2004 (7) TMI 539 - AT - Customs

Car - Import of - Audi Cars - Exemption based on Cubic capacity - Valuation - Transaction value - Misdeclaration - Duty liability confiscated goods - Penalty

Issues Involved:
1. Cubic Capacity of the imported cars.
2. Valuation of the imported cars.
3. Trading in Licences.
4. Penalty imposition and liability for differential duty.
5. Impact of settlements under Kar Vivad Samadhan Scheme.

Detailed Analysis:

I. Cubic Capacity of the Imported Cars:
The investigation revealed that the actual cubic capacity (CC) of the imported cars was higher than declared. Tests by IIT, Bombay, and Anna University, Madras, confirmed that the cars had engine capacities exceeding 1600 CC, contrary to the declared 1595 CC. The evidence included coded stickers on the cars, service records from Ashiya Motors, and testimony from Mr. Futehally and his service engineer. The Commissioners rejected the defense that the cars were a tropicalized version below 1600 CC, finding the test results and other evidence conclusive. The judgment upheld the Commissioners' findings, agreeing that the cars were not eligible for concessional duty rates.

II. Valuation:
The core issue was determining the correct assessable value of the cars. The declared invoice prices were found unreliable due to lack of detailed particulars about the car models and features. The Export Price Lists from Volkswagen were also deemed misleading and incomplete. The judgment favored using the Tourist Price Lists, which provided detailed pricing for each model and sub-model, as a more reliable basis for valuation. This method was supported by evidence showing payments made close to Tourist Price List values. The judgment directed revaluation based on the Tourist Price Lists, adding elements for freight, insurance, etc., to compute the price at the place of import.

III. Trading in Licences:
The investigation established that CCPs (Customs Clearance Permits) were purchased on commission, with evidence including a letter from Ashiya Motors offering payment for a CCP. The judgment found that the cars were imported with misdeclared descriptions and values, making them liable for confiscation under Section 111(m). Mr. Futehally was identified as the key figure in the fraudulent imports and transactions, with the NRI importers assisting him. The judgment upheld the penalties imposed on the importers and Mr. Futehally.

IV. Penalty Imposition and Liability for Differential Duty:
The judgment confirmed the imposition of penalties on Mr. Futehally and the importers for their roles in the fraudulent imports. A consolidated penalty of Rs. 60 lakhs was fixed for Mr. Futehally. The importers were found to be willing participants in the fraudulent activities, justifying the penalties imposed on them. The judgment clarified that the differential duty arising from revaluation would be the liability of the car owners who redeem the confiscated goods, not the original importers, as per Section 125(2) of the Customs Act and the Apex Court's decision in Jagdish Cancer Institute.

V. Impact of Settlements under Kar Vivad Samadhan Scheme:
The judgment addressed the impact of settlements under the Kar Vivad Samadhan Scheme on the appeals. It was determined that the revenue's appeals were protected by the proviso to Section 92 of the Finance Act, 1998, and the penalties on Mr. Futehally and the importers would not be affected by the settlements made by the car buyers. The judgment referenced the Bombay High Court's decision in Yogesh Korani v. Union of India, which clarified that settlements by the main noticee do not cover penalties on co-noticees arising from distinct causes of action.

Conclusion:
The appeals were disposed of by revising the duty demand based on the Tourist Price Lists and fixing a consolidated penalty of Rs. 60 lakhs on Mr. Futehally. The judgment upheld the confiscation of cars, penalties on the importers, and clarified the liability for differential duty, ensuring comprehensive resolution of the issues involved.

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