Defence Certificates Crucial to Decide Whether Aircraft Safety Systems Qualify as ‘Parts of Aircraft’: CESTAT

The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside a customs duty demand of over Rs. 92.81 lakh raised against Hindustan Aeronautics Limited (HAL) and its Transport Aircraft Division and remanded that the matter back holding the defence certificates crucial to decide whether aircraft safety systems qualify as ‘parts of aircraft’. The bench of Binu Tamta (Judicial Member) and Hemambika R. Priya, Member (Technical) remanded the matter for fresh adjudication after holding that critical evidence issued by the Ministry of Defence (MoD) was not examined by the adjudicating authority. The case arose from the import of specialised fire extinguishers and their parts by HAL for use in defence aircraft, including the DO-228 and Su-30MKI. HAL had claimed concessional customs duty under Serial No. 545 of Notification No. 50/2017-Cus dated 30 June 2017, which grants exemption to parts of aircraft falling under Heading 8802 of the Customs Tariff. The department alleged that fire extinguishers are standalone safety equipment and do not qualify as “parts of aircraft.” On this basis, show cause notices were issued for the period July 2017 to March 2022, culminating in a common Order-in-Original dated 21 July 2023 confirming differential customs duty of ₹92.81 lakh by invoking the extended period of limitation under Section 28(4) of the Customs Act, 1962; interest under Section 28AA; penalty equivalent to the duty amount under Section 114A; and an additional IGST demand of ₹6.75 lakh for the initial GST transition period. HAL contended that the imported fire extinguishers were not generic equipment but aircraft-specific systems, engineered and integrated into defence aircraft to handle engine and in-flight fire emergencies. The fire extinguishers are installed near aircraft engines and are integrated with sensors that automatically deploy fire-suppressant agents while the aircraft is airborne. They cannot be removed without dismantling aircraft sub-assemblies and are unusable outside the specific aircraft for which they are designed. For aircraft such as the DO-228 and Su-30MKI, these systems are mandatory for operational safety and combat readiness. Crucially, HAL produced declarations issued by the Ministry of Defence, certifying that the fire extinguishers are mandatory parts of the aircraft and that flying safety certificates (Form F-1090) would not be issued without them. HAL also relied on aircraft Illustrated Parts Catalogues and Standard Operating Procedures issued by defence airworthiness authorities. The department contended that although fire extinguishers are essential for airworthiness and safety, they do not contribute to the functioning of an aircraft per se and therefore cannot be treated as aircraft parts for the purpose of customs exemption. Relying on Supreme Court jurisprudence, including Dilip Kumar & Company, the Department argued for strict interpretation of exemption notifications and asserted that “parts of fire extinguishers” could not be equated with “parts of aircraft.” The CESTAT observed that the adjudicating authority had accepted that Notification No. 50/2017-Cus covers all parts of aircraft under Heading 8802, irrespective of tariff chapter. However, it failed to consider vital evidence subsequently placed on record, particularly MoD declarations certifying the mandatory and aircraft-specific nature of the fire extinguishers. Referring to established precedents, the Tribunal noted that equipment designed exclusively for use in aircraft and without which the aircraft cannot operate or receive airworthiness certification has, in earlier cases, been treated as “parts of aircraft.” The Bench cited decisions such as MAK Controls, High Energy Batteries, and Hyundai Unitech, where safety and auxiliary systems were recognised as integral components of the principal equipment. Holding that the Ministry of Defence certificates and related documents are relevant and decisive evidence, the Tribunal set aside the impugned order and remanded the matter to the adjudicating authority for fresh consideration in light of MoD declarations, Flight safety certificates, and judicial precedents on the scope of “parts” under exemption notifications. The appeals were allowed by way of remand, and all connected miscellaneous applications were disposed of. Case Details Case Title: M/s. Hal Transport Aircraft Division Versus Principal Commissioner Of Customs Case No.: Customs Appeal No. 50304 of 2024 Date: 09.01.2026 Counsel For Appellant: Priyanka Rathi and Ms. Priyanshi Chakarborty Counsel For Respondent: Chitra Srivastava, Authorized Representative Click Here To Read Order Read More: Non-Intimation Of Address Change: CESTAT Upholds Presumptive Service of Adjudication Order Despite Claim of Non-Receipt

Defence Certificates Crucial to Decide Whether Aircraft Safety Systems Qualify as ‘Parts of Aircraft’: CESTAT

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