Whether the seats that are being imported for replacing the existing seats in an aircraft be said to be for servicing, repair or maintenance of the aircraft under the Notification No. 12/2012-Customs.

Case:INTER GLOBE AVIATION LTD.
Citation:2015 (325) E.L.T. 617 (A.A.R.)
Issue:Whether the seats that are being imported for replacing the existing seats in an aircraft be said to be for servicing, repair or maintenance of the aircraft under the Notification No. 12/2012-Customs.
Brief facts: M/s. Inter Globe Aviation Limited (hereinafter also referred to as applicant) is a Public Limited Company. They are, among other things, engaged in providing scheduled air transport service. Applicant submits that they intend to import seats of aircraft for replacing the existing seats; that existing seats are proposed to be replaced to provide a more comfortable flying experience to the fliers and to improve the fuel efficiency of the aircraft as the seats would be lighter in weight; that in this process, seats requiring repairing due to wear and tear shall also be replaced. Applicant further submits that for such repair and maintenance activity under the aircraft, they had obtained approval from Directorate General of Civil Aviation (DGCA) as required under Civil Aviation Requirements (CAR)-145; that the certificate of approval allows them to carry out minor structural repair; that replacement of seats get covered under such minor structural change and that during the process of replacement, the old seats would be removed from the base by unbolting and new seats would be fitted with nuts and bolts Applicant further submits that at present, they are operating 96 Aircrafts of A-320 family and Airbus has fixed capacity of 180 seats wherein such aircrafts were originally fitted with the Weber Passenger seats, which have been replaced by Dragonfly brand in 52 aircrafts out of its fleet of 96 aircrafts. The weight of Weber seat is 13 kg, as compared to weight of Dragonfly seat, which is 9 kg. The applicant further informs that they were able to reduce the weight of its one Airbus 320 by 700 kg approximately. The applicant explains that if there is a reduction of 1% in weight, 100 kg of fuel will be saved for a flight.
Respondent’s Contention and Reasoning of Judgement:The authority for Advance Ruling stated that it has considered the submissions made by the Applicant in their application for advance ruling as well as the submissions made by them. It has also considered the questions and issues on which advance ruling have been sought for by the applicant, relevant facts having bearing on the questions and issues raised. It goes on by explaining that Notification No. 12/2012-Cus., dated 17-3-2012, exempts parts of aircraft falling under any chapter from whole of basic customs duty subject to fulfillment of condition No. 21 provided therein. The relevant part of condition No. 21 reads as -“If imported for servicing, repair or maintenance of aircraft, which is used for operating scheduled air transport service or the scheduled air cargo service, as the case may be”. As the benefit is being extended to the aviation industry, the terms “servicing”, “repair” and “maintenance” of an aircraft must be understood in terms of their usage and practice. Therefore, in order to understand its true meaning under the said Notification, reference must be made to the Aircraft Rules, 1937 and Civil Aviation Requirements (CAR) issued by DGCA. The term ‘maintenance’ is defined under the Aircraft Rules as follows:
Aircraft Rules, 1937 -
Rule 3(33C)- “Maintenance” means the performance of tasks required to ensure the continuing airworthiness of an aircraft, including any one or combination of overhaul, inspection, replacement, defect rectification and the embodiment of a modification or repair or test:
Rule 60 - Maintenance standards and certification. - (I) In this rule, ‘maintenance’ refer to performance of all work necessary for the purpose of ensuring that the aircraft is airworthy and safe including servicing of the aircraft and all modifications, repairs, replacements, overhauls, processes, treatment, tests, operations and inspection of the aircraft, aircraft components and items of equipment required for that purpose.
Revenue submits that there is no doubt about the classification of ‘Aircraft seats’ under CTH 9401 10 00. Even the applicant has not disputed the same. The classification of ‘Aircraft seats’ under CTH 9401 10 00 is confirmed by the Hon’ble CEGAT, Special Bench ‘D’, New Delhi in the case of Indian Airlines v. Collector of Customs [1988 (37) E.L.T. 420(Tribunal)]. As such, ‘Aircraft seats’ cannot be considered as ‘Spares/Parts’ Aircrafts. Further, Revenue submits that the new seats are not meant for replacing damaged or unworkable seats but for upgradation of the aircraft in order to make it more comfortable as an activity of servicing, repairing or maintenance. Therefore, the benefit of exemption notifications cannot be extended to aircraft seats as they do not qualify as parts of aircraft
It is observed that Notification No. 12/2012-Cus., dated 17-3-2012 exempts the goods of the description specified in column (3) and falling within the chapter, heading, sub-heading or tariff item of First Schedule to the Customs Tariff Act as are specified in the corresponding entry in column (2) of the Table, when imported into India;
* From so such of the duty of customs leviable thereon under the said First Schedule as is in excess of the amount calculated at the standard rate specified in the corresponding entry in column (4) of the said Table;
*From so much of the additional duty leviable thereon under sub-section (i) of Section 3 of the Customs Tariff Act, 1975 as is in excess of the additional duty rate specified in the corresponding entry in column 5 of the said Table, subject to any of the conditions, specified in the Annexure to the notification, the condition number of which is mentioned in the corresponding entry in column (6) of said Table.
S. No. 454 of above notification (relevant entry of the Table) is reproduced as under;

S. No.	Chapter or Heading or sub-heading or tariff item		Description of goods	Standard rate	Additional duty rate	Condition No.
(1)	(2)		(3)	(4)	(5)	(6)
454.	Any Chapter		Parts (other than rubber tubes), of aircraft of Heading 8802	Nil	-	21
21.	If, -
	(i)	Imported for servicing, repair or maintenance of aircraft, which is used for operating scheduled air transport service or the scheduled air cargo service, as the case may be; or
	(ii)	The parts are brought into India for servicing, repair or maintenance of an aircraft mentioned in clause (ii) of Condition No. (75)
	Explanation. - The expression ‘‘scheduled air transport service” and “scheduled air cargo service” shall have the meanings respectively assigned to them in Condition No. 75.

Condition No. 75 of the Notification No. 12/2012, dated 17-3-2012 read with Notification No. 334/2012-TRU, dated 23-3-2012, is reproduced as under;

75	If, -
	(i)	Imported by an operator or on behalf of the operator, for operating scheduled air transport service or, scheduled air cargo service, and such aircraft is used for operating the scheduled air transport service or the scheduled air cargo service, as the case may be; or
	(ii)	The said aircraft is not registered or not intended to be registered in India, and brought into India for the purpose of a flight to or across India, which is intended to be removed from India within fifteen days, or as extended by the competent authority in Ministry of Civil aviation, not exceeding sixty days, from the date of entry.
	Explanation. - For the purposes of this entry,
	(a)	“operator” means a person, organization or enterprise engaged in or offering to engage in aircraft operation;
	(b)	“scheduled air transport service” means an air transport service undertaken between the same two or more places and operated according to a published time table or with flights so regular or frequent that they constitute a recognizably systematic series, each flight being open to use by members of the public; and
	(c)	“scheduled air cargo service” means air transportation of cargo or mail on a scheduled basis according to a published time table or with flights so regular or frequent that they constitute a recognizably systematic series, not open to use by passengers.

Revenue has contended that as per subject notification, exemption has been granted to parts (other than rubber tubes), of aircraft of Heading 8802. Since aircraft seats are to be classified under CTH 9401 10 00 and not under Heading 8803, benefit of Notification No. 12/2012-Cus. is not available to import of aircraft seats. Further, Revenue relied on the judgment in Indian Airlines v. Collector of Customs [1988 (37) E.L.T. 420(T)], wherein it was held that benefit of exemption Notification No. 145/77-Cus., dated 1977 is not to be extended to aircraft seats imported by Indian Airlines, as Heading 94.01/04 and not Heading 88, specifically covers seats of a kind used for aircraft. Notification No. 145/77-Cus., dated 9-9-1977 exempted Customs duty leviable, which was specified in First Schedule to the Customs Tariff Act, 1975, as was in excess of 3% ad valorem on following goods;
(a)Airplane
(b)Airplane parts
(c)Airplane engines
(d)Airplane engine parts, and
(e)Rubber types and tubes used exclusively for airplanes.
Larger Bench of Tribunal in Indian Airlines, Calcutta v. Collector of Customs [1988 (38) E.L.T. 679(T)] examined 2 Notification Nos. 145/77-Cus., dated 9-7-1977 and 99/81-Cus., dated 1-4-1981 to ascertain whether imported airplane tyres can be exempted from Customs duty as airplane parts. It was held that neither of the two Notifications places the goods covered by it under any specific head of the Customs Tariff and it appeared that the law makers were conscious of the fact that the goods they are listing for exemption fell under different headings or chapters of the Customs Tariff. For example, of the articles mentioned in Notification No. 145/77-Cus., while rubber tyres and tubes for airplanes must fall under Chapter 40, other parts like engines, engine parts and so on would appropriately fall in Chapter 88 or even in Chapter 84. Similarly Notification No. 99/81-Cus., lists only airplanes spare parts, and there are hundreds of thousands of different airplane parts, some made of rubber, which would have to go under the rubber headings, electrical parts which would go under the electrical heading and others which would go under the machinery heading, and so on and so forth. By not writing the chapter head into the notifications, the exemption become possible for all kinds of aeroplane parts described under these notifications. This Larger Bench judgment also negates the decision rendered by the Tribunal, on similar issue and relied upon by the Revenue.
Hon’ble Supreme Court in case of Collector of Customs, Bangalore v. Maestro Motors Ltd. [2004 (174) E.L.T. 289(S.C.)] while deciding whether M/s. Maruti Udyog Ltd. is entitled to benefit of Notification No. 29/83 held that if according to language of notification, an item is specifically exempted then exemption would be available even though for the purposes of classification it may be considered to be something else, as is the case of the applicant. Relevant portion of said judgment is reproduced as under:
It is settled law that to avail the benefit of a notification a party must comply with all the conditions of the Notification. Further, a Notification has to be interpreted in terms of its language. If in the Notification exemption is granted with reference to tariff items in the First Schedule to the Customs Tariff Act, 1975, then the same Rules of Interpretation must apply. In that case the goods will be classified, even for the purposes of the Notification, as they are classified for purposes of payment of customs duty. But where the language is plain and clear effect must be given to it. In this Notification what is exempted is components, including components of fuel efficient motor cars in semi-knocked down packs and completely knocked down packs. Undoubtedly, for purposes of levy of custom duty, by virtue of Interpretative Rule 2(a), the components in a completely knocked down pack would be considered to be cars. But in view of the clear language of the Notification the components including components in completely knocked down packs are exempted. Effect must be given to the wording of this Notification. Thus components in completely knocked down packs would get the exemption under this Notification, even though for purposes of classification they may be considered to be cars.
The Respondent explains that the applicant proposes to import seats of aircraft claiming exemption of Notification No. 12/2012-Customs (S. No. 454), wherein parts (other than rubber tubes) of aircraft of Heading 8802 are subjected to nil rate of duty. Contention of the applicant is that seats of aircrafts are parts of aircrafts, thus, Notification No. 12/2012-Cus. needs to be extended to them. Revenue on the other hand, heavily relying on General Rules for Interpretation for Import Tariff, pleads that there is specific entry for “seats of a kind used for aircraft” under Tariff item 9401 10 00, thus proposed import should be classified under that entry and benefit of said Notification be not extended to the Applicant. It is settled position of law that exemption notification is to be read strictly and interpreted in terms of its language - when language is plain and clear, effect must be given to it. Plain reading of the notification show that all parts (other than rubber tubes) of aircraft of Heading 8802 are exempt from Customs duty including seats of aircraft. As per S. No. 454 of subject notification, parts of aircraft of Heading 8802 falling under any Chapter of Customs Tariff are exempt from duty. Tariff item 8802 contains “Other aircrafts (For example, Helicopters, Airplanes), Spacecrafts (including Satellites) and suborbital and Spacecrafts Launch Vehicles. Applicant proposes to import seats of aircrafts, which is part of aircraft. Aircraft falls under Tariff item 8802 and its seats, which is also part of aircraft. It is to be noted that if the intention of the Govt. was not to extend benefit of said notification to seats of aircraft, it would have mentioned so in the notification, along with rubber tubes, to which this benefit is not extended. To our mind, the approach of Revenue to apply General Rules for Interpretation for Import Tariff, even for interpretation of notification in this case, is legally incorrect. The benefit of Notification No. 12/2012-Customs (S. No. 454) is available to parts (other than rubber tubes), of aircraft of Heading 8802. There can be no doubt that seats are integral part of the airplane. This is also confirmed by the Department of Civil Aviation by clarifying that the seat would form part of the aircraft. Further, it is not possible for the airline to operate the flight without seats. Similarly, one cannot think of passengers travelling in airplane without seats. Further, the applicant satisfies condition No. 75, which is necessary for being eligible to avail said notification inasmuch as the applicant is an “operator” engaged in aircraft operation and proposes to operate scheduled air transport service (air transport service undertaken between the same two or more places and operated according to a published time table or with flights or so regular or frequent that they constitute a recognizable systematic series, each flight being open to use by members of the public).
In the instant case, benefit of said Notification is to be extended to the Aviation Industry; therefore, it may be appropriate to ascertain the meaning of words “maintenance” from the Aircraft Act, 1937 and rules made there under. It is observed that Rule 3(33C) and Rule 60 of the Aircraft Rules, 1937, maintenance inter alia include replacement, modifications, repairs and servicing. Further, “enhancement” would be covered under “modification”.
Decision: The Seats that have been imported forreplacing the existing seats in an aircraft would be said to be for servicing, repair or maintenance of the aircraft under the Notification No. 12/2012-Customs.
Comment: The Gist of the case is that if the parts of an Aircraft are imported for Servicing, Repair or for Maintenance of an Aircraft, which is used for operating Scheduled air transport service or the Scheduled Air Cargo Service, as the case may be, then such imported parts would be exempted from the Custom duty as per Notification No. 12/2012-Customs.
Prepared by: Adit Gupta

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