The Telegraph
Since 1st March, 1999
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Legal spin to keep Sachin’s Ferrari on track

New Delhi, Aug. 14: A legislative sleight-of-hand could throw the entire controversy over the customs waiver for Sachin Tendulkar's Ferrari into a twist.

Call it prescience or what you will, but the government had anticipated trouble over ad hoc customs exemptions. It, therefore, fortified its position by amending section 25 (2) of the Customs Act in this year's Union budget “so as to restore the powers to the central government to issue ad hoc exemption orders in circumstances of an exceptional nature”.

The government could use this as the legal fig leaf to justify its decision to waive the 120 per cent duty — amounting to Rs 1.13 crore in this case — that would have otherwise been payable on the red Ferrari that had been gifted to the master blaster by the company.

On Wednesday, Delhi High Court judge Vikramjit Sen issued notices to Tendulkar and the Union finance and sports ministries to explain why and how the duty was waived.

The court, which issued the notices suo motu on the basis of newspaper reports and a Laxman cartoon spoofing the entire episode, had said it would treat the matter as a public interest litigation. It fixed hearing on August 19.

Tendulkar was awarded the Ferrari 360 Modeno last year after he equalled Sir Don Bradman's tally of 29 Test centuries. The car was flown in from Paris on an Air France carrier on August 9.

One could debate the merits of Tendulkar's case and quibble over whether his feat qualifies as a “circumstance of an exceptional nature”.

However, the rule change means that the government does not have to spell out the reason for granting the ad hoc exemption.

Earlier, the relevant section in the Customs Act stated, “If the central government is satisfied that it is necessary in the public interest to do so, it may, by special order in each case, exempt from payment of duty, for reasons to be stated in such order, any goods, of strategic nature or secret nature, or for charitable purpose, on which duty is leviable.”

The latest amendment to the section leaves it entirely to the government's discretion to determine what is an “exceptional circumstance” that qualifies for a duty waiver and not have to spell out a reason for granting such a benefice.

This is not the first time that the government has waived customs duty on cars awarded to cricketers. Back in 1985, Ravi Shastri won an Audi when he was named Champion of Champions in the World Series tournament played in Australia. But unlike Tendulkar, who received the car as a gift, Shastri won the car as an award while playing in a tournament for India.

Imports of new cars attract a steep 120 per cent duty — which is exceptionally high when compared with the average Asean levels of around 20 per cent. The government has often in the past expressed the desire to bring down duties to levels in Asean — a South-east Asian trade bloc with which it is keen to forge a free trade agreement. Such an agreement cannot be forged if the duty levels are so far out of whack.

The government, which has kept the import duty high under pressure from domestic car makers who fear a flood of car imports if the rate is lowered, is able to do so because the tariff regime mandated by the World Trade Organisation permits such a high “bound rate”.

However, not everyone believes that the government has a cast-iron case here.

A senior advocate dealing with customs-related issues says, “It is a matter of serious dispute. Yashwant Sinha (as finance minister) had earlier laid down statutory guidelines which had to be adhered when granting an ad hoc exemption of a special nature.”

He added, “Although section 25(2) of the Customs Act gives the government discretionary powers, the underlying guidelines do not say anything about granting such an exemption to an individual. Hence, the customs waiver would be deemed incorrect.”

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