C. N. RAMACHANDRAN NAIR, J.

1. This is an appeal filed by the Commissioner of Customs challenging the order of the Customs, Excise and Service Tax Appellate Tribunal, cancelling the adjudication order issued by him against the respondent confiscating the two BMW cars imported by the respondent under Section 111(o) of the Customs Act and demanding differential duty of customs, interest and penalty for violation of the conditions of customs Notification 44/2002 dated 19.4.2002 under which imported cars were released at concessional rate of duty of 5% as against 160% for the normal import of foreign cars. We have heard standing counsel Sri. John Varghese appearing for the appellant and Sri. G. Natarajan appearing for the respondent.

2. The facts that led to the controversy are the following. Respondent is running a hotel mainly accommodating foreign tourists. Government of India issued customs Notification No. 44/2002 dated 19.4.2002 under Section 25(1) of the Customs Act granting concessional rate of duty at 5% on capital goods imported under valid licence issued under Export Promotion Capital Goods (EPCG) Scheme. The condition for granting concessional rate of duty for the i