Valuation of ATF available in fuel tank of aircraft returning from foreign trip

CESTAT Delhi has rejected the contention of the Revenue department that valuation of Aviation Turbine Fuel available as remnant fuel in the aircraft returning from foreign trip, has to be done by including 20% as notional freight charges in terms of Rule 10(2) of Customs Valuation Rules.

The assessee, Interglobe Aviation Limited, had paid Customs import duty on such ATF while only adding 1.125% as insurance charges and 1% as handling charges. Observing that the aircraft did not transport the fuel as cargo or goods for the purpose of freight, the Tribunal  was of the view that there should not be a freight element attributable to such fuel in the tank.

Relying on meaning of ‘freight’ in various dictionaries, it was held that fuel in the tank of aircraft used for propulsion cannot be considered as cargo/goods with attributable cost of freight. Application of Rule 10(2) was also rejected noting that since there is no freight element involved, there is no question of freight being ‘not ascertainable’.