Pranav B Prem

The Principal Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi has set aside a demand of ₹8.84 crore in customs duty along with interest, penalty and confiscation imposed on Decore Exxoils Pvt. Ltd., formerly Bhaskar Essoils Pvt. Ltd., over alleged misuse of duty exemptions granted for the import of a Learjet 60XR aircraft. The Directorate of Revenue Intelligence (DRI) had alleged that the company failed to comply with exemption conditions applicable to non-scheduled air transport services and violated statutory requirements governing charter operations. After examining the record and the applicable legal framework, the Tribunal concluded that the company had not breached the exemption conditions and that the DRI’s findings could not be sustained.

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Decore Exxoils had imported the aircraft in December 2010 by claiming concessional duty under Notification No. 21/2002-Cus and Notification No. 6/2006-CE, based on an undertaking that the aircraft would be used exclusively for non-scheduled air transport services. The company obtained a No Objection Certificate and subsequently a valid Non-Scheduled Operator Permit (NSOP) from the DGCA in January 2011. It operated charter services under the trade name DB Air and issued invoices after each chartered flight. However, in June 2015, the DRI seized the aircraft and issued a show cause notice alleging that the aircraft had been used privately by promoters of the Dainik Bhaskar Group without adherence to conditions of the exemption notification, including non-issuance of passenger tickets and non-publication of tariffs under the Civil Aviation Requirements (CAR 2010). The DRI also claimed that the company was not a “dedicated” air charter operator and that spare parts were not utilised in accordance with the exemption conditions.

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The Tribunal found these allegations to be contrary to binding judicial precedents. Referring to the Delhi High Court judgment in Global Vectra Helicorp Ltd., the bench held that NSOP holders are permitted to operate revenue charter flights for group companies so long as they are operated for consideration. The Tribunal also noted that CAR 2010 does not mandate issuance of individual passenger tickets for charter flights, as a single consolidated document satisfies the requirement. It further recognised that Decore Exxoils had charged remuneration for all flights, including those flown for group entities, thereby meeting the definition of “air transport service”. The assertion that the company was ineligible for exemption because it was not a “dedicated” air charter operator was rejected after examining the Memorandum and Articles of Association, which confirmed that providing air transport services was one of the principal objectives of the company. The Tribunal accordingly held that the company had not violated condition 104 of the exemption notification and that the aircraft had been used strictly within the scope of the NSOP.

The Tribunal also found serious infirmities in the DRI’s invocation of the extended limitation period under Section 28(4) of the Customs Act. The adjudicating authority had merely alleged suppression without establishing any deliberate intention to evade duty. Citing the Supreme Court rulings in Pushpam Pharmaceuticals, Anand Nishikawa and Uniworth Textiles, the Tribunal reiterated that “suppression must be deliberate and with the intent to evade duty”, and that mere omission or perceived irregularity does not justify invoking the extended limitation. In the absence of evidence of fraud, collusion or wilful misstatement, the extended period could not be applied.

Since the core allegations of misuse of the aircraft and violation of exemption conditions were held to be unfounded, the Tribunal concluded that the demand of differential duty, interest, penalties and confiscation could not be upheld. It therefore set aside the adjudicating authority’s order in its entirety.

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In conclusion, CESTAT allowed the appeal filed by Decore Exxoils in full, holding that the company had complied with all exemption conditions applicable to non-scheduled air transport services, that the demand raised by the DRI was unsustainable in law and on facts, and that the extended limitation period had been wrongly invoked. The customs duty demand of ₹8.84 crore, along with interest, penalty and confiscation, was quashed.

Appearance

Counsel For  Appellant: Shivek Trehan

Counsel For Respondent: N.M. Goyal, Authorised Representative

Cause Title: M/s. Decore Exxoils Pvt. Ltd.  Versus Customs Commissioner

Case No: Customs Appeal No. 50247 Of 2018

Coram: Hon’ble Mr. Justice Dilip Gupta (President), Hon'ble Mr. P.V. Subba Rao [Member (Technical)]