2026-VIL-1657-CESTAT-MUM-CU
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CUSTOMS CESTAT Cases

Customs – Utilization of scrips/export earnings of a 'group company' for discharge of export obligation under EPCG/SFIS/SHIS schemes – Paragraph 9.28 of the Foreign Trade Policy – Appellant importer, engaged in development of infrastructure projects, had used EPCG licences and SFIS/SHIS duty credit scrips issued to its group company for import of capital goods, discharging export obligation by utilising the group company's export earnings, including earnings from port handling services rendered to foreign vessels calling for import cargo – Demand of differential customs duty was raised on the ground that the two companies did not qualify as 'group companies' since neither held shareholding in the other, that shareholding of common individual directors was not relevant, and that earnings from services to import vessels could not be adjusted towards export obligation – Appellant contended that the two companies, both incorporated companies with common directors combinedly holding the requisite shareholding, satisfy the definition of 'group company', and that the competent authority's clarification to that effect is final and binding on the Customs Authorities – Whether the appellant and its group company qualify as 'group companies', and whether the group company's earnings from services to import vessels could be adjusted towards the appellant's export obligation – HELD – The definition of 'group company' requires two or more enterprises exercising the requisite voting rights or power to appoint the requisite proportion of directors in each other, and where both entities are companies with common directors combinedly holding the requisite shareholding in each, the twin criteria are satisfied, individuals having represented as directors and not in their individual capacity – The competent authority's clarification that the companies are group companies is final and binding on the Customs Authorities, whose role is limited once such clarification is issued – Following the settled position, upheld up to the Supreme Court, that companies with common controlling shareholding through their promoters qualify as group companies, the issue is no longer res integra – Earnings from port handling services to foreign vessels, being earned in foreign exchange or its equivalent, constitute export of service eligible for adjustment towards export obligation, and once the group company relationship is established, such earnings can be utilised to discharge export obligation – The orders dropping the demand on this ground do not require interference - Customs – Eligibility of parts of helicopter for exemption as 'capital goods' under SFIS/SHIS scheme – Notification No. 91/2009-Customs – Demand of differential duty was confirmed on import of helicopter parts on the ground that the helicopter was used for private purposes and could not be treated as capital goods related to the appellant's service sector business – Appellant contended that the helicopter was essential for transporting personnel to remote project sites for monitoring infrastructure projects, that its use was for private purpose in the civil aviation sense and not personal use of an individual, and that such use qualifies it as capital goods – Whether helicopter parts qualify as capital goods eligible for the exemption – HELD – Capital goods under the Foreign Trade Policy covers plant, machinery, equipment or accessories required, directly or indirectly, for rendering services, and the impugned goods, being parts for functioning of a helicopter used to transport personnel connected with infrastructure projects in remote areas, fall within that definition – Permission for operating the aircraft for 'private use' relates to the regulatory category under Civil Aviation Requirements and does not mean personal use of an individual, since a non-scheduled operator may operate flights for a company within its group and associated companies and its own employees and their family members – Use of helicopter parts for the appellant's infrastructure projects is capital goods under the Foreign Trade Policy, and use of the group company's scrips for the exemption is well within the Policy – The confirmation of duty demand on this count is not legally sustainable - Customs – Invocation of extended period of limitation – Section 28(4) of the Customs Act, 1962 – Demand on import of helicopter parts for part of the disputed period was raised beyond the normal period by invoking the extended period, alleging suppression and wilful mis-statement – Whether the extended period was invokable – HELD – Suppression requires a deliberate act to withhold correct information with intent to escape duty, and where facts are known to both parties, omission by one to do what it might have done does not amount to suppression – The appellant had itself referred the issue to the competent authority, obtained the necessary clarification, and furnished it to the department, besides obtaining requisite permits for import, use and operation of the helicopter – No case is made out for invoking the extended period, and the demand beyond the normal period does not stand legal scrutiny on this count also
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GST & Customs updates: Sep'26
By CA Vivek Jalan

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