M/s. Buhariwala Logistics And Anr. vs C.C. (Import & General), New Delhi

The appellants namely M/s. Buhariwala Logistics and Shri Vishvas Uday Singh Laad are in appeals against the impugned order, wherein penalties

under various sections of Customs Act, 1962 were imposed on them.

The facts of the case are that an intelligence was received by DRI that one Shri Sumit Walia alias Sunni Walia was importing high end luxury cars

from various foreign suppliers by mis-declaring as ‘new’, whereas in reality, all such cars were old and registered in the country of export prior

to export thereof, and thus, fell in the category of second hand cars, thereby attracting high duties of customs than paid by them. It was further

revealed that they were also involved in under-invoicing the value of these vehicles at the time of import and thus, evading the differential customs

duty on the same. The residential premises of Shri Sumit Walia was searched and various documents were found and it was found that Shri Sumit

Wadia imported one Mercedes Benz GL 320 Cdi car bearing Chassis No.WDC1648222A28655 7 in the name of Shri Tarun Kumar. The Bill of Entry

was filed in the name of Shri Tarun Kumar having Invoice No.6557, dated 17.03.2008 of Ms/ A.K. International (IE) Ltd. The price was declared as

US$47,700.00, the duty was discharged on concessional rate of Basic Customs Duty (BCD) as new car. Statement of Shri Sumit Walia and Shri G.S.

Prince, the G-Card holder of the Appellant No.1 were recorded. Statement of Shri Tarun Kumar was also recorded and after conducting the

investigations, it was revealed that the vehicle was sold to Shri Vishvas Udai Singh Laad, the Appellant No.2, a resident of Bangalore. Therefore, on

03.04.2013, the summons were issued to record the statement of the Appellant No.2. The premises of the Appellant No.2 were visited on 04.04.2013

and the car was seized. After seizure of the car, panchnama was drawn and given to Shri Prabhakar G, Personal Assistant to the Appellant No.2,

since Shri Vishvas Udai Singh Laad was not available at the residence at that time. Thereafter, a Show cause Notice was issued to Shri Sumit Walia,

Shri Tarun Kumar and the Appellant Nos. 1 & 2. On the basis of investigations, it was alleged that the car in question imported was old and used car

and was heavily under-valued to evade payment of duty and it was also revealed from the investigations that the appellant before us have aided and

abetted avoid Shri Sumit Walia for illegal importation of the car. The matter was adjudicated. The penalties of Rs.10 lakhs each under sections 112(a)

and 114AA of Customs Act, 1962 on Appellant No.1 were imposed. On appellant No.2 penalty of Rs.10 lakhs was imposed under section 112(b) of

the Act. The vehicle in question was confiscated and allowed to redeem on payment of redemption fine of Rs.22 lakhs. Aggrieved from the said

order, appellants are before us.

Arguments on behalf of the Appellant No.2

Ld. counsel for the Appellant No.2 submits that the appellant is a bona fide purchaser of the car as he purchased the car in good faith and have no

role on illegal importation of the car by Shri Sumit Walia or Shri Tarun Kumar. He submits that initially the car was imported by Shri Sumit Walia in

the name of Shri Tarun Kumar was sold to Mr. Oswal of Ludhiana, who in turn sold the same to the Appellant No.2. He further submits that no

statement of the appellant was recorded as summons were issued on 03.04.2013 and before recording the statement of the appellant, the Show Cause

Notice was served on 05.04.2013, since the appellant has no direct connection with the import of the impugned car and has obtained a loan of Rs.60

lakhs from the bank to purchase the car. Therefore, the appellant has bona fide belief that the car cleared through customs by the importer and there

was no reason to disbelieve the assessment of the said car by the customs. He further submits that the impugned car was an imported new car as per

Board circular No.1/2005-Cus, dated 11.01.2005 which classifies that a new imported vehicle for the purpose of this Chapter shall mean a vehicle that

has not been registered for use in any country and the same was registered in UK only for its onward exportation. To support his contentions, he

relied on the decision of Hon'ble High Court of Mumbai in the case of CC Vs. Noshire Moody [2012-TIOL-391-HC-MUM-CUS] and the decision of

the Tribunal in the case of Rahul Bhandare Vs. CC (Imports) [2012 (285) ELT 225 (Tri.)].

It is further submitted that the value declared with the customs at UK was not discounted by the VAT which would be eligible as refund to the

foreign suppliers and the contemporaneous imports are available to the proper officer at the time of importation.

For imposition of redemption fine, it is submitted that the appellant is bona fide purchaser of the car, therefore, the redemption fine is not imposable,

for this, he relied on the decision of Hon'ble High Court of Karnataka in the case of CC Vs. Five Star Shipping Co. [2012 (278) ELT 196 (Kar.),]

wherein it was held that the car which is cleared by the Customs Department and after such clearance, the purchase was effected by the bona fide

purchaser, such bona fide purchaser is not liable to pay redemption fine even if the car was under valued and the original importer is liable to pay the

differenial duty. He further submits that the redemption fine of Rs.22 lakhs was excessively high and not commensurate with the evidence, which

clearly established that the appellant is a bona fide purchaser. Therefore, he prayed that the penalties under sections 112(a) and 114AA of the Act are

not imposable on the appellant without recording the statement of the appellant. In these terms, he prayed that the impugned order qua confiscation of

the car and imposition of penalties under sections 112(a) and 114AA of the Act against the appellant be set aside.

Arguments on behalf of the Appellant No.1

On behalf of the Appellant No.1, the counsel submits that the statements of Shri Sumit Walia and Shri G.S. Prince, Green card holder of the

appellant were recorded, but no statement of any of the partners of the appellant firm was recorded nor any summons were issued to them. Shri G.S.

Prince, in his statement exposed Shri Sumit Walia and Shri Tarun Kumar, but he has not imputed any knowledge of this activities to his masters, i.e.,

the appellant. The Show Cause Notice has been issued to the appellant through inculpatory statement of Shri G.S. Prince, but Shri G.S. Prince was

not made party to the Show Cause Notice. He further submits that the car was allowed for clearance after examination and submission of documents

by Shri G.S. Prince after assessment. Shri G.S. Prince was handling Delhi office over the years and earned trust of the appellant, so there was no

reason to doubt him. Just on learning of these activities, he was immediately removed. In the impugned order, a penalty of Rs.10 lakhs was imposed

under Section 112(b) of the Act on the appellant mainly on the fact that the appellant being CHA has not verified the antecedents of the importer

diligently and has not informed to the Customs Department. It was also observed that the appellant failed to established that Shri G.S. Prince got

monetary benefits from the business dealings with Shri Sumit Walia and concluded that there was omission on the part of the appellant at the time of

importation of the car, which rendered imposition penalty under section 112(b) of the Act. He further submits that there is no material on record in the

form of statement or any other documentary evidence to impose penalty under section 112(b) of the Act. He further submits that in fact after realising

the fact at a later stage, the adjudicating authority on the prayer of the appellant was pleased to order addition of Shri G.S. Prince to subsequent Show

Cause Notice and was pleased to impose severe penalty on Shri G.S. Prince vide Orders in Original No.51 & 52/NLB/Commr./I&G/2014, both dated

31.07.2014 and no penalty was imposed on the appellant, after considering the material on record. This proves the innocence of the appellant.

He submits that in the case of CC Vs. Vaz Forwarding Ltd. [2011 (266) ELT 39 (Guj.)], the Hon'ble High Court of Gujarat dismissed the

Revenue’s appeal against the order passed by the Tribunal wherein penalty was dropped on the CHA since there is no direct evidence on record

that CHA was aware of the Advance licence being bogus and forged. He also relied on the decision of Hon’ble High Court of Mumbai in the

case of Raj Cleaning Agency [2006 (199) ELT 602 (Mumb), in the case of Mahender Shah [2010 (261) 497 (Tri. - Mumb.)] and the decision of the

Tribunal in the case of S.Y. Ranade [2009 (248) ELT 495 (Tri. - Mumb)], wherein it was held that there is no evidence to prove the involvement of

the CHA and an employee has suo moto acted for his personal greed and beyond the scope of his duty, therefore, the employer cannot be responsible

and penalised under section 112 of the Act.

On the other hand, Ld. Departmental Representative supported the impugned order and submitted that in this case car has been imported by Shri

Tarun Kumar through Shri Sumit Walia, who is the master mind behind the smuggled nature of the imported car and during the course of investigation

it was found that the car was highly under-valued and shown as new instead of old. The car was found in the possession of Appellant No.2 and the

employee of Appellant No.1 was actively involved in the activity. In these circumstances, he prayed that confiscation of car and imposition of

penalties on the appellants were proper.

Heard the parties and considered the submissions.

On perusal of the record and facts of the case, we find that initially the car was imported by Shri Sumit Walia in the name of Shri Tarun Kumar on

04.04.2008. We find that initially the car was imported for sale to M/s. Oswal in Ludhiana and the same was later on purchased by the Appellant No.2

on 21.04.2008. The appellant has purchased the car after the clearance from the customs as a bona fide purchaser of the car and has taken the loan

of Rs.60 lakhs for purchase of the car. In these circumstances, we hold that the appellant is a subsequent purchase of the car after importation in

India and bona fide purchaser of the car. Further, we find that Appellant No.2 has contended the valuation of the car and submitted that the car is not

an old car is not acceptable as the impugned order has not been challenged by Shri Sumit Walia and Shri Tarun Kumar, therefore, the said part of the

order has attained finality. In these circumstances, we are not agreeing with the contentions of the ld. counsel of the Appellant No.2 that the car is

new one and the value of the car is declared correctly.

We further find that the contention that the car cannot be confiscated as appellant is a bona fide purchaser. We hold that the car has been

confiscated for under-valuation and mis-declaration and the said part of the order has not been challenged by the importer. In these circumstances, the

impugned car is liable for confiscation. We also find that the redemption fine imposed is highly excessive. Therefore, we reduce the redemption fine to

Rs.5 lakhs. On payment of such redemption fine, the car shall be released to Appellant No.2. Further we find that the appellant is the bona fide

purchaser of the car and no statement of the appellant has been recorded and no role of the appellant has been discussed. Therefore, we hold that

penalties under sections 112(a) and 114AA were not imposable on the appellant. In these circumstances, the appellant is entitled to take the

possession of the car on payment of redemption fine of Rs.5 lakhs.

We find that in the case of Appellant No.1, no statement of the appellant was recorded. Moreover, during the course of hearing, the appellant has

submitted that Shri G.S. Prince is a G card holder and has acted in his own capacity to get the monetary benefits from the business dealings with Shri

Sumit Walia and the appellant was not having any knowledge of such importation. We further find that in subsequent proceedings on the same

investigation in other imports of car by the same persons on the request of the appellant, Shri G.S. Prince was made the party to the Show Cause

Notice and in those cases, the adjudicating authority has observed as under:-

“(F) Coming on the question of penalty on noticee No.(vi) M/s. Buhariwala Logistics I observe that in the show cause notice MN/s.

Buhariwala Logistics have been charged through their G-Card Holder G.S. Prince that by virtue of their action of facilitating the

fraudulent imports in violations of the provisions of CHALR, 2004 they have made themselves liable for Penalty under Section 112 and

Section 117 of the Customs Act, 1962 as applicable.

I find that in this case the show cause notice dated 24-04-2012 was earlier issued to M/s. Buhariwala Logistics through their G-Card

Holder G.S. Prince. Subsequently through Addendum / Corrigendum to the Show Cause Notice dated 08-10-2013 Shri G.S. Prince, G-card

holder of the CHA, M/s. Buhariwala Logistics was specifically put to notice as to why penalty should not be imposed on him for various acts

of omission and commission for facilitating Sh. Sumit Walia in fraudulent import of Aston Martin Rapide car in the name of Commercial

Attache of the Embassy of Vietnam and mis-declaration/ suppression of proper value of the said car.

I have gone through the written & oral submissions of M/s. Buhariwala Logistics that they were not involved in the said violation since,

actually it was Shri G.S. Prince who facilitated and handled the clearance of the imported vehicle without the knowledge of the CHA M/s.

Buhariwala Logistics. Even during the investigation stage, none of the persons involved had made any inculpatory statement regarding the

role of M/s. Buhariwala Logistics. However, since Sh. G.S. Prince was acting on behalf of M/s. Buhariwala Logistics. Therefore, it appears

that M/s. Buhariwala Logistics failed to perform their duty obligations under the CHALR, 2004 for which proceedings can be initiated

under the said Rules. As far as violations under the Customs Act, 1962 are concerned, I do not find any role of M/s. Buhariwala Logistics in

the present matter. In view of this fact, I refrain from imposing any penalty on M/s. Buhariwala Logistics in the present case.â€​

Thereafter the penalty on the appellant has been dropped but the penalty on Shri G.S. Prince was imposed. Further we find that in the case of CC Vs.

Vaz Forwarding Ltd.(supra), wherein the penalty was dropped on the CHA in absence of evidence of the knowledge of the CHA. Further, in the case

of S.Y Ranade (supra), it was held that there is no evidence to prove the involvement of the CHA and an employee has suo moto acted for his

personal greed and beyond the scope of his duty, therefore the employer, i.e., CHA cannot be penalised. In this case also, it is not in the knowledge of

the appellant that Shri G.S. Prince is involved in illegal importer and Shri G.S. Prince acted in his personal capacity for monetary gains. We also find

that in subsequent proceedings Shri G.S. Prince no penalty has been imposed on the appellant. Therefore, we hold that no penalty is imposable on the

appellant consequently, we set aside the penalty imposed on the appellant.

With these terms, the appeals are disposed of.