ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 06.03.2026
CESTAT Delhi Overturns 19.76 Crore Duty Demand on Aircraft Imports
This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email idΒ intelconsul@gmail.com or on his Mobile +91-9999005379.
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, recently delivered a significant judgment in the case of M/s Privilege Airways Pvt. β Ltd. & Appellant vs. Commissioner of Customs (Preventive). β The case revolved around the denial of exemption benefits under Notification No. β 21/2002-Cus (S.No. β 347B) for the import of a Falcon 2000 aircraft by Privilege Airways Pvt. β Ltd. The Tribunal, in its Final Order No. β 50309-50310/2026 dated March 3, 2026, set aside the impugned order passed by the Commissioner of Customs (Preventive), New Delhi, providing consequential relief to the appellants. β
Background of the Case
M/s Privilege Airways Pvt. β Ltd. imported a Falcon 2000 jet aircraft under the conditional exemption Notification No. β 21/2002-Cus (S.No. β 347B). β This notification provided duty exemptions for aircraft imported into India for non-scheduled (passenger) services or non-scheduled (charter) services, subject to certain conditions. β Specifically, Condition No. β 104 required the importer to:
- Obtain approval from the Ministry of Civil Aviation for importing aircraft for non-scheduled services. β
- Furnish an undertaking to the customs authorities that the aircraft would be used exclusively for non-scheduled (passenger) or non-scheduled (charter) services. β In case of failure to comply, the importer would be liable to pay the duty that would have been applicable without the exemption. β
Privilege Airways had provided the required undertaking, stating that the aircraft would be used for non-scheduled (passenger) services. β However, it was later discovered that the aircraft was chartered out to M/s Housing Development & Infrastructure Ltd. (HDIL), whose directors were the same as those of Privilege Airways. β The aircraft was used exclusively for the private purposes of HDIL’s directors, leading the customs authorities to allege a violation of Condition No. β 104(ii) of the exemption notification. β
Impugned Order and Appeals β
Following the discovery, a Show Cause Notice (SCN) was issued on May 25, 2009, to Privilege Airways, its director and others. β The SCN proposed recovery of duty amounting to Rs. β 19,76,50,325 under Section 28 of the Customs Act, 1962, along with interest. β It also proposed the confiscation of the aircraft under Section 125 of the Act, with a redemption fine of Rs. β 15,00,00,000, and penalties of Rs. β 5,00,00,000 on Privilege Airways and Rs. β 20,00,000 on Appellant under Section 112(a) of the Act. β
The Commissioner of Customs (Preventive), New Delhi, upheld the allegations in the SCN and passed the impugned order on July 30, 2010. Aggrieved by this decision, Privilege Airways and its director filed appeals before the CESTAT. β
Key Issues in the Case
The primary issue before the Tribunal was whether aircraft imported for non-scheduled (passenger) services could also be used for non-scheduled (charter) services without violating the conditions of the exemption notification. β The appellants argued that the use of the aircraft for non-scheduled (charter) services was permissible under the notification, as clarified by a larger bench of the Tribunal in the case of VRL Logistics vs. Commissioner of Customs, Ahmedabad (Customs Appeal No. β 74 of 2010-LB, Order dated August 8, 2022). β
Tribunal’s Observations and Decision β
The Tribunal noted that the larger bench in VRL Logistics had already addressed the issue and held that aircraft imported for non-scheduled (passenger) services could be used for non-scheduled (charter) services. β The larger bench had clarified that such usage did not violate the conditions of the exemption notification. β The Tribunal also observed that the customs authorities could not question the validity of the permission granted by the Directorate General of Civil Aviation (DGCA) unless the DGCA itself had canceled the permit. β
In light of the precedent set by the larger bench in VRL Logistics, the Tribunal found no reason to take a different view in the present case. β It held that the impugned order passed by the Commissioner of Customs (Preventive) could not be sustained and must be set aside. β
Final Order
The Tribunal set aside the impugned order dated July 30, 2010, and provided consequential reliefs to the appellants. β This decision effectively nullified the duty demand of Rs. β 19,76,50,325, the redemption fine of Rs. β 15,00,00,000, and the penalties imposed on Privilege Airways and its director. β
Conclusion
The judgment in this case underscores the importance of adhering to established legal precedents and clarifications provided by higher judicial authorities. β It also highlights the need for customs authorities to respect the permissions granted by regulatory bodies like the DGCA unless such permissions are explicitly revoked. β This decision is likely to have significant implications for the aviation industry, particularly for operators engaged in non-scheduled air transport services.
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Source: CESTAT Delhi
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