IMPORT OF CARS FROM LAND LOCKED COUNTRIES

[Mr. M. GOVINDARAJAN]

A land locked country means a country which is entirely closed by land or whose only coastline lie the enclosed areas. There are 48 land locked countries in the world. The land locked country is put in a disadvantaged position. It has to bear significantly higher costs of international cargo transportation compared to coastal countries. Losing access to the sea is generally a great blow to a nation, politically, militarily, and particularly with respect to international trade and therefore economic security.

The Notification No.2 (RE)/2006/04/2009, dated 07.04.2006 in terms of para 2(II)(g) says that in case a country of manufacture is a ‘land locked country’ and the shipment takes place from another country, the export would be deemed to have been made from the country of manufacture provided there are supporting documents to track the vehicle from the country of manufacture to the port of landing and from there to the port of destination.

In respect of import of car the following are conditions in Import Policy:

“2(II) The import of new vehicles shall be subject to the following conditions:

(a)  The new vehicle shall-

(i)         have a speedometer indicating the speed in Kilometers per hour;

(ii)        have a right hand steering, and controls (applicable on vehicles other than two and three wheelers);

(iii)       have photometry of the headlamps to suit ‘keep left’ traffic; and

(iv)       be imported from the country of manufacture.

(b)  In addition to the conditions specified in (a) above, the new vehicle shall conform to the provisions of the Motor Vehicles Act, 1988 and the rules made there under, as applicable on the date of import.

(c)  Whoever being an imported or dealer in motor vehicles who imports or offers to import a new vehicle into India shall,

(i)    at the time of importation, have valid certificate of compliance as per the provisions of Rule 126 of the Central Motor Vehicle Rules, 1989, for the vehicle model being imported, issued by any of the testing agencies, specified in the said rule;

(ii)   be responsible for all the provisions assigned to the manufacturer as per Rules 122 and 138 of Central Motor Vehicle Rules, 1989 and for issuing Form 22, as per provisions of the Rules; and

(iii)  give an undertaking in writing that the period of compliance to conformity of production as per Rule 126A of Central Motor Vehicle Rules shall be submitted within six months of the imports.   In view of failure to do so, no further import of new vehicle of that model shall be allowed thereafter.

(d)  The import of new vehicles shall be permitted through the Customs port and Nhava Sheva, Kolkata, Chennai, ICD Tughlakabad and Delhi Air Cargo, Mumbai Port.

(e)  The provisions of this notification will not apply to the imports of new vehicles:

(i)    For the purpose of certification as per para c(i) above;

(ii)   For the purpose of defence requirements; and

(iii)  For the purpose of R&D by vehicle manufacturers.”

“(7) import of new vehicles having an FOB value of US$40,000 or more and engine capacity of more than 3000cc for period run vehicle and more than 2500 cc for diesel run vehicles by-

(a) Individuals;

(b)  Companies and firms importing under the EPCG Scheme; and

(c)  OEMs (Original Equipment Manufacturers – who have manufacturing and service network in India)

Will be exempt from the conditions at Sl. No. 2(II)(c) above.   However at the time of customs clearance a Type of Approval Certificate/COP of an international accredited agency from the country of origin, including a notarized English translation, thereof, shall be furnished.   This Type Approval shall stipulate that the vehicle to be imported complies with all the ECE Regulations for the complete vehicle.   The accredited agencies have been notified vide Policy Circular No. 26, dated 9.2.2004.

In ‘Mangilipalli Pradeep Ramu V. Commissioner of Customs, New Delhi’ – 2013 (1) TMI 506 - CESTAT NEW DELHI the appellant imported a motor car Cadillac Escalade mode, valued at US$ 61500 and filed Bill of Entry dated 29.11.2007.   The assessable value of the car was worked out at Rs.24,76,282/-. The said car was manufactured in USA but was invoiced by a dealer in Dubai and shipped from Thailand.  

The said car was seized by the Department according to them the import was in contravention of the import policy as the import should have been made from the country of manufacture and non submission of ‘homologation certificate’ (‘homologation’ is a technical term, derived from Greek ‘homologeo’ for the agree, which is generally used in English to signify the granting of approval by an official authority). The car was confiscated under Section 111(d) of the Customs Act, 1962 and allowed to be redeemed on payment of redemption of fine of Rs.4 lakhs along with penalty of Rs.2 lakhs under Section 112 of the Customs Act on the importer.

On appeal before the Tribunal the appellant contended the following:

• The main conditions for import such cars specified in Import Policy have been complied with;
• They received documents from the supplier which showed shipment of vehicle originating from USA to UAE and from UAE to Thailand and Thailand to India and that should be good enough to meet the requirement;
• The requirement that cars should be imported from the country of manufacture was waived by amendment of the policy by the Government Notification No.74(RE-2008)/2004-09, dated 30.12.2008;
• In regard to homologation certificate and type approval certificate the Government of India had not notified the International Accredited Agency in USA which should have issued such certifications though Government of India had notified names of such agencies for a few other countries;
• The manufacturer in USA certified that the type was in conformity with the ECE Regulations and that should be good enough to meet the requirements of the conditions laid down in the Policy;
• Obtaining homologation certificate and certificate of COP from an international accredited Agency in USA was an impossible condition to be met in the case of cars manufactured in USA;
• The appellants had no intention to evade payment of any customs duty or avoid any import regulation and hence confiscation of the goods, the redemption fine and penalty imposed are not warranted.
  

The Revenue submitted the following:

• The import was made in contravention of the condition that the car should have been imported from the country of origin;
• If the country of manufacture and place of shipment are different there will be evidence that the goods have come from the country of manufacture to the country of shipment;
• The importers are expected to imports only from those countries where the conditions could be met;
• The Commissioner has rightly confiscated the goods and the redemption fine and penalty imposed are very reasonable considering the nature of contravention.
  

In this case the members rendered different orders.   Member (Technical) was not in agreement with the contentions of the appellant that the path of the goods imported is sufficient to meet the condition that the goods should have been imposed from the country of manufacture.   It is not for the Tribunal to guess the reason behind the condition and order what would be sufficient compliance with the Policy. The Import Policy is formulated having regard to various trade considerations of the country and international obligations. It is not for Tribunal to look into the merits and demerits of the import policy. In regard to non compliance of getting hologation certificate and certificate of COP the Member held that there was no reason to confiscate car since the condition is impossible to comply with.   However the Member held that the car was imported in contravention of the condition that the car should have been imported from the country of manufacture and rightly confiscation under Section 111(d) of the Customs Act. However the redemption fine was reduced to Rs. 2 lakhs and the penalty imposed under Section 112 was reduced to Re. 1 lakh.

The Judicial Member held that there is no mala fide intention established on the part of the appellant. The issue involved is bona fide issue of interpretation of legal provisions and the applicants could be under a bona fide belief that as the car was being imported from the country of manufacture, there would be no violation of provisions of the policy. As such imposition of penalties upon the importer was neither warranted nor justified and set aside the order of Commissioner.

Since there was difference of opinion the case was referred to third Member (Judicial). He held that the car Import Policy being the law of land which was subject matter of scrutiny by Customs and import having been made under that policy, contravention of that law is prevented by Customs. The appellant having contravened policy without the import being made from the country of manufacture defeats the spirit and object of the policy. That made the car confiscable and the car became smuggled goods liable to penal consequence of law of customs. The legislature intended import of car to enjoy notification benefit only if such import is made from the country of manufacture. The landing port should be the port of export and if it is in a land locked country, that may be imported from the adjoining country situated in the land locked country of coastal line from which export was permissible. When the car in question came from USA to UAE, it was exported from USA to UAE and thereafter export was from UAE to Thailand. India was third destination and USA, not being a land locked country which remained undisputed, no inference can be drawn to equate the import from Thailand into India as import from USA to India.

By virtue of the majority orders, the order passed by confiscation of car was confirmed and the reduction of penalties by Member (Technical) was also ordered.