in the filing of 19 appeals before the Tribunal bearing numbers C/50623 to 50641/2020.
(iii) The order dated November 22, 2019 upholding the order of assessment of 28 Bills of Entry. Accordingly, 28 appeals have been filed before the Tribunal bearing numbers C/50658 to 50685/2020.
4. The Appellant is a scheduled airline operator, engaged in the business of transportation of passengers and goods by air. In order to carry out the scheduled operations in India, the Appellant imported aircrafts and it is stated that when the engines/ auxiliary power units or other parts of the aircrafts began to develop defects, they were exported out of India for repairs to M/s Pratt & Whitney, which is a maintenance and repair organisation specializing in maintenance of parts/ aircrafts. It is further stated that at times, the aircrafts also have to be exported out of India for repairs and maintenance. The repaired parts/ aircrafts are thereafter reimported into India and at the time of re-import, Bills of Entry are filed. These Bills of Entry are assessed to basic customs duty and integrated tax at the applicable rates. The dispute in all these appeals is as to whether the Appellant is justified in claiming exemption of integrated tax under the Exemption Notification on re-import of repaired parts/ aircrafts into India during the period from August, 2017 to March, 2019.
5. The Appellant had claimed exemption at the time of re-import from payment of basic customs duty for aircrafts/ parts under a Notification No. 50/2017 dated June 30, 2017. There is no dispute in these appeals with regard to this exemption. The dispute is in regard to the levy of integrated tax on the re-import of aircrafts/ parts. The Appellant had claimed exemption from integrated tax under the Exemption Notification for the reason that the importer is required to only pay duty of customs on the fair cost of repairs and the cost of insurance and freight charges, both ways. The Customs Authorities, however, did not agree on this issue with the Appellant, as according to them the Appellant was not entitled to full exemption from integrated tax since the phrase duty of customs at serial no. 2 of the Exemption Notification, includes both the basic customs duty as also integrated tax. Thus, according to the Authorities, the appellant was required to pay integrated tax, in addition to the basic customs duty, on the fair cost of repairs and the cost of insurance and freight charges, both ways.
6. The Commissioner, therefore, disallowed the integrated tax exemption claimed by the Appellant on all the 415 Bills of Entry and integrated tax was levied on the fair cost of repairs and the cost of insurance and freight charges, both ways. It is against the
aforesaid assessment of the 415 Bills of Entry, that the Appellant had filed 415 appeals before the Commissioner (Appeals). The Commissioner (Appeals) upheld the assessments made on all the 415 Bills of Entry and, accordingly, rejected all the appeals.
7. To appreciate the contentions advanced by Shri B L Narasimhan, learned Counsel appearing for the Appellant and Shri Sunil Kumar, learned Authorised Representative of the Department, it is necessary to examine certain sections of The Customs Tariff Act 19755 and the Exemption Notification that are relevant for the purpose of deciding these appeals.
8. Section 2 of the Tariff Act provides that the rates at which duties of customs shall be levied under the Customs Act 19626 have been specified in the First and Second Schedules. It is reproduced below:
2. Duties specified in the Schedules to be levied.
“The rates at which duties of customs shall be levied under the Customs Act, 1962 (52 of 1962 ) are specified in the First and Second Schedules.”
9. Section 3 of the Tariff Act provides for levy of additional duty equal to excise duty, sales tax, local taxes and other charges. Subsections (1), (7), (8), (9), (11) and (12) of section 3 are relevant and are reproduced below. It needs to be noted that sub-section (7) of section 3 of the Tariff Act was substituted with effect from July 1, 2007.
“Section 3. Levy of additional duty equal to excise duty, sales tax, local taxes and other charges.-(1) Any article which is imported into India shall, in addition, be liable to a duty (hereafter in this section referred to as the additional duty) equal to the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article.
Provided xxxx xxxx xxxx
Explanation- xxxx xxxx xxxx
(7) Any article which is imported into India shall, in addition, be liable to integrated tax at such rate, not exceeding forty per cent as is leviable under section 5 of the Integrated Goods and Service Tax Act, 2017 on a like article on its supply in India, on the value of the imported article as determined under sub-section(8).
(8) For the purposes of calculating the integrated tax under sub-section (7) on any imported article where such tax is leviable at any percentage of its value, the value of the imported article shall, notwithstanding anything contained in section 14 of the Customs Act, 1962, be the aggregate of— (a) the value of the imported article determined under sub-section (1) of section 14 of the Customs Act, 1962 or the tariff value of such article fixed under sub-section (2) of that section, as the case may be; and (b) any duty of customs chargeable on that article under section 12 of the Customs Act, 1962, and any sum chargeable on that article under any law for the time being in force as an addition to, and in the same manner as, a duty of customs, but does not include the tax referred to in subsection (7) or the cess referred to in sub-section.
(9) Any article which is imported into India shall, in addition, be liable to the goods and services tax compensation cess at such rate, as is leviable under section 8 of the Goods and Services Tax (Compensation to States) Cess Act, 2017 on a like article on its supply in India, on the value of the imported article as determined under sub-section (10).
(11) The duty or tax or cess, as the case may be, chargeable under this section shall be in addition to any other duty or tax or cess, as the case may be, imposed under this Act or under any other law for the time being in force.
(12) The provisions of the Customs Act, 1962 (52 of 1962) and the rules and regulations made thereunder, including those relating to drawbacks, refunds and exemption from duties shall, so far as may be, apply to the duty or tax or cess, as the case may be, chargeable under this section as they apply in relation to the duties leviable under that Act.”
10. The relevant portions of the Exemption Notification are reproduced below:
“In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962) the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the goods falling within any Chapter of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and specified in column (2) of the Table below when reimported into India, from so much of the duty of customs leviable thereon which is specified in the said First Schedule, and the integrated tax, compensation cess leviable thereon respectively under sub-section (7) and (9) of section 3 of the said Customs Tariff Act, as is in excess of the amount indicated in the corresponding entry in column (3) of the said Table.
Table
