Subsequent Purchaser Can’t Be Charged For Paying Customs Duty U/S. 28 Of Customs Act As Importer Or Owner Of Goods: SC

The appellant approached the Apex Court challenging the Kerala High Court order allowing the Customs Appeal filed by the respondent-Department answering the questions in favour of the Revenue and against the appellant.

The Division Bench comprising Justice B.V. Nagarathna and Justice Nongmeikapam Kotiswar Singh held, “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.”

AOR Shashibhushan P. Adgaonkar represented the Appellant while Senior Advocate Rupesh Kumar represented the Respondents.

In this matter, one Jalaludheen Kunhi Thayil had imported the vehicle in question being a Porsche Carrera Car in the year 2002. The said car was later sold to one Shailesh Kumar in the year 2003. Subsequently, the appellant purchased the said car in the month of October, 2004 and in the year 2006, the appellant, along with the importer Thayil, the first possessor Sri Shailesh Kumar and a broker named Haren Choksey who was the brother of the appellant, was served with the Show-Cause Notice demanding short-levied customs duty to the tune of Rs.17,92,847.

The said Show-Cause Notice was issued under Section 28(1) read with Section 124 of the Customs Act, 1962 and stated that it was a case of deliberate misdeclaration of model and the year of manufacture, along with tampering with the chassis number of the imported car for the purpose of under invoicing and under valuation of the vehicle and evading the payment of the differential duty of customs amounting to Rs.17,92,847. The Commissioner of Customs confirmed the demand of duty of Rs.17,92,847/- being the duty short levied and short-paid on the imported vehicle and ordered the confiscation of the car with an option of redemption of the confiscated car on payment of fine and the differential duty. The demand was raised jointly and severely against the importer and the appellant.

The Appellant’s appeal before the Customs, Excise and Service Tax Appellate Tribunal was allowed.The Department then filed the Customs Appeal before the High Court of Kerala and the CESTAT’s order was set aside.

For the appellant, Adgaonkar submitted that the appellant is not the importer of the car but only a subsequent purchaser. The liability to pay customs duty is on the importer and not on a subsequent purchaser. It was further brought to the Court’s notice that the appellant is not the registered owner in terms of Section 39 and other relevant provisions which are under Chapter IV of the Motor Vehicles Act, 1988.

For the Respondent, Kumar referred to Section 28 as well as Section 124 of the Customs Act and contended that the vehicle in question was seized when it was in the possession of the appellant herein, and while it may be that the vehicle has not been registered in the name of the appellant but the fact remained that the appellant is the owner of the vehicle, that is the good, having regard to the fact that he had admittedly purchased the same.

Referring to the expression importer as mentioned under clause (26) of Section 2 of the Customs Act, the Bench observed that an “importer” can include an owner, a beneficial owner or any person holding himself out to be the importer. But these personae would fall under the above definition only during the time between the importation of goods and the time when they are cleared for home consumption.

“The appellant herein is only a subsequent purchaser of the said vehicle from 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 Bench said.

The Bench made a reference to the Motor Vehicle Act and held that when a motor vehicle stands registered in the name of a person, he would be the owner of the said motor vehicle. Admittedly, in the instant case, the car in question had not been registered in the name of the appellant herein but the registration certificate continued to be in the name of the original importer Thayil. Therefore, the latter was held to be the owner of the vehicle in law.

Noting that the ownership of the vehicle in law was still with the importer Thayil and thus, the owner of the vehicle was known, the Bench held, “Consequently, the very initiation of the proceedings against the appellant herein under the provisions of Customs Act by summoning him by issuance of Show-Cause Notice and subsequent seizure and confiscation of the vehicle in question are not in accordance with law and are unlawful.”

Allowing the appeal, the Bench quashed the impugned judgment of the High Court, Show Cause Notices and other proceedings initiated 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

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