Mandatory import condition breach sustained confiscation and penalty for second-hand vehicle import

CESTAT upheld confiscation of a second-hand special purpose vehicle under Section 111(d) of the Customs Act, 1962 because the import breached a mandatory FTP import condition: the vehicle exceeded the permitted three-year age limit and no waiver of that requirement had been obtained. The importer had sought waiver only of the homologation-certificate condition, showing awareness of the applicable licensing notes. The Tribunal also sustained penalty under Section 112(a), holding that the breach was not merely technical or venial and that the importer's conduct did not justify penalty relief; the penalty was considered proportionate and reasonable.

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Issues: (i) Whether the imported second-hand vehicle was liable to confiscation under Section 111(d) of the Customs Act, 1962 for breach of the import conditions in the Foreign Trade Policy and the Import Licensing Notes; and (ii) whether the penalty imposed under Section 112(a) of the Customs Act, 1962 was justified and reasonable.

Issue (i): Whether the imported second-hand vehicle was liable to confiscation under Section 111(d) of the Customs Act, 1962 for breach of the import conditions in the Foreign Trade Policy and the Import Licensing Notes.

Analysis: The import was made under the ITC (HS) classification for a second-hand special purpose vehicle. The importer had itself sought and obtained waiver only of the homologation-certificate requirement, thereby accepting that the import was subject to the Import Licensing Notes attached to Chapter 87. The governing policy made free import subject to regulation under the FTP and other law in force, and the relevant note required imported second-hand motor vehicles to be not older than three years from the date of manufacture. The vehicle admittedly exceeded that age limit, and no waiver of that condition had been obtained.

Conclusion: The import was in breach of the applicable import condition and confiscation under Section 111(d) of the Customs Act, 1962 was upheld.

Issue (ii): Whether the penalty imposed under Section 112(a) of the Customs Act, 1962 was justified and reasonable.

Analysis: The breach was not treated as a mere technical or venial infraction. The importer had noticed and acted upon other licensing conditions but did not seek waiver of the age restriction, showing awareness of the restriction and absence of a bona fide misunderstanding. In such circumstances, the principles governing judicial exercise of penalty discretion did not warrant waiver of penalty. The amount imposed was also considered proportionate to the value of the goods and therefore reasonable.

Conclusion: The penalty under Section 112(a) of the Customs Act, 1962 was sustained as justified and reasonable.

Final Conclusion: The decision affirmed confiscation and penalty, holding that import of the second-hand vehicle in breach of the applicable licensing condition attracted customs consequences and did not merit penalty relief.

Ratio Decidendi: Where an importer knowingly imports goods in breach of a mandatory import condition and does not seek waiver of that condition, the breach is not merely technical and both confiscation and penalty may validly be sustained.

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