CESTAT Mumbai Sets Aside ₹6.01 Crore Duty Demand Against Navayuga Engineering Over Helicopter Parts
On 22 September, the Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) set aside a Rs. 6.01 crore customs duty demand against Navayuga Engineering Company Limited, holding that helicopter parts used to transport personnel for infrastructure projects qualified as “capital goods” eligible for customs duty exemption.
A Bench comprising Judicial Member Ajay Sharma and Technical Member M.M. Parthiban also held that Navayuga and Krishnapatnam Port Company Limited (KPCL) qualified as “group companies” under the Foreign Trade Policy, allowing the former to use KPCL's scripts. The Tribunal held:
“...In view of the above statutory provisions relating to air transport operation of passengers, we are of the view that the appellants use of helicopters in relation to their infrastructure projects, can be considered as 'capital goods' under the definition provided under FTP and paragraph 3.12.6 of the FTP applicable for SFIS imports and 3.17.5 of the FTP applicable for SHIS imports.”
Navayuga Engineering imported capital goods, machinery, spare parts and other equipment during 2007-08 to 2013-14 and claimed customs duty exemptions under the Export Promotion Capital Goods (EPCG), SFIS and SHIS schemes using licences and scrips issued to KPCL.
The Directorate of Revenue Intelligence (DRI) alleged that Navayuga Engineering and KPCL did not qualify as “group companies” and that Navayuga Engineering had improperly used KPCL's export earnings and duty credit scrips. It also disputed the exemption claimed on the helicopter parts, contending that the helicopter was imported and used for private purposes.
The adjudicating authority had earlier dropped proceedings relating to a Rs. 17.03 crore demand concerning EPCG licences. In another order, it dropped a Rs. 62.96 crore demand but confirmed Rs. 6.01 crore towards customs duty on the helicopter parts, along with interest, and imposed redemption fine and penalties.
The Bench noted that the Directorate General of Foreign Trade (DGFT), after consultation with the Department of Legal Affairs, had clarified on 22 February 2017 that Navayuga Engineering and KPCL were group companies under Paragraph 9.28 of the Foreign Trade Policy, 2009-14.
It noted that common directors held 64.30% shareholding in Navayuga Engineering and 36.96% in KPCL. Since both entities were companies and satisfied the criteria prescribed under the Foreign Trade Policy, the Bench held that they qualified as group companies.
The Tribunal also relied on the Supreme Court's decision in Tata Teleservices, which upheld recognition of group companies based on indirect control. On the helicopter parts, it noted that the helicopters were used to transport company personnel and other persons connected with monitoring infrastructure projects involving roads, bridges, marine development and turnkey projects.
It held that the reference to “private use” in the Directorate General of Civil Aviation (DGCA) permission did not mean personal use. Given the broad definition of “capital goods” under the Foreign Trade Policy, the Bench held that the helicopter parts qualified as capital goods and were eligible for exemption under the relevant SFIS and SHIS provisions.
Further, the Tribunal held that the extended period of limitation could not be invoked as the issue regarding the group-company status had already been brought to the department's knowledge and Navayuga Engineering had obtained and furnished the DGFT clarification.
Accordingly, the CESTAT set aside the Rs. 6.01 crore duty demand, along with the consequential confiscation, redemption fine and penalties. It dismissed the Revenue's appeals and allowed Navayuga Engineering's appeal with consequential relief.
For Appellant: Dr. C. Manickam, Advocate
For Respondent: Shri C.S. Pavan, Authorized Representative