A later buyer cannot be held responsible for paying customs duty under Section 28 of the Customs Act as the importer or owner of the goods, according to the Supreme Court.
The Supreme Court dismissed a case under the Customs Act against the appellant, who bought a car from the importer. The Court ruled that a later buyer cannot be held responsible for customs duty. It also explained that according to Section 125(1), the person in possession of the car can only be held liable if the original owner is unknown. The appellant challenged a Kerala High Court decision that favored the Customs Department. The Division Bench, including Justice B.V. Nagarathna and Justice Nongmeikapam Kotiswar Singh, stated, “The appellant is merely a later buyer of the vehicle, which was originally purchased from the importer. Therefore, the appellant cannot be held liable for customs duty under Section 28 of the Customs Act as an importer or owner of the goods.”
AOR Shashibhushan P. Adgaonkar represented the Appellant, while Senior Advocate Rupesh Kumar represented the Respondents. The case involved Jalaludheen Kunhi Thayil, who imported a Porsche Carrera Car in 2002. This car was sold to Shailesh Kumar in 2003. The Appellant bought the car in October 2004. In 2006, the Appellant, along with Thayil, Shailesh Kumar, and a broker named Haren Choksey (the Appellant’s brother), received a Show-Cause Notice. This notice demanded a payment of Rs. 17,92,847 for short-levied customs duty. It was issued under Section 28(1) and Section 124 of the Customs Act, 1962, claiming there was a deliberate misdeclaration of the car’s model and year, as well as tampering with the chassis number to evade customs duty. The Commissioner of Customs upheld the duty demand of Rs. 17,92,847 and ordered the car’s confiscation, allowing for redemption upon payment of the fine and the owed duty. The demand was made against both the importer and the Appellant.
The Appellant’s case at the Customs, Excise and Service Tax Appellate Tribunal was successful. Following this, the Department appealed to the High Court of Kerala, which overturned the CESTAT’s decision. Adgaonkar, representing the appellant, argued that the appellant is not the car’s importer but merely a later buyer. He stated that the responsibility for customs duty lies with the importer, not a subsequent buyer. Additionally, it was pointed out that the appellant is not the registered owner according to Section 39 and other relevant sections of the Motor Vehicles Act, 1988. On the other hand, Kumar for the Respondent cited Sections 28 and 124 of the Customs Act, arguing that the vehicle was seized while in the appellant’s possession. He acknowledged that although the vehicle is not registered in the appellant’s name, the appellant is still considered the owner since he purchased it.
The Bench noted that the term “importer” in clause (26) of Section 2 of the Customs Act can refer to an owner, beneficial owner, or anyone presenting themselves as the importer. However, this definition applies only from the time of importation until the goods are cleared for home use. The Bench concluded that the appellant is simply a later buyer of the vehicle from someone who bought it from the importer. Therefore, the appellant cannot be held liable for customs duty under Section 28 of the Customs Act as an importer or owner of the goods as defined.
The Bench referred to the Motor Vehicle Act and determined that the registered owner of a motor vehicle is the person in whose name it is registered. In this case, the car was not registered in the name of the appellant; instead, the registration certificate was still in the name of the original importer, Thayil. Thus, Thayil was legally recognized as the owner of the vehicle. Since the legal ownership remained with Thayil, the Bench stated, “As a result, the initiation of proceedings against the appellant under the Customs Act, including the Show-Cause Notice and the subsequent seizure and confiscation of the vehicle, were not lawful.” The Bench allowed the appeal and overturned the High Court’s judgment, along with the Show Cause Notices and other actions taken against the appellant.
Cause Title: Nalin Choksey v. The Commissioner of Customs, Kochi [Neutral Citation: 2024 INSC 933]
Appearance:
Appellant: AOR Shashibhushan P. Adgaonkar, Advocate Pradnya S Adgaonkar
Respondents:Senior Advocate Rupesh Kumar, AOR Gurmeet Singh Makker, Advocates V C Bharathi, H R Rao, Shashank Bajpai, Navanjay Mahapatra
