Custom, Excise & Service Tax Tribunal
Maan Tourist Transport Service (P) Ltd vs Commissioner Of Customs (Import), ... on 8 October, 2010
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. I Appeal No. C/812/09 (Arising out of Order-in-Original No. 118/09 dated 16.7.2009 passed by Commissioner of Customs (Import), Nhava Sheva.) For approval and signature: Honble Mr P.G. Chacko, Member (Judicial) Honble Mr. M. Veeraiyan, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== Maan Tourist Transport Service (P) Ltd Appellant (Represented by: Mr P.A. Augustian, Advocate) Vs Commissioner of Customs (Import), Nhava Sheva Respondent (Represented by: Mr V.K. Singh, SDR) CORAM:
Honble Mr P.G. Chacko, Member (Judicial) Honble Mr. M. Veeraiyan, Member (Technical) Date of Hearing : 07.10.2010 Date of Decision: 07.10.2010 ORDER NO..
Per: P.G. Chacko
1. This appeal filed by the importer is against the following order of the learned Commissioner of Customs:
12. I accordingly order as follows:
(a) The imported car is appropriately classifiable under CTH 87032299.
(b) The declared value is rejected under rule 12 of the Customs Valuation Rules, 2007. The value is re-determined, under the provisions of said valuation rules adopting the value of contemporaneous import, as Rs 54,62,939/-.
(c) The import is not entitled to concessional rate under notification 21/2002-Cus [Sr No. 344 (2)]
(d) The said car is confiscated under Section 111 (d) & Section 111 (m) of the Customs Act, 1962. However, I allow the importer an option to redeem the said vehicle on payment of Rs 14,00,000/- (Rupees Fourteen lacs only) as redemption fine in lieu of confiscation, under Section 125 of the Customs Act, 1962. The option must be exercised within 30 days of receipt of this order by the importer.
(e) I impose a penalty of Rs 5,00,000/- (Rupees Five lacs only) upon the importer under section112 (a) of the Customs Act, 1962.
2. The undisputed facts are :
(a) The appellant imported one unit of CHRYSLER 300C SEDAN RHD car describing the vehicle to be New Chrysler 300C RHD-W/ST ACCESS CH: 1C3H9E3D77Y592775 T.A. No. E11*2001/116*0141*08 DT 11.01.2007 (14-seater) and declaring its assessable value to be Rs 35,50,545/- (US$ 69,545) and also declaring its country of origin to be the United States. In the relevant Bill of Entry dated 4.5.2009, which was filed by the appellant for Customs clearance of the goods, the importer claimed classification under CTH 8702 10 19. The vehicle was manufactured by CHRYSLER, USA in August, 2007. It was imported by CHRYSLER, UK in December 2007 or January 2008 and was registered in UK on 31.1.2008. The registration certificate (available at page 105) indicates the type of approval number as e11*2001/116*0141* and the Vehicle Identification No (VIN)/Chassis frame No as 1C3H9E3D77Y592775. It also indicates the seating capacity of the vehicle to be five including driver. It further shows the colour of the vehicle to be black. The UK-registered vehicle was subsequently exported to the United States where its body was extended to increase the seating capacity and for allied modifications. These works were done in the premise of a CHRYSLER dealer. It was the vehicle so modified in the United States that the appellant imported.
3. On physical inspection of the vehicle coupled with examination of the records, the department took the view that it was classifiable as an old/used vehicle with original seating capacity of five and therefore classifiable under CTH 8703 23 99 which attracted basic customs duty @ 100% and also required specific licence for importation. The customs authorities further found undervaluation of the vehicle. According to them, the value of the vehicle was liable to be enhanced to Rs 54,62,939/- on the basis of the value of a contemporaneous import from New Zealand. The contemporaneous import of a similar car (CHRYSLER 300 C, Stretched Limousine from New Zealand) was covered by Bill of Entry No. 779278 dated 11.2.2009 wherein the declared value was US$ 1,07,000/- equivalent to Rs 54,62,939/-. Having found old/used car having been imported without licence and also having found misdeclaration of value, the customs authorities held the vehicle to be liable to confiscation under Section 111 (d) and (m) of the Customs Act and also held the importer to be liable to penalty under Section 112 of the Act. Though, they had agreed to have the car provisionally released on condition of payment of duty, execution of bond and furnishing of bank guarantee, the importer did not exercise the option for provisional clearance. Subsequently, in a show-cause notice issued to them, the department proposed to confiscate the vehicle, impose penalty on the importer, recover duty based on enhanced value etc. These proposals were contested by the appellant. It was in adjudication of this dispute that the Commissioner passed the impugned order.
4. From the submissions made by both sides, five main issues have arisen in this case:
(a) whether the vehicle imported by the appellant is new or old?
(b) Whether it is classifiable under CTH 8702, as claimed by the appellant, or under CTH 8703, as claimed by the Revenue?
(c) What should be the assessable value of the goods;
(d) Whether the car is liable to confiscation under Section 111 of the Customs Act, and, if so, what should be the quantum of redemption fine;
and
(e) Whether the appellant is liable to be penalized under Section 112 of the Customs Act, and, if so, to what extent?
Whether the vehicle is new or old.
5. The learned counsel for the appellant, reiterating the relevant grounds of the appeal, has submitted that the appellant imported a new vehicle which did not require any licence for importation. In this connection, the learned counsel has claimed support from Import Licence Note (2) (I) under Chapter 87, which defines new imported vehicle for purposes of the said Chapter. As per this definition, a new imported vehicle (including all the vehicles other than railway or tramway) for the purposes of Chapter 87 shall mean a vehicle that (a)
(b)
(c) has not been registered for use in any country according to the laws of that country, prior to importation into India. It is submitted that the vehicle was not in actual use in the UK after its registration and therefore, it should be deemed to be a new vehicle in terms of the above Import Licensing Note. On the other hand, the learned SDR has relied on the Import Licensing Note (1) (I) in Chapter 87, which provides that a secondhand or used vehicle (including of the vehicles other than railway or tramway) for the purposes of the said Chapter shall mean a vehicle that has been registered for use in any country according to the laws of that country, prior to importation into India. The learned SDR submits that the vehicle registered in the UK should be considered to have been in actual use in that country till it was re-exported to the United States, especially when the appellant has not adduced any evidence to the contra. In the circumstances, the vehicle can only be held to be secondhand or used vehicle with all its implications for the appellant. We have found substance in the submission of the learned SDR. Admittedly, the vehicle after its importation to the UK remained in that country for about a year, which is evidenced by the documents available at pages 105-107 which are UK registration certificate dated 31.1.2008 and the United States entry document dated 29.12.2008. As rightly pointed out by the learned SDR, it is difficult to believe that the vehicle was not in use in the UK between the date of its registration and that of its re-export to the United States. It is also pertinent to note that, in the UK, during the material period, it was not necessary that the registered keeper of the vehicle should be the legal owner. This legal position is clear from the entry which we have found in the UK registration certificate which reads thus: The registered keeper is not necessarily the legal owner. It would thus appear that an user of vehicle in the UK was also entitled to be its registered keeper. In any case, the appellant has not adduced any evidence to show that the vehicle was never in actual use in the UK. Therefore, the vehicle is liable to be considered as a secondhand or used vehicle in terms of Import Licensing Note (1) (I) in Chapter 87. In this context, it is also pertinent to note that the car was manufactured in August 2007 and was imported into India on 4.5.2009. It would be unconscionable to consider the car on the date of its importation into the country to be a new vehicle. Yet another piece of evidence which clearly indicates the secondhand nature of the vehicle is available at page 106, which is a certificate of the United States dealer who undertook the conversion of the vehicle into Stretched Limousine. It was certified that the total cost of the vehicle was US$ 69,545 inclusive of cost of conversion amounting to US$ 31,000 as per the relevant invoice. From these figures, it would appear that the vehicle underwent substantive changes at a high cost, at the end of the United States dealer who supplied the goods to the appellant. This document is accompanied by another document which specifies the various works done upon the vehicle including upgradation of the air-conditioning system, change of colour, improvement on television/stereo system, improvement on lighting system etc. The car which was black in colour and of a seating capacity of five while in the UK turned out to be a new Limousine of silver gray colour and all substantially improved facilities and cosmetics in the United States. By all standards, therefore, the car imported by the appellant was a secondhand /used vehicle which was imported from the United States after its modifications there. We hold the issue against the appellant.
6. In a convenient reshuffle of the issues, we shall now take up the fourth issue.
Whether the car is liable to confiscation under Section 111 of the Customs Act, and if so, what should be the quantum of redemption fine?
7. According to the department, the vehicle should have been imported under specific licence. The appellant would contend that it was freely importable. The learned Commissioner confiscated the vehicle in terms of Section 111 (d) and (m) of the Customs Act after holding that it was imported against prohibitions. The adjudicating authority found that the vehicle had been imported in violation of the prohibition imposed by the Import Licensing Notes appended to Chapter 87 of ITC-(HS) Classification framed in terms of para 2.1 of the Foreign Trade Policy 2004-09. The learned counsel has challenged this finding of the adjudicating authority by submitting that what was imported by the appellant was a new vehicle, to which the Import Licensing Note referred to by the learned Commissioner was not applicable. The learned counsel has also pointed out that the appellant had produced a Type Approval Certificate of an accredited agency from the UK in terms of Import Licensing Note 7 (b) as amended by Notification No. 56/RE-2008/2009 dated 11.7.2008. It is submitted that the said certificate certified compliance with all the ECE Regulations for the complete vehicle. It is submitted that, as the appellant complied with the requirements in terms of Import Licensing Note 7 in respect of the vehicle in question, which according to the appellant, was a new vehicle, the Commissioners decision to confiscate it in terms of Section 111 (d) of the Customs Act cannot be sustained in law. The learned SDR has reiterated the plea that what was imported by the appellant was a secondhand/used vehicle. We have already held the vehicle to be a secondhand/used vehicle. It is nobodys case that such a vehicle could be imported without specific licence. Therefore, the licensing requirement was violated in respect of the subject import and consequently, as rightly held by the Commissioner, the vehicle was liable to confiscation under Section 111 (d) of the Customs Act. The learned Commissioner has also ordered confiscation in terms of Section 111 (m) after finding that the value of the vehicle had been misdeclared by the importer with intent to evade payment of appropriate duty. This aspect will be considered in another context later. For the present, we uphold the confiscation of the vehicle.
Valuation issue
8. The importer declared Rs 35,50,545/- as the assessable value of the car. The adjudicating authority has enhanced the value to Rs 54,62,939/- on the basis of the value of a contemporaneous import covered by Bill of Entry dated 11.2.09 which pertained to import of a similar CHRYSLER car into India from New Zealand. The learned counsel has argued that the Commissioners order does not disclose any valid reason to reject the transaction value. There is no evidence of extra payment to the supplier, nor is there any allegation of relationship between the importer and the supplier. Therefore, according to the learned counsel, the transaction value should have been accepted under Section 14 of the Customs Act. In this connection, the learned counsel has relied on the following decisions:
(i) Basant Industries vs CC, Bombay 1996 (81) ELT 195 (SC);
(ii) CC, New Delhi vs Prodelin India (P) Ltd 2006 (202) ELT 13 (SC);
(iii) Eicher Tractor Ltd vs CC, Bombay 2000 (122) ELT 32 (SC);
(iv) CC, Mumbai vs Bureau Veritas 2005 (181) ELT 3 (SC);
(v) Lasalle Products (India) vs CC, Kanpur 2006 (200)ELT 579 (Tri-Del);
(vi) CC, Chennai vs Pushpanjali Silks Pvt Ltd 2006 (202) ELT 80 (Tri-Chennai);
(vii) Ahammed Kunhi vs CC, Chennai 2007 (218) ELT 270 (Tri-Chennai).
9. The learned SDR has argued in support of the valuation determined by the adjudicating authority. According to him, the value was correctly determined by the learned Commissioner on the basis of the value of a similar car contemporaneously imported from New Zealand.
10. In his rejoinder, the learned counsel submits that there can be no comparison between the value of goods imported from two different countries and, therefore, the subject vehicle cannot be valued on the basis of the so-called contemporaneous import.
11. We have considered the submissions. We have already held that the car imported by the appellant is a secondhand/used vehicle. It is settled law that valuation of secondhand goods cannot be made on a comparison with other secondhand goods. Each secondhand goods is uniquely placed and factors affecting its value cannot necessarily be true for other secondhand goods. In the present case, the learned Commissioner determined the assessable value on the basis of the value of similar vehicle imported from New Zealand. As rightly pointed out by the learned counsel, imports from different countries cannot be compared for purposes of Rules 4 and 5 of the Customs Valuation Rules, 2007. Moreover, with reference to conversion cost also we have not found any comparability of the two vehicles. The conversion cost in respect of the vehicles imported by the appellant was US$ 31,000 whereas that incurred in the case of the vehicle covered by contemporaneous Bill of Entry was US$ 50,200/-. Indisputably, this widely different conversion cost of similar vehicles should reflect themselves in the respective assessable values and consequently there can be no comparison between the two. For these reasons and for the further reason that no valid ground has been disclosed for rejecting the declared value, we are inclined to set aside the enhancement of value done by the learned Commissioner in this case. Apparently, the transaction value would reflect the basis of the assessable value of the goods under Section 14 of the Customs Act, in the absence of evidence against acceptability of that value. In this connection, many of the decisions cited by the learned counsel seem to be supportive of the appellant.
12. Having found no misdeclaration of value by the appellant, there is no reason to hold the goods to be liable to confiscation in terms of Section 111 (m) of the Customs Act.
Classification
13. According to the appellant, the car imported by them is classifiable under CTH 8702 as motor vehicle for the transport of 10 or more persons including the driver. The learned counsel submits that it is not in dispute that the car in the form it was imported had the seating capacity of 12 and therefore it should have been classified under the above heading. It is pointed out that CTH 8703 canvassed by the department is residuary to CTH 8702 and, therefore, before any attempt to classify the vehicle under CTH 8703, its classification under CTH 8702 should be ruled out. In this case, it is claimed, the adjudicating authority has classified the vehicle under CTH 8703 without ruling out its classification under CTH 8702.
14. On the other hand, the learned SDR submits that, admittedly, the vehicle was a five-seater car when it was originally manufactured by CHRYSLER, USA. In other words, it was pre-designed for transportation of only five persons including the driver. Such a five-seater car cannot be classified under CTH 8702 and therefore it would appropriately be classified under CTH 8703. The learned SDR has also relied on the Tribunals decision in Mahindra & Mahindra Ltd vs Commissioner 2010 (249) ELT 182 (Tri-Mum), wherein this Bench considered the essentiality of expert opinion in matters requiring determination of the designed capacity of a motor vehicle. The learned SDR has particularly referred to para 42 of the cited judgment, which is reproduced below:
42. The next question that arises is how should the Assessing Officer examine this aspect? Can he do this by requiring the assessee to transport or fill up the vehicle with 10 persons including the driver and come to the conclusion that the vehicle has been designed for 10 persons? Obviously, the answer would be NO. Since the Assessing Officer cannot be said to be having the expertise which is required to consider this aspect. Further, there are so many variables when 10 persons are loaded in the vehicle. The actual number of persons that can travel in a vehicle is not really relevant for the purpose of deciding whether a vehicle has been designed to carry that many persons. It is usual to find that a large number of people (much more than the capacity of the vehicle certified) traveling in vehicles in India. A bus, which is supposed to carry 50 persons often, carries more than 100 persons in this country. The cars, which are designed to carry 5 or 6 persons, carrying more than 10 persons are not rare to be seen. Therefore, as a lay man an Assessing Officer cannot decide whether a vehicle has been designed to carry 10 persons. In such a situation, naturally the Assessing Officer would ask the manufacturer himself to explain the basis on which the conclusion that the vehicle is designed to transport 10 persons has been arrived at. Naturally, the manufacturer of the motor vehicle in such a situation would explain that in India, any vehicle, before it is put on the road, is required to get a certificate from ARAI or VRDE. Further, the manufacturer would also explain that each and every vehicle manufactured in India, is required to be registered and get a registration number for plying on the road in India. In such a situation, the Assessing Officer would call for the certificate issued by the organization recognized for this purpose viz., ARAI or VRDE and if the certificate certifies that the vehicle is designed for carrying 10 persons, he would accept the classification claimed by the manufacturer. He may also verify the certificate of registration issued by the concerned transport authorities, if he is satisfied with the certificate issued by the organization required to certify the vehicle before it is put on the road; naturally he would not have to proceed further. This requirement arises, because as explained earlier, there has to be a standard, based on which a vehicle can be said to have been designed for the transport of 10 persons or more. These standards would be either available in standard text book or scientific literature or with the organizations, which are entrusted to prepare standards or with the organization, who are required to decide such factors and sometimes standards are also prescribed in the relevant acts framed for such purpose. In this case, the Motor Vehicles Act and Rules there under, lay down the standards. Even if the Motor Vehicle Act does not lay down the standards, the experts opinion rendered by the organizations like ARAI or VRDE can be accepted in view of the fact that these organizations have been recognized for these purposes. If this procedure to decide whether a vehicle is designed for carrying 10 persons or not is not followed, the situation can be chaotic and different types of vehicles in different sizes and in different designs can be manufactured and claimed to be designed for carrying a number of persons. To prevent such chaotic situation, regulatory agencies like transport authorities and organizations like, ARAI or VRDE are recognized so that certain level of uniformity can be achieved and certain uniform standard are followed in the country. Once a vehicle is certified by ARAI or VRDE as the vehicle designed for the transport of 10 persons or more including the driver, the classification claim has to be accepted and approved. But if no such expert concurrence is available or if they have not certified the requirement of the tariff heading as is the case, assessing officer has to consider whether he can decide the seating capacity himself or he needs expert assistance. If provisions of law are simple and do not need expertise, assessing officer himself can decide whether vehicle fulfills the condition.
15. In his rejoinder, the learned counsel submits that the Honble Supreme Court has granted stay against the above decision of the Tribunal. He has also produced a copy of the relevant Order dated 8.2.2010 in Civil Appeal No. 957/10 filed by Mahindra & Mahindra Ltd against the CESTAT Final Order dated 7.12.2009, which reads thus:
Issue notice, returnable within two weeks.
Mr. B.K. Prasad, learned Advocate, accepts notice.
As far as interim stay is concerned, we are hereby grating ad interim stay restraining the Department from taking any coercive steps till further orders particularly when considerable amount has been paid.
16. As rightly pointed out by the learned SDR, the ad interim stay granted by the apex court is against coercive recovery proceedings of the department and not against the operation of the Tribunals order. We are, therefore, inclined to follow the view taken by this Bench earlier in the case of Mahindra & Mahindra Ltd (supra). We think, this view will be quite appropriate in the instant case inasmuch as both sides have fairly submitted that neither the Commissioner nor even this Tribunal has the necessary expertise to determine the designed capacity of a motor vehicle. As held in the case of Mahindra & Mahindra Ltd, the assessing officer can call for certificate issued by the organization required for this purpose, viz., ARAI. Following the view taken by this Bench in Mahindra & Mahindra Ltds case, we would hold that the adjudicating authority could obtain expert opinion from competent agencies/authorities such as ARIA and VRDE on the designed seating capacity of the vehicle and then proceed to determine its classification under the Tariff. The impugned order does not indicate that the learned Commissioner consulted any expert in the matter. One of the main grievances of the appellant is that the Commissioner is not an expert to hold that the vehicle imported by them has the seating capacity of less than ten. In our view, this grievance of the appellant, which has been pressed before us by their counsel, can be best redressed by a remand of this issue to the lower authority.
17. In this connection, we also note that, in the impugned order, the learned Commissioner held the importer not to be entitled to the benefit of concessional rate under Notification No. 21/2002-Cus. We have seen the full text of this notification supplied by the learned SDR and we find that the motor vehicles mentioned at serial No. 344 of the Table annexed to the Notification have to be new vehicles to attract the concessional rate of duty prescribed against the said serial number. Therefore, even if the subject vehicle is classified under CTH 8703, the benefit of concessional rate of duty would not be admissible to the appellant, as we have already found the vehicle to be secondhand /used. In this scenario, we make it clear that the Commissioners decision on the applicability of Notification No. 21/2002-Cus would not get altered in the context of de novo consideration of the classification issue. Further, it goes without saying that, on the classification issue, the party shall be given a reasonable opportunity of being heard by the Commissioner after obtaining expert opinion as aforesaid and furnishing a copy thereof to the party.
As to quanta of fine and penalty
18. We have already accepted the declared value of the vehicle (Rs 35,50,545/-). The redemption fine of Rs 14 lakhs imposed by the Commissioner in lieu of confiscation of the car is apparently based on the enhanced value determined by the Commissioner. This fine was imposed in terms of both Section 111 (d) and (m) of the Customs act. Now that we have dropped the charge under Section 111 (m) of the Act, and have accepted the declared value of the vehicle, the redemption fine is bound to be reduced as well. Accordingly, we reduce the quantum of fine under Section 125 of the Act to Rs 5,00,000/- (Rupees Five lakhs only). Proportionately the penalty on the appellant has also to be reduced from Rs 5.00 lakhs to Rs 2.00 lakhs (Rupees Two lakhs only) under Section 112 (a) of the Act.
19. In the result, it is ordered as under:
(a) It is held that the car imported by the appellant is a secondhand /used car and not a new car;
(b) Its declared value is, however, accepted;
(c) The confiscation of the vehicle is upheld but redemption fine is reduced to Rs 5.00 lakhs (Rupees Five lakhs only;
(d) The quantum of penalty is reduced to Rs 2.00 lakhs (Rupees Two lakhs only);
(e) The classification issue is remanded to the Commissioner for fresh decision in terms of this order;
(f) The amount of duty shall be redetermined on the basis of fresh classification and also of the declared value of the vehicle.
20. The appeal is disposed of in the above terms.
(Dictated in open Court.) (M. Veeraiyan) Member (Technical) (P.G. Chacko) Member (Judicial)rk 15