Custom, Excise & Service Tax Tribunal
) King Rotors & Air Charter Pvt. Ltd vs Commissioner Of Customs (Acc & Import), ... on 17 June, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL Nos. C/363/09 & C/369/09 (Arising out of Order-in-Original CAO No. CC-MJ/05-2009/Adj.ACC dated 16.3.2009 passed by Commissioner of Customs (Import), Mumbai) For approval and signature: Honble Mr. P.G. Chacko, Member (Judicial) and Honble Mr. Sahab Singh, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
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1) King Rotors & Air Charter Pvt. Ltd. Appellant
2) Capt. K.N.G. Nair Vs. Commissioner of Customs (ACC & Import), Mumbai Respondent Appearance:
Shri D.B. Shroff, Senior Advocate, with Shri H.C. Daruwalla, Advocate, for appellants Shri W.L. Hangshing, Authorised Representative (JCDR), for respondent CORAM:
Honble Mr. P.G. Chacko, Member (Judicial) and Honble Mr. Sahab Singh, Member (Technical) Date of Hearing: 24.3.2011 Date of Decision: 17.6.2011 ORDER NO Per: P.G. Chacko In the first appeal, M/s. King Rotors & Air Charter Pvt. Ltd. (the assessee) have challenged demand of duty of Rs.8,68,53,254/- confirmed against them by the Commissioner of Customs in respect of one Bell Helicopter (Model No.412-EP, Sr.No.36454) imported by them and cleared under Bill of Entry No.520260 dated 5.4.2008 availing exemption from payment of (i) Basic Customs Duty under Notification No.21/2002-Cus. dated 1.3.2002 (serial No.347B) as amended by Notification No.61/2007-Cus. dated 3.5.2007, (ii) Additional Customs Duty (countervailing duty) under Notification No.6/2006-CE dated 1.3.2006 (serial No.54A) as amended by Notification No.6/2007-CE dated 1.3.2007 and (iii) Special Additional Duty of Customs under Notification No.20/2006-Cus. dated 1.3.2006 (serial No.1). The assessee is also aggrieved by the confiscation of the goods ordered by the Commissioner under Section 111 of the Customs Act (with option for redemption against payment of fine of Rs.10 lakhs) as also by the penalty of Rs.2.5 lakhs imposed under Section 112 of the Act. The appeal of Capt. (Retd.) K.N.G. Nair, Managing Director of the company, is directed against the penalty of Rs.2.5 lakhs imposed on him by the adjudicating authority under Section 112 of the Act.
FACTS OF THE CASE
2. M/s. Bell Helicopter Asia (Pte) Ltd. (Singapore) had sold the helicopter to M/s. Brics Leasing & Finance International Ltd. (Ireland), from whom the assessee obtained lease of the aircraft. Accordingly, the assessee imported it in dismantled condition and filed the aforesaid Bill of Entry for its clearance through Air Cargo Complex, Sahar, Mumbai. The assessable value was declared to be Rs.37,56,04,380/- equivalent to $ 91,09,148/- as per the relevant invoice. No Objection Certificate dated 13.3.2008 from the Director-General of Civil Aviation (DGCA), which stated that DGCA had no objection to the import of one Bell-412 Helicopter S.No.36454 for non-scheduled air transport (passenger) services, was produced by the importer. Permit No.11/2006 dated 29.11.2006 issued by DGCA under Rule 134(3) of the Aircraft Rules, 1937 was also produced by the importer. This permit in printed format was to operate non-scheduled air transport services (passenger/cargo/charter) with the above helicopter (seating capacity 13) specified in Appendix 1 thereto. The permit was valid till 28.11.2008 at the time of the import. Both Appendix 1 (description of aircraft) and Appendix 2 (validity period) to the permit were captioned PERMIT TO OPERATE NON-SCHEDULED AIR TRANSPORT SERVICES (PASSENGER). Appendix 1 also stated that the specified aircraft could be operated under the authority of this permit for Non-scheduled Air Transport Services (Passenger). Appendix 3 to the permit laid down CONDITIONS FOR OPERATION OF NON-SCHEDULED AIR TRANSPORT SERVICES (PASSENGER). The importer also submitted an undertaking in terms of condition No.104 of Notification No.21/2002-Cus. as amended by Notification No.61/2007-Cus., undertaking to use the helicopter only for providing non-scheduled (passenger) services and to pay the duty thereon in the event of their failure to comply with the said condition of the Notification. The Bill of Eentry was assessed by the assessing authority extending the benefit of exemption from all duties and, accordingly, the helicopter was allowed to be cleared by the assessee.
3. Subsequently, suspecting misuse of the helicopter by the assessee, the Central Intelligence Unit (CIU) of the Air Cargo Complex launched investigations. The CIU, by letter dated 26.4.2008, requested the assessee to forward the documents relating to the clearance of the helicopter and also documents evidencing its end-use. But the assessee did not submit any documentary evidence of end-use of the helicopter. Therefore, by a summons, the Managing Director of the company was asked to appear before the investigating officer and produce documents such as logbook, copies of monthly return and annual return submitted to DGCA in connection with the end-use of the imported helicopter. In response to the summons, the party submitted copies of passenger manifest, documents evidencing payment of lease amount to M/s. Brics Leasing & Finance International Ltd. and agreement dated 14.4.2008 entered into between them (assessee) and M/s. Heligo Charters Pvt. Ltd. (Heligo, for short). Upon completion of these preliminary investigations, the helicopter was seized under panchanama dated 11.9.2008 at Rajamundri Airport under Section 110 of the Customs Act by the officers concerned on the reasonable belief that it was liable to confiscation under Section 111 of the Act. It was handed over to the importer under superdnama dated 11.9.2008 for safe custody. However, on 15.9.2008, it was released to the assessee on the basis of a bond for value of Rs.9 crores executed by them in terms of the Honble High Courts interim order dated 12.9.2008 in Writ Petition No.2184 of 2008.
4. The CIU recorded a statement of the Managing Director under Section 108 of the Customs Act on 10.10.2008, wherein he stated, inter alia, (i) that the company was engaged in providing helicopter services to other companies on charter basis, (ii) that the helicopter in question was on charter-lease to Heligo under an agreement, (iii) that Heligo was maintaining logbook for flight operation, obtaining the necessary permission/approval from DGCA, paying salary to the pilots and also paying the fuel bills, (iv) that Heligo did not have any published tariff and did not issue flight tickets to passengers. From the scrutiny of the documents produced by the assessee (including the agreement dated 14.4.2008 between them and Heligo for charter-hire of helicopter) and from a study of the provisions of the Civil Aviation Requirements (CAR) Section 3, Air Transport Series C, Part III dated 8.10.1999 and Part V dated 17.5.2000, it appeared to the department that the assessee had given the helicopter on lease to Heligo for its use to the total exclusion of members of the public in violation of para 2 of CAR, Section 3, Air Transport Series C, Part III dated 8.10.1999 as also in violation of the relevant condition of Notification No.21/2002-Cus. as amended and that of Notification No.6/2006-CE as amended. It appeared to the department that the assessee had committed breach of the undertaking given by them. Further, according to the department, the assessee was liable to produce import licence from the Director-General of Foreign Trade (DGFT) for clearing the helicopter which was allegedly not used for the purpose intended by DGCA.
5. On the above basis, the Commissioner of Customs issued a show-cause notice to the assessee proposing (a) to deny them the benefit of the Notifications and recover duty on the helicopter, (b) to confiscate the aircraft under Section 111(d) & (o) of the Customs Act, (c) to levy interest on duty under Section 28AB of the Act and (d) to impose penalties under Sections 112 and 114A of the Act. The same show-cause notice also proposed a penalty on the Managing Director of the company under Section 112 of the Act. The above proposals were contested by the noticees. It was in adjudication of this dispute that the learned Commissioner of Customs (Import) passed the impugned order.
HONBLE HIGH COURTS DIRECTION AND ITS PURSUANCE
6. The order passed by the Appellate Tribunal on 16.4.2010 under Section 129E of the Customs Act directing the assessee to pre-deposit 50% of the duty amount and the subsequent order dated 2.7.2010 of the Tribunal dismissing the assessees appeal on the ground of non-compliance were challenged by them in Customs Appeal No.36 of 2010 before the Honble High Court. By order dated 21.7.2010, the Honble High Court set aside the Tribunals orders and remanded the case to the Tribunal for final decision on merits without pre-deposit. The operative part of the High Courts order reads thus: . Matter is remitted back to the Tribunal with direction to consider the minimum requirements engrafted in Exh. U dated 1st June, 2010 with other contentions since all rival contentions on merits are kept open. If necessary, it would be open for the appellant to amend their appeal memo and/or application for pre-deposit to raise contention based on the minimum requirements laid down in Exh. U dated 1st June 2010, by the Director General of Civil Aviation.
7. On the strength of the Honble High Courts order, the assessee filed a Miscellaneous Application to amend the memorandum of appeal, which this Tribunal allowed by order dated 15.10.2010 and, accordingly, paragraphs (dd) to (gg) came to be added to the grounds of the appeal. Amended copies of the memorandum of appeal were filed by the counsel for the appellant on 28.2.2011. Subsequently, the appeal was heard with the connected appeal on 17.3.2011. The counsel for the appellants filed written submissions on 23.3.2011 and the JCDR filed his submissions/argument notes on 24.3.2011. Orders were reserved on 24.3.2011.
THE MAIN ISSUE
8. The main issue agitated before us was whether the assessee could be held to have complied with condition No.104 attached to serial No.347B of Notification 21/2002-Cus. as amended by Notification No.61/2007-Cus. Notification No.21/2002-Cus. as amended by Notification No.61/2007-Cus. prescribed nil rate of duty for all goods falling under Heading 8802 (except 8802 60 00) subject to condition No.104 vide serial No.347B in the Table annexed to the Exemption Notification. It was not in dispute that the helicopter imported by the appellants was covered by the description of goods at serial No.347B ibid. The whole dispute in this case arose out of rival interpretations of condition No.104, which reads as follows:-
(i) the aircraft are imported by an operator who has been granted approval by the competent authority in the Ministry of Civil Aviation to import aircraft for providing non-scheduled (passenger) or non-scheduled (charter) services; and
(ii) the importer furnishes an undertaking to the Deputy Commissioner of Customs or Assistant 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 enterprise 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 charter or hire of an aircraft to any person, with published tariff, and who is registered with and approved by Directorate General of Civil Aviation for such purposes, and who conforms to the civil aviation requirement under the provision of Rule 133 A of the Aircraft Rules 1937:
Provided that such Air charter operator is a dedicated company or partnership firm for the above purposes.
9. DGCA has the authority under Rule 133A of the Aircraft Rules, 1937 to issue, through publication entitled Civil Aviation Requirements, special directions not inconsistent with the Aircraft Act, 1934 or the Rules, relating to the operation, use, possession, maintenance or navigation of aircraft flying in or over India or of aircraft registered in India. In exercise of this authority, DGCA issued CIVIL AVIATION REQUIREMENTS, SECTION 3, AIR TRANSPORT SERIES C, PART III w.e.f. 8th October, 1999, laying down minimum requirements for grant of permit to operate non-scheduled air transport services (passenger). These Civil Aviation Requirements [CAR for short] will hereinafter be referred to as Passenger CAR. Part V of Civil Aviation Requirements laying down minimum requirements for grant of permit to operate non-scheduled air transport services (charter operation) was issued w.e.f. 17th May, 2000, and the same will hereinafter be referred to as Charter CAR. A new/revised Part III was issued by DGCA on 1st June, 2010, laying down minimum requirements for grant of permit to operate non-scheduled air transport services and the same will hereinafter be referred to as New CAR. Sub-rule (3) of Rule 134 of the Aircraft Rules makes it mandatory for a person to obtain the special permission of the Central Government for operating non-scheduled air transport services. The power to grant such permission is delegable under Rule 3A. The permit in the present case was issued by DGCA for operating non-scheduled air transport services (passenger) and the same may hereinafter be referred to as non-scheduled operators permit (passenger) or NSOP (passenger).
SUBMISSIONS FOR APPELLANTS
10. The learned counsel for the appellants submitted that the assessee holding permit for non-scheduled air transport services (passenger) was also entitled to use the helicopter for charter operations. DGCA, who granted the permit, was aware of the use of the aircraft for charter operations but never raised any objection. The permit was renewed from time to time, which indicated that DGCA considered the charter operations to be permissible under NSOP (passenger). The Customs authorities were not to go beyond the opinion of DGCA on the scope of the permit. The condition No.104 ibid was prescribed for the benefit of non-scheduled operators, irrespective of whether they carried out passenger operations or charter operations. It did not create any dichotomy between non-scheduled air transport services (passenger) and non-scheduled air transport services (charter operations) to ensure that each kind of operations should be to the exclusion of the other. The learned counsel, in this context, relied on clause 9.2 of Passenger CAR, which reads thus:-
Non-scheduled operators can conduct charter/non-scheduled operations for transportation by air of persons, mail or goods. In such operations, the operators shall not publish their time schedules as the operations are of non-scheduled nature. The learned counsel, in this context, also claimed support from certain clarificatory letters issued by DGCA, viz. (i) letter dated 15.12.2009 issued to M/s. International Air Charter Operations India Pvt. Ltd. clarifying that an operator having NSOP (passenger) can conduct charter operations as per para 9.2 of the Civil Aviation Requirements, Section 3, Series C Part III; (ii) letter dated 15.7.2009 to the Commissioner of Customs in the case of import of helicopter by M/s. Escorts Ltd. clarifying that operation of charter services is permissible by NSOP (passenger) holder under this paragraph (para 9.2); (iii) letter dated 8.8.2008 to M/s. Global Vectra Helicorp Pvt. Ltd. clarifying that the lease/charter of aircraft and its operation are not merely a financial leasing, the activities are considered to be within the privileges of non-scheduled operators permit (NSOP) granted to you. This last letter also indicated that the NSOP granted to the party was NSOP (passenger operations). The learned counsel went on to argue that condition No.104 of Notification 21/2002-Cus. treated non-scheduled air transport services (charter operations) on par with non-scheduled air transport services (passenger) and either would satisfy the condition. In this connection, the learned counsel referred to clause (ii)(a) of condition No.104 and argued that the same should be read as: the said aircraft shall be used only for providing non-scheduled services. According to him, this clause was not incorporated to prohibit charter operations by a non-scheduled air transport services (passenger) permit holder. Therefore, it was argued that the permit granted to the assessee by DGCA covered all non-scheduled services, which also included charter operations, which could be carried out without issue of tickets to individual passengers. In this connection, it was also contended that clause (c) of Explanation to condition No.104 was not relevant. Condition No.104 was, therefore, claimed to have been satisfied by the assessee.
11. The learned counsel pointed out that there was nothing in condition No.104 or in the Aircraft Act or in the Aircraft Rules to indicate that an operator holding permit for non-scheduled air transport services (passenger) was bound to keep his aircraft available and open for use only by members of the public. There was no obligation for an operator of non-scheduled air transport services (passenger) to compulsorily run the services for members of the public either totally or for any specified number of hours. Had there been any such obligation for a holder of NSOP (passenger), the same would have been explicitly provided for in Passenger CAR.
12. The learned counsel argued that there could be only three categories of air transport service operator, viz., (i) scheduled air transport service operator; (ii) non-scheduled air transport service operator; (iii) private owners. Import of aircraft for scheduled air transport services (first category) was exempt from payment of customs duty in terms of serial No.346B of Notification 21/2002-Cus. as amended by Notification 20/2007-Cus. dated 1.3.2007. Import of aircraft for non-scheduled air transport services (second category) came to be exempted from payment of customs duty in terms of serial No.347B of Notification 21/2002-Cus. as amended by Notification 61/2007-Cus. dated 3.5.2007. Import of aircraft for purely private use (third category) remained dutiable, which was the legislative intent expressed in the Finance Ministers Budget Speech of 28.2.2007. The learned counsel was referring to para 140 of the Finance Ministers Budget Speech, reading as follows:-
140. Import of aircraft, including helicopters, by Government and scheduled airlines is, at present, exempt from all duties, and that position will continue. However, there is no reason to allow the exemption to other private importers. Hence, I propose to levy an import duty of 3 per cent, which is the WTO bound rate, on all private import of aircraft including helicopters. Such import will also attract countervailing duty and additional customs duty. Mr. Shroff argued that non-scheduled (charter) service was a species of non-scheduled (passenger) services and, therefore, it was open to the assessee to operate non-scheduled air transport services (charter) with the imported helicopter under NSOP (passenger) issued by DGCA. Therefore, the charter operations under the assessees Charter-Hire Agreement with Heligo were in conformity with the definition of non-scheduled (passenger) service. The counsel opined that it was grossly incorrect to equate the charter operations to private use.
13. It was also claimed by the counsel that DGCA had clarified in writing to the Customs authorities that the charter operations of the assessee were within the privileges of the permit issued to them for non-scheduled air transport services (passenger). He expected the department to produce a copy of the relevant communication of DGCA. It was also pointed out that the assessee themselves had written to DGCA on 17.2.2009 for a clarification on the point and the latters reply was being awaited.
14. It was also submitted that DGCA was aware of the legal position that, as per clause 9.2 of Passenger CAR, holders of NSOP (passenger) were entitled to use the permit for charter operations. Ld. Counsel claimed that DGCA clarified this legal position in respect of the assessee and other operators such as M/s. Escorts Ltd., M/s. International Air Charter Operations India Pvt. Ltd. etc. In this scenario, counsel argued, it was not open to the Customs authorities to take the stand that the charter operations of the assessee with the imported helicopter were unauthorized. According to the learned counsel, the Customs authorities did not have jurisdiction to examine the scope of the permit issued by DGCA. That jurisdiction belonged to DGCA only. It was also contended that the interpretation of condition 104 of Notification 21/02-Cus. by Customs authorities should be in consonance with DGCAs clarifications on the provisions of CAR. Ld. Counsel also urged that the said condition of Exemption Notification be liberally construed in view of the Supreme Courts decision in Tata Oil Mills Ltd. vs. Collector 1989 (43) ELT 183 (SC).
15. Without prejudice to the above arguments which were based on interpretation of condition No.104 of the Exemption Notification with reference to the provisions of Passenger CAR, the learned counsel raised the alternative plea that condition No.104 ibid needed to be interpreted in the light of New CAR (CIVIL AVIATION REQUIREMENT, SECTION 3, AIR TRANSPORT SERIES C, PART III, ISSUE II issued on 1st June 2010). Here, he was pressing into service the additional grounds (dd) and (ee) of the assessees memorandum of appeal. It was submitted that clause 3.3 of New CAR defined non-scheduled air transport service wide to include both passenger service and charter service. It was contended that this provision of New CAR eliminated the dichotomy, if any, between non-scheduled (passenger) services and non-scheduled (charter) services. It was also argued that New CAR had retrospective effect by virtue of clause 2.7 thereof and hence could be made applicable to the present case.
16. Without prejudice, it was further submitted that the assessee was entitled to the benefit of Notification No.21/2002-Cus. (serial No.347B) as amended by the latest Notification 21/2011-Cus. dated 1.3.2011. The learned counsel referred to the newly added Explanation 2 to condition No.104 attached to serial No.347B ibid and submitted that this Explanation being clarificatory in nature had retrospective effect and, consequently, use of the imported helicopter for non-scheduled (charter) services under NSOP (passenger) issued by DGCA was not to be construed to be a violation of the said condition for duty-free import. A copy of Notification 21/2011-Cus. dated 1.3.2011 was also produced by the Advocate.
17. Further, it was submitted by the learned counsel that a co-ordinate Bench of this Tribunal had, of late, allowed the benefit of exemption under Notification 21/2002-Cus. dated 1.3.2002 (serial No.347B) to another importer, viz. M/s. Airmid Aviation Services (P) Ltd. on a similar set of facts. The learned counsel also produced copies of Final Order No. C/170-174/2010 dated 12.11.2010 passed by the Tribunal in appeal Nos. C/493 to 497/09 [Commissioner of Customs, New Delhi vs. Sameer Gehlot 2011 (263) ELT 129 (Tri.-Del.)]. The counsel expressed the view that this Bench was bound by the above decision of the co-ordinate Bench.
SUBMISSIONS FOR RESPONDENT
18. The learned JCDR, at the outset, submitted that New CAR did not have retrospective effect. He submitted that the admissibility of the benefit of Notification 21/2002-Cus. required to be examined in the light of the relevant provisions of Passenger CAR and Charter CAR. Relying on the definition of PASSENGER AIRCRAFT under Rule 3(39) of the Aircraft Rules, 1937, the learned JCDR pointed out that the non-scheduled operators permit (passenger) issued by DGCA to the assessee was intended to be used to operate the imported helicopter only for public transport of passengers. The helicopter was, admittedly, chartered to a private company (Heligo) which, in turn, used it to ferry the personnel of Offshore Drilling-for-Oil Companies to the total exclusion of members of the public. It cannot be said to have been used for providing non-scheduled (passenger) services as defined in clause (b) of Explanation to condition No.104 ibid.
19. The learned JCDR also referred to the definition of PRIVATE AIRCRAFT under Rule 3(43) and submitted that the helicopter in question, being an aircraft other than public transport aircraft, was a private aircraft only. Therefore, according to the JCDR, the charter operations in this case constituted only private use of the helicopter. It was argued that the legislative intent underlying the Exemption Notification was to exempt only those aircrafts which were operated in the public domain. As the assessee did not operate the helicopter in the public domain, they were not eligible for the benefit. Mr. Hangshing broadly classified aircraft operations into (a) scheduled operations and (b) non-scheduled operations. Scheduled operations were covered by the expression scheduled air transport service defined under Rule 3(49). On the strength of this definition, the learned JCDR pointed out that all scheduled operations fell in the public domain and hence an aircraft imported for such operations was exempted from payment of duty under Sr.No.346B of Notification 21/2002-Cus. as amended by Notification 20/2007-Cus. Non-scheduled operations could be further classified into (a) passenger operations and (b) charter operations. Charter operations could be either for private use or for public use. It was argued that only charter operations in the public domain were covered by clause (c) of Explanation to condition No.104 of Notification No.21/2002-Cus. as amended by Notification No.61/2007-Cus. JCDR sought to attach great significance to published tariff figuring in the text of clause (c) of Explanation to condition No.104. He submitted that private charter operations did not require publication of tariff. Hence the requirement of tariff to be published by a non-scheduled (charter) air transport operator claiming the benefit of the Exemption Notification would clearly show that the charter operations were intended to benefit members of the public. The learned JCDR argued that, in the absence of a published tariff, the chartered flight services were to be considered as private and hence did not qualify for the exemption.
20. The learned JCDR submitted that, to be eligible for exemption in the category of non-scheduled (charter) services, the assessee had to fulfil two basic conditions stipulated in clause (c) of Explanation to condition No.104. Firstly, they must have a permit for non-scheduled (charter) services conforming to the provisions of Charter CAR and, as per clause (2.1) of this CAR, the maximum seating capacity of a twin-engined aircraft for non-scheduled charter operations must not exceed 9 (nine) excluding crew seats. The helicopter in question was 13-seater. Secondly, there must be a published tariff for the flight operations. Neither of these conditions was fulfilled by the assessee and hence they were not entitled to claim the benefit of exemption in the category of non-scheduled (charter) services.
21. The learned JCDR argued that substantive conditions of Exemption Notifications were to be strictly construed to avoid any fraud on the revenue and do justice to genuine claimants. Though the assessee complied with the pre-importation condition laid down in clause (i) of condition No.104 attached to entry 347B of Notification No.21/2002-Cus., they violated the post-importation condition laid down in clause (ii) read with Explanation to the said condition No.104 by putting the imported copter to private use in breach of their undertaking. The post-importation condition was to be strictly interpreted on the basis of the provisions of the Explanation and the same could not be read down by employing extraneous means like DGCAs opinion. In this connection, Mr. Hangshing also cited case law viz. Dimexon vs. UOI 2009 (241) ELT 519 (Bom.). In this manner, the learned JCDR argued that the assessee was not entitled to exemption from payment of duty on the helicopter under Notification 21/2002-Cus. (serial No.347B) as amended by Notification 61/2007-Cus.
22. Canvassing support for the independent jurisdiction of Customs department vis-`-vis Civil Aviation department as to whether the assessee used the copter for air transport service as undertaken to the Customs department, the learned JCDR relied on Sheshank Sea Foods Pvt. Ltd. vs. UOI 1996 (88) ELT 626 (SC) and Surya Samudra Holiday Resorts (P) Ltd. vs. Commissioner 2010 (256) ELT 433 (Tri.-Mum).
23. With regard to the Tribunals decision in Sameer Gehlots (AASPLs) case (supra), the learned JCDR submitted that the department had since filed Civil Appeal in the Supreme Court and, therefore, the Tribunals decision was not liable to be followed as a precedent. The learned JCDR also made an endeavour to distinguish the case in hand from the case of AASPL.
CONSIDERATION AND DECISION 24.1 We have given careful consideration to the submissions. The substantive issue is whether the assessee is entitled to exemption from payment of duties of customs on the helicopter imported by them vide Bill of Entry No.520260 dated 5.4.2008 wherein they claimed exemption from BCD under serial No.347B of Notification 21/2002-Cus. as amended by Notification 61/2007-Cus. [A decision on this issue must also be applicable to CVD as condition No.21 attached to Notification No.6/06-CE (entry 54A) as amended is, substantially, not different from condition No.104 attached to the said entry 347B of Notification No.21/02-Cus. as amended]. The Notification, at serial No.347B thereof, prescribed nil rate of duty for all goods falling under Heading 8802 (except SH 8802 60 00) subject to condition No.104. The text of this condition has already been included vide para (8) of this order. In compliance with clause (i) of this condition, the importer produced DGCAs no objection for import in respect of the helicopter and the same authoritys permit for using the aircraft to operate non-scheduled air transport services (passenger). In terms of clause (ii) of the condition, they furnished an undertaking to the Deputy Commissioner of Customs.
24.2 There is no room for doubt as to the scope of the permit issued to the assessee by DGCA. The permit is for operating non-scheduled air transport services (passenger) with the helicopter mentioned in the list appended thereto (Appendix-1), for the period specified in Appendix-2, subject to observance of the conditions specified in Appendix-3. NON-SCHEDULED AIR TRANSPORT SERVICES (PASSENGER) prominently figures in the caption of each of these appendices to the permit. Appendix-1 (list of aircraft) clearly provides:- The following aircraft can be operated under this permit for Non-scheduled Air Transport Services (Passenger). The permit per se is subject to the compliance with the provisions of the Aircraft Act, the Aircraft Rules and any Orders, Directions or Requirements issued under the said Act and Rules. One of the Requirements issued under Rule 133A of the Aircraft Rules is Charter CAR, and clause (2.1) thereof provides that This CAR is applicable to Non-scheduled Air Transport Services (Charter Operations) using twin-engined aeroplane having maximum seating capacity not exceeding nine seats excluding crew seats. Charter CAR cannot be applicable to the appellants twin-engined (vide Panchanama dated 11.9.2008) helicopter which is 13-seater (vide Annexure-1 to PERMIT No.11/2006 dated 29.11.2006, NO OBJECTION FOR IMPORT dated 13.3.2008 and clause (3.2) of CHARTER-HIRE AGREEMENT dated 14.4.2008). The applicable CAR is Passenger CAR. DGCAs NO OBJECTION FOR IMPORT itself indicates the purpose for which aircraft is required, which is Non-scheduled Air Transport (Passenger) Services. DGCAs covering letter dated 13.3.2008 says: This office has No Objection to the import of One Bell-412 helicopter S.No.36454 for Non-scheduled Air Transport (Passenger) Services. Thus it is abundantly clear from the records that DGCAs permission to the assessee is only to operate non-scheduled passenger services with the helicopter imported by them. If the parenthetic appearance of both the words passenger and charter [(Passenger/Cargo/Charter)] in the description of air transport services in the printed format of Permit No.11/2006 created any doubt in the appellants mind, it was enough for them to read the mind of the authority which issued the permit. The issuing authoritys mind is reflected in the full text of the permit and connected documents. The permission is to operate non-scheduled passenger services with the imported helicopter, and not charter services.
24.3 In any case, the appellants have not produced any clarification of DGCA to the contra. They claim to have requested the said authority by letter dated 17.2.2009 for a clarification on the point, but they are yet to obtain any. Any clarification issued by DGCA to third parties on the particular facts of their cases cannot be pressed into service in the appellants case. We have also seen assertive averments in the assessees appeal to the effect that the Customs authorities themselves received DGCAs clarification in the appellants favour on the scope of the subject permit. But these assertions are yet to be substantiated. They remain ipse dixit. Nobody has stood in the way of the appellants themselves obtaining similar clarification from DGCA or in the way of their gathering information from DGCA under the Right to Information Act regarding the clarification which is said to have been given to Customs authorities. The onus to prove that DGCA has clarified in favour of the appellants is on them and none else as per the maxim: affirmanti non neganti incumbit probatio. No prudent mind can expect DGCA, who laid down Charter CAR, to say that the assessee is entitled to use the 13-seater helicopter to operate non-scheduled charter services in violation of clause (2.1) of the said CAR.
24.4 Nevertheless, as the fact remains that the assessee had the approval of DGCA for import of the helicopter for providing non-scheduled (passenger) services, it cannot be gainsaid that clause (i) of condition No.104 was complied with.
24.5 The undertaking given by the importer in terms of clause (ii) of condition No.104 of Notification No.21/2002-Cus. (Sr.No.347B) as amended by Notification No.61/2007-Cus. reads as follows:-
UNDERTAKING Date 05.04.2008 The Dy. Commissioner of Customs Air Cargo Unit Sahar Airport, Andheri (E), Mumbai 400099.
Sub: Undertaking as per Customs Notification number 021/2002, Serial number 347/B. Ref: Bill of Entry number 520260 Dated 05.04.2008.
Above referred bill of entry consists of one helicopter which we have imported for King Rotors & Air Charters Pvt. Ltd. which is a non-scheduled air transport service (passenger) as per the DGCA, Government of India, permit No. 11/2006 dated 02/09/2003.
We hereby certify and undertake as follows:
1) Helicopter will be used only for providing non-scheduled operator permit passenger services.
2) We will pay on demand the tariff and as per notification stated above in the event of failure to comply with 1 & 2 as per notification 021/2002 Sr. No. 347B as per the Deputy Commissioner may specify in this behalf. We shall bond to oblige under section 142 of Customs Act 1962. In witness where of the parties bore to have only executed this bond. In case of failure to comply with this condition we shall pay the necessary duties.
For King Rotors & Air Charters Pvt. Ltd.
Sd/-
Authorised Signatory [underlinings added] Obviously, the assessee undertook to use the helicopter only for providing non-scheduled passenger services. They also undertook to pay on demand the necessary duties of customs in the event of non-compliance.
24.6 The question now to be considered is whether the assessee used the imported helicopter for the avowed purpose. It is not in dispute that, under a charter-hire agreement dated 14.4.2008 with Heligo, the assessee allowed the helicopter to be used by Heligo for the purpose of mobilizing and demobilizing of personnel of third party companies and for movement of their freight and/or equipment. Under the agreement, Heligo would reimburse the actual costs incurred by the assessee in sourcing and acquiring spares for maintenance of the helicopter. The necessary infrastructure for maintenance of the helicopter would also be provided by Heligo. The entire cost of insurance to cover all liabilities in respect of passengers, cargo, crew, helicopter and third party would be incurred by the assessee and reimbursed to them by Heligo. Heligo would also pay monthly remuneration to the pilots of the assessee. They would also bear the costs of maintenance of the helicopter and also the costs of fuel and comsumables required for its operation. On a perusal of the charter-hire agreement between the assessee and Heligo, we find that Heligo chartered/hired the helicopter for their exclusive use and they incurred the entire costs of operation and maintenance of the helicopter and even the cost of insurance to cover all liabilities. One significant term of the contract was that the helicopter shall be utilized solely for the purpose of providing the services pursuant to the agreement and the contractor shall not utilize the helicopter for any other purpose without the prior consent of the company. Accordingly, the helicopter could not be used by the assessee (contractor) for any other purpose without the prior consent of Heligo (company). It is evident that the agreement created an exclusive right in Heligo for use of the helicopter during its tenure. That Heligo exercised this right for the benefit of third party companies is, in turn, evident from the written submissions dated 23.3.2011 filed by the appellants advocates, which read thus: ..even Heligo Charters Pvt. Ltd., in turn, charter the aircraft . The aircraft is chartered by many offshore and oil companies to ferry their personnel .. the aircraft has been used by independent third party offshore oil extraction/drilling companies The flights undertaken by aircraft are commercial, revenue flights paid for by third party offshore companies. Obviously the end-users of the helicopter are the so-called third party companies which cannot be called members of the public. Popular dictionaries of English provide the following meaning of public or the public, as the case may be : * public = the community or people in general [Collins Dictionary of the English Language] * public = the people as a whole; community at large [New World Dictionary of the American Language] * public = people collectively [The New Shorter Oxford English Dictionary] * public = ordinary people in general; the community [Concise Oxford English Dictionary Indian Edition] * the public = ordinary people in society in general;
[Oxford Advanced Learners Dictionary of Current English, 7th Edition] Members of the public are natural persons and cannot be juristic persons like the third party companies which chartered the aircraft from Heligo.
24.7 Non-scheduled passenger services has been defined in clause (b) of Explanation to condition No.104 and the same means air transport services other than scheduled (passenger) air transport services as defined in Rule 3 of the Aircraft Rules, 1937. [Incidentally, we note that the expression non-scheduled air transport services (passenger) is defined in the same way in clause (2) of Passenger CAR.] Scheduled air transport service has been defined under Rule 3(49) of the Aircraft Rules, 1937 and the same reads as under:-
Scheduled air transport service means air transport service undertaken between the same two or more places and operated according to a published time table or with flights so regular or frequent that they constitute a recognisably systematic series, each flight being open to use by members of the public; [underlining added] The learned counsel for the appellants has argued that two distinct requirements have to be satisfied by an air transport service to be called scheduled air transport service. According to him, the two essential requirements are the following: (a) there must be regular or frequent flights or flights operated according to a published time table between the same two or more places; (b) each flight must be open to members of the public. The learned counsel has argued that any air transport service that does not meet the above two requirements will be a non-scheduled (passenger) service. On this basis, it has been claimed that the assessee was providing non-scheduled (passenger) service under the permit granted by DGCA and was thereby complying with condition No.104. This argument is fraught with analytical error. Any such dissection of the definition of scheduled air transport service as attempted by the counsel is not warranted to obtain the meaning of non-scheduled air transport service. This is because requirement (b) mentioned by him is not determinative of whether the air transport service is scheduled or non-scheduled. To our mind, the only difference between the two types of air transport service lies in the simple fact that one is scheduled while the other is non-scheduled, which would mean that scheduled air transport services involve flight services operated on the basis of a schedule of time whereas non-scheduled air transport services are without any time schedule for the flights. [This view is fortified by clause (9.2) of Passenger CAR, which deals with non-scheduled operators and their operations and says: In such operations, the operators shall not publish their time schedules as the operations are of non-scheduled nature.] Other features are common for both scheduled and non-scheduled services. It would follow that, like scheduled air transport service (passenger), non-scheduled air transport service (passenger) also should be open to use by members of the public. As the flight operations in this case were not open to the public, the helicopter cannot be held to have been used for non-scheduled (passenger) services.
24.8 As condition No.104 itself refers to Rule 3 of the Aircraft Rules, 1937 in the context of defining the expression non-scheduled (passenger) services, it is permissible to take aid of the said Rule in ascertaining the connotation of the word passenger used in the expression non-scheduled (passenger) services. Rule 3(39) defines passenger aircraft as aircraft which effects public transport of passengers. Public transport is also seen defined under Rule 3(45). In the instant case, it is not the claim of the appellants that they used the helicopter for public transport of passengers. They only allowed Heligo to hire the aircraft for a remuneration and use it for transporting employees of Oil & Gas/allied companies between Vishakapatnam airport and offshore oil/gas fields under contracts awarded to Heligo by those companies. The appellants were unable to use the copter (during the tenure of the agreement) for any other purpose without the prior consent of Heligo. They did not have any control over the manner in which the helicopter was used by Heligo (who professedly entered into charter contracts with third party companies in respect of the aircraft which was accordingly used for transporting the personnel of these companies) and the copter operations were not open to members of the public. Where the helicopter would not come within the meaning of passenger aircraft, the flight operations cannot be called non-scheduled (passenger) services.
24.9 The learned counsel has argued to the effect that non-scheduled (passenger) services have wider scope than non-scheduled (charter) services and hence would encompass the latter category of services also. This argument is also unacceptable inasmuch as it is contrary to clause (ii)(a) of condition No.104, which reads thus: The said aircraft shall be used only for providing non-scheduled (passenger) services or non-scheduled (charter) services, as the case may be. This part of condition No.104 treats non-scheduled (passenger) services and non-scheduled (charter) services as two distinct and mutually exclusive categories of services, which position is clear from the expressions only and as the case may be used in the above text. The plea of inclusiveness of non-scheduled (passenger) services and non-scheduled (charter) services is anathema to anyone who would prudently like to go by the text of clause (ii)(a) of condition No.104 as per the established rule of strict interpretation of Exemption Notification.
24.10 For the reasons which we have already recorded, the assessee cannot be held to have provided non-scheduled (passenger) services as defined in clause (b) of Explanation to condition No.104.
24.11 Coming to the definition of non-scheduled (charter) services given under clause (c) of Explanation to condition No.104, we note that a non-scheduled (charter) air transport operator should provide such services under proper permit and with published tariff and should conform to the provisions of Charter CAR issued by DGCA under Rule 133A of the Aircraft Rules, 1937. The assessee did not have proper permit. The one issued to them was NSOP (passenger) and not NSOP (charter). The requirement of published tariff implies that the charter operations must also be open to members of the public. The assessee did not have a published tariff as alleged in the SCN and rightly found by the adjudicating authority. [The submission in the assessees appeal that there was no such allegation in the show-cause notice is factually incorrect]. Moreover, Charter CAR did not permit a 13-seater helicopter to be used for non-scheduled (charter) services. Therefore the air transport operations undertaken with the helicopter would not fit in the definition of non-scheduled (charter) services under clause (c) of Explanation to condition No.104. The argument of the assessees counsel that clause (c) of the Explanation is irrelevant is fallacious inasmuch as it is their own case that the scope of non-scheduled (passenger) services is wide enough to include non-scheduled (charter) operations undertaken with the imported helicopter. Condition No.104 is a substantive condition attached to entry No.347B of the Exemption Notification and the same has to be considered and construed in its entirety including the said clause (c). The interpretation of such a condition of Exemption Notification cannot be liberal as canvassed by the counsel lest it should defeat the very purpose of exemption. Contextually, we may also add that the view taken by apex court in The Tata Oil Mills case (supra) was dissented from by the court in the case of Gujarat State Fertilizers Co. vs. Collector 1997 (91) ELT 3 (S.C.) 24.12 The air transport services in question are neither of the kind defined under clause (b) [non-scheduled (passenger) services] nor of the one defined under clause (c) [non-scheduled (charter) services] of Explanation to condition No.104. The permit granted to the assessee by DGCA was NSOP (passenger) and the same could be used for non-scheduled (passenger) services only. In the undertaking given by them to the Deputy Commissioner, they had undertaken to use the aircraft for non-scheduled (passenger) services only. Obviously, the assessee violated the undertaking given to the Deputy Commissioner of Customs and committed breach of the above condition of Notification No.21/02-Cus. Clause (ii) of the condition, which lays down the requirement of the importer having to furnish an undertaking to the Customs department to use the imported aircraft only for the avowed purpose, embodies a post-importation condition. Where, in terms of such condition, the importer undertakes to the Customs department to use the imported goods for a specified purpose or in a specified manner, the latter has the correlative right to monitor the post-importation use of the goods and ensure that it is being used for the specified purpose or in the specified manner. It goes without saying that any breach of the undertaking will be actionable. The Customs authorities can proceed independently against the importer for any such breach of undertaking/violation of post-importation condition dehors Civil Aviation authorities interpretations or clarifications of CAR provisions. Even the assessee has acknowledged the jurisdiction of the Customs authorities vide Written Submissions dated 23.3.2011 filed by counsel. Here is an excerpt from para (E) of those submissions:
It is not the case of the Appellant that the customs authorities are in all cases bound by the interpretation and clarifications issued by the DGCA. The Customs, of course, have the power and the jurisdiction to consider if there is violation of an exemption notification under the Customs Act. We are of the opinion that the adjudicating authority correctly interpreted condition No.104 of the Exemption Notification in its exclusive jurisdiction and that DGCA cannot have any say in this matter. The cases of Bombay Chemicals [1982 (16) ELT 171 (Bom)] and Honeywell Technology [2008 (231) ELT 592 (Tribunal)] relied on by the assessee were correctly distinguished by the learned Commissioner. In our view, where non-scheduled (passenger) services and non-scheduled (charter) services have been defined in the Notification and the mutual exclusivity of these services has also been clearly spelt out therein, it is not permissible to borrow the definitions or other provisions from the Aircraft Rules or any CAR issued thereunder, for reading down the provisions of the Notification issued under Section 25 of the Customs Act. The Honble Bombay High Courts decision in Dimexons case (vide supra) lends support to this view. Para (5) of the High Courts judgment is reproduced below:-
5. When there be two Acts, may be both Special Acts what has first to be examined is the field that they cover. Duty is payable pursuant to the Customs Act. The Import and Export Act regulates the import or export of goods. In so far as levy of customs duty is concerned, the Customs Act is the Special Act. The issue whether any goods can be imported or exported has nothing to do with the assessment of customs duty. In our opinion, therefore, once the Notification is issued under Section 25 of the Customs Act that Notification alone would govern the issue of exemption of customs duty. In the instant case a Notification has been issued. The Notification under Serial No.67 of Table clearly uses the expression steel pots and steel counter pins made of steel as long as they are used for the manufacture of gem and jewellery for export. That has not been disputed. What has been contended is that by virtue of Exim Policy Press Pots are not entitled to the benefit of the said notification. In our opinion, the stand of the respondents would be contrary to the provisions of the Notification issued under Section 25 of the Customs Act. The Exim Policy cannot have the effect of reading down the Notification issued under the provisions conferred under Section 25 of the Customs Act. The denial, therefore, of the benefit to the petitioners herein would be without jurisdiction and consequently this petition will have to be allowed. [underlining added] The learned counsel has relied on certain clarificatory letters of DGCA (which were issued to some other importers) to argue that clause (ii)(a) of condition No.104 of Exemption Notification No.21/2002-Cus. (347B) as amended by Notification No.61/2007-Cus. should be read thus: the said aircraft shall be used only for providing non-scheduled services. He has also urged that clause (c) [definition of non-scheduled (charter) services] of Explanation to the said condition be ignored as irrelevant. To accept these arguments would mean reading down the substantive condition of the Exemption Notification, which is not permissible in view of the Honble High Courts ruling in Dimexons case. The said condition must be understood from the clear language of its text.
24.13 The appellants have contended that the power to determine whether they provided non-scheduled air transport services with the helicopter as per the permit issued to them or whether they violated the terms of the permit vests in DGCA (Civil Aviation Department) and that the Customs authorities have no jurisdiction to do so. The learned counsel has also argued vehemently to the same effect. We have already noted that DGCAs permit fulfils clause (i) of condition No.104. The permit was for providing non-scheduled (passenger) services. In terms of clause (ii) of the said condition, the importer undertook to the Customs department to use the imported helicopter for the said purpose only. As we have already observed, the correlative right to monitor the manner of use of the aircraft and determine whether it was being used for the said purpose as undertaken vested in the Customs department. The DGCAs authority to monitor the manner of utilization of the permit is, subtly, another thing which can, in no way, affect the above jurisdiction of the Customs department. In the case of Sheshank Sea Foods Pvt. Ltd. (vide supra), the Honble Supreme Court was considering a somewhat analogous question, i.e., whether the jurisdiction of Customs authorities under Ministry of Finance to investigate into the alleged domestic disposal of the imported (exempt) material in violation of a condition of Exemption Notification No. 116/88-Cus. was affected by the jurisdiction of the licensing authority under Ministry of Commerce to investigate into the alleged non-discharge of export obligation by the importer in breach of Import & Export Policy, 1988-91. The courts decision was as follows:-
10. We do not find in the provisions of the Import and Export Policy or the Hand Book of Procedure issued by the Ministry of Commerce, Government of India, anything that even remotely suggests that the aforesaid power of the Customs authorities had been taken away or abridged or that an investigation into such alleged breach could be conducted only by the licensing authority. That the licensing authority is empowered [to] conduct such an investigation does not by itself preclude the Customs authorities from doing so. (underlining added) The Revenue in the present case can draw support from the above decision of the apex court, which was also followed by this Tribunal in the case of Surya Samudra Holiday Resorts (vide supra). All objections raised by, and on behalf of, the appellants against the jurisdiction of the Customs department have only to be overruled.
24.14 The appellants have alternatively claimed the benefit of New CAR issued by DGCA on 1st June 2010. The learned counsel has argued that the provisions of New CAR have retrospective operation. Clause (2.1) of New CAR provides for non-scheduled air transport services to be carried out by single load multi-engine helicopters. Clause 2.7 reads as under:-
This CAR applies to all Non-Scheduled Operators Permit holders including those who have obtained their permits prior to the coming into force of this CAR. However, they shall comply with the requirements of para 4.2 (b) of this CAR, within 06 months of the date of effectivity of the CAR. [underlining added] Clause 3.2 (definition of scheduled air transport service) is pari materia with Rule 3(49) of the Aircraft Rules, 1937. Clause 3.3 (definition of non-scheduled air transport service) reads as under:-
Non-Scheduled air transport service means air transport service, other than a scheduled air transport service as defined in para 3.2 above, being operated for carriage of passengers, mail and goods, and includes charter operations. [underlining added] The learned counsel has highlighted the underlined provisions (supra) and has argued that, by virtue of clause 3.3 ibid, the charter operations undertaken by the assessee are also covered by the expression non-scheduled (passenger) service and, therefore, condition No.104 should be held to have been satisfied by them. The plea of retrospective operation of New CAR is untenable as this CAR does not say that it has retrospective effect. The document on its face indicates that the provisions are effective from 1st June 2010 (EFFECTIVE: FORTHWITH). Moreover, it appears from clause (2.7) ibid that a holder of NSOP issued prior to 1.6.2010 has to comply with the requirements of clause 4.2(b) of New CAR within six months from the date of effectivity (1.6.2010) of this CAR if he wants this CAR to be applicable to his permit. Clause 4.2(b) requires the NSOP holder to have a minimum paid-up capital as prescribed therein and to submit a certificate from the Banker/Chartered Accountant to confirm the paid-up capital of the company. This requirement has to be fulfilled within 6 months from 1.6.2010 by the permit-holder so that New CAR becomes applicable to his old permit w.e.f. 1.6.2010. The appellants have not claimed to have fulfilled the requirement. Even if it be assumed that they duly fulfilled it, the effect would be that the provisions of New CAR became applicable to their permit w.e.f. 1.6.2010, i.e., only prospectively. Therefore, the provisions of New CAR will not be retrospectively applicable to the permit [NSOP (passenger)] issued to the assessee by DGCA. The relevant provisions applicable to the permit are those of Passenger CAR for the purpose of the present case. If the assessee has not opted for New CAR by complying with clause 4.2(b) ibid, the copter operations will continue to be governed by Passenger CAR (obiter).
24.15 The learned counsel for the appellants has also heavily relied on the latest amendment to condition No.104 ibid brought about by Notification 21/2011-Cus. dated 1.3.2011. It has been argued that the new Explanation added to condition No.104 is clarificatory and hence retrospective in operation and consequently the assessee should be held to have duly complied with condition No.104 for the benefit of exemption under Notification 21/2002-Cus. (serial No.347B) as amended by Notification 61/2007-Cus. A partially amended text was substituted for condition No.104 by Notification No.21/2011-Cus. dated 1.3.2011. The new condition reads as follows:-
104. (i) the aircraft are imported by an operator who has been granted approval by the competent authority in the Ministry of Civil Aviation to import aircraft for providing non-scheduled (passenger) or non-scheduled (charter) services;
(ii) the importer is a dedicated company or partnership firm for the non-scheduled services; and
(iii) the importer furnishes an undertaking to the Deputy Commissioner of Customs or Assistant 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; 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 :- 1. For the purposes of this entry,-
(a) operator means a person, organization, or enterprise 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 mean services provide by a non-scheduled (charter) air transport operator, for charter or hire of an aircraft to any person, with published tariff, and who is registered with and approved by 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:
2. For the purposes of this exemption, use of such imported aircraft by a non-scheduled (passenger) operator for non-scheduled (charter) services or by a non-scheduled (charter) operator for non-scheduled (passenger) services, shall not be construed to be a violation of the conditions of import at concessional rate of duty. (underlining added) Two significant changes are that (1) the expression as the case may be which was present in erstwhile clause (ii)(a) of condition No.104 came to be deleted vide new clause (iii)(a) and (2) Explanation 2 was added. Prior to the amendment, clause (ii)(a) of condition No.104 read thus:-
The said aircraft shall be used only for providing non-scheduled (passenger) services or non-scheduled (charter) services as the case may be.
After the amendment, the relevant clause [(iii)(a)]reads as follows:-
The said aircraft shall be used only for providing non-scheduled (passenger) services or non-scheduled (charter) services.
The effect of deletion of the expression as the case may be is that the aircraft could be used for non-scheduled (passenger) services or non-scheduled (charter) services, which position is in accord with para 3.3 of New CAR issued by DGCA on 1.6.2010. In our view, the new Explanation (Explanation 2) was added only to clarify this position. It is settled law that an Explanation cannot be construed beyond the scope of what is provided under the main provision itself. It is added to avoid any ambiguity arising out of the main provision. In the instant case, the main provision is clause (ii)(a) of condition No.104. Apparently, it was necessary for the legislative authority to clear the ambiguity arising out of deletion of the expression as the case may be from clause (ii)(a) of condition No.104. The new Explanation was added for this limited purpose and hence the same cannot have retrospective operation. Before the said expression was deleted, there was no ambiguity and hence the new Explanation has no role to play in the erstwhile clause (ii)(a). It just clarifies the new clause (iii)(a).
24.16 The above amendments can be looked at from another angle also. During the regime of Passenger CAR and Charter CAR (PART III AND PART V, RESPECTIVELY, OF SECTION 3, AIR TRANSPORT SERIES C, CIVIL AVIATION REQUIREMENT), NSOP (passenger) could be used only for non-scheduled (passenger) services and NSOP (charter) could be used only for non-scheduled (charter) services. The two permits were not allowed to be used interchangeably. In other words, NSOP (passenger) could not be used for non-scheduled (charter) services and NSOP (charter) could not be used for non-scheduled (passenger) services. It was with the coming into force of New CAR on 1.6.2010 (PART III (AMENDED), SECTION 3, AIR TRANSPORT SERIES C, CIVIL AVIATION REQUIREMENT) that charter operations also came to be included in the definition of non-scheduled air transport service operated for carriage of passengers, mail and goods vide para 3.3 of New CAR. [Incidentally, the appellants theory of passenger/charter dual operations under para (9.2) of Passenger CAR came to be demolished with the coming into force of para (3.3) of New CAR on 1.6.2010]. The Central Government, apparently, took note of the changed scenario and issued Notification No.21/2011-Cus. deleting the expression as the case may be from clause (ii)(a) of condition No.104 and adding a new Explanation to the said condition. As the import in question took place during the previous regime, the importer cannot claim the benefit of the amending Notification 21/2011-Cus. dated 1.3.2011.
24.17 The learned counsel for the appellants has also strongly opined that the substantive issue in this case is squarely covered by the decision of the co-ordinate Bench in Sameer Gehlots case (supra). In that case, M/s. Airmid Aviation Services Pvt. Ltd. (AASPL, for short) had imported a helicopter in February 2008 availing exemption under Notification 21/2002-Cus. dated 1.3.2002 (serial No.347B) as amended by Notification 61/2007-Cus. The benefit was availed by the importer by producing permit dated 30.1.2008 issued by DGCA for operating non-scheduled air transport services (passenger). Subsequent to the duty-free clearance of the aircraft by AASPL, the department issued a show-cause notice to them demanding customs duty of over Rs.6.74 crores, proposing to confiscate the aircraft and to impose penalty on the importer and others. The demand of duty and other proposals were contested by the importer. In adjudication of the dispute, the Commissioner of Customs took the view that the importer had correctly availed exemption from payment of duty on the helicopter. Her decision was reviewed by a Committee of Chief Commissioners and accordingly appeals were filed by the department. These appeals came to be dismissed by a co-ordinate Bench of the Tribunal. We have perused the full text of the Tribunals order in AASPLs case reported as Commissioner of Customs, New Delhi vs. Sameer Gehlot 2011 (263) ELT 129 (Tri.-Del.).
24.18 We have carefully studied the order of the co-ordinate Bench. The Bench considered the two parts of condition No.104 of Notification 21/2002-Cus. (serial No.347B) as amended by Notification 61/2007-Cus., the first part being that the importer should have been granted approval by the competent authority in the Ministry of Civil Aviation to import the aircraft and the second part being that the importer should furnish an undertaking at the time of import to the Assistant Commissioner/Deputy Commissioner of Customs. The entire condition No.104, however, was treated as a pre-importation condition and it was held that this condition was complied with by the importer by producing DGCAs permit for non-scheduled air transport services (passenger) and furnishing an undertaking to the effect that the aircraft would be used only for providing non-scheduled (passenger) services. The Bench took the view that the exemption Notification did not provide a post-importation condition. It opined that the Customs authorities were not expected to monitor the aircraft operations to find out whether the operator violated the permit granted by the Civil Aviation authority. Where the DGCA had granted permit for non-scheduled (passenger) operations and had renewed it from time to time and did not report to the Customs authorities that the importer had violated the terms of the permit, it was not open to the Customs authorities to take a different view and deny exemption to the importer on the ground that the latter had used the aircraft for charter operations in violation of the permit issued by DGCA. In the result, the benefit of exemption was held to be admissible to the importer.
24.19 With great respect, we have to say that we are unable to persuade ourselves to follow Sameer Gehlot (supra) as a binding precedent, for the following reasons:-
(a) The decision in that case holding the importer (AASPL) to be eligible for exemption from payment of duty of customs on the helicopter under Notification 21/2002-Cus. (serial No.347B) as amended by Notification 61/2007-Cus. is based inter alia on the premise that the second part [i.e., clause (ii)] of condition No.104 is also a pre-importation condition. This part of the condition is to the effect that the importer should furnish, at the time of importation, an undertaking to the Deputy Commissioner of Customs or the Assistant Commissioner of Customs that (a) the imported aircraft shall be used only for providing non-scheduled (passenger) services or non-scheduled (charter) services, as the case may be, and (b) that he shall pay on demand, in the event of his failure to use the aircraft for the specified purpose, an amount equal to the duty payable on the aircraft but for the exemption under the Notification. To our mind, this condition relating to undertaking has two aspects viz. the factum of undertaking and the subject of undertaking. The view taken by the Bench that this condition is a pre-importation condition overlooks the fact that the subjects of undertaking are post-importation. Though the factum of undertaking takes place at the time of importation, the subjects of undertaking are things of the future. One of the two subjects of undertaking is that the aircraft shall be used for the avowed purpose only. The second subject of undertaking is that the duty of customs should be paid, on demand, by the importer in the event of his failure to use the aircraft for the avowed purpose. Both are things to happen post-importation. This crucial aspect did not receive the attention of the Honble Bench when it took the view that the condition was only a pre-importation condition. The view was taken per incuriam. Salmond on Jurisprudence (12th Edition by P.J. Fitzgerald), dealing with applicability of the rule of per incuriam, says as under:-
A precedent is not binding if it was rendered in ignorance of a statute or a rule having the force of statute, i.e., delegated legislation. This rule was laid down for the House of Lords by Lord Halsbury in the leading case, and for the Court of Appeal it was given as the leading example of a decision per incuriam which would not be binding on the court. The rule apparently applies even though the earlier court knew of the statute in question, if it did not refer to, and had not present to its mind, the precise terms of the statute. Similarly, a court may know of the existence of a statute and yet not appreciate its relevance to the matter in hand; such a mistake is again such incuria as to vitiate the decision. Even a lower court can impugn a precedent on such grounds. In Sameer Gehlots case (AASPLs case), the post-importation nature of the subjects of undertaking was not appreciated by the Bench while taking the view that the requirement of undertaking to be made by the importer was a pre-importation condition. The mistake vitiated the decision. This is the reason why, with great respect, we consider the decision in AASPLs case as having been rendered per incuriam.
(b) That case is also distinguishable on facts from the present case. (I) In that case, the department had not proceeded in terms of the undertaking executed by M/s. AASPL. Per contra, in the present case, the department took positive action to find out whether the undertaking given by the assessee was being honoured by them. By examining the terms of the charter-hire agreement between the assessee and Heligo and by conducting scrutiny of connected documents and by collecting further information from the assessee in relation to the flight operations conducted under the said agreement, the department ascertained whether the assessee was acting in terms of the undertaking furnished by them. (II) In AASPLs case, the Bench also considered a few letters issued by DGCA clarifying that a permit to operate non-scheduled (passenger) services also allowed the operator to operate non-scheduled (charter) services. It is not clear whether such letters were issued in relation to the permit granted by DGCA to AASPL or to some other operators. In the present case, it is not in dispute that DGCA is yet to give a reply to the assessees request for clarification. (III) In the case of AASPL, there was no proposal in the show-cause notice to deny them exemption on the ground that the imported aircraft was used for charter services without published tariff, unlike in the present case.
(c) It appears from the judgment of the co-ordinate Bench that it considered a letter dated 20.7.2010 of DGCA which referred to the amended CAR, apparently the same as New CAR issued on 01/06/2010 by DGCA. The bench thus seems to have taken into account DGCAs clarification or opinion based on New CAR. The judgment, however, does not indicate that the question whether this CAR has retrospective operation was considered.
24.20 To summarize our findings:-
* Permit No. 11/2006 issued to the assessee by DGCA was to operate non-scheduled (passenger) services with the imported helicopter; it could not be used for operating non-scheduled (charter) services; it was governed by the provisions of Passenger CAR, and not by that of Charter CAR nor by that of New CAR.
* The assessee neither provided non-scheduled (passenger) services as defined under Explanation to Condition No. 104 of Notification No. 21/02-Cus. dated 01/03/2002 (347B) as amended by Notification No. 61/07-Cus. dated 03/05/2007 nor provided non-scheduled (charter) services as defined under the said Explanation, by using the helicopter.
* Though the assessee complied with clause (i) of the Condition No. 104 ibid, they violated the post-importation condition viz. Clause (ii) of the said Condition No. 104. They also violated similar condition of Notification No.6/06-CE dated 01/03/2006 (entry No. 54A) as amended by Notification No. 6/07-CE dated 01/03/2007.
* On account of the above violation, the assessee is not eligible for exemption from BCD under Notification No. 21/02-Cus. (entry No.347B) as amended by Notification No. 61/07-Cus or for exemption from CVD under Notification No. 6/06-CE dated 01/03/2006 (entry 54A) as amended by Notification No. 6/07-CE dated 01/03/2007. Consequently, they cannot, also, claim the benefit of Notification No.20/2006-Cus. dated 1.3.2006 (entry No.1) in respect of SAD.
* Amendments brought to Condition No. 104 ibid by Notification No. 21/2011 dated 01/03/2011 are not applicable to this case.
* Decision in AASPLs (Sameer Gehlots) case cannot be followed as precedent.
Therefore we hold that the assessee is liable to pay duties of customs totaling to Rs. 8,68,53,254/- (with interest under Section 28AB of the Customs Act) on the helicopter imported by them vide Bill of Entry No. 520260 dated 05/04/2008.
OTHER ISSUES
25. As to manner of demand of duty:
The appellants find fault with the demand of duty raised by the adjudicating authority in terms of the bond executed by them. It is submitted that no demand of this kind was proposed in the show-cause notice, which invoked Section 28(1) of the Customs Act read with the undertaking dated 5.4.2008 of the appellants. This objection has been reiterated in the written submissions also. JCDR has cited two decisions, viz., Endress + Hauser Flowtec (I) Pvt. Ltd. vs. Commissioner 2009 (237) ELT 598 (Tri.-Mum.) and Sravani Impex (P) Ltd. vs. DRI 2010 (252) ELT 19 (AP) in his bid to defend the Commissioners order. After considering the submissions, we have not found any substance in the aforesaid submission made by the appellants. It is not in dispute that the show-cause notice invoked the applicable provision of law, viz., Section 28(1) of the Customs Act to demand duty. As the demand arose out of violation of clause (ii)(a) of condition No.104 of the Exemption Notification, the assessees undertaking to pay the duty on demand in the event of such violation [vide clause (ii)(b) of condition No.104] was also appropriately invoked in the show-cause notice. The order-in-original in para (32) thereof says that the duty is payable in terms of the Bond executed under Condition 104 of Notification 21/2002-Cus.. The reference to Bond here is, obviously, a reference to the undertaking furnished by the importer in terms of the said condition No.104 of the Exemption Notification inasmuch as, in the text of the undertaking itself, the term bond was used thus: In witness whereof the parties have . executed this bond. The word bond appearing in the operative part of the order cannot have any different connotation. The undertaking was to pay the duty on demand. The show-cause notice demanded it under Section 28(1) of the Customs Act, read with the undertaking. The adjudicating authority confirmed the demand of duty in terms of the undertaking under Section 28(2) of the Customs Act. We can only take this view for the simple reason that, undoubtedly, the dispute relating to duty liability was adjudicated under sub-section (2) of Section 28 of the Act. If the demand of duty is under sub-section (1) of Section 28, its confirmation by the adjudicating authority can only be under sub-section (2) of that Section, which position is indisputable and undisputed. Nothing turns on non-mention of Section 28 in the operative part of the Commissioners order. Therefore, to our mind, the question raised by the appellants is only trivial. In any case, the question can be answered only in favour of the Revenue in view of judicial decisions to the effect that a demand of duty is not vitiated by wrong provision of law being invoked to confirm it vide Endress + Hauser case (supra) wherein J.K. Steel vs. UOI 1978 (2) ELT J355 (SC) was followed.
26. As to limitation:
(i) The show-cause notice, which was issued beyond the normal limitation period of six months, invoked the extended period of limitation under the proviso to Section 28(1) of the Customs Act on the ground that the assessee had availed duty exemption by willfully misstating and suppressing the facts regarding the intended use of the said helicopter leading to non-levy of appropriate duty of customs. In the reply to the notice, it was submitted that there had been no violation of the permit issued by DGCA or the Aviation Laws or condition No.104 of the Exemption Notification and, therefore, there was no question of demanding any duty or interest in the extended period of issue of notice available under Section 28 as alleged. In the impugned order, a reference to time-bar is seen in para (32) which reads as follows:-
32. However, I find that this is a matter of interpretation of Notification 21/2002-Cus. There is no collusion, willful mis-statement or suppression of facts on the part of KRACPL or its Managing Director. Therefore, I do not consider it necessary to impose any penalty under section 114A of the Customs Act, 1962. But this finding does not ipso facto mean that the demand for duty is time barred. The duty is payable in terms of the Bond executed under Condition 104 of Notification 21/2002-Cus.
In the assessees appeal, the challenge is seen confined to one sentence reading: The Commissioner failed to appreciate that the demand under the show-cause notice was time-barred. Nothing was added by amending the memorandum of appeal, nor was the above challenge sought to be amplified through written submissions or otherwise at the bar. The assessee has not set up any firm contest vis-`-vis the extended period of limitation invoked in the SCN on the alleged ground of suppression and wilful misstatement of facts.
(ii) Yet another reason for rejecting the plea of limitation is that, when a post-importation condition in an Exemption Notification is not fulfilled, the department can demand the duty without any bar of limitation as held by a larger bench of the Tribunal in the case of Bombay Hospital Trust vs. Commissioner 2005 (18) ELT 374 (Tri.-LB) affirmed by the Honble High Court vide 2006 (201) ELT 555 (Bom.)
(ii) Apart from the above, there is better reason why the demand of duty cannot be held time-barred. The Honble High Court had, by final order dated 27.1.2009 in W.P. No.2184 of 2008 filed by the assessee, permitted the Customs department to issue show-cause notice within two weeks from the said date. The courts order reads:-
Mr. Sethna, learned senior counsel for respondents 1 and 2 states that the issue raised in this petition is similar to the matter which is being adjudicated upon at Delhi where the hearing before the adjudicating authority is complete and the order is awaited. He states that in view of this, respondent 2 shall issue show cause notice to the petitioner within two weeks from today. He further states that hearing will be completed within a period of two weeks thereafter and orders will be passed within a period of two weeks of conclusion of the hearing. The above statements are accepted. The show-cause notice was accordingly issued on 9.2.2009. The appellants, having accepted the above order of the Honble High Court, are estopped from raising the plea of time-bar against the demand of duty raised in the notice.
27. As to confiscation:
The aircraft was confiscated in terms of clauses (d) and (o) of Section 111 of the Customs Act. There is no valid ground against the confiscation in these appeals. It is not in dispute that the assessee-company is not in the category of persons who were unconditionally permitted under DGFTs Notification No. 2 (RE2006)/2004-09 dated 07/04/2006 to import aircrafts/helicopters without import licence. For a person who had obtained DGCAs permit for operating scheduled or non-scheduled air transport services, the Notification allowed conditional permission to import aircraft/helicopter without DGFTs import licence, the condition being that the import and use of the aircraft/helicopter should be in accordance with the permit. The appellants imported the helicopter in question without DGFTs licence and caused it to be used in violation of the terms of DGCAs permit. Such user of the helicopter rendered it liable to confiscation under Section 111(d) of the Customs Act for want of import licence from DGFT. The appellants cleared the aircraft at Customs free of duty by availing exemption subject to a post-importation condition but subsequently violated the condition thereby rendering the goods liable to confiscation under Section 111(o) of the Act also. The learned Commissioners order of confiscation is, therefore, liable to be upheld. As no grievance has been raised against imposition of fine in lieu of confiscation, no question arises as to the quantum of fine.
28. As to penalty:
(i) Any issue as to penalty under Section 114A of the Customs Act has not arisen in these appeals.
(ii) The appellants are aggrieved by the penalties imposed on them under Section 112 of the Act. Their contention is that no such penalty could have been imposed on them inasmuch as (a) the helicopter was not liable to confiscation and (b) the adjudicating authority itself found that there was no collusion, wilful misstatement or suppression of facts on their part. It is submitted that they did not do anything contumaciously or mala fide and hence not liable to be penalized. At the outset, we may observe that one ground stated by the appellants no longer exists, now that the confiscation of the helicopter stands sustained. As regards collusion, wilful misstatement etc., we note that the relevant findings were recorded by the learned Commissioner for purposes of Section 114A of the Act and the same cannot be invoked for challenging the penalties imposed under Section 112 of the Act. When the helicopter imported by the appellants was found to be liable to confiscation under Section 111(d) and (o) of the Act, the question arose as to who rendered it so liable. In our view, the learned Commissioner did not err in finding against the appellants on this question. On our own perusal of the records, it emerges that the appellants ab initio intended to use the aircraft for charter operations in violation of NSOP (passenger) granted by DGCA for non-scheduled (passenger) operations. Though at the time of import, they undertook before the Customs authorities to use it only for operating non-scheduled (passenger) services, the copter was actually given on charter-hire to a private company (Heligo) which, in turn, chartered it to third party companies. The recitals of the charter-hire agreement dated 14.4.2008 between the assessee and Heligo indicate that the latter had already obtained contracts awarded by third party companies for prospective charter operations with the helicopter in question. The statement given by the Managing Director under Section 108 of the Customs Act also fairly reveals the fact that the intention to use the helicopter for charter operations dates back to the time of import. If that be so, it can be reasonably held that, when the appellants gave the aforesaid undertaking to the department, they knew that they were going to violate it. They cannot be heard to say that they were not aware of the provisions of Passenger CAR or of the scope of NSOP (passenger) issued by DGCA. In our view, the appellants are liable for contumacious conduct by which they rendered the aircraft liable to confiscation. The penalties imposed on them under Section 112 are only liable to be upheld.
29. In the result, the appeals are dismissed.
(Pronounced in Court on 17.6.2011) (Sahab Singh) Member (Technical) (P.G. Chacko) Member (Judicial) tvu 1 59