Registration In Exporting Country Before Import Does Not Make Vehicle Used: CESTAT Chennai

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Chennai, has held that a vehicle does not lose its eligibility for concessional customs duty available for new vehicles merely because it was temporarily registered in the country of export, so long as there is no evidence that it was actually used before being exported to India.

The revenue must establish that the vehicle was actually used before it was exported to India.

“Mere registration of a motor vehicle in the exporting country does not, by itself, establish that the vehicle had been put to use. The decisive test is whether the vehicle had actually been used prior to export,” the tribunal ruled.

The ruling came in appeals filed by two Chennai residents, Raju Thomas and Alberto Bestonso, over the import of a Maserati GranTurismo. The vehicle had been declared at a value of GBP 53,000. Customs rejected the declared transaction value and enhanced the assessable value, alleging deliberate undervaluation.

A bench comprising Judicial Member P. Dinesha and Technical Member Vasa Seshagiri Rao upheld the rejection of the declared value. The tribunal found that the Revenue's case was supported by cogent, contemporaneous and independently corroborated evidence.

Among the evidence were two invoices dated October 28, 2008 for the same Maserati GranTurismo. While the invoice produced by the importer showed a price of GBP 53,000, another invoice issued by H.R. Owen Sports Cars showed GBP 80,516, inclusive of VAT. The higher-value invoice was independently corroborated by the First Secretary (Commercial), High Commission of India, London.

The tribunal also took into account Alberto Bestonso's statement, an annexure furnished by him, electronic correspondence and other commercial records recovered during the investigation. It held that the evidence had to be considered cumulatively and was sufficient to create reasonable doubt about the truth and accuracy of the declared value. Customs was therefore justified in invoking Rule 12 of the Customs Valuation Rules and rejecting the declared transaction value.

At the same time, the tribunal found that the entire GBP 80,516 could not be taken as the assessable value. The invoice included GBP 11,923.98 in UK VAT, which was refundable in the exporting country. That amount did not form part of the price actually payable for export to India and had to be excluded from the assessable value.

Customs denied the importer a concessional customs duty rate available for new motor vehicles, arguing that the Maserati no longer qualified as a new vehicle because it had been registered with the UK's Driver and Vehicle Licensing Agency before being exported to India.

The tribunal rejected that reasoning. Referring to CBEC Circular No. 1/2005-Cus., it observed that temporary registration can be a statutory requirement in some countries for moving a new vehicle from a factory or showroom to a port or airport.

Here, the Revenue did not produce evidence of previous ownership, commercial use, insurance claims, servicing, maintenance, abnormal mileage or any other circumstance showing that the Maserati had actually been used in the UK. The invoice recorded payment of GBP 55 towards the first registration administration fee and mentioned the UK registration number, but the tribunal found that this did not establish actual use.

The tribunal also rejected the argument that an importer who had been found to have undervalued a vehicle would automatically lose the benefit of the concessional notification. Valuation and exemption eligibility, it observed, arise under different statutory provisions and have to be considered independently.

It therefore held that the Maserati remained a new motor vehicle for the purposes of Serial No. 344(2), despite its temporary registration in the UK.

The tribunal nevertheless upheld the vehicle's liability to confiscation under Section 111(m) of the Customs Act, finding that the value had been deliberately misdeclared. It held that the concessional duty benefit did not efface the separate finding of deliberate undervaluation.

The ₹14 lakh redemption fine, however, was set aside. The vehicle had already been cleared and was no longer available for confiscation or redemption.

Relying on the Supreme Court's ruling in Commissioner of Customs v. Finesse Creation Inc., the tribunal held that a redemption fine could not be imposed since the vehicle was no longer available for confiscation.

The penalty imposed on Raju Thomas under Section 114A was also to be recalculated after giving effect to the concessional notification and excluding the refundable VAT from the assessable value. The ₹10 lakh penalty imposed on Alberto Bestonso under Section 112(a), however, was upheld.

The tribunal partly allowed Raju Thomas's appeal and sent the matter back to the original adjudicating authority only to re-quantify the assessable value, differential duty, applicable interest and the consequential Section 114A penalty. Bestonso's appeal was rejected.

For Appellant: Hari Radhakrishnan

For Respondent: Rajini Menon, Authorised Representative for the Revenue.