CESTAT Upholds Confiscation of IMFA Helicopter for Private Use, Quashes Penalties on Officials

February 03, 2026 : The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal has upheld the confiscation of a helicopter imported by Indian Metal and Ferro Alloys Limited (IMFA) after finding that the aircraft was predominantly used for private, non-revenue purposes in violation of post-import conditions attached to a customs duty exemption. At the same time, the Tribunal set aside penalties imposed on the company’s Vice-Chairman and Senior Manager, holding that there was no proof of intentional abetment on their part.

The ruling was delivered by a Bench comprising Justice Dilip Gupta, President, and Hemambika R. Priya, Technical Member, in a batch of appeals arising out of an order passed by the Commissioner of Customs (Preventive), New Delhi. The Tribunal examined detailed flight log records and found that nearly 80 percent of the helicopter’s flying hours were used for private flights without any remuneration, while only about 20 percent related to charter operations.

IMFA had imported a Robinson R-44 Raven II helicopter in October 2007, claiming nil basic customs duty under Notification No. 21/2002-Cus., as amended by Notification No. 61/2007. The exemption applies to aircraft imported for non-scheduled passenger or non-scheduled charter services, subject to strict post-import conditions under Condition No. 104. At the time of import, IMFA furnished an undertaking to use the helicopter only for the specified purpose and to pay the applicable duty if the conditions were breached.

Following an investigation, the Customs Department alleged that the helicopter was largely used for private and non-commercial purposes, including travel by senior executives, without earning any revenue. A show cause notice was issued proposing confiscation of the aircraft, recovery of customs duty amounting to about ₹48.58 lakh, and penalties on senior officials of the company.

The Commissioner confirmed the duty demand and ordered confiscation of the helicopter under Section 111(o) of the Customs Act, 1962, while also imposing penalties under Section 112 on the Vice-Chairman and the Senior Manager. Interest was not demanded, as the Commissioner held that Section 28 of the Customs Act did not apply to cases involving violation of post-import conditions.

Before the Tribunal, IMFA argued that there was only a clerical error in mentioning the serial number of the exemption notification in its undertaking and that the substantive conditions applicable were those under Condition No. 104. The Tribunal accepted that the wrong serial number had been mentioned inadvertently, but made it clear that this did not dilute the obligation to strictly comply with Condition No. 104.

Relying heavily on the Delhi High Court’s decision in East India Hotels Ltd., the Tribunal reiterated that “air transport service” necessarily involves transportation for some form of remuneration. Flights undertaken without any remuneration, even if permitted under aviation regulations, do not qualify as non-scheduled passenger or charter services for the purpose of customs exemption. On the facts, the Tribunal found that the predominant use of the helicopter was for private, non-revenue flights, amounting to a clear violation of the exemption conditions.

The Tribunal held that there was no substantial compliance with Condition No. 104 and that confiscation of the helicopter and confirmation of the duty demand were legally justified. It further ruled that recovery of duty flowed directly from the breach of the undertaking given at the time of import and was independent of Section 28 of the Customs Act.

On the issue of personal penalties, however, the Tribunal took a different view. It held that penalty under Section 112 requires proof of knowledge or intentional abetment. Mere association with the company or incidental use of the aircraft does not automatically establish mens rea. The Tribunal noted that the adjudicating authority had not recorded any specific finding that the Vice-Chairman or Senior Manager had knowingly abetted the violation of the exemption conditions.

Relying on Supreme Court and Bombay High Court precedents, the Tribunal held that innocent or routine facilitation without deliberate intent cannot attract penal liability. In the absence of evidence of conscious knowledge or intentional aid, the penalties imposed on the Vice-Chairman and Senior Manager were quashed. The Department’s appeal seeking enhancement of penalties was also dismissed.

As a result, while the confiscation of the helicopter and the customs duty demand against IMFA were upheld, all personal penalties were set aside.

Cause Title: Indian Metal and Ferro Alloys Limited vs Commissioner of Customs (Preventive)
Case No.: Customs Appeal No. 70 of 2010
Coram: Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member)