East INDIA Hotels LTD. vs. Commissioner Of Customs, Central Excise And Central GST, New Delhi

Facts

East India Hotels Ltd. (the appellant) imported an aircraft on 21.05.2007, availing a customs duty exemption under Notification No. 21/2002-CUS, as amended by Notification 61/2007-CUS. This exemption was conditional upon the aircraft being used solely for providing non-scheduled (passenger) or non-scheduled (charter) services, as per Condition no. 104 of the Notification. The appellant furnished an undertaking to this effect, agreeing to pay approximately ₹13.92 crores in customs duty if the condition was violated. The respondent, Commissioner of Customs, issued a Show Cause Notice on 27.06.2008, alleging that the aircraft was used for private purposes, thus violating the undertaking and the Notification. The Commissioner passed an order on 27.07.2010, confiscating the aircraft. The Customs, Excise and Service Tax Appellate Tribunal (Tribunal) dismissed the appellant's appeal on 14.01.2020, holding that the aircraft was used for private purposes and not for the specified services, thereby violating Condition no. 104.

Held

The Court held that the appellant had not complied with Condition no. 104 of the Notification. While the Court disagreed with the Tribunal's specific reasoning that non-scheduled (passenger) services must entail providing air transport services to the public at large on payment of a published tariff, it agreed with the ultimate conclusion that the appellant had failed to meet the condition. The Court found that the appellant had not used the aircraft for providing air transport service for remuneration of any kind. The Court distinguished the present case from the precedents relied upon by the appellant, Reliance Transport v. Commissioner of Customs and Global Vectra Helicorp Ltd. and Ors. v. Commissioner of Customs (Import) and Ors., stating that the facts in Reliance Transport were materially different as the appellant in that case had used the aircraft for remuneration. The Court also noted that the Global Vectra Helicorp case supported the view that non-scheduled (passenger) services must entail transport of persons or things for remuneration. Therefore, the question of law was answered in the negative, meaning the Tribunal's conclusion that the appellant had not complied with the condition was upheld.

Key Issues

1. Whether the learned Tribunal erred in misinterpreting Customs Notification No. 21/2002-CUS, as amended by Notification 61/2007-CUS, and concluding that the appellant had not complied with the conditions for availing duty exemption under the Notification? The appellant argued that its use of the aircraft for its officials and Board of Directors qualified as providing non-scheduled (passenger) services, thus meeting the condition for duty exemption. The appellant relied on its DGCA permit to operate non-scheduled (passenger) services and argued that the Tribunal's interpretation was too narrow. The respondent (Revenue) argued that the aircraft was used for private purposes and not for providing non-scheduled (passenger) or non-scheduled (charter) services as stipulated in Condition no. 104 of the Notification. The Tribunal's finding that the appellant had not complied with the conditions for exemption was based on its interpretation of the Civil Aviation Requirement Rules (CAR), air transport circulars, and a DGCA letter, which categorized private aircraft usage differently from non-scheduled operator services. The Tribunal concluded that the exemption was not available for private operators.