CESTAT: Jet Airways entitled to tax exemption on re-import of repaired parts/aircrafts

CESTAT: Jet Airways entitled to tax exemption on re-import of repaired parts/aircrafts

The Tribunal emphasized that in the Exemption Notification, integrated tax cannot be understood as duty of customs. It was held that the appellant was entitled to exemption from payment of integrated tax under the Exemption Notification

The Customs, Excises, and Service Taxes Appellate Tribunal (CESTAT), New Delhi Bench allowed the appeals and held that Jet Airways was entitled to exemption from payment of Integrated Goods and Service Tax (IGST) on re-import of repaired parts or aircraft into India under the Exemption Notification dated 30 June 2017, as amended by Corrigendum Notification dated 22 July 2017.

The coram headed by President Justice Dilip Gupta and P.V. Subba Rao (Member, Technical), while giving relief to the Jet Airways (appellant), set aside the order passed by the Commissioner.

The appellant, Jet Airways (India) Ltd acclaimed to a scheduled airline operator, was engaged in the business of transportation of passengers and goods by air. In order to carry out the scheduled operations in India, the appellant imported aircrafts and stated that when the engines or auxiliary power units or other parts of the aircrafts began to develop defects, they were exported out of India for repairs.

It was further stated that at times, the aircrafts also have to be exported out of India for repairs and maintenance. The repaired parts/aircrafts are thereafter re-imported into India and at the time of reimport, Bills of Entry are filed. These Bills of Entry are assessed to basic customs duty and integrated tax at the applicable rates.

The dispute in all the 60 appeals was as to whether the appellant was justified in claiming exemption from payment of integrated tax under the Exemption Notification for the reason that the importer is required to only pay the duty of customs on the fair cost of repairs and the cost of insurance and freight charges, both ways on re-import of repaired parts/aircrafts into India during the period commencing August 2017 to March 2019.

The Tribunal felt it was necessary to examine certain sections of The Customs Tariff Act 1975 and the Exemption Notification that were relevant for the purpose of deciding these appeals. The Tribunal highlighted that Section 3 of the Tariff Act provides for levy of additional duty equal to excise duty, sales tax, local taxes and other charges. Subsections (1), (7), (8), (9), (11) and (12) of Section 3 were relevant. It noted that Section 3(7) of the Tariff Act was substituted with effect from 1 July 2007.

The Tribunal in its order dated 13 January 2021 further stated, "It is in exercise of the power conferred by section 25(1) of the Customs Act that the Exemption Notification has been issued. The Central Government exempted the goods falling within any Chapter of the First Schedule to the Tariff Act and specified in column (2) of the Table when re-imported into India, from so much of the duty of customs leviable thereon which is specified in the First Schedule, and the integrated tax, compensation cess leviable thereon respectively under sub-sections (7) and (9) of section 3 of the Tariff Act."

The Tribunal stated that even the levy of additional duty under Section 3 of the Tariff Act, which was in addition to the duty of customs under Section 2 of the Tariff Act, would not be the duty of customs for the purpose of Notifications issued under the Customs Act.

"It is, therefore, clear that though integrated tax is levied under Section 5 of the Integrated Tax Act, but it is collected in accordance with the provisions of section 3 of the Tariff Act on the value as determined under the Tariff Act and at the point when duties of customs are levied under section 12 of the Customs Act. Thus, integrated tax is levied under Section 5(1) of the Integrated Tax Act and only the procedure for collection has been provided under Section 3 of the Tariff Act," observed the Tribunal.

The Tribunal asserted that that mention of duty of customs, integrated tax and compensation cess in the main body of the Exemption Notification implied that the Government was conscious of the distinction between the three. Above all, all the three, namely, the duty of customs, integrated tax and compensation cess have been used in the main body of the same Exemption Notification.

Therefore, the Tribunal emphasized that in the Exemption Notification, integrated tax cannot be understood as the duty of customs. It was held that the appellant was entitled to exemption from payment of integrated tax under the Exemption Notification on re-import of repaired parts/aircrafts into India.