2016 (8) TMI 85 - HC - Customs

Demand of duty - import of cars illegally - held that - - in the present case is that in the first instance the car in question was seized and released to the Mr. Hasanjee upon FIAA furnishing the BG of the entire customs duty in the sum of Rs. 5, 35, 118. There is no attempt made by the Department to explain why the said BG was not encashed and why it was allowed to lapse. Secondly the Petitioner was not the first transferee. There were at least three earlier transferees of the car by way of sale between 1985 and 1991. The factual finding of the Commissioner that the Petitioner was a bonafide purchaser has not been questioned by the Department. In other words he Petitioner bought the car without the knowledge of it being illegally imported on account of the failure to re-export it within six months from the date of its import. Thirdly the impugned order of the CEGAT was passed ex parte i.e. without affording the Petitioner an opportunity of being heard. - Demand set aside.

Summary

Issues:
Challenge to impugned order by Customs Excise & Gold (Control) Appellate Tribunal, demand notice for custom duty, Carnet Scheme violation, car seizure, multiple transfers, show cause notice, order-in-original, appeal before CEGAT, ex parte order, liability for custom duty, legal infirmity, differential custom duty recovery, bonafide purchaser defense.

Analysis:
The writ petition challenged the order by the Customs Excise & Gold (Control) Appellate Tribunal (CEGAT) disposing of the Department's appeal against the order-in-original and the subsequent demand notice for custom duty amounting to Rs. 5,35,118. The case involved a violation of the Carnet Scheme where 34 cars were imported into India and seized by the Enforcement Directorate for non-compliance with re-export conditions. The specific car in question, a Mercedes Benz, went through multiple transfers before reaching the Petitioner.

The Commissioner of Customs issued an order-in-original in 1996, confiscating the car and imposing penalties on previous owners. The Commissioner found the Petitioner to be a bonafide purchaser without knowledge of the car's illegal import under the Carnet Scheme. The CEGAT disposed of the Petitioner's appeal upholding the fine but later allowed the Department's appeal due to a legal infirmity in the original order.

The Petitioner, unaware of the CEGAT's order, received a demand notice in 2002 for the custom duty amount. The Court considered the Department's failure to encash the bank guarantee obtained at the initial stage and the fact that the Petitioner was not the first transferee. The Court set aside the CEGAT's order and the demand notice, stating that the Petitioner, as a bonafide purchaser, should not bear the burden of the entire custom duty due to the Department's actions.

The Court highlighted the unfairness of requiring the last transferee, a bonafide purchaser, to pay the entire custom duty when the Department had already obtained a bank guarantee at the beginning. The Court concluded that sending the matter back for further hearings would only prolong the litigation unnecessarily, thus allowing the writ petition in favor of the Petitioner.