2012 (9) TMI 213 - HC - Customs

Import of car - undervaluation confiscation redemption fine Held that - Bona fide purchaser of a car which is cleared by the Customs Department is not liable to pay redemption fine even if the car was under valued and the original importer is liable to pay the difference in duty - in favour of assessee

Summary

Issues:
- Challenge to order of Tribunal on confiscation liability and redemption fine for a car purchased in open market.
- Liability of a bona fide purchaser for redemption fine on an undervalued car cleared by Customs Department.
- Application of law declared by the Apex Court in Mohan Meakin Ltd. case on redemption fine for a bona fide purchaser.

Analysis:
The appeal before the High Court challenged the Tribunal's order regarding the confiscation liability and redemption fine for a car purchased in an open market. The respondent, a purchaser of an imported car released by Customs after due assessment, faced the issue of the Customs Department seizing the car and ordering an increased valuation, resulting in a redemption fine of Rs. 8 lakhs. Despite the Department ordering additional duty on the original importer, the respondent, a bona fide purchaser, was required to pay the redemption fine due to the increased valuation. The Tribunal, relying on the Mohan Meakin Ltd. case judgment by the Apex Court, held that a bona fide purchaser in an open market cannot be held liable for the redemption fine and set aside the order, leading to the revenue's appeal.

The High Court admitted the appeal to consider the substantial question of law regarding the justification of the Tribunal's decision based on the Mohan Meakin Ltd. case law, even though no order was passed under Section 111 of the Customs Act when the vehicle was released to the importer. The Mohan Meakin Ltd. case established that once goods are released into the market and sold, the Collector cannot initiate proceedings to recover valuation differences from a bona fide purchaser. The Court noted that a bona fide purchaser of a car cleared by Customs is not liable for the redemption fine, even if undervalued, with the original importer being responsible for the duty difference. Consequently, the High Court ruled in favor of the respondent, stating that the substantial question of law was answered in favor of the assessee and against the revenue, while reserving the revenue's right to proceed against the original importer for duty recovery.