Raman Sood vs Union of India

The challenge in this writ petition is to the impugned order dated 6th March, 2000 passed by the Customs Excise & Gold (Control) Appellate Tribunal (''CEGAT'') disposing of the Department''s appeal against the order-in-original dated 27th December, 1996 and to the consequent demand notice dated 13th December, 2002 issued by the Department to the Petitioner demanding custom duty amounting to Rs. 5,35,118.

While directing to issue Rule D.B on 8th August, 2003, the Court stayed the operation of the aforementioned demand notice.

The facts leading to the present writ petition are that under CARNET-DE-Passage permit Scheme (''Carnet Scheme''), 34 cars were imported in India and cleared without payment of custom duty subject to the condition that they are re-exported within six months. It appears that the Enforcement Directorate (''ED'') seized 13 of the 34 cars on the ground that they failed to comply with the said condition of re-export within six months. One of the cars of make Mercedes Benz forms the subject matter of the present petition.

One Mr. A. Hasanjee, who is a British national holding British passport, brought the said car to India some time in 1984. The said car was allowed to be released from the Customs upon the Federation of India Automobile Association (''FIAA'') furnishing a bank guarantee (''BG'') in the sum of Rs. 5,35,118 towards the customs duty payable. The car was then registered with the Regional Transport Office (''RTO'') in Delhi.

Mr. Hasanjee left for London and returned to India on 9th June, 1985. He was arrested and released on bail on 22nd July, 1985 upon furnishing a personal bond of Rs. 1,25,000. He is stated to have absconded soon after. Later in 1985, the car was registered in the name of Mr. Iqbal Peer Mohammed of Mumbai with the transport authority of Mumbai and was given Registration No. MAS-9108. Subsequently, the car was sold to Mr. Sandeep Bishnoi. It was brought from Mumbai to Delhi and was registered in the name of Mr. Bishnoi under Registration No. DAC-8181.

Mr. Sandeep Bishnoi is stated to have sold the said car to Mr. Suresh Jain of M/s. Suresh Jain & Associates. In 1991 Mr. Suresh Jain sold the said car to M/s. Ajay Enterprises Ltd., the Director of which is Mr. Raman Sood, the Petitioner herein.

On 12th June, 1993 the officers of the Customs Department visited the premises of the Petitioner. In the absence of the Petitioner, his brother Mr. Satish Sood produced a photocopy of the registration book pertaining to the said car. When Mr. Satish Sood was unable to produce the original documents concerning the customs clearance of the car, it was seized under Section 110 of the Customs Act, 1962 (''CA''). Later the car was released to the Petitioner upon his furnishing a BG and personal bond.

A show cause notice (''SCN'') dated 10th December, 1993 was issued to several persons, including the Petitioner, who had dealt with the car. They were asked to show cause why the said car should not be confiscated under Section 111(d) and 111(o) of the CA and the penalty under Section 112 of the CA should not be imposed. The SCN noted the fact that the car had been released in the first instance upon FIAA furnishing the BG for the entire customs duty. The SCN further noted that Mr. Sandeep Bishnoi and Mr. Suresh Jain did not join the investigation.

The Commissioner of Customs passed an order-in-original on 27th December, 1996. Specific to the plea that the Petitioner that he had purchased the car without knowledge of its illegal import under the Carnet Scheme, the Commissioner observed as under :

".... Thus evidence clearly shows that both Suresh Jain and Raman Sood are bona fide purchasers. They had no knowledge that the car had been imported under the Carnet System and had not been re-exported and was liable to confiscation. The investigation has also been revealed any evidence to show that Suresh Jain or Raman Sood had any knowledge about the liability of the car to confiscation under the provisions of Customs Act, 1962. In these circumstances, I hold that there is no evidence to support the allegations as contained in the show cause notice against Suresh Jain and Raman Sood."

Qua the Petitioner the operative portion of the said order reads as under :

"I order confiscation of Mercedes Benz car Model 280S having Indian number 926-20-002492 and Chassis No. WDB-126021-200-17913 under Section 111(d) and 111(o) of the Customs Act. However the car has already been released on execution of a bond and furnishing a bank guarantee. I accordingly, order that an amount of Rs. 50,000 be recovered from Shri Raman Sood of M/s. Ajay Enterprises Limited, New Delhi as fine in lieu of confiscation by enforcing the bond and the bank guarantee. I impose upon Shri Abubacker Hasanjee and Shri Sandeep Bishnoi a penalty of Rs. 1,00,000 (Rupees one lakh only) each under Section 112(a) and (b) of Customs Act 1962 �.."

Aggrieved by the above order, the Petitioner filed an appeal before the CEGAT. Simultaneously the Customs Department also filed an appeal, which fact was not known to the Petitioner. For some reason, the Petitioner''s appeal was taken up by the CEGAT first and not together with appeal filed by the Department. By the impugned order dated 27th November, 1997, the CEGAT disposed of the appeal filed by the Petitioner upholding the fine amount. The CEGAT also noted in its order, as under :

"At this stage, learned counsel has stated that the amount of Rs. 50,000 imposed as fine has already been paid by the Appellant. Therefore, he prays that a direction been paid by the Appellant. Therefore, he prays that a direction may be given to the concerned authorities to release the bond and guarantee furnished by the Appellant at the time of obtaining release of the car and also prays that the RC book of the car which is with the authorities may be directed to be released to him. The authorities are directed to consider this aspect of the matter and release the documents and the RC book after verification of the above submission regarding deposit of the fine ��."

Consequent upon the order of the CEGAT, the Petitioner is stated to have sold the car further to one Mr. Balwant Singh on 1st July, 1999 for a sum of Rs. 1.70 lakhs.

Meanwhile, the Department''s appeal against the order dated 27th December, 1996 of the Commissioner was taken up for hearing by the CEGAT. As the final order dated 6th March, 2000 shows, none appeared for the Petitioner. The said order was passed ex parte. After referring to Section 125 of the CA, which provides for payment of duty at the time of exercising the option of redeeming the goods, it was observed that the order-in-original suffered from legal infirmity to that extent. The Department''s appeal on the said aspect was accordingly allowed.

The Petitioner states that he had no knowledge of the aforementioned order. He learnt of it only when he received the impugned demand notice dated 13th December, 2002 calling upon him to pay the customs duty of Rs. 5,35,118.

Mr. Rajiv K. Garg, learned counsel for the Petitioner submits that with the order-in-original of the Commissioner returning a finding that the Petitioner was a bona fide purchaser, the question of fastening the liability of the customs duty against the Petitioner was unjustified, particularly since FIAA had already furnished a BG for the entire customs duty. Further all the previous transferees were known to the Department. However, the recovery of the entire customs duty was sought to be made only from the Petitioner.

Ms. Sonia Sharma, learned Senior standing counsel for Respondent Nos. 2 and 3, referred to Section 125(2) of the CA which enables the recovery of duty from the person from whom the illegally imported goods is recovered. Ms. Sharma accordingly submitted that the Petitioner could not escape the liability to pay the differential customs duty. She placed reliance on the decision of the Madras High Court in Nine Star Exports v. Commissioner of Customs (Ports)—2003 (151) E.L.T. 265 (Mad.) and the decision dated 24th March, 2015 of the Supreme Court in Fortis Hospital Limited v. Commissioner of Customs, Import (Civil Appeal No. 1049 of 2008) [2015 (318) E.L.T. 551 (S.C.)].

In the first place it requires to be noted that the decision in Fortis Hospital Limited v. Commissioner of Customs, Import (supra) was rendered in the context of import of diagnostic equipment. In the said decision it was held that there could not be a recovery of customs duty with reference to Section 125(2) of the CA if the option for payment of fine in lieu of confiscation in terms of Section 125(1) of the CA is not exercised. The decision in Nine Star Exports v. Commissioner of Customs (Ports) (supra) is also distinguishable on facts. It did not involve the transfer of the imported goods to several persons and an attempt at recovering customs duty only from the last of such transferees.

A fact which is not disputed by the Department in the present case is that in the first instance the car in question was seized and released to 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 bona fide purchaser has not been questioned by the Department. In other words the 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.

Although it was suggested by Ms. Sonia Sharma that the matter could be sent back to the CESTAT for affording the Petitioner an opportunity of being heard, considering the number of years that have lapsed since the passing of the impugned order, the Court does not see any useful purpose being served except prolonging the litigation interminably.

In the instant case, the Department had already obtained a BG for the entire customs duty at the initial stage from FIAA. In the circumstances, without encashing the said BG, the Department is not justified in requiring the last transferee, who is admittedly a bona fide purchaser to bear the burden of the entire customs duty.

For the aforementioned reasons, the Court sets aside the impugned order dated 6th March, 2000 of the CEGAT and the consequent demand notice dated 13th December, 2002.

The writ petition is allowed in the above terms.