Custom, Excise & Service Tax Tribunal
Shri Sachin Joshi vs Kolkata(Admn Airport) on 26 February, 2025
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO. 1
Customs Appeal No. 75351 of 2018
(Arising out of Order-in-Appeal No. KOL/CUS(Port)/AA/1615/2017 dated 01.11.2017
passed by the Commissioner of Customs (Appeals), 3rd Floor, Custom House, 15/1,
Strand Road, Kolkata - 700 001)
Shri Sachin Joshi : Appellant
JMJ House, 6th Floor, Orchard Avenue,
Hiranandini Garden, Powai,
Mumbai - 400 076
VERSUS
Commissioner of Customs : Respondent
Custom House, 15/1, Strand Road,
Kolkata - 700 001
APPEARANCE:
Shri G. Vidyadhav Reddy, Advocate for the Appellant
Shri Sourabh Chakravorty, Authorized Representative for the Respondent
CORAM:
HON'BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO. 75499 / 2025
DATE OF HEARING: 12.02.2025
DATE OF DECISION: 26.02.2025
ORDER:[PER SHRI K. ANPAZHAKAN] This appeal has been filed by Mr. Sachin Joshi, JMJ House, 6th Floor, Orchard Avenue, Hiranandini Garden, Powai, Mumbai - 400 076 (hereinafter referred to as the "appellant") against the Order-in- Appeal No. KOL/CUS(Port)/AA/1615/2017 dated 01.11.2017 passed by the Commissioner of Customs (Appeals), 3rd Floor, Custom House, 15/1, Strand Road, Kolkata - 700 001.
Page 2 of 21Appeal No.: C/75351/2018-DB
2. Briefly stated, the facts of the case are that a "Mercedes Benz CLS63 AMG" car bearing Model and Chassis No. WDD2193722A085181 was imported from Singapore to Kolkata Port vide Bill of Entry No. 340569 dated 07.05.2007. The said Bill of Entry was filed in the name of "Mr. Arshad Vayal Peedika"
(importer) of Kerala, India and the car was cleared based on his passport since the said importer had lived abroad for more than two years and he was eligible to bring a car into India. The car was registered on 14.06.2007 in the name of the said importer i.e., Mr. Arshad Vayal Peedika with Haryana Registration No. HR04-B-7070.
3. The Directorate of Revenue Intelligence (DRI), Mumbai Zonal investigated the imports of luxury cars. During the course of investigation, statements were recorded from various persons concerned with the importation of the above said car. On completion of the investigation, the officers of the DRI concluded that Mr. Sachin Joshi, who is the appellant herein, is the actual importer of the said car and accordingly, issued a Show Cause Notice dated 28.02.2018 to him on the allegation that the CIF value of the car was mis-declared as Rs.37,27,444/- whereas the correct value after allowing depreciation would be Rs.47,84,230/- and that the car was mis-declared as a new vehicle to pay duty at the rate of 113% as against the duty on used vehicles at the rate of 165% with a view to evade Customs duty. Accordingly, the said Notice inter alia demanded differential Customs duty of Rs.36,81,947/- in terms of the provisions of Section 28(1) of the Customs Act, 1962.
Page 3 of 21Appeal No.: C/75351/2018-DB 3.1. On adjudication, the Ld. Commissioner of Customs, Custom House, Kolkata confirmed the demands raised in the Show Cause Notice vide the Order-in-Original No. 2562/2012 dated 17.10.2012, wherein he has ordered as under: -
"1. I reject the declared value under the provisions of Section 14(1) of the Customs Act, 1962 read with the provisions of Rule 10A of Customs Valuation rules 1988 and re-determine it under Section 14(1) of the Customs Act, 1962 read with the provisions of Rule 4 of the Customs Valuation Rules 1988 at Rs. 47,84,230/- as discussed supra.
2. I hold that the vehicle is old and used i.e., second hand in terms of import licensing Notes (1) (1) under Chapter 87 of ITC (HS) Classification of Export and Import items in view of the letter dt. 23-09-2011 received from Mercedes Benz India Pvt. Ltd. and deny the benefit of Notification No. 21/2002-Cus dt. 01-03-2002.
3. I confirm the differential duty amounting to Rs. 36,81,947/- under Section 28(1) of the Customs Act, 1962 along with interest under the provisions of Section 28AB of the Customs Act, 1962 as discussed above.
4. I confiscate the vehicle Mercedes Benz CLS63AMG imported vide B/E No. 340569 dt. 07-05-2007, declared value of Rs. 37,27,444/- CIF (Redetermined assessable value Rs. 47,84,230/-) under the provision of Section 111(m) of the Customs Act, 1962 [read with Section 11(1) of the Foreign Trade (Development and Regulation) Act, 1992 and provisions of Rules 11, 14(1) and 14(2) of the Foreign Trade (Regulations) Rules 1993 and the import licensing notes appended to Chapter 87 of the ITC (HS), under the provisions of para 2-12 of the Foreign Trade Policy 2004-2009 and 2-8 of the Hand Book of Procedures, however, I give an option to redeem the goods under Section 125 of the C.A'62 on payment of redemption fine of Rs. 25,00,000/- (Rupees twenty five lakhs only) to the person from his possession the car was seized.Page 4 of 21
Appeal No.: C/75351/2018-DB
5. I also impose a penalty of Rs. 36,81,947/- (Rupees thirty six lakh eighty one thousand nine hundred and forty seven only) under section 114A of the Customs Act, 1962 on Shri Sachin Joshi, who paid the duty on importation and the vehicle was seized from his possession.
6. I also impose a penalty of Rs. 35,00,000/- (Rupees thirty five lakh only) under Section 114AA of the Customs Act, 1962 on Shri Sachin Joshi in view of the discussions supra.
7.(i) I also impose a penalty of Rs. 10,00,000/- (rupees ten lakh only) each on Shri Rajesh Jethani, Arshad Peedika, Shri Javed Desai, under Section 112(a) of the Customs Act, 1962 for their acts of omission and commission as discussed supra.
7.(ii) I also impose a penalty of Rs. 5,00,000/- (Rupees five lakh only) each on Shri Rajesh Jethani, Arshad Peedika, Shri Javed Desai under Section 112(b) of the Customs Act, 1962 for their acts of omissions & commissions as discussed above.
7.(iii) I also impose a penalty of Rs. 5,00,000/- (rupees five lakh only) each on Shri Rajesh Jethani, Arshad Peedika, Shri Javed Desai under Section 114AA of the Customs Act. 1962 for their acts of omissions & commissions as discussed above.
8.(i) I also impose a penalty of Rs. 2,00,000/- (Rupees two lakh only) each on Shri Suresh Halde, Manoj Baid and M/s. Baid Organization (CHA B-64) under Section 112(a) of the Customs Act, 1962 for their acts of omissions & commissions as discussed supra.
8.(ii) I also impose a penalty of Rs. 2,00,000/- (Rupees two lakh only) each on Shri Suresh Halde, Manoj Baid and M/s. Baid Organization (CHA B-64) under Section 112(b) of the Customs Act, 1962 for their acts of omissions & commissions as discussed supra.
8.(iii) I also impose a penalty of Rs. 2,00,000/- (Rupees two lakh only) each on Shri Suresh Halde, Manoj Baid and M/s. Baid Organization (CHA B-64) under Section 114AA of the Customs Act, 1962 for their acts of omissions & commissions as discussed supra."Page 5 of 21
Appeal No.: C/75351/2018-DB 3.2. On appeal, the Ld. Commissioner (Appeals) has upheld the demands confirmed in the Order-in- Original dated 17.10.2012 vide the impugned order.
4. Aggrieved by the impugned order, the appellant, Mr. Sachin Joshi, has filed this appeal.
5. The appellant has inter alia taken the following grounds in support of his contentions: -
(i) A new car during the relevant time could be imported only by a person who lived abroad for more than two years as per the Import Licensing Notes attached to Chapter 87 of Schedule-1 (Imports) to the ITC (HS) Classification of Export and Import Items.
Apparently, Mr. Arshad Vayal Peedika was one such person, who imported the said car with reference to his passport, and on customs clearance, the Vehicle was registered in the name of the Importer. The record shows that summons were issued and received by him twice. It is also stated in the Show Cause Notice that an amount of Rs. 12,00,000/- was paid by Mr. Sachin Joshi to Mr. Arshad Vayal Peedika towards purchase of the Car, once the car became local goods. When such detailed history of the Importer is available, DRI made no effort to record his version and arrive at a categorical conclusion about the actual culprit and the role of Sachin Joshi. DRI chose to let Mr. Arshad Vayal Peedika go off the hook and made Mr. Sachin Joshi the fall guy.
(ii) The Show Cause Notice, at paragraphs 15 to 19, has clearly brought out that Rajesh Page 6 of 21 Appeal No.: C/75351/2018-DB Jethani, Javed Desai, Suresh Halde and M/s. Baid organization (CHA) have indulged in import of several cars fraudulently and various show- cause notices have already been issued to them. SCN annexed statements of Suresh Halde, who cleared about 81 cars, which clearly shows the well-oiled fraudulent modus operandi. Sachin Joshi is a victim of this fraud, as they sold the Car to him by misrepresentation.
(iii) DRI did not even bring out the statement of Rajesh Jethani or Charanjit Singh, despite them being the root of this major modus operandi. It is also not brought out on record as to how the remaining 80 cars have been treated and the fact of how many people were made victim by them is to be analysed prior to understanding the matter in case of Mr. Sachin Joshi. Without bringing the actual culprits, alleging that the victim is the reason for violations, is a travesty of justice and investigation.
(iv) The actual Importer Mr. Arshad Vayal Peedika is a live person, not a fictitious person. Rajesh Jethani, Charanjit Singh, Suresh Halde have done the fraudulent import in collaboration or taking the help of Mr. Arshad Vayal Peedika and using Mr. Javed Desei, have found a victim in this appellant to cheat and sell the car. Mr. Sachin Joshi is a victim and is not the importer who paid the overseas suppliers or on whose TR or Passport goods are allowed clearance.
(v) Respondent did not consider the Hon'ble
Karnataka High Court's judgment in
Page 7 of 21
Appeal No.: C/75351/2018-DB
Commissioner of Customs, Bangalore v Five Star Shipping Co. Ltd. [2012 (278) ELT 196 (Kar.)] wherein it has been held that redemption fine cannot be imposed on bona fide purchaser. The allegations and findings that appellant was involved in criminal conspiracy and mis-declaration are without any evidence. Appellant is a bona fide purchaser, and the judgment squarely applies in the facts of this case.
(vi) Hon'ble Bombay High Court in Gagandeep Singh Anand v Commissioner of Cus. (Import), Mumbai [2019 (367) ELT 212 (Bom.)] held that demand of duty could only be made upon importer of goods and not upon the person in whose possession or ownership confiscated goods were found when owner/possessor of confiscated goods does not seek to redeem the offending goods. Hon'ble Kerala High Court in Commissioner of Customs, Kochi v Nalin Choksey [2018 (362) ELT 545 (Ker.)] held that "However, in case where goods seized from custody of bona fide purchaser and confiscated on account of short-levy, etc., such bona fide purchaser cannot be fastened with duty liability if he opts not to redeem confiscated goods. In such a case, Revenue can realize its dues by selling confiscated goods for any short recovery of duty and other dues on account of disposal of confiscated goods, proceedings have to be initiated against original importer only and not against subsequent buyer."
Page 8 of 21Appeal No.: C/75351/2018-DB
(vii) The appellant cannot be held to be importer when the ingredients of Sec 2(26) are not satisfied. Between the importation of goods and the time when the goods are cleared for home consumption, Appellant was not the owner or beneficial owner. Appellant has not paid the overseas supplier of the Car, whereas Appellant paid the importer local currency and bought the car, which is imported and registered in the name of Mr. Arshad VayalPeedika who is the importer of the goods.
(viii) Appellant herein is not the 'Owner' of the Car in question as per Sec 2(30) of the Motor Vehicles Act 1988, which reads as follows:
"2. Definitions. In this Act, unless the context otherwise requires, ...
(30) "owner" means a person in whose name a motor vehicle stands registered and where such person is a minor, the guardian of such minor, and in relation to a motor vehicle which is the subject of a hire-purchase agreement, or an agreement of lease or an agreement of hypothecation, the person in possession of the vehicle under that agreement;"
(ix) As per the Hon'ble Supreme Court's judgment in Nalin Choksey v The Commissioner of Customs, Kochi [Civil Appeal No. 13393/2024 arising out of SLP(C) No. 16123/2018], Mr. Sachin Joshi cannot be construed as the 'Owner' of the Vehicle and hence, this Appellant does not fall under the scope of Section 125 of Customs Act 1962 and redemption fine cannot be imposed on him. As the Appellant herein is neither 'importer' nor 'owner', Appellant is not Page 9 of 21 Appeal No.: C/75351/2018-DB liable to pay any differential duty under Sec 125(2).
(x)Respondent relied on Hon'ble Madras High Court's judgment in Commr. of Cus. (Export). Chennai v Patel Engineering Ltd. [2015 (321) ELT 33 (Mad.)] to impose penalty under Sec 114A, which is wholly misplaced; the judgment was regarding imposition of penalty under Sec
112.
(xi) Confiscation of goods cleared is arbitrary and contrary to Hon'ble Madras High Court's judgment in Nakoda Unique Gold Pvt Ltd. v Union of India [2014 (300) ELT 10 (Mad.)] - relevant paragraph is reproduced as under:
"10. It is settled law that the goods cleared under Section 47 of the Customs Act, 1962 cannot be confiscated except in contemplation of an order or in pursuance of an order passed in revision under Section 129D of the Act. Such exercise of the revisional powers or correctional jurisdiction by a superior authority like the Collector of Customs can only be by calling for the records, examining the same on grounds of legality, propriety or correctness of the same and on examination of the same, giving directions to the subordinate authorities to apply to the Collector (Appeals) for determination of the points arising out of the decision or order, as may be specified by the Collector of Customs."
(xii) In Bussa Overseas & Properties P. Ltd. v C.L. Mahar, Asst. C.C., Bombay [2004 (163) ELT 304 (Bom.)],the Hon'ble Bombay High Court held that once goods are cleared for home consumption they cease to be imported goods. Relevant paragraph is reproduced as under:
Page 10 of 21Appeal No.: C/75351/2018-DB "7.... The learned counsel urged that once the goods are cleared for home consumption, then the goods covered by the consignments cease to be imported goods in accordance with the definition of expression 'imported goods' under Section 2 of the Act and consequently such goods are not liable for confiscation. There is considerable merit in the submission of the learned counsel. The goods lose its character of imported goods on being granted clearance for home consumption and thereafter the power to confiscate can be exercised only in cases where the order of clearance is revised and cancelled."
This judgment was maintained by Hon'ble Supreme Court in Asst. Collector v Bussa Overseas and Properties Pvt. Ltd. [2004 (163) E.L.T. A160 (S.C.)].
(xiii) The Show Cause Notice proposed to impose penalty on the appellant under Sec 114AA on the allegation that Appellant along with S/Shri Rajesh Jethani, Arshad Peedika, Javed Desai, Suresh Halde, Manoj Baid and Baid Organization, knowingly or intentionally, allowed documents to be made, filed the Bill of Entry, fully knowing that the declarations were false. The allegation is despite the fact that Appellant did not know others except Javed Desai who sold him the car. The statement of the CHA who cleared the Car clearly brings out the modus operandi of Rajesh Jethani, Charanjit Singh, who cleared 81 cars fraudulently. Alleging that Appellant is in connivance with people he neither met nor knows, based on presumptions, merits to be set aside.
(xiv) The ingredients of Sec 114A and Sec 114AA do not exist in this matter with reference to this Appellant. Appellant is neither the Page 11 of 21 Appeal No.: C/75351/2018-DB importer nor the owner of the Car. He neither colluded, nor is there any wilful misstatement of facts or suppression of facts, as the Appellant never interacted with Customs Department in relation to the import and clearance of the Car. Appellant did not file or sign any documents for clearance of the vehicle. He had no knowledge of any mis-declaration, undervaluation. Bill of entry is filed and declaration under the Bill of entry is given by the Importer to whom the overseas supplier has supplied the car as can be seen from the invoice, bill of lading and packing list; the car was registered in the name of the Importer post clearance. Appellant herein never met the Importer or the group who are the masterminds in the fraud. In view of this, the person liable to pay duty under the Customs Act is not the Appellant herein. Hence, demand of duty from Appellant does not sustain, imposing penalty under Sec 114A and Sec 114AA does not hold.
(xv) Once penalty is imposed under Sec 114A, separate penalty cannot be imposed under Sec 114AA as is done in impugned matter.
Judgment of CESTAT, Bangalore in Buhler India Pvt. Ltd. v Commissioner of Cus. & ST, Bangalore [2014 (310) ELT 593 (Tri-Bang.)] is relied upon and the relevant paragraph is reproduced as under:
"10. As regards penalty under Section 114AA, we find that Section 114AA reads as follows "If a person knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, any declaration, statement or document which is false or incorrect in any material particular, in the transaction of any Page 12 of 21 Appeal No.: C/75351/2018-DB business for the purposes of this Act, shall be liable to a penalty not exceeding five times the value of goods: In this case, penalty under Section 114A has already been imposed for misdeclaration of the goods without considering the chapter notes. The question is whether for the same offence, penalty under 2 Sections can be imposed. We are unable to agree with this proposition. In this case there is no allegation of any activity covered by Section 114AA which is actually not covered by Section 114A. Therefore, in our opinion, under the facts and circumstances of this case, penalty under Section 114AA need not be imposed.
11. In view of the above discussion, penalty under Section 114AA is set aside and in respect of all other issues, appeal is rejected."
5.1. In view of the above submissions, the appellant prayed for setting aside the demands of differential duty confirmed against him. He also prayed for setting aside the redemption fine and penalties under sections 114A and 114AA imposed on him.
6. The Ld. Authorized Representative of the Revenue submits that Mr. Sachin Joshi is the actual importer of the car in question; even though the vehicle was imported in the name of Mr. Arshad Vayal Peedika for availing the benefit of transfer of residence, the actual Customs duty was paid by Mr. Sachin Joshi (appellant). He contends that the vehicle was registered in Haryana and the appellant had been utilizing the said vehicle for several years and also paying insurance premium thereon. He submits that this itself sufficiently demonstrates that the appellant is the actual importer of the said car; as the car was found to be an old and used one, and being a theft car, the Ld. Authorized Representative of the Revenue submits that the appellant had not correctly declared Page 13 of 21 Appeal No.: C/75351/2018-DB the value of the same at the time of importation and thus, the value was required to be re-determined and differential duty thereon demanded. Therefore, he contends that the duty has been rightly demanded from the appellant. The Ld. Departmental Representative thus supported the impugned order.
7. Heard both sides and perused the appeal records.
8. We observe that the vehicle was imported by Mr. Arshad Vayal Peedika by availing the benefit of 'Transfer of Residence'. The vehicle was cleared at concessional rate of duty as applicable to cases of transfer of residence by using the passport no. E2603762 of Mr. Arshad Vayal Peedika. Thus, we observe that it is a case of baggage/transfer of residence and not a regular import. Mr. Arshad Vayal Peedika is the person who has availed the transfer of residence and hence, as per records, he is the actual importer in whose name the vehicle had been cleared by the Customs Authorities. The investigation found that the Customs duty had been paid by the appellant viz. Mr. Sachin Joshi and that the vehicle had also been subsequently registered and used by him for many years. However, we are of the view that the person who purchased the vehicle from the importer, in whose possession the vehicle was seized cannot be considered as the actual 'importer' of the vehicle. We observe that this view has been expressed in the case of Gagandeep Singh Anand v. Commissioner of Cus. (Import), Mumbai [2019 (367) E.L.T. 212 (Bom.)], wherein it has been observed as under: -
Page 14 of 21Appeal No.: C/75351/2018-DB "11. Regarding question Nos. (1) and (3) :-
9. (a) The undisputed facts are that the said car was imported by one Mr. Dholakia in 2002, who had filed the Bill of Entry and cleared the same. The said car was thereafter sold by Mr. Dholakia to one Mr. Oberoi, who sold it to the appellant in 2005. The said car was seized from the appellant on 13th August, 2007 and confiscated with option to redeem the same on payment of the fine on 24th December, 2008. The appellant has not exercised the option to redeem the said car till date.
10. (b) On the aforesaid facts, the Commissioner of Customs and the Tribunal has sought to recover the shortfall in duty payment on import of the car from the appellant. This even in the absence of the appellant redeeming the confiscated car.
11. (c) Mr. Akhilesh Kangasia, Learned Counsel appearing in support of the appeal submits that the appellant is not liable to pay differential duty as he is not the importer but a bona fide purchaser of the said car. The liability to pay the Customs duty under Section 28 of the Act is on the importer of the car and the same cannot be foisted on an innocent buyer of the said car. Moreover, the said car stood confiscated in 2008 with option to redeem the same on payment of fine, which option the appellant has not exercised. Thus, no occasion to apply Section 125(2) of the Act can arise. It is further submitted that the issue now stands concluded in favour of the appellant by the decision of this Court in Commissioner of Customs v. VXL India Ltd., 2006 (193) E.L.T. 396.
12. (d) As against the above, Mr. Kantharia, Learned Counsel appearing for the Revenue in support of the impugned order of the Tribunal submits that the appellant is liable to pay the differential duty in view of the clear mandate of Section 125(2) of the Act. This requires the owner of the goods to not only pay the redemption fine but also the duty and other costs payable on the offending imported said car.
13.(e) We have examined the rival contentions. From the facts, it is evident that the appellant is the second buyer of the car. The importer of the car is one Mr. Dholakia who had cleared the said car from Page 15 of 21 Appeal No.: C/75351/2018-DB the Customs on payment of customs duty and thereafter sold to one Mr. Oberoi. The appellant had purchased the said car from Mr. Oberoi in the year 2005. During the course of investigation by the DRI, the said car was seized on 30th August, 2007 and confiscated in 2008 with option to redeem the same. It is an admitted position that since then the said car is in possession of the DRI as the option to redeem has not been exercised. The importer of the said car is Mr. Dholakia who had filed the bill of entry and cleared the said car on payment of customs duty as assessed by the Officers of the customs. In fact, on identical fact situation, where the importer of the offending car was not traceable, this Court in VXL India Ltd. (supra) has held that the differential duty, if any, is to be only recovered from the importer in terms of Section 28 of the Act and the same cannot be recovered from the buyer of such offended goods.
14. (f) Moreover, the confiscation of the said car by the order dated 24th December, 2008 of the Commissioner of Customs contained an option to redeem the same by the appellant on payment of Rs. 8 lakhs as penalty. Admittedly, the appellant has not exercised the option to redeem the said car. The said car continued to be in possession of the Customs. Thus, not having exercised the option to purchase the car, the occasion to invoke Section 125(2) of the Customs Act, would not arise. The said car continues to vest in the Central Government by virtue of Section 126 of the Act. Under Section 125 of the Act, there is no obligation on a party to pay the fine in lieu of confiscation but the party is given an option to redeem the goods, if he so desirous by paying fine in lieu of confiscation of the offending goods. In this case, the appellant has not exercised the option of paying the redemption fine and, therefore, the occasion to pay in addition to the redemption fine the duty and charges payable in respect of the offending goods, does not arise. In fact, this issue is no longer res integra as the Supreme Court in Fortis Hospital Ltd. v. Commissioner of Customs, 2015 (318) E.L.T. 551 has held that the obligation to pay duty on the confiscated goods, would only trigger, when the person from whom the offending goods are seized/confiscated, exercises the option to redeem the confiscated goods. Therefore, where no such option is exercised, Section 125(2) of the Act is not Page 16 of 21 Appeal No.: C/75351/2018-DB set in motion. Similarly, this Court in VXL India Ltd. (supra) has upheld the view of the Tribunal taking a similar view.
15. (g) Thus, the demand of duty could only be made upon the importer of the goods and not upon the person in whose possession/ownership the confiscated goods were found when the owner/possessor of the confiscated goods does not seek to redeem the offending goods under Section 125 of the Act.
16. (h) Therefore, for the above reasons, question No. (1) is answered in the negative i.e. in favour of the appellant and against the respondent Revenue. So also for the above reasons question No. (3) is answered in the affirmative i.e. in favour of the appellant and against the respondent Revenue."
8.1. The said view is also supported by the decision rendered in the case of Commissioner of Customs, Kochi v. Nalin Choksey [2018 (362) E.L.T. 545 (Ker.)].The relevant paragraphs of the said decision are reproduced below: -
"9 The liability on the subsequent purchaser would not at all be a consideration in interpreting Section 125 of the Act. As has been pointed out by the Learned Standing Counsel, when there is a misdeclaration of value, the goods imported becomes prohibited goods, as has been defined under Section 2(33) of the Act, which includes violation of conditions subject to which the goods are permitted to be imported, when a misdeclaration has been made and for that reason short levy of duty, it attracts Section 111(m) and proceedings are initiated under the said provision for confiscation of goods as has been permitted under Section 111 of the Act. The provision for confiscation under Section 111 lists various contingencies in which such confiscation can be proceeded with and it includes Clauses (d), (m) and (o) which are applicable in the import of the subject vehicle. When confiscation is provided and the Commissioner takes proceedings against the said goods and effects such confiscation, then the goods becomes the property of the State.
Page 17 of 21Appeal No.: C/75351/2018-DB A mitigation is provided insofar as the owner of the goods, from whom the goods are seized, to opt for redemption under Section 125. On payment of redemption fine imposed under sub-section (1) and short levy of duty under sub-section (2) the owner is entitled to get released the goods. Redemption fine also has to be restricted to the market value of the goods. The payment of duty is not a consequence of the levy under Section 28, but the option exercised under Section 125. The owner from whom the goods are seized does not have the liability to pay the duty, but the goods involved in the import are liable to be confiscated and to save distress on the goods, if the owner, opts to redeem it under Section 25, there is an obligation to pay the duty and fine imposed.
10. In the present case, the redemption fine was imposed at Rs. 6,00,000/- and short levy of duty was collected at Rs. 17,92,847/-. The subsequent bona fide purchaser may not have any liability to duty. However, by confiscation, the State gets the authority to recover the entire market value of the goods, which would definitely be more than the duty, if redemption is not made then the person from whose possession the goods are seized merely loses the property in goods and there could be no further levy of duty on the bona fide purchaser. The Department, despite such confiscation could proceed for recovery of duty too, but only from the importer.
11. Sub-section (2) of Section 125 reads as follows :-
"125 Option to pay fine in lieu of confiscation. -
(1) XXX (2) where any fine in lieu of confiscation of goods is imposed under sub-section (1), the owner of such goods or the person referred to in sub-section (1) shall, in addition, be liable to any duty and charges payable in respect of such goods."
Section 125 comes into play only after there is a confiscation effected by the Commissioner, which gives an option to the owner or the person from whom the goods were seized to apply for Page 18 of 21 Appeal No.: C/75351/2018-DB redemption, in applying for redemption, the owner or person from whom the goods were seized would have to pay the redemption fine as imposed by the Commissioner under Section 125(1). Again as is seen from the above extracted sub-section (2) of Section 125, where any fine in lieu of confiscation of goods is imposed under sub-section (1), the owner of such goods or the person referred to in sub- section (1), shall, in addition to the fine, be liable to any duty and charges payable in respect of such goods. Hence, when an option is exercised for redemption in lieu of confiscation, person opts not only to pay the redemption fine but also to make good the short levy of duty. The option being a choice of the person, there cannot be any contention raised against payment of short levy of duty, which is a necessary consequence of redemption under Section 125 of the Act.
12. Answering the questions of law, we find from the above reasoning on Question No. (a) that customs duty and redemption fine can be demanded from the person in ownership and custody of the imported goods on an option exercised for redemption, despite there being no liability to duty on any person other than the importer. With respect to Question No. (b) as to a proper case in which a person other than the actual importer could be made liable to pay customs duty and redemption fine, we would not answer it since it does not arise here. With respect to Question No. (c), the imported goods on there being a short levy of duty along with interest, would be liable for confiscation. On such confiscation, the Government could sell the goods and realize whatever value is fetched on such sale. For any duty or interest still remaining with respect to the goods, the Department would have to necessarily proceed against the original importer and not against any subsequent purchaser, with respect to liability to pay duty as also redemption fine, we reiterate at the risk of repetition that; it is for reason of the option exercised to redeem the goods. The question (d) also is answered in favour of the Revenue and against the assessee, since the payment of duty and redemption fine is not on any joint and several liability but for reason of the option exercised to redeem the goods by the subsequent purchaser, however bona fide, from whom the goods were seized."
Page 19 of 21Appeal No.: C/75351/2018-DB
9. The decisions cited above indicate that Mr. Arshad Vayal Peedika, who filed the Bill of Entry and in whose name the vehicle was cleared, is to be considered as the actual importer of the vehicle in question. Hence, we hold that the differential duty, if any, was required to be demanded from the actual importer Mr. Arshad Vayal Peedika. However, we observe that the demand of differential Customs duty has not been raised against Mr. Arshad Vayal Peedika in the present case. Accordingly, we hold that the differential duty demanded from Mr. Sachin Joshi is not sustainable and thus the same is set aside.
10. Further, we observe that the appellant had purchased the vehicle, post import clearance into domestic area, from the importer namely, Mr. Arshad Vayal Peedika. As per an arrangement agreed upon, the appellant was to bear the Customs duty payable and also pay the advance to Mr. Arshad Vayal Peedika for the purchase of the vehicle. Thus, it is observed that the appellant is not the importer of the car and did not have any role in its import or clearance thereof. The Department has failed to bring in any corroborative evidence on record to substantiate their allegation that the appellant was the actual importer of the vehicle in question and not Mr. Arshad Vayal Peedika. In these circumstances, we hold that the confiscation of the vehicle from the appellant, who is not the importer of the car and who had only purchased the said vehicle, is not sustainable and accordingly, we set aside the order of confiscation made vide the impugned order. Accordingly, we also hold that the demand of redemption fine in lieu of confiscation from the appellant is not sustainable.
Page 20 of 21Appeal No.: C/75351/2018-DB
11. We observe that penalties have been imposed on the appellant under Section 114A and Section 114AA of the Customs Act, 1962. As per Section 114A, penalty is imposable on the person who short paid or not paid the duty due to wilful misstatement or suppression of facts. It is imposable on the person who is liable to pay the duty. As the appellant is not the person who is liable to pay the duty in this case, we hold that penalty under section 114A cannot be imposed on him. Penalty under section 114AA is imposable for using false and incorrect material in the transaction of business. In this case, the appellant has not filed any document for clearance of the car. Hence, it is clear that he has not made any false declaration for clearance of the car. Accordingly, we hold that penalty under section 114AA cannot be imposed on him. Accordingly, we set aside the penalties imposed under sections 114A and 114AA of the Customs Act, 1962.
12. In view of the above discussions, we pass the following order:
(i) We set aside the demand of
differential Customs duty from the
appellant.
(ii) We set aside the order of confiscation
made in the impugned order. Accordingly, the redemption fine imposed in lieu of confiscation from the appellant is set aside.
(iii) The penalties imposed on the appellant under sections 114A and 114AA of the Customs Act, 1962 are set aside.
Page 21 of 21Appeal No.: C/75351/2018-DB
13. The appeal filed by the appellant is disposed of on the above terms.
(Order pronounced in the open court on 26.02.2025) Sd/-
(ASHOK JINDAL) MEMBER (JUDICIAL) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd