CESTAT Quashes Confiscation Of Luxury Mercedes Benz Car & Penalties Imposed On Subsequent Purchasers

The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT)has set aside the confiscation of a luxury Mercedes Benz car and quashed penalties imposed on subsequent purchasers, holding that goods once confiscated and redeemed cannot be re-confiscated. The bench of Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) has observed that the action of the Customs Department to initiate proceedings against the appellant, who is a bona fide purchaser of the redeemed goods for value is unjust. The case relates to the import of a Mercedes Benz CLS 320 CDI car in July 2008 through New Customs House, New Delhi. The vehicle was imported in the name of an individual importer, declaring the car as “new” and availing concessional customs duty under an exemption notification. Customs authorities rejected the declared value, re-assessed the car at a higher value, ordered confiscation with an option of redemption on payment of fine, and imposed penalty. After adjudication, the car was released on payment of redemption fine and subsequently registered in India. A few months later, the vehicle was sold to a private company and its director for a consideration of about ₹54 lakh, partly financed through a bank loan. Years later, the Directorate of Revenue Intelligence (DRI) initiated investigations into alleged mis-declaration and undervaluation of luxury car imports. Based on these investigations, a fresh show cause notice was issued alleging that the car was falsely declared as new, had been previously registered abroad, and was undervalued to evade duty. Following remand by the Tribunal in an earlier round, the Principal Commissioner passed a de-novo order in 2016 once again ordering confiscation of the car and imposing penalties on the purchasers under Sections 112(a) and 114AA of the Customs Act, 1962. The Tribunal examined multiple issues, including whether DRI officers were competent to issue the show cause notice; whether the car could be confiscated again after having already been confiscated and redeemed earlier; and whether penalties could be imposed on subsequent purchasers who were not involved in the original import. While the appellants argued lack of jurisdiction, absence of evidence of collusion, violation of natural justice, and bona fide purchase after lawful clearance and registration, the Department contended that the car was liable to confiscation due to mis-declaration and that penalties were justified even against later purchasers. On the issue of jurisdiction, the Tribunal noted that the matter now stands settled by the Supreme Court’s review judgment dated 7 November 2024, which held that DRI officers are “proper officers” empowered to issue show cause notices under Section 28 of the Customs Act. However, on the core issue of confiscation, the Tribunal held that re-confiscation of the same goods is impermissible in law. Relying on earlier decisions, including the Supreme Court ruling in Mohan Meakin Ltd. and its own decision in Suchita Agarwal, upheld by the Delhi High Court, the Tribunal observed that once goods are confiscated, redeemed on payment of fine, and released into the market, they cannot be confiscated again in subsequent proceedings. The Tribunal emphasized that any failure by customs authorities to properly assess market value or duty at the first stage cannot be remedied by initiating fresh confiscation proceedings against later purchasers who had no role in the original import. With regard to penalties under Sections 112(a) and 114AA, the Tribunal found no evidence to establish that the appellants had abetted the alleged mis-declaration or had knowingly dealt with goods liable to confiscation. It noted that the car had already been cleared, redeemed, and registered under the Motor Vehicles Act before being purchased. The Tribunal also relied on High Court precedents holding that penalties cannot be imposed in the absence of clear findings of deliberate involvement or mens rea, particularly against bona fide purchasers who were not part of the import process. CESTAT set aside the confiscation of the Mercedes Benz car as well as all penalties imposed on the appellants. The appeals were allowed in full, bringing an end to the prolonged dispute that had spanned over a decade. Case Details Case Title: Watermark Systems (India) Private Limited Versus Principal Commissioner of Customs Case No.: Customs Appeal No. 51419 Of 2016 Date: 20.11.2025 Counsel For Appellant: Dhruv Matta and Ms. Namrata Singhal Counsel For Respondent: Shiv Shankar,Authorized Representative Click Here To Read Order Read More: Mumbai Customs Mandates Strict SOP for Speaking Orders in Faceless Re-Assessments

CESTAT Quashes Confiscation Of Luxury Mercedes Benz Car & Penalties Imposed On Subsequent Purchasers

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