ORDER
T.K. Jayaraman, Member (T)
1. The following appeals filed by M/s. Indian Airlines against the Revenue in respect of the OIAs indicated are taken up for disposal, as the issues involved are common.
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Appeal No. Name of the party O-I-A No. & Date
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C/115 to 120/2001 Indian Airlines v. CC, Cochin 354 to 359/2000,
(6 appeals) 8-12-2000
C/305 to 308/2002 Indian Airlines v. CC, Cochin 7 to 9/2000 &
(4 appeals) 51/2002,21-3-2002
C/233, 234/2002 Indian Airlines v. CC, Bangalore 17/2002-Cus.
23-1-2002
C/175/2003 Indian Airlines v. CC, Bangalore 192/2003
30-4-2003
C/176/2003 Indian Airlines v. CC, Bangalore 129/2003
25-3-2003
C/97/2003 Indian Airlines v. CC, Bangalore 33/2003
29-1-2003
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2. M/s. Indian Airlines normally function as Domestic Airlines. However, they have also International Flights. When the Aircraft returns to an airport in India and its international run is terminated, the Revenue demands Customs Duty on the fuel (ATF) remaining in the aircraft. The appellants challenge the levy of Customs Duty on the ATF onboard the aircraft. Alternatively, they claim exemption for ATF vide Notification No. 151/94, dated 13-7-1994 and similar Notification claiming that ATF is same as Superior Kerosene. In the impugned Orders-in-Appeal, the demand of duty in the original orders have been confirmed. Further, exemption to ATF has also been denied.
3. S/Shri A.N. Jayaram, learned Senior Advocate, Manoj Arora, learned Advocate and Sanjay Gupta, learned Advocate appeared for the appellants and Shri L. Narasimha Murthy, learned SDR appeared for the respondents.
4. The main thrust of the argument of Shri A.N. Jayaram, the learned Sr. Advocate is that Customs Duty is chargeable only on goods imported. Relying on the Supreme Court’s decision in AIR 1961 Supreme Court 315 (V 48 C 49) in the case of Burmah S.O.S. & D. Co. v. Commercial Tax Officer, he urged that one cannot give a very literal meaning to the word ‘Import’. In the above mentioned decision, the Supreme Court interpreted the term export and held as follows :
“The test of export is that the goods must have a foreign destination where they can be said to be imported. It matters not that there is no valuable consideration from the receiver at the destination end. If the goods are exported and there is sale or purchase in the course of that export and the sale or purchase occasions the export to a foreign destination, the exemption is earned. The crucial fact is the sending of the goods to a foreign destination where they would be received as imports. The two notions of export and import, thus, go in pairs.
Aviation spirit loaded on board an aircraft for consumption though taken out of the country, is not exported since it has no destination where it can be said to be imported, and so long as it does not satisfy this test, it cannot be said that the sale was in the course of export. Further, the sales can hardly be said to ‘occasion’ the export. The seller sells aviation spirit for the use of the aircraft, and the sale is not integrally connected with the taking out of aviation spirit. The sale is not even for the purpose of export. It does not come within the course of export, which requires an even deeper relation. The sale, thus does not come within Article 286(1)(b)”.
5. The learned Counsel maintained that in view of the above observations of the Hon’ble Supreme Court, if an aircraft carries ATF on board for consumption, it cannot be said that ATF is exported. In the same way, when the aircraft returns with ATF in its fuel tank, it cannot be said that ATF is imported. In other words, in the absence of an importer abroad, there is no export of ATF taken on board the aircraft. On the same logic, no import has taken place in respect of ATF on board the aircraft returned to India from a foreign country. If ATF is not said to be imported, then there is no question of levy of Customs Duty on the same. The learned Counsel contended that for import and export, there should be a seller and the purchaser and in this case this will not satisfy the interpretation given by the Supreme Court for the terms ‘import’ and ‘export’. He urged that the ratio of this decision has been followed by the Supreme Court in the case of Madras Marine and Co. v. State of Madras (1986) 3 Supreme Court Cases 552]. Further, the learned Counsel took us through the judgment of the Hon’ble Supreme Court reported in AIR 1958 Supreme Court 341 (V 45 C 55) wherein the Court has quoted Chief Justice Marshal’s interpretation of the word ‘importation’ in Para 23 of the judgment which is given below :
“Chief Justice Marshall dealing with the word “importation” said in Brown v. State of Maryland (1827) 12 Wheat 419 at p. 442 4 Law Ed. 678: (at p. 686)(O) :
“The practice of most commercial nations conforms to this idea. Duties, according to that practice, are charged on those articles only which are in-tended for sale or consumption in the country. Thus sea-stores, goods imported and re-exported in the same vessel, goods landed and carried over land for the purpose of being re-exported from some other port, goods forced in by stress of weather and landed, but not for sale are exempted from the payment of duties. The whole course of legislation on the subject shows that in the opinion of the legislature the right to sell is connected with the payment of the duties:”
In view of the above observations, the learned Counsel maintained that no duty would be leviable on the ATF on board the aircraft landed in India, as the same is neither for sate nor consumption in the country. He held that the view that use of ATF inside the country does not amount to consumption. Further, he stated that the goods should become a part of the land mass of the country for import to take place.
6. Our attention was also drawn to the judgment of the Hon’ble High Court of Kerala in the case of Shri Ramlinga Mills Private Ltd and Ors. v. ACC and Anr. reported in 1983 (12) E.L.T. 65 (Ker.) wherein it was held that the essential ingredient for import of goods is transaction of sales, a passing consideration and delivery of property. Therefore, the concept of import cannot be dissociated with the person exporting the goods and the person who imports them. It was also observed that a literal interpretation of the terms ‘imports’ and ‘exports’ would cause undue confusion. The learned Counsel said that the interpretation of the Supreme Court of the word ‘export’ in the Burmah Shell as quoted has been followed recently in (2000) 6 Supreme Court Cases 12 in the case of 20th Century Finance Corporation Ltd. and Anr. v. State of Maharashtra.
7. In view of the various judicial pronouncements cited and also the interpretation of the Supreme Court in the context of Article 286 of the Constitution, the learned Counsel urged that the same cannot be brushed aside by the Customs authorities to give a literal interpretation to the word “import”. In fine, he said that the ATF brought by the aircraft returning from the foreign country and which remains onboard the aircraft cannot be said to be imported and hence, is not liable to Customs Duty.
Entitlement of ATF to the benefit of exemption Notification 151/94, dated 13-7-1994.
8. The Notification is for Kerosene, which is ordinarily used as illuminant in oil burning lamps. According to the learned Counsel, Kerosene and ATF are technically one and the same. Since the expression used is ‘ordinarily used’, the same does not preclude the use elsewhere.
9. Shri L. Narasimha Murthy, the learned SDR, argued that the words “import” and “imported goods” are defined in the Customs Act and when these words are already defined, it is not proper to take the meaning assigned to them in the context of interpreting other enactments relating to Sales Tax, etc. As per the Customs Act, 1962, any goods which are brought into India from a place outside India would be imported goods excluding the goods which have been cleared for home consumption. For any import to take place, there is no need for sale as contended by the learned Counsel for the appellants. This is clear from the definition of the “importer” in the Customs Act. In the Customs Act, “importer” in relation to any goods at any time between their importation and the time when they are cleared for home consumption includes any owner or any person holding himself out to be the importer. In the case under reference, M/s. Indian Airlines brought ATF in their aircraft to India. Hence, import has taken place. Since they are the owners of the ATF in the aircraft, the appellants are the importers. As the ATF is going to be consumed in India, they are liable to pay duty as only the foreign going vessels or aircraft can consume onboard imported stores without payment of duty as per Section 87 of the Customs Act, 1962. The learned SDR further brought to our notice the Circular No. 65/2001-Cus., dated 19-11-2001 and also Circular 33/2002-Cus., dated 25-6-2002 wherein the leviability of Customs Duty on fuel and other stores consumed onboard during extension flights in domestic sector was clarified.
10. As regards the entitlement of ATF to the exemption, our attention was drawn to the decision of the CEGAT in the case of Indian Airlines Ltd. v. CC, Cochin – 2002 (150) E.L.T. 496 (Tri. – Del.) wherein it is held that mere fact that both the ATF and Kerosene fall under the same tariff heading in old and new Excise Tariff as well as in Customs Tariff would not mean that whatever exemption was available to kerosene would automatically be available to the ATF.
11. We have considered the submissions urged by the Revenue and the appellants. The learned Counsel for the appellants relied mainly on the Hon’ble Supreme Court’s interpretation of the word “export” in the context of Article 286 of the Constitution. In order to appreciate the ratio of that decision, it would be worthwhile to give the brief facts of the case.
12. In that case, M/s. Burmah Shah supplied ATF to an aircraft going out of the country. They did not want to pay sales tax on the plea that the ATF supplied to the aircraft leaves the country and this transaction amounts to export and not sales within West Bengal. Under Article 286 of the Constitution, there are restrictions on the imposition of tax on the sale or purchase of goods. The relevant extract of Article 286 is given below:
Article 286 (1) “No law of a State shall impose or authorise the imposition of a tax on the sale or purchase of goods where such sale or purchase takes place (a) outside the State; or (b) in the course of the import of the goods into or export of the goods out of the territory of India.”
In view of Article 286, the appellant maintained that the West Bengal State cannot levy sales tax on the ATF sold in the course of export. The contention of the appellant was negatived by the Hon’ble Supreme Court.
13. The Hon’ble Supreme Court observed that supplying ATF to the aircraft going out of the country does not amount to export. The court interpreted that for export there should be a destination and in the case under reference, there was no destination, as the ATF is for use in the aircraft and not for sale to a foreign importer. In other words, there is neither an exporter nor an importer. Under these circumstances, the transaction cannot be called as export as understood in International Commerce. In fact, the Supreme Court held that inasmuch as ATF was sold to the Airlines in India, the same is liable for sales tax irrespective of the fact that the ATF is taken onboard the aircraft to a place outside India as this action does not amount to export. In the above case, the Supreme Court was actually interpreting the meaning of export in the context of sales tax. The same interpretation cannot be given to the word in the context of the Customs Act. When the appellants maintained that they were getting drawback on the ATF supply from the Customs, to buttress their point that the transaction amounts to export the Supreme Court observed that the word export may conceivably used in more senses than one and the Customs barrier is a barrier for customs purposes and duty drawback may be admissible if the goods once imported are taken out of the country. The Customs Duty drawback has nothing to do with the sale of aviation spirits, which takes place in West Bengal. Moreover as far as sales tax is concerned, the taxable event is sale. Since the ATF was sold in West Bengal, the Supreme Court did not allow any exemption for the same on the ground that the transaction is export. In our view, to decide the leviability to duty of the ATF brought by the Aircraft, we have to rely on the definition given in the Customs Act and there is no ground to deviate from the same. Examination of the scheme of the Customs Act also is very relevant. It is true that a literal interpretation of the words ‘import’ and ‘export’ would cause immense confusion but this point has been very much taken into account in the scheme of the Customs Act. That is why, there are special provisions in the Customs Act for levy of duty on baggage, goods imported or exported by post and stores. In the case of Baggage, there is no question of ‘import’ in the sense in which the learned Counsel uses the term. Similar is the case with Ships’ or Aircrafts’ stores. Is there no duty on baggage brought by passengers? Yes, there is. In all the cases of levy of duty of customs, the charging section is Section 12, which is applicable only to imported goods. Hence, baggage, ships stores, postal articles are as much ‘imported goods’ as commercial cargo for the purposes of Customs Act. If we say that only when there is a commercial transaction i.e. the existence of an exporter and an importer for import or export to take place, then anybody can bring anything and say that the goods which are brought are not imported and hence are not liable to duty. Any goods crossing the customs barrier is said to be imported for customs purposes. Even for bringing a dead body into the country, a Bill of Entry has to be filed. Smuggling of goods into the country is nothing but import of goods contrary to certain prohibitions of law. If the meaning of export and import is restricted to only commercial transactions between exporter and importer, it would be well-nigh impossible to enforce the Customs Act. It is a well-known fact that a foreign going vessel or aircraft can consume fuel and other stores without payment of duty. The authority for this is Section 87 of the Customs Act, which reads as follows:
“Imported stores may be consumed on board a foreign-going vessel or aircraft – Any imported stores on board a vessel or aircraft (other than stores to which Section 90 applies) may, without payment of duty, be consumed thereon as stores during the period such vessel or aircraft is a foreign-going vessel or aircraft.”
14. From Section 87, it is very clear that the ATF in the fuel tank onboard the aircraft should be considered only as imported stores and the same is exempted from duty only when the aircraft is foreign going. It is also a common practice that whenever a foreign going vessel turns to coastal run the Customs department recovers duty on the stores consumed during the coastal run. The department has devised an elaborate procedure for collection of duty on ship stores consumed during coastal run in CBEC Circular 58/97-Cus., dated 6-11-1997. The CESTAT, Bangalore in the case of Surrendra Overseas Ltd. v. CC, Hyderabad – 2004 (168) E.L.T. 492 (Tri. – Bang.) has held that duty is demandable when foreign going vessels are reverted to coastal vessels and after operating as coastal vessels for sufficient time and again reversed back as foreign going vessels. In the Kerala High Court judgment referred to by the learned Counsel for the appellants, goods were originally destined for Cochin. Before reaching Cochin, the vessel touched Bombay and during that time an exemption notification was available for the said goods however, by the time the vessel reached Cochin the exemption notification was withdrawn the party contended that the goods .have been imported into India the moment the vessel touched Bombay. But the contention of the party was not accepted by the Department arid the Hon’ble High Court of Kerala observed that a literal interpretation should not be given to the word import and held that the goods could not have been said to be imported into India the moment the vessel reached Bombay. In our view, the observations of the Hon’ble High Court cannot be taken out of context to say that the ATF brought by an aircraft returning from a foreign country and landing at India does not amount to import. As per Section 53 of the Customs Act, any goods imported in a conveyance and mentioned in the import manifest or the import report as the case may be, as for transit in the same conveyance to any place outside India or any customs station may be allowed to be so transited without payment of duty. We have to mention this only to highlight that the scheme of Customs Act has taken into account all the eventualities so that the word import as defined in the Customs Act does not cause any confusion or practical problems. Hence, we hold that the ATF on board the aircraft is liable to pay duty. The same would not cease to be imported goods under the Customs Act by any stretch of imagination. The customs barrier is indeed sacrosanct for effective implementation of customs laws. According to Section 21 of the Customs Act, even all goods, derelict, jetsam, flotsam, flotsam and wreck brought or coming to India, shall be dealt with as if they were imported into India unless it is shown to the satisfaction of proper officer that they are entitled to be admitted duty free under the Act. Is there any doubt now to hold that ATF on board brought by the Aircraft is dutiable?
15. As regards the entitlement of exemption notification to ATF, the issue has already been decided in the appellants own case noted supra and hence they do not have a good case in their favour. Hence, we do not feel that a detailed discussion is called for.
16. It was brought to our notice that vide Notification No. 151/94-Cus., dated 13-7-1994 the ATF on board an aircraft of M/s. Indian Airlines returning to India will be exempted equal to the Customs duty on the quantity taken out of India. From the OIAs, it is seen that this point has not been dealt with. Therefore, the demand of duty should be re-quantified (if already not done) by giving the benefit of the above Notification. Hence, the cases are remanded to the original authorities for re-quantification as per law. The appellants should produce all necessary documents for this purpose.
17. The appeals of M/s. Indian Airlines are disposed of in the above