CESTAT Sets Aside ₹19.76 Crore Duty Demand on Privilege Airways’ Falcon 2000 Aircraft, Allows Charter Use Under Exemption

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

The bench comprising Judicial Member S. S. Garg and Technical Member P. V. Subba Rao allowed the appeals filed by the company and its director, quashing the order of the Commissioner of Customs (Preventive), New Delhi, which had denied exemption, ordered confiscation of the aircraft, and imposed penalties.

Privilege Airways had imported the Falcon 2000 aircraft claiming exemption under Notification No. 21/2002-Cus. (S. No. 347B), which grants duty exemption to aircraft imported for providing non-scheduled (passenger) services or non-scheduled (charter) services, subject to specified conditions. At the time of import, the company undertook to use the aircraft for non-scheduled passenger services.

Subsequently, the Department alleged violation of Condition No. 104 of the notification after finding that the aircraft had been chartered to Housing Development & Infrastructure Ltd. (HDIL), whose directors were also directors of Privilege Airways, and was used exclusively by them. A show cause notice dated 25 May 2009 proposed recovery of duty, confiscation, and penalties.

The adjudicating authority confirmed the demand of ₹19.76 crore under Section 28 of the Customs Act, ordered confiscation of the aircraft with a redemption fine of ₹15 crore, and imposed penalties of ₹5 crore on the company and ₹20 lakh on its director.

Before the Tribunal, the central issue was whether an aircraft imported for non-scheduled passenger services could also be used for non-scheduled charter services without breaching the exemption conditions.

The Tribunal noted that there was no dispute regarding the chartering of the aircraft to HDIL. However, relying on the Larger Bench ruling in VRL Logistics, it held that aircraft imported for non-scheduled passenger services can also be deployed for non-scheduled charter services.

The bench emphasized that the exemption notification itself covers both categories of non-scheduled operations and does not mandate exclusive use under a single category. Therefore, charter use of the aircraft could not be treated as a violation of the conditions of exemption.

Following this reasoning, the Tribunal concluded that denial of exemption, demand of duty, confiscation, and penalties were unsustainable in law. The impugned order was set aside, and the appeals were allowed with consequential relief to the appellants.

Case Title: Privilege Airways Pvt. Ltd. v. Commissioner of Customs (Preventive)
Case Number: Customs Appeal No. 506 of 2010