Car Already Confiscated Once Can’t Be Re-Confiscated; CESTAT Quashes Penalties on Bona Fide Purchasers in Mercedes CLS 320 CDI Import Case
Pranav B Prem
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, has set aside the confiscation and penalties imposed in a long-running dispute concerning the import of a Mercedes Benz CLS 320 CDI, holding that a car already confiscated once and released on redemption fine cannot be subjected to a second confiscation. The ruling was delivered by Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member).
The proceedings arose from a 2008 import by Mukesh Kumar, who declared the vehicle as new and valued it at ₹20.47 lakh. Customs rejected the declared value, re-determined it at ₹28.83 lakh, and ordered confiscation under Section 111(d) of the Customs Act, permitting release on payment of redemption fine. The issue resurfaced years later when the Directorate of Revenue Intelligence initiated a broader investigation into luxury-car imports. The DRI alleged that the Mercedes had been mis-declared as new despite prior registration in the U.K., and undervalued to secure exemption under Notification 21/2002-Cus.
Statements recorded during the probe suggested that one Shri Sumit Walia arranged imports using names of individuals like Mukesh Kumar, allegedly for a fee. After import, the vehicle was sold in 2008 to Watermark Systems through Mr. Saket Dalmia for ₹54 lakh. The car was financed in part through a bank loan and properly recorded under RTO procedures. The DRI seized the vehicle from Watermark Systems in July 2013.
After issuance of show cause notices, a de-novo adjudication order passed in 2016 imposed penalties of ₹10 lakh under Section 112(a) and ₹5 lakh under Section 114AA on Watermark Systems and the same on Mr. Dalmia, while dropping duty demands against them.
The Tribunal noted that the vehicle had already been confiscated in 2008 and redeemed upon payment of fine. Relying on the Supreme Court’s judgment in Mohan Meakin Ltd., it held that goods once confiscated and released cannot again be confiscated, especially from a bona fide purchaser. The Tribunal also referred to its earlier decision in Suchita Agarwal (2015), later upheld by the Delhi High Court, to reaffirm that re-confiscation of the same imported goods is not permissible.
In reviewing the purchase by Watermark Systems and Mr. Dalmia, the Tribunal found no evidence indicating that they were involved in or aware of any alleged mis-declaration at the time of import. The car had been purchased after import through normal commercial channels, including RTO transfer, and there was no material linking them to the initial import transaction. It held that penalties under Sections 112(a) and 114AA require clear proof of active involvement or intentional use of false documents, neither of which was established.
In support of its view, the Tribunal cited the Bombay High Court’s ruling in Gagandeep Singh Anand, where penalties imposed on a subsequent purchaser of a vehicle were similarly invalidated because no role in the import process was attributed to the buyer. The appellants had also raised a jurisdictional challenge to the DRI’s issuance of the show cause notice. The Tribunal noted that the Supreme Court’s review judgment delivered in November 2024 has now clarified that DRI officers are “proper officers” under Section 28 of the Customs Act, thereby settling the issue.
The Tribunal set aside the confiscation of the Mercedes CLS 320 CDI and quashed all penalties imposed on Watermark Systems and Mr. Saket Dalmia. Holding that re-confiscation was legally impermissible and that the appellants were bona fide purchasers without involvement in the import, the CESTAT allowed the appeals in full.
Appearance
Counsel For Appellant: Advocates Dhruv Matta and Ms. Namrata Singhal
Counsel For Respondent: AR Shankar
Cause Title: Watermark Systems (India) Private Limited Versus Principal Commissioner of Customs
Case No: Customs Appeal No. 51419 Of 2016
Coram: Justice Dilip Gupta (President), Hemambika R. Priya (Technical Member)
