Chimes Aviation Private Limited Vs Commissioner of Customs (CESTAT Delhi)
Conclusion: Confiscation and customs duty recovery order against Chimes Aviation Private Limited for use of aircrafts for purposes other than training was quashed as the customs authorities should have proceeded to recover the duty on the basis of the undertaking only when the competent authority in the DGCA found as a fact that assessee had violated the conditions of the permit.
Held: In the present case, assessee-company had initially imported Aircrafts for flying training purpose and had given such an undertaking to the customs authorities. The DGCA had also granted permits to the company. It was subsequently on 23.04.2009 that assessee submitted an application before the MCA for grant of a No Objection Certificate to operate non-scheduled (charter) services, which certificate was granted by the MCA on 15.06.2009 and on 28.07.2009 an endorsement was made in the permit. The show cause notice alleged that the earlier undertaking submitted by the appellant before the customs authorities was to the effect that the Aircrafts would be used only for flying training purpose but subsequently assessee-company changed the purpose and started using the Aircrafts for non-scheduled air transport (charter) services without submitting any further undertaking, though a permit might have been granted by the DGCA to operate the Aircrafts for non-scheduled air transport (charter) services. The show cause notice, therefore, alleged them assessee had violated the terms of conditions of the exemption notification as a result of which the customs duty was required to be paid by assessee in terms of the undertaking. It was noticed that the Larger Bench of the Tribunal in M/s. VRL Logistics Ltd. vs. Commissioner of Customs, Ahmedabad8 had arrived at the conclusion after placing reliance upon the decision of the Supreme Court in Titan Medical Systems Pvt. Ltd. Collector of Customs, New Delhi14. It had therefore, to be held that the customs authorities could have proceeded to recover the duty on the basis of the undertaking only when the competent authority in the DGCA found as a fact that assessee had violated the conditions of the permit. In the present case, such a finding had not been recorded and on the other hand, the permits had been renewed from time to time. Customs Appeal therefore, deserved to be allowed.
FULL TEXT OF THE CESTAT DELHI ORDER
Customs Appeal No. 55387 of 2013 has been filed by M/s. Chimes Aviation Pvt. Ltd.1 to assail the order dated 28.09.2012 passed by the Commissioner of Central Excise (Adjudication), New Delhi 2 , confiscating eight CESSNA 172R Aircrafts under section 111(0) of the Customs Act, 19623 but permitting them to be redeemed on payment of redemption fine under section 125 of the Customs Act; ordering recovery of import duty amounting to Rs. 1,96,95,848/- forgone on the import of eight CESSNA Aircrafts with interest; ordering recovery of import duty amounting to Rs. 29,02,019/- forgone on imports of spare parts for maintenance of the said aircrafts with interest; imposing penalty of Rs. 1,96,95,848/- on the appellant for acts of omission and commission rendering the said Aircrafts and spare parts liable to confiscation under section 114 of the Customs Act; and ordering appropriation of bank guarantee of 3 crores executed by the appellant during the course of investigation and for adjustment towards the import duties forgone, redemption fines and personal penalty.
2. Customs Appeal No. 55388 of 2013 has been filed by Uday Punj, Director of the appellant to assail the said order dated 28.09.2012 passed by the Commissioner in so far as it imposes a penalty of Rs. 1,96,95,848/- for acts of omission and commission which rendered the said Aircraft and the spare parts liable to confiscation under section 114 of the Customs Act.
3. Miscellaneous Application No. 50437 of 2022 was filed by the appellant in Customs Appeal No. 55387 of 2013 and Miscellaneous Application No. 50088 of 2022 was filed by the appellant in Customs Appeal No. 55388 of 2013 seeking permission of the Tribunal to introduce a new ground in the appeals, namely that the show cause notice issued by the Additional Director General, Director of Revenue Intelligence was without jurisdiction in the view of the decision of the Supreme Court in Canon India Private Limited Commissioner of Customs4. These two Miscellaneous Application were allowed by order dated 28.09.2021 and the appellant was permitted to raise the ground at the time of hearing of the appeals.
4. The Department has filed Miscellaneous Application No. 50087 of 2022 in Customs Appeal No. 55387 of 2013 and Miscellaneous Application No. 50088 of 2022 in Customs Appeal No. 55388 of 2013 with a prayer that the hearing of the appeals may be adjourned for three months as review petitions had been filed by the Department before the Supreme Court for review of the judgment rendered in Canon India.
5. However, at the time of hearing of the appeals, Ms. Madhumita Singh learned counsel for the appellant stated that the appellant will not press the additional ground raised in the applications filed in the appeals and would argue the appeals on merits. In this view of the matter, the two Miscellaneous Applications filed by the Department have been rendered infructuous and are, accordingly, rejected.
6. The appellant imported eleven Aircrafts in 2008 for „flying training‟ purposes at its training academy at Dhana, District Sagar in the State of Madhya Pradesh. These Aircrafts were cleared under the Exemption Notification dated 01.03.2002, as amended by Notification dated 03.05.20075, under serial no. 347A read with Condition No. 103. Out of these eleven Aircrafts that were imported one Aircraft was completely damaged due to an accident on 06.04.2009 and one was sold to M/s. Chetak Aviation on 30.07.2008. According to appellant, one Aircraft was never operated. The appellant has further stated that to overcome financial constraints and to have funds for maintenance of the Aircrafts, the appellant sought approval from the Director General of Civil Aviation6 to permit the operation of the Aircrafts for non-scheduled (charter) services. This category of import is also exempted from payment of customs duty in the same manner as Aircrafts for „flying training‟ purposes. The permission was initially granted by the DGCA for ten Aircrafts, but it was subsequently reduced to five Aircrafts after an amendment was made in the Civil Aviation Requirement dated 01.06.20107.
7. The appellant claims that from the time of import i.e. 27.02.2008 till 31.03.2012, the appellant used the Aircrafts belonging to the appellant for a total time of 17,808:30 hours. Further, out of the total flying of 17,808:30 hours, the Aircrafts were used for non-scheduled (charter) services for only 217:05 hours i.e. 1.21% of the total flying hours. Thus, even after getting the permission for using the said Aircrafts for both training and charter services, the usage for non-scheduled (charter) service operations was very minimal i.e. 1.21% and the main activity continued to be „flying training‟ using 98.79% of the flying hours.
8. Apart from the import of the said Aircrafts, the appellant had also imported aircraft parts for maintenance of the said Aircrafts, after availing the benefit of duty exemption under Serial No. 347C of the exemption notification. During the period of 2008-11, the appellant imported various spare parts and cleared it by filling Bill of Entries from Air Cargo, New Delhi, ICD, Tuglakabad, New Delhi and Air Cargo, Kolkata.
9. As per Serial No. 347C of the exemption notification, the aircraft parts are entitled to nil rate of customs duty subject to the Condition No. 105 of the exemption notification. Condition No. 105, inter alia, stipulates that parts of aircrafts shall be used for repair and maintenance service of an aircraft used for operating flying training purpose or nonscheduled (charter) service and for the said purpose, the importer has to furnish an Undertaking that if the importer fails to use the imported parts for the specified purpose, an equal amount of duty shall be paid on demand on the said goods but for the exemption under the exemption notification.
10. The licenses granted by DGCA both for training as well as nonscheduled (charter) service were renewed from time to time.
11. To appreciate the issues involved in this appeal it would be appropriate, at this stage, to give the sequence of the events date wise:
