B. Ravichandran ORDER
B. Ravichandran, Member (T)
1. The appeal is against order dated 11.11.2016 of Commissioner of Customs, Airport, New Delhi. The appellant is engaged in air transport business both in domestic and international sector. They operate some of their air crafts in domestic sector and continue the service in international sector also. The Aviation Turbine Fuel (AFT) is filled by the appellant for domestic flight operation. When the same aircraft is to embark on an international travel, the ATF in the fuel tank is considered as cleared outside India and when the aircraft returns from foreign trip, the ATF left over/available in the aircraft is considered to be an import item subjected to customs duty as per the applicable rates. The appellants were maintaining accounts of these transactions and at the end of the month, they submitted detailed flight-wise information including customs duty liability, payment of such duty, flight details including quantity of ATF on which duty has been paid. This practice has been continuing for many years. The dispute in the present case mainly revolves around the valuation of ATF available in the fuel tank of aircraft returning from the foreign trip to continue travel in domestic sector. The appellants were considering the price at which the international Airlines purchases ATF from Indian Oil Corporation. Such price formed the basis of assessable value with addition of 1.125% as insurance charges and 1% as handling charges. The customs duty was discharged by the appellant on ATF available in such aircrafts returning from international trips on a monthly basis, by adjusting from the advance deposit maintained by them with the Department.
2. The Revenue entertained a view that for valuation of ATF available on remnant fuel in the returning aircraft, the appellants are liable to add 20% as notional freight charges in terms of Rule 10(2) of Customs Valuation Rules. The proceedings initiated against the appellant resulted in confirmation of demand of differential customs duty amounting to Rs. 9,17,060/- covering the period September, 2011 to March, 2015. A penalty of Rs. 5 lakh was imposed on the appellant under Section 112 of the Customs Act, 1962. A penalty of Rs. 5 lakh was imposed on the appellant under Section 112 of the Customs Act, 1962.
3. Ld. Counsel appearing for the appellant submitted that the impugned order is not legally sustainable. His main grounds in appeal can be summarized as below:-
(A) No clear procedure has been established for filing bill of entry in the case of ATF. The appellants have been discharging customs duty on a regular basis in respect of remnant ATF imported as part of fuel in the tank. All details have been submitted to the Customs Authorities on a regular monthly basis. This practice has been continuing for quite sometime. The Ministry vide letter dated 24.4.1971 clarified as to the procedure for discharging duty on left over ATF. Considering the background explained in the said letter, the procedural provisions relating to the duty payment on left over ATF should be construed liberally.
(B) There is no machinery provision laid down to be followed in such situations. In fact, the Mumbai Commissionerate issued detailed procedure for filing bill of entry etc. only on 3.3.2015.
(C) The aircraft carries fuel in the form of ATF. It is part and parcel of the aircraft. There is no transportation of ATF as cargo warranting any notional addition of freight of 20% on such ATF. The fuel to be carried by any aircraft is regulated by the Civil Aviation Authorities. Any aircraft will carry sufficient amount of fuel for its propulsion to the predetermined destination, with additional quantity as per the safety requirement to meet the contingencies of diversion or delay in landing. In other words, no aircraft carries ATF as an ........