CESTAT Sets Aside ₹19.76 Crore Duty Demand on Privilege Airways Over Falcon 2000 Import

March 03, 2026 : The Customs, Excise and Service Tax Appellate Tribunal, New Delhi, has set aside a customs duty demand of ₹19.76 crore raised against Privilege Airways Pvt. Ltd. over the import of a Falcon 2000 aircraft, holding that use of such aircraft for charter operations does not violate the applicable exemption notification.

The ruling came from a Bench comprising S. S. Garg (Judicial Member) and P. V. Subba Rao (Technical Member), which allowed the appeals filed by Privilege Airways and its director Sarang Wadhawan, granting consequential relief.

The dispute arose from an Order-in-Original dated 30 July 2010 passed by the Commissioner of Customs (Preventive), New Delhi. The Commissioner had denied the benefit of exemption under Notification No. 21/2002-Customs (Serial No. 347B) and confirmed a duty demand of ₹19,76,50,325 under Section 28 of the Customs Act, 1962. The order also directed confiscation of the aircraft with an option to redeem it on payment of ₹15 crore and imposed penalties of ₹5 crore on the company and ₹20 lakh on its director.

Privilege Airways had imported the Falcon 2000 aircraft claiming exemption available to operators approved by the Ministry of Civil Aviation for providing non-scheduled passenger or charter services. At the time of import, the company undertook that the aircraft would be used for non-scheduled passenger services.

However, the Department alleged that the aircraft had been chartered to Housing Development & Infrastructure Ltd. (HDIL) and used exclusively by its directors, who were also linked to Privilege Airways. This, according to the Department, amounted to a violation of the conditions of the exemption notification, leading to the issuance of a show cause notice dated 25 May 2009.

The Tribunal noted that there was no dispute regarding the chartering of the aircraft to HDIL. The core issue was whether an aircraft imported for non-scheduled passenger services could also be used for non-scheduled charter services.

On this point, the Bench relied on the Larger Bench ruling in VRL Logistics v. Commissioner of Customs, which had conclusively held that aircraft imported for non-scheduled passenger services can also be used for non-scheduled charter services without breaching the exemption conditions.

Applying this precedent, the Tribunal held that the exemption notification itself contemplates both categories of use and does not restrict an operator to only one mode. Therefore, the use of the aircraft for charter operations did not amount to a violation of the undertaking furnished at the time of import.

Rejecting the reasoning adopted in the impugned order, the Tribunal concluded that the denial of exemption, along with the duty demand, confiscation, and penalties, was unsustainable in law. The impugned order was accordingly set aside.

Case Details:
Privilege Airways Pvt. Ltd. vs Commissioner of Customs (Preventive)
Customs Appeal No. 506 of 2010