Case Law Details
In re Shriprop Aerospace Private Limited (CAAR New Delhi)
M/s. Shriprop Aerospace Private Limited (hereinafter referred to as `SAPI: or ‘the Company’ or ‘the applicant’), having IEC No. AAUCS99871) has filed an application (CAAR-1) for advance ruling before the Customs Authority for Advance Rulings, New Delhi (CAAR, in short). The said application was received in the Secretariat of CAAR, New Delhi on 18.01.2024 along with enclosures in terms of Section 28H (1) of the Customs Act, 1962 (hereinafter referred to as the ‘Act’). The applicant has stated that import of certain parts of the aircraft’s engine is the proposed activity and an advance ruling has been sought on applicability of serial number 545 of Notification No. 50/2017-Customs dated 30.06.2017.
2. The applicant has inter-alia stated that, they are a technical support service provider for defence projects and currently serves overseas clients in the area of an IT system based Business Process Management (BPM) for aircraft engines parts from Bengaluru and Maintenance, Repair & Overhaul (`MR0′) services for aircraft engines from Kanpur; Indian Air Force (`IAF’) through Ministry of Defence (`MoD’) has provided a consent letter to the OEM that the applicant is eligible for provision of MRO services; they are authorized to conduct Maintenance, Repair & Overhaul (MRO) for SAE’s M53 and M88 turbojet engines used for the Military Aircraft of the IAF; for provision of MRO services towards the aircraft’s engine, the applicant ought to import certain parts of the engine from the OEM; the OEM supplies such parts to the applicant with a condition that they are not authorized to use these parts for any purpose other than Mirage Aircraft of the IAF or re-export them to any other country; further, the OEM also confirms that these parts are for use in an aircraft and the end user for these parts is Indian Air Force. The applicant has also stated that since these parts are used by Indian Defence, thus, in terms of Non-Disclosure Policy, they would not be able to share the specific designs and functionalities of each of the part except with written permission from the OEM and IAF; the subject parts are specifically designed for turbojet engines of military aircraft used by IAF and cannot be used in any other aircraft engines or for any other function other than the specific aircraft turbojet engines; the subject parts can be used specifically in turbo-jet engines of military aircraft, hence, are classified as “Parts of Turbo-Jet Engine” under Sub-heading 84119100 of the Customs Tariff; however, there is an ambiguity in the applicability of exemption Notification No. 50/2017-Customs dated 30.06.2017 (SI. 545) i.e whether the same is applicable only for “Parts, of Aircraft” or also to “Parts of Parts”.
3. The applicant has further stated that, the subject goods imported are not ‘parts of general use’ but are parts with specific use; these parts are specifically designed, solely and principally to be used in turbo jet engines which are particularly used in Mirage fighter aircraft used by the IAF; the End Use Certificate confirms the same; the subject goods from operational perspective are intended to be used for MRO activity as “Parts of Turbo Jet Engines” where engines are used in aircraft used by IAF falling under 8802 and parts are classifiable under Sub-heading 84119100; the standard rate of Basic Customs duty (BCD) for goods classified under 84119100 is 7.5%; however, it is believed that they are ought to be eligible for exemption in terms of serial number 545 of Notification No. 50/2017-Customs dated 30.06.2017 (as amended from time to time), by virtue of which the effective rate of BCD ought to be 2.5%; the said entry as applicable to parts (other than Rubber tyres and Tubes), of aircraft of heading 8802 or 8806 (except unmanned Aircraft used as Television camera, digital camera or video camera recorder), falling under any chapter; on a plain reading of the notification, the exemption is extended to “All Parts of an Aircraft (other than rubber tyres and tubes)” classifiable under “Any Chapter”; on the basis of well settled position of law, the applicant believes that “Parts of Parts” ought to be deemed to be part of the machine; hence, in the instant case, engine being part of aircraft” and subject goods being “parts of engine” ought to be considered as part of the aircraft and ought to be eligible for exemption.
4. The applicant has placed reliance on a number of cases, namely:
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