By TIOL News Service

NEW DELHI, AUGUST 06, 2015: THE question on which advance ruling sought is as follows -

Whether the new seats that are being imported for replacing the existing seats in aircraft be said to be for servicing, repair or maintenance of the aircraft under condition no. 21 of the Notification No. 12/2012-Cus?

The Applicant submitted that they intend to import seats of aircraft for replacing the existing seats; that existing seats are proposed to be replaced to provide a more comfortable flying experience to the fliers and to improve the fuel efficiency of the aircraft as the seats would be lighter in weight; that in this process, seats requiring repairing due to wear and tear shall also be replaced. They also submit that for such repair and maintenance activity under the aircraft, they had obtained approval from Directorate General of Civil Aviation (DGCA) as required under Civil Aviation Requirements (CAR)-145; that the certificate of approval allows them to carry out minor structural repair; that replacement of seats get covered under such minor structural change; that during the process of replacement, the old seats would be removed from the base by unbolting and new seats would be fitted with nuts and bolts.

The applicant had filed an application before the AAR on 28.06.2012 and the first Bill of Entry was filed on 15.01.2013 i.e. after about 6 months and, therefore, in view of the ruling in Guthy Renker Marketing Pvt. Ltd.,- 2009-TIOL-07-ARA-CUS the activities subsequent to filing of this application would not make the applicant ineligible under Section 28 I (2) (a) of the Customs Act, 1962.

Notification No. 12/2012-Cus.dt. 17.3.2012, sr. no. 454 exempts parts of aircraft (heading 8802)(other than rubber tubes)falling under any chapter from whole of basic customs duty subject to fulfillment of condition no. 21 provided therein and which condition reads - If imported for servicing, repair or maintenance of aircraft, which is used for operating scheduled air transport service or the scheduled air cargo service, as the case may be ;

The Applicant submitted that the terms "servicing", "repair" and "maintenance" have not been defined in the notification and, therefore, since the benefit is being extended to the aviation industry, these terms must be understood in terms of their usage and practice. Inasmuch as reference must be made to the Aircraft Rules, 1937 and Civil Aviation Requirements (CAR) issued by DGCA, particular, rule 3(33) & rule 60 which read as below -

Rule 3 (33C)- "Maintenance" means the performance of tasks required to ensure the continuing airworthiness of an aircraft, including any one or combination of overhaul, inspection, replacement, defect rectification and the embodiment of a modification or repair or test:

Rule 60 - Maintenance standards and certification- (I) In this rule, 'maintenance' refer to performance of all work necessary for the purpose of ensuring that the aircraft is airworthy and safe including servicing of the aircraft and all modifications, repairs, replacements, overhauls, processes, treatment, tests, operations and inspection of the aircraft, aircraft components and items of equipment required for that purpose.

According to the applicant, the aforesaid provisions of the Aircraft Rules show that the scope of the word 'maintenance' in relation to aircraft is very wide and it covers all kinds of modifications, replacements, repair and servicing.

In response, the Revenue representative submitted that there is no doubt about the classification of 'Aircraft seats' under CTH 9401 10 00 and, therefore, they cannot be considered as 'Spares/Parts' of Aircrafts and since the new seats are not meant for replacing damaged or unworkable seats but for up-gradation of the aircraft in order to make it more comfortable, the benefit of the exemption notification cannot be extended.

The Authority extracted the relevant entry and the condition of the notification 12/2012-Cus & after adverting to the LB decision in Indian Airlines, Calcutta Vs Collector of Customs - 2002-TIOL-320-CESTAT-DEL-LB & the apex court ruling in Maestro Motors Ltd. - 2004-TIOL-98-SC-CUS observed –

+ It is settled position of law that exemption notification is to be read strictly and interpreted in terms of its language – when language is plain and clear, effect must be given to it. Plain reading of the notification show that all parts (other than rubber tubes) of aircraft of Heading 8802 are exempt from Customs duty including seats of aircraft.

+ As per S. No. 454 of subject notification, parts of aircraft of Heading 8802 falling under any Chapter of Customs Tariff are exempt from duty. Tariff item 8802 contains "Other aircrafts (For example, Helicopters, Aeroplanes), Spacecrafts (including Satellites) and sub orbital and Spacecrafts Launch Vehicles.

+ Applicant proposes to import seats of aircrafts, which is part of aircraft. Aircraft falls under Tariff item 8802 and its seats, which is also part of aircraft. It is to be noted that if the intention of the Govt. was not to extend benefit of said notification to seats of aircraft, it would have mentioned so in the notification, along-with rubber tubes, to which this benefit is not extended. To our mind, the approach of Revenue to apply General Rules for Interpretation for Import Tariff, even for interpretation of notification in this case, is legally incorrect.

+ There can be no doubt that seats are integral part of the aeroplane. This is also confirmed by the Department of Civil Aviation by clarifying that the seat would form part of the aircraft. Further, it is not possible for the airline to operate the flight without seats. Similarly, one cannot think of passengers travelling in aeroplane without seats. Further, the applicant satisfies condition No. 75, which is necessary for being eligible to avail said notification in as much as the applicant is an "operator" engaged in aircraft operation and proposes to operate scheduled air transport service (air transport service undertaken between the same two or more places and operated according to a published time table or with flights or so regular or frequent that they constitute a recognizable systematic series, each flight being open to use by members of the public). The fact that applicant is "operator" for "operating scheduled air transport service" has not been challenged by the Revenue, further confirms applicant satisfies said condition No. 75.

+ In the instant case, benefit of said Notification is to be extended to the Aviation Industry; therefore, it may be appropriate to ascertain the meaning of words "maintenance" from the Aircraft Act, 1937 and rules made there-under. It is observed that Rule 3 (33C) and Rule 60 of the Aircraft Rules, 1937, maintenance inter-alia include replacement, modifications, repairs and servicing. Further, "enhancement" would be covered under "modification". Therefore, the contention of Revenue is devoid of merit.

The Authority for Advance Rulings, therefore, held that the new seats that are being imported for replacing the existing seats in aircraft are for servicing, repair or maintenance of the aircraft and entitled for the benefit of exemption notification 12/2012-Cus.

(See 2015-TIOL-05-AAR-CUS)