The Customs Authorities are not bound by the decision of the DGCA in determining compliance with the undertaking, and compliance with the conditions of providing non-scheduled (passenger) services as defined in the Explanation to the Condition No.104 of the Notification is crucial.

JUDGMENT

Vibhu Bakhru, J. The Revenue has filed the present appeal impugning an order dated 08.09.2022 (Final Order No.50822-23/2022- hereafter `the impugned order') in Customs Appeal No. 640/2010 and Customs Appeal No. 642/2010, passed by the Customs Excise and Service Tax Appellate Tribunal (hereafter `the Tribunal').

2. The respondent had filed the appeal being Customs Appeal No. 640 of 2010, impugning an order-in-original dated 31.08.2010, whereby the Adjudicating Authority (Commissioner of Customs) had, inter alia, raised a demand of Rs.57,42,63,453/- (Rupees fifty seven crore, forty two lakhs, sixty three thousand, four hundred and fifty three only) and further imposed a penalty of Rs.16,00,00,000/- (Rupees sixteen crore only) under Section 112(a) of the Customs Act, 1962 (hereafter `the Customs Act'). In addition, the Adjudicating Authority had also directed confiscation of the aircraft imported by the respondent (hereafter `the aircraft'), under Section 111(o) of the Customs Act with an option to redeem the same by payment of a redemption fine of Rs.40,00,00,000/- (Rupees forty crores) under Section 125 of the Customs Act. The allegation against the respondent is that it had not complied with the undertaking furnished in terms of the Condition No.104 of the Notification No.21/2002-Cus. dated 01.03.2002 as amended by the Customs Notification No.61/2007-CUS dated 03.05.2007. In terms of the Condition No.104, the aircraft is required to be used for providing non-scheduled (passenger) services. According to the Adjudicating Authority, the respondent had not complied with the said condition and had used the aircraft for private purposes and not for providing non-scheduled (passenger) services.

3. The Tribunal allowed the respondent's appeal by the impugned order. The Tribunal found that the aircraft was used in accordance with the permit granted by the Director General of Civil Aviation (DGCA) and the aircraft was used for remuneration. The Tribunal decided the appeal in view of an interim order dated 08.08.2022 passed by the lager Bench of the Tribunal in Customs Appeal No.74/2010 captioned M/s VRL Logistics Ltd. v. Commissioner of Customs, Ahmedabad. The operative part of the impugned order reads as under:

"35. It is seen that the Larger Bench held that the undertaking to usethe aircraft for non-scheduled (passenger) service can be said to have been violated only when the DGCA finds that the use of the aircraft is not in accordance with the permit granted by DGCA for non-scheduled(passenger) service and only in that event the Customs authority can demand duty in terms of undertaking. In the present case, the DGCAhas not found the use of the aircraft by appellant to be in violation of permit for non-scheduled (passenger) service and in fact has renewedthe permit year after year. There is, therefore, no violation of the undertaking and, therefore, Customs cannot demand duty in terms of the undertaking.

36. It also needs to be noted that the Larger Bench of the Tribunal specifically held that the decision of the Division Bench of the Tribunal in East India Hotels which holds that it is the Customs department that has to ensure compliance of the undertaking is not correct. The Larger Bench also held that the decision of the Division Bench in King Rotors does not lay down the correct position of law.

"Analysis of the division bench decisions

119. The division bench of the Tribunal in King Rotors heldthat since the flight operations are not open to the public, theaircraft would not be considered to have been used for non-scheduled(passenger) services. This view, as discussed above,proceeds on an incorrect appreciation of the definition of non-scheduled(passenger) services.

120. The division bench of the Tribunal in East India Hotels held that published tariff to the public is a mandatoryrequirement of a non-scheduled (passenger) service and so ifthe tariff is not published, the use of the aircraft would be as aprivate aircraft. It