Customs cannot Re-Confiscate Mercedes Car citing Import Misdeclaration when Subsequent Buyer is Unaware of Allegation: CESTAT [Read Order]
CESTAT ruled that the Mercedes car could not be re-confiscated and dropped penalties as there was no evidence the buyers knew of any past customs violation.
The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) recently held that the customs cannot re-confiscate a vehicle and slap penalties on a subsequent purchaser citing misdeclaration by the original importer, in the absence of any evidence showing that the subsequent purchaser had knowledge to prove the earlier misdeclaration.
The case arose from an appeal filed by Watermark Systems (India) Private Limited and the subsequent buyer from the import of a Mercedes Benz.
Customs authorities found that the vehicle had been misdeclared as a newer model year leading to undervaluation.
The car was confiscated once under Section 111(m) and released on payment of redemption fine and penalty, and those proceedings had attained finality.
The Department later issued a fresh Show Cause Notice alleging that the vehicle was liable for confiscation under Section 111(o) and that the subsequent buyers had knowingly purchased goods that were already tainted by misdeclaration. Penalties were proposed under Sections 112(a) and 112(b).
Before the adjudicating authority, the appellants contended that re-confiscation is legally impermissible once the goods have already been confiscated and released in earlier proceedings. They also argued that they were bona fide purchasers in the open market, with no knowledge of any misdeclaration or undervaluation by the original importer.
The adjudicating authority, however, proceeded to confiscate the car a second time and imposed penalties on Watermark Systems and the subsequent owner.
The Bench comprising Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) examined the earlier adjudication order and noted that the car had already been subjected to confiscation and released on payment of fine.
The Tribunal examined the earlier Order-in-Original and observed that the vehicle had already undergone confiscation proceedings and had been released on payment of fine. They relied on the Supreme Court’s decision in Suchita Agarwal vs. Commissioner of Customs (Import & General) New Delhi (2015), held that once goods are confiscated and redeemed, a second round of confiscation on the same facts is not permissible.
The Tribunal further observed that for imposing penalty under Section 112(a) or 112(b), the department must establish that the person had knowledge or reason to believe that the goods were liable for confiscation.
The Tribunal found no material to indicate that Watermark Systems or the subsequent buyer had any such knowledge when they purchased the vehicle.
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The Tribunal held that the mere purchase of a used vehicle in the market does not give rise to a presumption of knowledge of past customs violations. In the absence of any evidence establishing involvement or knowledge, the penalties were held to be unsustainable.
Accordingly, the CESTAT set aside the impugned order, quashed the re-confiscation, and dropped the penalties imposed on Watermark Systems India Pvt. Ltd. and the subsequent buyer.
The appellants were represented by Dhruv Matta and Namrata Singhal, while Shiv Shankar appeared for the Revenue.
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