2015 (12) TMI 1149 - HC - Customs

Levy of penalty on CHA / agent, broker - Import of high end luxury cars from various foreign suppliers by mis-declaring as new - Undervaluation of goods - Imposition of penalty under sections 112(a) and 114AA of Customs Act, 1962 - Demand of differential duty - Held that - Court noted that the CCIG proceeded to adjudicate the SCN in question, as far as Respondent No. 1 is concerned, without recording the statement of anyone on behalf of Respondent No. 1. Further Respondent No. 1 was not confronted with the statement made by Mr. G.S. Prince. As rightly pointed out by Mr. Sanjay Kantawala, learned counsel for Respondent No. 1, there was no evidence to show that Respondent No. 1 was aware of the acts of his agent, Mr. Prince, as far as clearance of the car in question was concerned. Sections 112 (a) and 114AA of the Act are penal in nature. Therefore, in the absence of some tangible material to show that the illegal import was with the knowledge of Respondent No. 1, no penalty can be imposed on Respondent No.1. - There was no finding, based on the evidence on record, that Respondent No. 1 was aware of the illegal import in which the G-card holder was involved. Considering that it was a question of penalty, there ought to have been some tangible material to show that Respondent No. 1 was aware of the acts of its employee/agent, Mr. Prince. As rightly pointed out, if Respondent No. 1 was found to have acted in breach of Regulation 19 (8) of CHALR 2004, that might call for a separate action to be initiated under those regulations. However, that by itself will not justify the imposition of penalty under Sections 112 and 114AA of the Act unless knowledge of the illegal acts of the agent/employee is able to be attributed to his employer/principal, i.e. Respondent No.1. Registration certificate of the car obtained by the First Secretary (Trade), High Commission of India, London (UK) was produced before the Appellant. The car was imported into India through M/s. A.K. International and cleared through customs on 4th April 2008 on payment of duty on the basis that it was a new car. It was ultimately sold to Respondent No. 2 on 21st April 2008. The CCIG sought to place the onus on Respondent No. 2 to show how the prior registration in UK, though stated for the purpose of onward sale to India, has helped the transport authorities of UK for allowing the export of the impugned car. There was no warrant for shifting the burden to prove the negative to Respondent No.2 unless the Department had discharged the primary onus of showing the involvement and knowledge of Respondent No.2 in the illegal import of the car in question. - deletion by the CESTAT of the penalty imposed on Respondent No. 2 cannot be faulted. The reduction of the redemption fine also does not call for interference - No substantial question of law arises - Decided against Revenue.

Summary

Issues Involved:
1. Whether the CESTAT was correct in holding that no penalty should be imposed on the Respondents.
2. Whether the CESTAT was correct in holding that the Respondent is entitled to take possession of the car on payment of redemption fine of Rs. 5 lakhs.

Detailed Analysis:

1. Penalty Imposition on Respondents:
The appeal was filed by the Commissioner of Customs (Import) against the CESTAT's decision to not impose penalties on Respondent No. 1 (M/s. Buhariwal Logistics) and Respondent No. 2 (Mr. Vishwas Uday Singh Laad). The background involved the Directorate of Revenue Intelligence (DRI) uncovering that Mr. Sumit Walia was importing high-end luxury cars by misdeclaring them as new, thereby evading higher customs duty applicable to second-hand cars. The investigation revealed that one such car, a Mercedes Benz GL 320 Cdi, was imported under false pretenses and subsequently sold to Respondent No. 2.

The CESTAT found that Respondent No. 2 was a bona fide purchaser of the car and had taken a loan of Rs. 60 lakhs for its purchase. The CESTAT noted that the car was indeed liable for confiscation but reduced the redemption fine to Rs. 5 lakhs and found no justification for the penalties under Sections 112 (a) and 114AA of the Customs Act, 1962.

2. Redemption Fine and Possession of the Car:
The second issue was whether the CESTAT was correct in allowing Respondent No. 2 to take possession of the car upon payment of a reduced redemption fine of Rs. 5 lakhs. The CESTAT had reduced the redemption fine from Rs. 22 lakhs to Rs. 5 lakhs, considering the circumstances and the bona fide nature of Respondent No. 2's purchase.

Preliminary Objections:
Two preliminary objections were raised regarding the maintainability of the appeal:
- The first objection was about the matter involving a question of valuation of the imported car and the corresponding customs duty payable. This was rejected as the appeal concerned only the penalties on Respondents.
- The second objection pertained to the monetary limit for filing appeals, which was also rejected as the penalties involved exceeded the minimum limit of Rs. 10 lakhs.

Merits of the Case:
- The Appellant argued that the CESTAT based its conclusions on subsequent adjudication proceedings where Respondent No. 1 was exonerated, and the appeals against those orders were pending. The Court found that the CESTAT had discussed the case on merits and rejected the plea for remanding the matter for a fresh decision.
- Regarding Respondent No. 1, the Court noted that the CCIG had not recorded any statement from Respondent No. 1 nor confronted them with Mr. G.S. Prince's statement. There was no evidence to show that Respondent No. 1 was aware of the illegal import, and thus, no penalty could be imposed under Sections 112 (a) and 114AA of the Act.
- For Respondent No. 2, the Court found that there was no tangible evidence to show his involvement in the misdeclaration at the time of import. The car was registered in the UK and sold to Respondent No. 2 after customs clearance, supporting his claim of being a bona fide purchaser.

Conclusion:
The Court concluded that the CESTAT's decision to not impose penalties on Respondents and to allow Respondent No. 2 to take possession of the car upon payment of the reduced redemption fine did not suffer from any illegality. The appeal was dismissed with no order as to costs.