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CESTAT Mumbai Sets Aside ₹6.01 Crore Duty Demand Against Navayuga Engineering Over Helicopter Parts
In a significant ruling that clarifies the scope of customs duty exemptions for infrastructure companies, the has set aside a ₹6.01 crore duty demand against . The Tribunal held that helicopter parts used to transport personnel for infrastructure projects qualify as "" under the , thereby entitling the company to claim exemptions under the SFIS and SHIS schemes. Additionally, the Bench affirmed that Navayuga Engineering and are "," allowing the former to utilize KPCL's .
The decision, delivered by Judicial Member Ajay Sharma and Technical Member M.M. Parthiban, provides much-needed clarity on the interpretation of "" in the context of air transport used for project-related purposes. It also underscores the importance of prior DGFT clarifications in limiting the invocation of extended periods of limitation by revenue authorities.
Background of the Dispute
Navayuga Engineering, engaged in large-scale infrastructure projects including roads, bridges, marine development, and turnkey contracts, imported , machinery, spare parts, and other equipment between 2007-08 and 2013-14. The company claimed customs duty exemptions under the Export Promotion (EPCG) scheme, as well as under the SFIS (Served from India Scheme) and SHIS (Status Holder Incentive Scrip) schemes, using licences and scrips issued to KPCL. Both companies were part of the same group, with common directors holding substantial shareholding—64.30% in Navayuga Engineering and 36.96% in KPCL.
The launched investigations, alleging that Navayuga Engineering and KPCL did not qualify as "" under the FTP and that the former had improperly used KPCL's export earnings and . The DRI also disputed the exemption claimed on helicopter parts, contending that the helicopter was imported and used for private purposes, thereby not qualifying as .
The adjudicating authority had earlier dropped proceedings relating to a ₹17.03 crore demand concerning EPCG licences and another ₹62.96 crore demand. However, it confirmed ₹6.01 crore towards customs duty on the helicopter parts, along with interest, , and penalties. This led to the appeal before CESTAT.
Key Observations by the Tribunal
The Bench carefully examined the definition of "" under the FTP and the specific provisions applicable to SFIS and SHIS imports. It noted that the DGFT, after consultation with the , had clarified on that Navayuga Engineering and KPCL were under . This clarification was crucial because it established the legitimacy of using KPCL's scrips.
On the helicopter parts, the Tribunal relied on the broad definition of "" under the FTP, which includes goods used in the production, manufacture, or processing of goods, or in mining, or in infrastructure projects. The Bench observed:
"In view of the above statutory provisions relating to air transport operation of passengers, we are of the view that the appellants use of helicopters in relation to their infrastructure projects, can be considered as ' ' under the definition provided under FTP and applicable for SFIS imports and 3.17.5 of the FTP applicable for SHIS imports."
The Tribunal further noted that the DGCA permission for "private use" did not mean personal use; rather, it was a classification under aviation regulations distinguishing non-scheduled operations from scheduled commercial flights. The helicopters were used to transport company personnel and other persons connected with monitoring infrastructure projects, which fell within the ambit of "infrastructure projects" under the FTP.
Group Company Status and Precedent
The DRI had argued that Navayuga Engineering and KPCL did not meet the "group company" criteria because the shareholding was not majority or direct control. However, the Bench rejected this narrow interpretation, citing the 's decision in , which upheld the recognition of based on indirect control. The common directors and overlapping shareholding satisfied the criteria prescribed under the FTP, and the DGFT's prior clarification further cemented this position.
The Tribunal also held that the could not be invoked against Navayuga Engineering because the issue regarding group-company status had already been brought to the department's knowledge. The company had proactively obtained and furnished the DGFT clarification, demonstrating and negating any .
Impact on Tax Litigation and Infrastructure Sector
This ruling carries substantial implications for infrastructure companies that rely on helicopters or other aircraft for personnel movement to remote project sites. By treating such equipment as , the decision enables companies to claim duty exemptions that reduce project costs. It also reinforces the principle that DGFT clarifications, when obtained in good faith, can insulate importers from extended limitation periods and penalties.
For customs and tax professionals, the judgment provides a clear analytical framework for assessing whether imported goods qualify as under the FTP. The reference to the Tata Teleservices precedent on group company recognition will be particularly useful in related disputes involving corporate groups with cross-shareholding structures.
The CESTAT's order also sends a strong message against revenue authorities' tendency to re-litigate issues already settled by DGFT clarifications. The Tribunal dismissed the Revenue's appeals and allowed Navayuga Engineering's appeal with , meaning the entire duty demand, , , and penalties stand set aside.
Conclusion
The CESTAT Mumbai's decision is a welcome relief for Navayuga Engineering and a significant clarification of the law on customs duty exemptions for helicopter parts used in infrastructure projects. By affirming the group company status and the classification, the Tribunal has aligned itself with the of the FTP. Legal practitioners and corporate tax teams will find the detailed reasoning on limitation and DGFT clarifications valuable for future compliance and litigation strategies.
The order underscores the importance of obtaining timely clarifications from competent authorities and maintaining transparent records. As the infrastructure sector continues to expand, this ruling may encourage more companies to invest in air transport for project monitoring, knowing that the associated duty exemptions are secure.
