CESTAT Delhi Sets Aside ₹19.76 Crore Customs Duty Demand on Privilege Airways Over Falcon 2000 Aircraft Import

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) at New Delhi recently set aside a customs duty demand of nearly Rs 19.76 crore raised against Privilege Airways Pvt. Ltd. over the import of a Falcon 2000 aircraft.

The tribunal held that an aircraft imported for non-scheduled passenger services can also be used for non-scheduled charter services under Notification No. 21/2002-Customs.

The Bench of Judicial Member S. S. Garg and Technical Member P. V. Subba Rao held that such use is permissible under the exemption notification.

Privilege Airways had imported the Falcon 2000 aircraft by claiming the duty exemption available to operators providing non-scheduled passenger services. As required under the notification, the company undertook at the time of import that the aircraft would be used for that purpose.

The issue surfaced later when customs authorities found that the aircraft had been chartered to Housing Development & Infrastructure Ltd. (HDIL). The aircraft was allegedly used exclusively by the directors of HDIL, who were also directors of Privilege Airways.

The department alleged that this violated conditions of the exemption notification. A show cause notice dated May 25, 2009, was issued seeking recovery of Rs 19.76 crore in customs duty along with confiscation of the aircraft and penalties.

An order passed by the Commissioner of Customs (Preventive), New Delhi, on July 30, 2010, brought the proceedings to a head. The commissioner denied the exemption and confirmed the duty demand against the company.

Before the tribunal, the dispute narrowed to a single question: could an aircraft imported for non-scheduled passenger services also be used for charter operations?

In answering this, the tribunal referred to the Larger Bench ruling in VRL Logistics, which clarified that aircraft imported for non-scheduled passenger services may also be deployed for non-scheduled charter services.

Following the ruling, the tribunal held that the impugned order could not be sustained.

The tribunal set aside the impugned order and granted relief to the airways. 

For Appellant: None

For Respondent: Shri Gurdeep Singh Special Counsel for the Respondent