Provisional release of aircraft.

PJ/Case Law /2016-17/3313

Case:-LIGARE AVIATION LTD. VERSUS PRINCIPAL COMMR. OF C.EX., MADURAI

Citation:-2016 (339) E.L.T. 593 (Tri. - Chennai)

Brief facts:- The present appeal is filed by appellant M/s. Ligare Aviation Ltd. against a letter O.S. No. 60/2015-AIU, dated 30-7-2015 issued by the Principal Commissioner, office of the Commissioner of Central Excise, Madurai.

Appellant’s contention:-The ld. Advocate appearing on behalf of theapplicant submits that the matter relates to seizure of aircraft at Madurai. He submits that the applicant had imported one aircraft VT-AVH Falcon 2000 into India vide Bill of Entry No. 268017, dated 19-1-2011 and it was provisionally assessed on furnishing a PD bond and bank guarantee equal to 5% of differential customs duty. Subsequently it was taken out of India on 14-7-2014 on a voyage as a ferry flight and returned on 16-7-2014. On arrival into India, the Officer of AIU, Madurai Airport seized the aircraft under Section 110 of Customs Act under valid Mahazar on the ground that this movement of the aircraft amounts to export and reimport and the appellant failed to submit the Shipping Bill/Bill of Entry. The appellant requested for provisional release and the Principal Commissioner vide his impugned order granted provisional release of the aircraft subject to a) to furnish a Bond of Rs. 128 Crores equal to the value of the seized aircraft and b) to furnish a bank guarantee of Rs. 25,89,44,000/-. Aggrieved by this order of the ld. Principal Commissioner, the appellant is in appeal before this Tribunal.
Shri Parthasarathy, Ld. Advocate appearing for the appellant submits that the conditions to be fulfilled for provisional release of the aircraft is too onerous and since the aircraft has been seized, it is not in operation. He submits that as per the sale and purchase agreement dated 11-7-2014 (Ref. Page 41 of the appeal memo), appellants have sold the Falcon 2000 aircraft to the overseas buyer M/s. INV2-R Leasing Company Ltd. (buyer) for a consideration. He also submits that by another lease agreement dated 11-7-2014 entered between the appellant and the overseas buyer for operating the same aircraft on lease by the appellant for a consideration. He further submits that for the purpose of financial arrangement and working capital of the company, aircraft was sold and again by entering into lease agreement, aircraft was leased out to appellant. The aircraft was flown to Colombo on 14-7-2014 and after completing the sale transaction, the aircraft returned to Madurai on 16-7-2014. He submits that aircraft was imported only in the year 2011 and cleared at NIL rate of duty. Therefore, in this transaction aircraft though it was sold and leased out, it was in their possession and it was a case of re-import. He submits that the Notification No. 94/96, dated 16-12-1996 as amended exempts customs duty on re-imported goods under various categories and submits that since they have not claimed any drawback or DEEC benefit, they are covered under Sl. No. 3 of the said notification where the rate of duty of re-imported goods is NIL. He further submits that even it is considered as import, the Sl. No. 453 of exemption Notification 12/2012, dated 17-3-2012 as amended prescribes the effective rate of duty of 2.5% for the aircraft falling under 8802. Considering the original import value, the duty payable as per the above notification comes to only Rs. 3.20 crores. He also submits that they complied with Condition No. 77 of the above notification as they had a valid DGCA clearance certificate to operate Non-Scheduled (Passenger) services (NSOP). He submits that there is no violation or any contravention of the provisions of Customs Act. He pleads for provisional release of the goods without insisting bank guarantee considering the exemption notifications or the Bank Guarantee should be equivalent to Customs Duty i.e. Rs. 3.20 Crores. He further submits that the investigation is yet to be completed and no SCN has been issued. He submits that the aircraft is operated for non-scheduled passenger service and requested for release of the aircraft without any security.

Respondent’s contention:-On the other hand, ld. AR for Revenue opposed the appellants arguments and submits that the goods were seized for contravention of the provisions of the Act under valid mahazar was drawn under Section 110 of the Act as both export and import of the goods taken place without filing of shipping bill or Bill of Entry, either at the time of export or at the time of import and no documents whatsoever were produced. Therefore, taking into consideration the value of the aircraft i.e. Rs. 128 crores, the Principal Commissioner in his discretion has allowed provisional release of the goods on payment of 28% of the value of the goods for release. He also submits that this case is not covered under eligibility of the notification.

Reasoning of judgment:- After hearing both sides, and on perusal of seizure mahazar dated 25-7-2015, the Senior Intelligence officer, Air Intelligence Unit, Customs Airport, Madurai has seized the aircraft under Section 110 of the Customs Act on the reasonable belief that aircraft has been exported and imported illegally in violation of Sections 50 and 46 of the Customs Act and the said aircraft was handed over to the custody of the appellant by “Supurdginama” dated 25-7-2015. Thereafter, appellant sought for release of the aircraft and the Principal Commissioner, Madurai in his order allowed provisional release on execution of bank guarantee of Rs. 25,89,44,000/-.
On perusal ofsaleand purchase agreement dated 11-7-2014, they find the aircraft has been sold to overseas buyer INV-2 Leasing Company Ltd., Ireland. Simultaneously, vide another agreement dated on the same date, the same aircraft has been again leased out to appellant company for a consideration. They find that appellant claiming the benefit of Notification No. 94/96-Cus. exempting the goods which are re-imported into India is not applicable to appellant’s case. It is not a case of appellant that they exported the aircraft for any other purpose which are re-imported but the aircraft was sold to the overseas buyer. Further, they find that the Customs Notfn. 12/2012, dated 17-3-2012 as amended prescribed the rate of basic additional duty of 2.5% (Sl. No. 453) for Aircraft falling under Chapter Heading 8802 subject to fulfilment of Condition No. 77 and the appellant do possess valid DGCA Licence for operating as Non Scheduled Passenger Aircraft.
Considering the overall facts and circumstances of the case and the seizure memo and appellants having the licence from DGCA to operate NSOP services, they modify the the provisional release order dated 30-7-2015 and allow provisional release under Section 110A of the Customs Act subject to execution of bond equivalent value of the goods of Rs. 128 crores (Rupees One hundred twenty eight crores only) and the bank guarantee is reduced from Rs. 25,89,44,000/- to Rs. 5,00,00,000/- (Rupees five crores only). The impugned order is modified to the extent indicated above and the appeal is allowed in the above terms. Order by ‘Dasti’.

Decision:- Appeal allowed

Comment:- Aircraft sold to overseas buyer for a consideration again leased out to appellant by entering into lease agreement. Aircraft after completing the sale transaction was returned to Madurai. Aircraft was seized on reasonable belief that aircraft has been exported and imported illegally. Appellant is having licence from DGCA to operate Non-scheduled Passenger Aircraft. As per section 110A, any goods, documents or things seized under section 110, may, pending the order of the adjudicating officer, be released to the owner on taking a bond from him in the proper form with such security/bond. Consequently, provisional release under Section 110A was allowed subject to execution of bond equivalent value of goods of Rs. 128 crores and bank guarantee reduced from Rs. 25,89,44,000 to Rs. 5,00,00,000.

Prepared by:-Monika Tak

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PJ/Case Law /2016-17/3313

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