2021 (6) TMI 672 - AT - Customs

Valuation of imported goods - Toyota Landcruiser - misdeclaration of goods by concealing evidence - Confiscation of goods - Penalty - HELD THAT - It is clear from the conditions specified in public notice no. 3 (RE-2000)/1997-2002 dated 31st March-2000 of Director General of Foreign Trade that endorsement of no sale for two years was to be recorded by the competent authority in the registration certificate of the vehicle. The appellant, having entered into lease agreement with the importer, cannot be said to be ignorant of such condition. Nonetheless, we are unable to concur with the findings of the lower authorities that no sale restriction has been breached by taking possession of the vehicle on lease. The distinction between sale and lease is not only substantive but also legally unassailable - the appellant cannot be held liable as a willful participant in breaching conditions of import. Consequently, the penalty on the appellant does not sustain. Demand of differential duty - HELD THAT - There is no doubt that the differential duty confirmed by the lower authorities under section 28 of Customs Act, 1962 cannot be fastened on the appellant as a substitute for the importer. Confiscation for misdeclaration of value - alleged breach of condition of no sale - HELD THAT - Though the relative gravity of each has not been mathematically determined, the lack of challenge to the former in the present proceedings precludes erasure of confiscation under section 111 of Customs Act, 1962 and, thereby, retains fine, even in the lack of segregation, for redemption. In this peculiar circumstance of challenge restricted to one of the grounds of confiscation coupled with the absence of appeal by the person affected by the other, it would be inappropriate for us to contemplate alteration of the fine. In view of our findings supra, the appeal is allowed to the extent of setting aside the penalty imposed on the appellant with the clarification that the appellant may not be subjected to recovery proceedings for differential duty, redemption fine or penalty that devolves on the importer.

Issues:
Allegation of misdeclaration of imported vehicle's value, liability for duty, confiscation, penalty, breach of restriction on sale, role of possessor in import liabilities.

Analysis:
1. The dispute arose from the alleged misdeclaration of the value of an imported 'Toyota Landcruiser', leading to duty liability, confiscation, and penalties. The appellant, Ms. Marina J Mahi, faced charges after officers of the Directorate of Revenue Intelligence seized the vehicle due to concealed evidence of manufacture in 2003, despite a 1999 declaration. The original authority demanded a differential duty, a redemption fine, and imposed a penalty, which the Commissioner of Customs (Appeals) upheld, prompting the current appeal.

2. The investigation revealed a scheme involving loans obtained against such vehicles, their transfer in breach of import restrictions, and the appellant's connection to the impugned vehicle. The physical examination exposed tampering with critical information, leading to a revised value assessment and a finding of deliberate misdeclaration and breach of sale restrictions.

3. The appellant acknowledged leasing the vehicle from the original importer and being a co-applicant for a loan secured against it. Reports highlighted irregularities in the vehicle's details, suggesting misrepresentation. The appellant's involvement in the import process was a key point of contention.

4. Legal arguments centered on whether the appellant could be held liable under the Customs Act, citing relevant case law. The distinction between sale and lease agreements, and the interpretation of import conditions, formed the crux of the appellant's defense against the alleged breaches.

5. The Authorized Representative emphasized the enforcement of import conditions and argued that the loan and lease agreements constituted a form of transfer violating sale restrictions. The original authority's findings regarding the appellant's role were reiterated during the proceedings.

6. The appellant did not contest tampering allegations but focused on the breach of the 'no sale' condition. The tribunal refrained from delving into the misdeclaration evidence, narrowing the scope to the sale restriction issue.

7. Precedents were cited to distinguish liability under different sections of the Customs Act and to establish that importers bear primary responsibility. The interpretation of relevant legal provisions guided the assessment of the appellant's liability in the current case.

8. The tribunal analyzed the 'no sale' restriction in light of the lease agreement, emphasizing the legal distinction between sale and lease transactions. The appellant's lack of willful participation in breaching import conditions influenced the decision to set aside the penalty.

9. The tribunal clarified that differential duty liabilities could not be transferred to the appellant, aligning with previous court decisions on importer liability under the Customs Act.

10. The judgment addressed the confiscation of the vehicle for misdeclaration and sale restriction breaches. The lack of challenge to the misdeclaration charge preserved the confiscation and fine for redemption, with no alteration due to the limited scope of the appeal.

11. Ultimately, the appeal succeeded in overturning the penalty on the appellant, ensuring protection from recovery proceedings related to duty, fine, or penalty that primarily pertained to the importer. The judgment was pronounced on 18/06/2021.

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