Case Law Details
Jet Airways India Limited Vs Commissioner of Customs (CESTAT Kolkata)
Introduction: Jet Airways India Limited secures a significant victory as the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Kolkata rules in its favor on the issue of valuing remnant Aviation Turbine Fuel (ATF). The dispute centers around the inclusion of transportation costs in the assessable value of ATF, and the tribunal’s decision carries implications for the entire aviation industry.
Detailed Analysis: Jet Airways operated international flights from Kolkata Airport to various destinations between December 2007 and December 2011. During this period, the airline acquired duty-free ATF (Aviation Turbine Fuel) from Indian Oil Corporation Limited (IOCL) and other oil companies. The ATF was used for international flights, and any excess ATF on arrival at Kolkata Airport was diverted for domestic use.
The Customs authorities alleged that Jet Airways failed to include transportation and insurance charges in the assessable value of the imported ATF, resulting in a demand for duty, interest, and penalties. The dispute hinged on the interpretation of Rule 10(b) of the Customs Valuation Rules, 2007.
Jet Airways argued that the ATF used for domestic flights should not be subject to transportation and insurance charges, as the fuel is consumed during flight and not transported as cargo. The airline referred to a precedent set by a Larger Bench of CESTAT in its own case, stating that transportation costs need not be included in the value of remnant ATF for determining assessable value.
The Tribunal, considering the precedent, ruled in favor of Jet Airways, stating that ATF used for domestic flights is not being transported and, therefore, transportation and insurance charges should not be included in the assessable value.
Conclusion: Jet Airways emerges victorious in the case against the Customs authorities, with CESTAT Kolkata ruling that transportation and insurance charges need not be included in the assessable value of remnant ATF used for domestic flights. The decision not only sets a precedent for similar cases but also clarifies the valuation rules concerning ATF in the aviation sector.
The ruling ensures relief for Jet Airways from the duty demand and penalties, reinforcing the importance of understanding the specific nature of goods and their usage in customs valuation. As the aviation industry navigates complex customs regulations, such decisions contribute to legal clarity and provide a basis for compliant operations.
FULL TEXT OF THE CESTAT KOLKATA ORDER
Both sides are in appeal against the impugned order.
2. The facts of the case are that 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 journey from Kolkata Airport to abroad, the assessee has lifted duty free ATF from M/s IOCL and other oil companies and have 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 aircrafts into domestic sector for the period December, 2007 to December, 2011, was found to be 13907.68 KL .
2.1 The ATF is classifiable under CTH 27101920 and attract 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 0 1.03.2006 as amended.
2.2 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.
2.3 Further, 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.
2.4 Further, 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 to Section 47 (1) and Section 47 (2) of the Customs Act, 1962, thus, liable to pay import duty along with interest thereon.
2.5 The assessee was asked to file 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 in the aircraft pertaining to international flights on conversion from foreign and domestic run periodically. However, 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 in their case.
2.6 In these set of facts, 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.
2.7 The matter was adjudicated. 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.
2.8 Therefore, the demand was confirmed along with interest and penalty of Rs.2.00 Crores was also imposed.
2.9 The adjudicating authority did not confiscate the imported goods, consequently, did not impose any redemption fine.
2.10 Against the said order, both sides are in appeals. 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 is liable for confiscation and not imposing any redemption fine.
4. The ld.Counsel for the assessee submits that the sole issue in this case is whether the assessee is liable to include the cost of transportation of remnant ATF be added in the IOCL price, on which the Customs duty has been discharged and for determination of cost of transportation, the same is to be arrived at in terms of Rule 10 (2) of the Valuation Rules, 2007 as the transportation charges cannot be ascertained in case of import of remnant ATF. The ld.Counsel for the assessee submits that the issue whether the transportation charges are to be added in the assessable value or not in this case.
4.1 He also submits that the issue involved this case has been settled by the Larger Bench of this Tribunal in the assessee’s own case reported in 2021 (377) ELT 83 (Tri.-LB). Therefore, it is his submission that the issue is no more res-integra, accordingly, the demand of duty against the assessee be set aside and penalty is not imposable.
4.2 He further submits that as the demand is not sustainable, therefore, the question of confiscation of remnant ATF does not arise. Consequently, no redemption is imposable.
5. On the other hand, the ld.A.R. for the Revenue, supported the impugned order and submits that the ld.Commissioner has failed in arising by not confiscating remnant ATF.
6. Heard both the parties and considered the submissions.
7. We find that the issue which 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 own case (supra), wherein this Tribunal has held as under :
”48. It is not in dispute that the appellant has discharged the duty liability on the price of remnant ATF for more than a decade treating it to be imported goods taking into consideration the prevalent IOCL price. The question that arises for consideration in this appeal is whether the ATF which is filled in the fuel tank of an aircraft is actually being transported through an aircraft. The answer clearly is that the airlines are not transporting ATF for delivery to India. ATF which is filled in the fuel tank of the aircraft is actually required to fly the aircraft and is a consumable for the airlines. It cannot, in such circumstances, be urged that ATF is being transported through the aircraft. A different situation would, however, arise if an oil company specifically imports ATF in large containers/tanker as ‘goods’ or as cargo, for the purpose of selling the same to airlines. There can be no doubt that in such a situation the cost of transportation for import of ATF would have to be included in the transaction value for the purpose of determining the customs duty liability.”
And finally 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.
8. As the issue has already been settled by the Larger Bench of this Tribunal in the assessee’s own case, therefore, we hold that the transportation cost is not to be included in the value of remnant ATF for determining the assessable value in this case.
9. In that circumstances, we set aside the demand of duty confirmed against the assessee.
10. As no demand is sustainable, consequently, no penalty is imposable on the assessee.
11. Consequently, we hold that the goods are not liable for confiscation and the ld. Commissioner has rightly held that remnant ATF is not liable for confiscation and refrained imposing redemption fine one the assessee.
12. In view of the above observations, we allow the appeal filed by the assessee and dismiss the appeal filed by the Revenue.
13. Appeals are disposed off in the above terms.
(Operative part of the order was pronounced in the open court)
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