ELP clears the path for Airmid Aviation 1st CESTAT decision on Aircraft Imports under Non-Scheduled Operators Permit in favour of Importers

ELP (Economic Laws Practice) has been successful in its very first final hearing heard by the CESTAT (Custom Excise & Service Tax Appellate Tribunal) on the issue of duty free imports of aircraft under Non-Scheduled Operator’s Permit (NSOP) on behalf of Airmid Aviation, an Indiabulls group company.

ELP (Economic Laws Practice) has been successful in its very first final hearing heard by the CESTAT (Custom Excise & Service Tax Appellate Tribunal) on the issue of duty free imports of aircraft under Non-Scheduled Operator’s Permit (NSOP) on behalf of Airmid Aviation, an Indiabulls group company.

ELP represented Airmid Aviation with Partner Tarun Gulati and Associate Kishore Kunal.

Speaking to Bar & Bench, Partner Tarun Gulati said, “This is an industry worldwide issue and the Customs Department was unreasonably denying the benefit of the exemption. This is the first decision which resolves the controversy in favour of the importers. The Tribunal has correctly held that, use of aircraft by group company’s is not prohibited. Hopefully with this decision, this controversy will die down”.

A.K. Raha, Ex-Central Board of Excise and Customs Member, appeared for the Customs Department.

The CESTAT has dismissed the departmental appeal. This decision is likely to have an industry wide impact, as more than 25 cases have been initiated by the Customs Authorities against various corporate groups on similar allegations.

The Customs Department has initiated proceeding against various importers of aircrafts on the allegations that benefit provided under their notification has been wrongly put to use.  

Exemption Notification:

As per Serial No.347 B of the exemption notification, all kinds of aircraft are entitled to a NIL rate of basic customs duty subject to condition No. 104 of the exemption notification. Condition 104, inter alia, stipulates that the aircraft has to be imported by an operator who has been granted approval by the competent authority in the Ministry of Civil Aviation for providing non-scheduled (passenger) services and non-scheduled (charter) services. Accordingly, the Importers availed the benefit of the exemption notification and imported aircraft/ helicopters to provide NSOP services.

Show cause notices to importers were issued on the allegations of usage of aircraft for group company requirements amounting to “private use” and therefore, the benefit of the exemption notification cannot be extended to such importers. Later, the department took a stand that “charter services” are not permissible under the NSOP (Passenger) Permit and importers conducting charter operations were violating the conditions of the exemption notification. Several other allegations were made against importers including that the absence of a published tariff, was also a violation of the conditions.

Airmid Aviation had succeeded before the Commissioner, but the Customs Department filed an appeal before the CESTAT primarily on the ground that charter services were not permitted under the NSOP (Passenger) Permit.

The Customs Departmental Appeal was dismissed by the CESTAT on holding that:

• Charter operations are permitted under the NSOP (Passenger) permit;
• There is no restriction under the exemption notification which prohibits a group company use, if it is for remuneration;
• The DGCA, which is the jurisdictional authority, had clarified that charter operations and group company operations were permitted;
• The exemption notification did not contain provisions which permitted the customs authorities to monitor the use after importation and the DGCA, in this case, had not found any violation of the conditions of the NSOP issued by it;
• The ground taken by the Department in the Appeal to the effect that charter operations were not permitted were beyond the show cause notice;
• The Department’s allegation that the Importer did not have a published tariff was incorrect as the condition for published tariff was meant only for operators registered as NSOP (Charter).

There are various cases against big corporate groups in India are pending with the likes of Reliance, Unitech, Punj Lloyd, GMR, Global Vectra.

(C/493-497/2009)