Subsequent Purchaser Of Imported Vehicle Cannot Be Asked To Pay Customs Duty; Liability On Importer : Supreme Court

The Supreme Court ruled that the 'subsequent purchaser' of an imported motor car cannot be called an 'importer' to attract the liability under the Customs Act, 1962 to pay customs duty on the import of the vehicle.

The bench comprising Justice BV Nagarathna and Justice N Kotiswar Singh heard the appeal preferred by the subsequent purchaser of a Porsche Car against the High Court's decision upholding the demand of custom duty of ₹17,92,847 from the appellant along with other individuals on the allegation of misdeclaration of the car's model, tampering with its chassis number, and undervaluation to evade customs duty.

The respondent customs department justified the demand of duty on the ground that since the appellant was in possession of the Car, he was liable to pay the differential customs duty upon redemption of the confiscated Car along with the fine under Section 125 of the Customs Act.

The appellant (subsequent purchaser) resisted the payment of custom duty contending that he neither imported the vehicle nor owned the vehicle. The appellant argued that the liability to pay customs duty lies with the importer, not subsequent purchasers.

Setting aside the High Court's decision, the Court observed that the appellant cannot be termed as an importer to be charged for paying customs duty under Section 28 of the Customs Act.

“Admittedly, the appellant was not the importer of the car in question, nor was the appellant involved in the process of importation of the car. The car was neither imported for his benefit nor on his behalf. It was Sri Jalaludheen Kunhi Thayil who was the importer from whom no recovery of the differential duty had been made. The appellant herein is only a subsequent purchaser of the said vehicle from a person who had purchased the same from the importer. Thus, the appellant cannot be charged for paying customs duty under Section 28 of the Customs Act as an importer or owner of the goods within the meaning of the definition of importer.”, the court observed.

The Court rejected the respondent's argument that the appellant, as the possessor of the confiscated car, could redeem it under Section 125 of the Customs Act by paying the differential duty. The Court clarified that this argument would only apply if the owner of the confiscated vehicle were unknown.

Upon reviewing the facts, the Court observed that the appellant could not be considered the "owner of the vehicle" under Section 2(30) of the Motor Vehicles Act, 1988, as the vehicle's registration certificate listed the importer, not the appellant, as the registered owner. Therefore, the Court held that since the owner of the vehicle—the importer—is known, no liability could be imposed on the subsequent purchaser to pay the differential customs duty for redeeming the confiscated car.

“Admittedly, in the instant case, the car in question has not been registered in the name of the appellant herein but the registration certificate continues to be in the name of the original importer Sri Jalaludheen Kunhi Thayil. Therefore, the latter is the owner of the vehicle in law. It may be that there has been a transfer of the vehicle from Sri Jalaludheen Kunhi Thayil to Sri Shailesh Kumar from whom the appellant has purchased the vehicle. However, there is no ownership in law which can be recognized insofar as the appellant herein is concerned inasmuch as his name has not been entered in the registration certificate concerning the vehicle in terms of the provisions of the Motor Vehicles Act, 1988. Hence, the appellant herein cannot be construed to be the owner of the vehicle and hence, he does not fall within the scope and ambit of Section 125 of the Customs Act, 1962. Further, the argument that the appellant can be made liable to pay the duty because the seized car was in the possession of the appellant cannot also be accepted, since as per Section 125(1) of the Customs Act, the possessor of the car can be made liable only when the owner of the goods is not known. However, in the instant case, it is an admitted position that the ownership of the vehicle in law is still with the importer Sri Jalaludheen Kunhi Thayil and thus, the owner of the vehicle is known.”

Consequently, the Court held that “the very initiation of the proceedings against the appellant herein under the provisions of Customs Act by summoning him by the issuance of Show-Cause Notice and subsequent seizure and confiscation of the vehicle in question are not in accordance with law and are unlawful.”

Accordingly, the appeal was allowed.

Appearance:

For Petitioner(s) Mr. Shashibhushan P. Adgaonkar, AOR Mrs. Pradnya S Adgaonkar, Adv.

For Respondent(s) Mr. Rupesh Kumar, Sr. Adv. Mr. Gurmeet Singh Makker, AOR Mr. V C Bharathi, Adv. Mr. H R Rao, Adv. Mr. Shashank Bajpai, Adv. Mr. Navanjay Mahapatra, Adv.

Case Title: NALIN CHOKSEY VERSUS THE COMMISSIONER OF CUSTOMS, KOCHI

Citation : 2024 LiveLaw (SC) 962

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