2024 (4) TMI 126 - AT - Customs

Levy of penalty on the Directors of the Company - Valuation of imported goods - import of luxury vehicles by misusing the Transfer of Residence (TR) Scheme - re-determination of value - HELD THAT - The Custom House found that the car import violated the EXIM policy and the value declared was also low. They hence cleared the goods only after enhancing the value, denying concessional rate of duty under the TR facility and collecting fine and penalty for the violations noticed. The goods after clearance were purchased by the Appellants. As per post clearance investigation by DRI the car was once again subject to adjudication proceedings based on fresh violations that were allegedly unearthed by DRI. M/s Mothers Pride is a limited company and is an independent legal entity. The learned Original Authority has not clearly brought out any charge against the appellants other than that they were involved in the purchase of the car. There is no allegation that the Appellants were the importers of the impugned car. The main charge and the action that follows in the Order in Original was mainly against M/s Mothers Pride. Since they are not before me, the issues relating to valuation, duty, interest and penalty pertaining to them are not of concern in this appeal. The fact that the car was not in the possession of the importer for one year was noticed by the assessing officers at the time of import itself and penal action taken for the same. Hence a subsequent penal action does not survive for the same FTDR Act violation. Moreover, once the penalty was paid and the goods cleared for home consumption, the restrictions of sale etc. which would have been present had the goods been cleared under TR concession no longer holds good. In such a situation the Appellant cannot be said to have infringed any provision of the Customs Act, even if they had due to ignorance, participated in procuring the impugned car for the company and sought to cloak the purchase under a veil of legalese involving a car loan. The impugned order in as much as it relates to the penalty imposed on the Appellants is set aside - Appeal allowed.

Summary

Issues:
The issues involved in the judgment are the undervaluation of imported luxury vehicles, violation of Transfer of Residence (TR) Scheme, confiscation of imported car, imposition of penalty under section 112(a) of the Customs Act, and the liability of directors in the import and sale of the car.

Undervaluation of Imported Car:
The case involved the import of a Toyota Land Cruiser Prado Car declared at a low value of USD 5,000, which was later re-determined by Customs Officers at Rs 03,75,555. The importer did not meet the minimum possession period required for TR facility, leading to confiscation under section 111(c) of the Customs Act. Adjudication resulted in fines and penalties being imposed, which were paid by the importer.

Violation of TR Scheme and Imposition of Penalty:
Post-clearance investigation revealed that the imported car was undervalued and came into possession of a company through certain individuals. Show Cause Notices were issued alleging undervaluation and violation of TR facility conditions. The adjudicating authority re-determined the value, imposed duties, and penalties on the company. Directors of the company were also penalized under section 112(a) of the Customs Act, leading to appeals before the Tribunal.

Legal Arguments and Rulings:
The appellants argued that they purchased the car after full duty payment and clearance, thus no TR facility restrictions applied. They cited legal precedents to support their claim that fresh proceedings against redeemed goods are void. The Revenue contended that the re-valuation was justified, and clearance under section 47 did not bar penalizing the appellants. The Tribunal found that the penalty on the appellants was not justified as they were not the importers and the main charges were against the company. Precedents were cited to support the decision, and the penalty on the appellants was set aside.

Conclusion:
The Tribunal set aside the penalty imposed on the appellants, stating that they were not directly involved in the import process and the main charges were against the company. The appellants were deemed eligible for any consequential relief as per the law.