Facts of the Case

  • The appellant, East India Hotels Ltd., imported an aircraft (Hawker 850 XP) claiming exemption under Notification No. 21/2002-CUS.
  • The exemption required that the aircraft be used only for non-scheduled (passenger) or charter services.
  • The appellant obtained DGCA approval and furnished an undertaking to use the aircraft accordingly.
  • However, the aircraft was used for transporting company officials and directors without any remuneration.
  • A Show Cause Notice alleged misuse of exemption and evasion of customs duty (~₹13.92 crores).
  • The aircraft was confiscated under Section 111(o), and the Tribunal upheld the order. 

Issues Involved

  1. Whether use of aircraft for transporting company officials without remuneration qualifies as non-scheduled (passenger) services.
  2. Whether the appellant complied with Condition No. 104 of Notification No. 21/2002-CUS.
  3. Whether customs authorities can examine compliance despite DGCA approval.

Petitioner’s Arguments

  • The appellant held a valid NSOP permit from DGCA.
  • No violation was found by DGCA; hence customs authorities cannot question usage.
  • Non-scheduled services include even non-revenue flights.
  • Relied on precedent:
    • Reliance Transport v. Commissioner of Customs

Respondent’s Arguments

  • Aircraft was used for private purposes, not for providing air transport services.
  • No remuneration was charged, hence not “air transport service” under Rule 3(9).
  • Violation of Condition No. 104 leads to denial of exemption and duty liability.

Court Findings / Analysis

  • “Air transport service” requires transport for remuneration.
  • Non-revenue flights do not qualify as air transport services.
  • Therefore, such use cannot be classified as non-scheduled (passenger) services.
  • Customs authorities are empowered to verify compliance with exemption conditions independently of DGCA.
  • Tribunal erred in some reasoning (public tariff requirement), but final conclusion was correct.

Court Order / Final Decision

  • Appeal dismissed.
  • Court held that the appellant failed to comply with Condition No. 104.
  • Exemption benefit denied; duty liability upheld.

Important Clarifications by Court

  • Non-scheduled services do not require public tariff publication (Tribunal incorrect on this point).
  • However, remuneration is essential to qualify as air transport service.
  • DGCA approval does not bar customs authorities from examining exemption compliance.

 Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/VIB31012023CUSAA52020_194850.pdf

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