Custom, Excise & Service Tax Tribunal
Reliance Transport &Amp; Travels ... vs C.C. New Delhi (Import &Amp; General) on 15 October, 2018
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Custom Appeal No. 497 of 2010
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
West Block No.2, R. K. Puram, New Delhi.
Date of hearing: 08.08.2018
Date of pronouncement: 15.10.2018
Custom Appeal No. 497 of 2010
(Arising out of Order-in-Original No. 22/Commr/HKC/2010 dated
30.08.2010 passed by the Commissioner of Customs (Prev.) New Delhi).
M/s Reliance Transport & Travels Ltd. Appellant
Vs.
CC, New Delhi Respondent
Appearance:
Sh. Prakash Shah & Ms. Diksha Rai, Advocates for the appellant Sh. Rakesh Kumar, AR for the Respondent Coram:
Hon‟ble Mr. Anil Choudhary, Member (Judicial) Hon‟ble Ms. Bijay Kumar, Member (Technical) Final Order No. Per: Anil Choudhary:
The issue involved in this appeal is whether the appellant importer of aircraft, have violated the post imports condition for availing the concession in the custom duty under Notification No. 21/2002-Cus. as amended by Notification No. 61/2007-Cus. read with condition No. 104, rendering it 2 Custom Appeal No. 497 of 2010 liable to payment of duty on import of aircraft, alongwith penalty under Section 112(a) and further imposition of redemption fine of Rs. 30 crore under Section 125, consequent to order of confiscation of the aircraft, vide the impugned order dated 30.08.2010 passed by the Commissioner of Customs (Prev.) New Custom House, near IGI Airport, New Delhi.
2. The appellant had vide Bill of Entry No. 225245 dated 12.11.2007 imported an aircraft (Global 5000, BD-700-1ALL) valued at Rs.1,44,43,00,081/- from M/s Investec International Limited, Ireland having registration No. VT-JSK. At the time of clearance of the said aircraft, exemption was claimed from duty under Notification No. 21/2002-Cus. as amended, under serial No. 347B, at Nil rate of duty. Appellant submitted a No Objection Certificate dated 18.06.2007 from Ministry of Civil Aviation. They have also submitted a permit No. 03/2000 dated 28.09.2000 duly endorsed on 7.12.2007 by Assistant Director Air Transport, Director General Civil Aviation, New Delhi for Non-scheduled air-transport service (passenger), NSOP for short, for the period from 28.09.2007 to 27.09.2008.
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3. As per condition No. 104 of serial No. 347B of said Notification No. 21/2002-Cus read with 61/2007-Cus, the importer of aircraft under the category of Non-Scheduled Operator Permit (NSOP) passenger/ charter, has to furnish an undertaking to the Deputy Commissioner of Customs at the time of importation, that the said aircraft shall be used only for providing NSOP services, that is, non-scheduled passenger services or Non- scheduled charter services, as the case may be. It is the admitted fact that the appellant had furnished the requisite undertaking and was accordingly given the benefit of the said notification at the time of import clearance.
4. Subsequently, on the basis of some intelligence to Revenue, it appeared that the said imported aircraft was being used for private use by the Reliance ADA Group Pvt. Limited (hereinafter called as RADAGPL), through the appellant in the guise of „non scheduled operator passenger permit‟, to evade payment of customs duties and also in violation of the Customs Act, 1962, Foreign Trade Policy and the extant rules and instructions of the Director General of Civil Aviation. Accordingly, it appeared to Revenue that when a non scheduled operator, imports the aircraft and uses it for private purposes, then for violation of post-import condition the benefit of notification cannot be extended and the basic 4 Custom Appeal No. 497 of 2010 custom duty with CVD and SAD and applicable cess will have to be recovered from the importer/ appellant. Reference was also made to Air Transport Circular 1 of 1998 dated 21.04.1998 issued by DGCA, wherein guidelines for operating non-scheduled chartered flight to foreign destinations makes a specific categorization of -
(i) International cargo flight
(ii) Non revenue passenger charter flight
(a) Private aircraft owned by individuals
(b) Private aircraft owned by Companies/ Corporations
(c) Aircraft belonging to non-scheduled/ scheduled
operators
Thus, there appeared to be different category for private use from other users, namely non-scheduled operators.
5. It is further alleged in the show cause notice dated 18.07.2008, that statement of Sh. Robin Kumar Sharma, Manager Operation was recorded during the course of investigation, who inter-alia stated that the appellant company was incorporated in September, 1982 and the founder Directors were Ms. Dipti D. Ambani, daughter of Dhirubhai H. Ambani and Sh. Dinesh L. Seth. The Directors at the time of investigations were Dr. Tushar 5 Custom Appeal No. 497 of 2010 Motiwala, Sh. Aditya Anand Mitra and Sh. Prakash Beria. The issued, subscribed and paid up equity capital of the company is contributed by M/s Swan Sorority Finance Pvt. Limited - 53.76% and RADAGPL - 46.24%. He further stated that the aircraft is having two three cabin with club and conference sitting arrangement, which is not similar to any economy class plane of any airlines carrier. Further, the aircraft has been obtained on dry lease for which the appellant pays an agreed quarterly amount. The appellant also have an agreement with RADAGPL for use of aircraft on a long term basis for which they received consideration in the form of entire cost of dry lease plus maintenance plus operational expenses plus 5% towards the service fee on such aggregate amount. The appellant charges RADAGPL Rs. 7.5 lakh per hour for domestic journey and Rs. 10 lakh for other than domestic journey. It was also stated that the appellant have not given the aircraft for use to any other person/ company other than RADAGPL. It was further stated that the said aircraft is used by RADAGPL for the use of the executives of the company of Reliance Group, alongwith their spouse and close relatives. Appellant also filed list of passenger manifest in respect of the use of the said aircraft. 6 Custom Appeal No. 497 of 2010
6. Further, it appear to Revenue that the appellant as per CAR (Civil Aviation Rules) Rule 3 Air Transport Services „C‟ part-III dated 08.10.1999, as a NSOP, is required to issue passenger tickets in accordance with the provisions of the Carriage of Air Act, 1972. These tickets shall stipulate the condition of carriage including the liability of the operator which shall be the same as applicable to the scheduled air transport operator. In the instant case, evidently, no such tickets have been issued. Further, as mentioned in the passenger manifest, it appeared that the passengers were mainly the officials of Reliance ADAG Group. As such, the appellant have violated the post import condition of the said Notification No.21/2002-Cus. read with 61/2007-Cus as amended.
7. Further, it appeared, as required under CAR, Section 3, Air Transport Services „C‟, Part III, para 9.7, the NSOP shall issue passenger tickets in accordance with the provisions of the Carriage by Air Act, 1972. As per the agreement dated 04.10.2007 between RADAGPL and the appellant, the appellant shall give priority to request of RADAGPL for transport of passengers on national and international routes. It appeared to Revenue that this means that the said aircraft shall be available to other parties or people only if RADAGPL does not require for their use. Para (f) of the agreement 7 Custom Appeal No. 497 of 2010 provides that the appellant shall be entitled to operate non-schedule flights by virtue of the permission given to it by DGCA and will accordingly, operate such flights. Further, para 3.1 of the said agreement states that appellant shall raise the monthly invoice or debit notes upon RADAGPL at such period as aforementioned. It further appeared that the appellant under the agreement with M/s Investec International Limited - lessor, relating to dry lease agreement with the appellant, was required to pay total base rent of US$831,091on quarterly basis. This base rent corresponds to the lease agreement charged by the appellant from RADAGPL on quarterly basis. Thus, it appeared that the transaction between the appellant and the RADAGPL was not at arms length and in contravention to the condition of NSOP or service permit. It further appears that the said aircraft has not been used for the purpose it was imported namely non-schedule passenger flight, but has been used for personal use or for promoting their own business. It further appeared that the appellant have never used the said aircraft for providing air transport passenger or charter service to any other client except as observed hereinabove. It further appeared that RADAGPL has resorted to a colourable device by floating a company - appellant, in creating a facade using not only dubious method but also resorting to subterfuge under a cloak, using corporate veil.
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8. It also appears that there is some mis-declaration of value at the time of import and aircraft was originally invoiced at US$42,000,000 by Bombardier Aerospace Corporation, whereas the purchase price was reflected in the bill of entry at US$35,721,720, whereas as per the insurance policy the value of aircraft is US$42 million. The aircraft was dispatched by M/s Bombardier Aerospace Corporation in a raw stage, incomplete. The entire interior work was carried out in USA. It further appeared that Jane‟s All the World‟s Aircraft 2007-2008, pages 66 - 68, the cost of Bombardier Global 5000 (BD-700-IAII) is US$ 33 million „green‟(2002), i.e. aircraft in raw stage. Thus, it appeared that the assessable value should have been US$ 42 million plus 1% landing charges, which equals to Rs.169,04,37,000/- as per prevailing exchange rate of Rs. 39.85 per US$. It further appeared that under Section 111(d) of the Customs Act, 1962, any goods imported into India contrary to any prohibition imposed under the Customs Act or any other law, shall be liable to confiscation. Further, Section 111(o) of the Act provides that any goods exempted subject to any condition, from duty, or any prohibition in respect of the import thereof, under this Act or any other law for the time being in force, in respect of which the condition is not observed, shall be liable for confiscation. Further, Section 111(m) provides for confiscation due to undervaluation. 9 Custom Appeal No. 497 of 2010
9. Accordingly, show cause notice was issued proposing to confiscate the said aircraft valued at Rs. 1,69,04,37,000/- with further proposal to demand custom duty of Rs. 41,87,78,314/- alongwith interest and further penalty was proposed under Section 112 and 114A, read with Section 140 of the Act on the appellant, and further penalty was also proposed on Sh. Ramesh A. Thadani, Senior Vice-President and Sh. Robin Kumar Sharma, Manager Operation and also on the Chairman and all Directors of the appellant and Reliance ADAGPL.
10. The show cause notice was adjudicated on contest. Dropping the charge of undervaluation order of confiscation was passed with option to redeem on payment of fine of Rs. 30 crores. Further, reduced duty of Rs.35,78,01,888/- was confirmed in terms of undertaking given at the time of import and the aircraft was released provisionally, order of invocation of Bank Guarantee furnished at the time of provisional release was made. Further, held that no duty was demandable under Section 28 of the Customs Act. Further, penalty of Rs. 10 crores was imposed on the appellant under Section 112(a) of the Act. Further penalty of Rs. 10 lakhs each was imposed on Sh. Ramesh A. Thadani, Sh. Robin Kumar Sharma under 10 Custom Appeal No. 497 of 2010 Section 112(a) read with Section 140 of the Act. Proceedings initiated against other co-noticees was dropped.
10. Being aggrieved, the appellant preferred appeal before this Tribunal. It is recorded in the stay order dated 21.03.2011, that the appellant have furnished Bank Guarantee of Rs. 36,82,50,371/- which was alive and accordingly appellant was directed to keep the said Bank Guarantee alive till disposal of the appeal. It is stated by the ld. Counsel that the said Bank Guarantee is still alive.
11. Ld. Counsel Sh. Prakash Shah appearing for the appellant states- 11.1 That at the time of assessment of the bill of entry, the documents furnished, as regard entitlement to import as per concession under the said Notification was found to be proper and thus the provision of Section 28 of the Customs Act are not applicable and the duty have been demanded by enforcing the bond given by the appellant.
11.2 It is further stated that there is no contravention of Condition No. 104 "post import condition" at any time and the finding of the ld. Commissioner in this regard is erroneous.
11Custom Appeal No. 497 of 2010 11.3 It is further submitted that once the conditions are satisfied at the time of import and accepted by the ld. Commissioner, there are no "post import condition" under the said notification. The Condition No. 104 in the said Notification No. 21/02-Cus. as amended, which reads as under:-
"(i) The aircraft are imported by an operator who has been granted approval and by the competent authority in the Ministry of Civil Aviation to import aircraft for providing non-scheduled (passenger) services or non-scheduled (charter) services and
(ii) The importer furnishes an undertaking to the Deputy Commissioner of Customs or Asst. Commissioner of Customs, as the case may be, at the time of importation that :-
(a) The said aircraft shall be used only for providing non-scheduled (passenger) services or non-scheduled (charter) services, as the case may be;
and
(b) He shall pay on demand, in the event of his failure to use the imported aircraft for the specified purposes, an amount equal to the duty payable on the said aircraft but for the exemption under this notification. Explanation. - for the purposes of this entry.
(a) Operator means a person, organization, or enterprises engaged in or offering to engage in aircraft operation;
(b) Non-scheduled (passenger) services means, air transport services other than scheduled (passenger) air transport services as defined in Rule 3 of the Aircraft Rules, 1937.
(c) Non-scheduled (charter) services means services provided by a non- scheduled (charter) air transport operator, for the charter on a hire of an aircraft to any person, with the published tariff, and who is registered with and approved by the Directorate General of Civil Aviation for such purposes, and who conforms to the civil aviation requirement under the provision of Rule 133A of the Aircraft Rules, 1937.
Provided that such Air Charter operator is a dedicated company or partnership firm, for the above purposes.
12Custom Appeal No. 497 of 2010 Notification No. 21/2002 stood amended by Notification No. 61/2007, which provided for exemption of additional duty of customs also." 11.4 It is further submitted that admittedly appellant has used the said aircraft only for providing non-scheduled charter services and thus complied with Condition No. (ii)(a). According to the impugned order, the appellant violated the alleged post import condition, namely, that the aircraft was not used for the purpose for which it was alleged to be imported and the said aircraft was used as a private aircraft. Ld. Commissioner has dropped all other charges in the show cause notice and have denied exemption on the sole ground that the appellant have used the said aircraft as a private aircraft and not for NSOP, for want of issuance of tickets to the passenger(s).
11.5 It is further urged that the permit granted by the DGCA for NSOP allows the operator/ appellant to conduct the non-schedule operation for transportation by air and persons/ mail/ goods, in terms of paragraph 9.2 of CAR, Section 3 „C‟ Part-III and further allows to operate either on charter basis or by sale of individual seats. This is also evident from Condition No. 2(a) in the said Notification No. 21/2000-Cus. as amended. 11.6 It is further submitted that there is no requirement for issuance of tickets in case of charter operation. The only requirement in such case is to 13 Custom Appeal No. 497 of 2010 provide the name of passengers and issue of boarding pass, which have been admittedly complied with by the appellant.
11.7 Thus, evidently entering into agreement by appellant with RADAGPL for operation of the said aircraft by extending the charter services as a NSOP, is not in contravention of the permit granted by DGCA. Moreover, the DGCA has revalidated the permit for every two years since the grant of the permit on 28.09.2000, and the same was valid all throughout.
11.8 Further, the term "transport" is defined in Rule 43 of the Aircraft Act, to all carriage of person effected by aircraft for a remuneration in any nature whatsoever, and all carriage of persons or things effected by such aircraft with such remuneration, if the carriage is effected by an air passenger undertaking. Thus, it is apparent that the said aircraft have not been used by appellant as a private aircraft. Admittedly, appellant have hired the said aircraft to other companies include RADAGPL for non- schedule operation, for remuneration. Admittedly, the agreement between the appellant and RADAGPL provides for payment of hire charges as specified or 105% of expenditure and cost incurred by the appellant, whichever is higher. Further, it is admitted that the appellant had paid the 14 Custom Appeal No. 497 of 2010 service tax on such higher charges, duly certified by their Chartered Accountant.
11.9 Further, it is not the custom authority which is competent but the DGCA is the competent authority to decide whether the appellant have complied with the permit granted to it to operate the said aircraft for NSOP. Admittedly, DGCA has not cancelled the permit of the said aircraft to operate as a NSOP at any point of time.
11.10 It is further urged that the facts of the present case are fully covered by the precedent ruling of this Tribunal in favour of the appellant in the case of CC, New Delhi vs. Sameer Gehlot - 2011 (263) ELT 129 (Tri. Del.) and Global Vectra Helicorp Ltd. vs. CC(Import), Mumbai - 2015 (329) ELT 235 (Tri. Mumbai). Accordingly, ld. Counsel for the appellant prays for allowing their appeal by setting aside the impugned order and for return of their Bank Guarantee, duly discharged.
11.11 It is further urged that ld. Commissioner had erred by travelling beyond the scope of show cause notice by demanding duty by enforcement of the bond. Admittedly, the show cause notice demanded duty under Section 28 of the Act and the same have been held as not applicable by the ld. Commissioner. The only option with the ld. Commissioner was to drop the proceedings and/ or the proposed demand. It is settled position of law 15 Custom Appeal No. 497 of 2010 that the adjudicating authority cannot travel beyond the scope of the show cause notice. Thus, the impugned order is liable to be set aside. Reliance is placed on the ruling of the Hon‟ble Supreme Court in the case of CCE, Nagpur vs. Ballarpur Industries Ltd. - 2007 (215) ELT 489 (SC), on this proposition.
11.12 It is further urged that for recovery of any amount by enforcement of bond, ld. Commissioner of Custom is not empowered and to enforce such a demand is by adopting legal proceedings in a Court of law. Ld. Counsel placed reliance on the ruling of the Hon‟ble Supreme Court in the case of Metro Exports vs. CC, Cochin - 2003 (161) ELT 989 (Tri. Del.)
12. Ld. AR appearing for the Revenue opposing the appeal, and relied on the finding recorded in the impugned order. He further states that only the persons of RADAGPL or their nominees have used and/ or travelled in the said aircraft. Further, issue of ticket is a pre-condition for operating as NSOP. The appellant have misuse the exemption notification as the appellant company is the subsidiary of RADAGPL and M/s Swan Sorority Finance (P) Limited, which are companies under the management of „Reliance Anil Dhirubhai Ambani Group‟. It is further stated that the tariff for operating as a NSOP is not published and as such the duty is demanded 16 Custom Appeal No. 497 of 2010 for violation of post import condition No. (ii)(a) of the said Notification No. 21/2002-Cus. as amended. Ld. AR further states that similar issue arose in the case of VRL Logistics Ltd. vs. CC, Ahmedabad - 2015 (316) ELT 494 (Tri. Ahmd.) have been referred to Larger Bench, vide an interim order dated 22.10.2014 by the Ahmedabad Bench of this Tribunal. As such, the matter may be kept in abeyance until the receipt of the opinion of the Larger Bench. The co-ordinate Bench has taken note that in the precedent ruling of this Tribunal particularly in the case of Sameer Gehlot (supra) the Tribunal has taken a view that benefit of the said notification is available to the assessee/ importer whereas another coordinate bench in the case of King Rotors & Air Charter P. Ltd. vs. CC(ACC & Import), Mumbai - 2011 (269) ELT 343 (Tri. Mum.) has taken a diagonally opposite view and denied the benefit of exemption notification.
13. Having considered the rival contentions, we find that so far as reference to the Larger Bench is concerned, the said order is a non-speaking order as it have neither considered the facts of the two cases and have summarily referred the matter to the Larger Bench, without even framing any questions to be decided by the Larger Bench. Further, we find that the coordinate Bench of this Tribunal in Global Vectra (supra) by Final Order 17 Custom Appeal No. 497 of 2010 dated 29.04.2015, wherein one of us is the Member ( Anil Choudhary, Member Judicial) have distinguished the ruling in the case of King Rotors & Air Charter (supra) observing that in the case of King Rotors & Air Charter the facts were that they had entered into an agreement with one Heligo Charter Pvt. Limited and under such agreement it parted with the possession of the helicopter / aircraft to Heligo Charter Pvt. Limited. The said Heligo Charter was taking care of maintenance, repair and operation, payment of salaries to the crew members, etc. etc. Further, on enquiry by Revenue the said King Rotors & Air Charter could not submit any documentary evidence of end use of the helicopter. Further, in the course of enquiry from the copies of passenger manifest, document evidencing payment of lease amount to the lessor -supplier of the helicopter, and copy of agreement with Heligo Charter, it was found that actually Heligo Charter was engaged in providing helicopter services to other company as NSOP, on a charter basis. The said Heligo Charter was maintaining log book, including approval from the DGCA, payment to the crew, paying for fuel bill, etc. Further, King Rotors could not furnish any letter from DGCA as to the compliance of the licensing condition as a NSOP. 18 Custom Appeal No. 497 of 2010
14. We find that such facts are not obtaining in the facts of the present case and the facts herein are at variance and as such the reference to the Larger Bench hereinabove has got no relevance for deciding the present appeal. Further, we note that Hon‟ble Supreme Court in the case of Collector vs. AlNoori Tobacco Products -2004 (170) ELT 135 (SC) (SC) have held that in respect of following precedent, have observed that circumstantial ---- one additional or different facts may make a world of difference between conclusion in two cases. Disposal of cases by following settled precedent decision, is not proper. We further find that the contention raised by the ld. AR for Revenue that the said aircraft was mainly used by the Directors, Executives and their close relatives, friends of RADAGPL is of no consequence as the CAR requirement under Section 3 of Air Transport Series part -III Issue-II, dated 01.06.2010, which applies to the existing permit holder, clarifies in para 2.4 and 2.5 as follows:
"2.4. The carriage of passengers by a non-scheduled operator's permit holder may be performed on per seat basis or by way of chartering the whole aircraft on per flight basis. There is no bar on the same aircraft being used for either purpose as per the requirement of customers from time to time. The operator is also free to operate series of flights on any sector within India by selling individual seats but will not be permitted to publish time table for such flights. Operation of revenue charter to points outside India may also be undertaken as per paragraph 9.2.
2.5 A non-scheduled operator is also allowed to operate revenue charter flights for a company within its group companies, subsidiary 19 Custom Appeal No. 497 of 2010 companies, sister concern, associated companies, own employees, including Chairman and members of the Board of Directors of the company and their family members, provided it is operated for remuneration, whether such service consists of a single flight or series of flights over any period of time".
15. It is evident that the appellant have not used the said aircraft in contravention of the permit granted by the DGCA to operate as a NSOP. Admittedly, DGCA has not cancelled the permit and admittedly same stands renewed from time to time. We further find that in the precedent order of this Tribunal in Global Vectra (supra) it has been held that issue of ticket is not an essential condition, not required in case of charter operation. Admittedly, appellant have operated their aircraft mainly for charter operation, which is permissible under the NSOP.
16. We further find that the impugned order is also bad in law and the ld. Commissioner has travelled beyond the scope of the show cause notice as the duty was demanded under Section 28 of the Act whereas the demand under the said Section has been dropped but duty has been confirmed by way of enforcement of the bond, in absence of any such proposal in the show cause notice, the demand is bad and fit to be set aside. 20 Custom Appeal No. 497 of 2010
17. Accordingly, we hold that the appellant had rightly availed the benefit of concession/ exemption under Notification No. 21/2002 -Cus. read with Notification No. 61/2007-Cus as amended. Accordingly, the appeal is allowed and the impugned order is set aside. The appellant is entitled to consequential relief in accordance with law. We further direct the concerned adjudicating authority to release the Bank Guarantee and bond within a period of two weeks from the date of receipt of a copy of this order.
(Pronounced on 15.10.2018).
(Anil Choudhary) Member (Judicial) (Bijay Kumar) Member (Technical) Pant