CESTAT Delhi Denies Customs Exemption For IMFA Helicopter Used In Non-Revenue Flights

The Customs, Excise and Service Tax Appellate Tribunal at New Delhi has reiterated that non-revenue flights cannot qualify as air transport services for customs duty exemption.

“Flight service for no remuneration at all would not qualify to be considered as air transport service,” the tribunal noted, relying on the Delhi High Court's ruling in East India Hotels Ltd. while examining the use of an imported helicopter.

A Bench of President Justice Dilip Gupta and Technical Member Hemambika R. Priya upheld the confiscation of a Robinson R-44 Raven II helicopter imported duty-free by Indian Metal and Ferro Alloys Ltd.

The company had claimed exemption under Notification No. 21/2002-Cus, as amended in 2007, which permits duty-free import of aircraft for non-scheduled passenger or charter services, subject to strict conditions.

One such condition requires the aircraft to be used only for those services and provides for recovery of duty if the condition is breached.

The customs department alleged that the helicopter was predominantly used by company officials for private travel without earning any remuneration.

Based on aircraft log-book records, the tribunal found that, excluding test and ferry flights, about 80% of the flying hours were private, non-revenue flights, while only around 20% were charter operations.

“There is, therefore, no substantial compliance of Condition No. 104 of the Exemption Notification,” the tribunal held.

On this basis, it upheld confiscation of the helicopter and confirmed recovery of customs duty under the undertaking furnished at the time of import.

However, the tribunal set aside penalties imposed on the company's Vice-Chairman and Senior Manager under Section 112 of the Customs Act.

It held that mere violation of exemption conditions is not sufficient to impose personal penalties unless knowledge or intentional abetment is established.

Finding no such determination in the impugned order, the tribunal ruled that penalties on individual officers were unsustainable in law.

Consequently, the department's appeal seeking enhancement of penalties was also dismissed.

For Appellants: Advocates Tushar Jarwal, Vikrant Maheshwari and Daliya Singh

For Respondents: Advocates P.R.V. Ramanan, Special Counsel, Rakesh Kumar and Shri Girijesh