A bench of B V Nagarathna and N Kotiswar Singh rejected an argument that such a buyer can be made liable to pay the duty because the seized car was in his possession, 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.

 

The court held 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 as not in accordance with law and are unlawful.

 

The bench here allowed an appeal filed by Nalin Choksey against the Kerala High Court's order of April 3, 2018, which answer the issue of payment of duty in favour of Customs department.

 

According of facts of the matter, one Jalaludheen Kunhi Thayil had imported the vehicle in question being a Porsche Carrera Car on June 28, 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.

 

The appellant, along with the importer Jalaludheen Kunhi Thayil, the first possessor Shailesh Kumar and a broker named Haren Choksey who was the brother of the appellant, was served with the Show-Cause notice on June 27, 2007 demanding short-levied customs duty to the tune of Rs 17,92,847.

 

The Commissioner of Customs confirmed the demand of duty of Rs 17,92,847. The demand was raised jointly and severely against the importer and the appellant.

The appellant herein preferred an appeal before the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench at Bangalore, which was allowed in his favour in 2008.

 

The appellate tribunal held that the appellant herein is a bonafide purchaser who had not purchased the car from the original importer and therefore, he had no role in the import of the car or in the misdeclaration or in any offence connected with the import.

 

On appeal by the Customs department, the High Court said the payment of short-levy of duty is a necessary consequence of redemption of the goods under Section 125 of the Customs Act and since the appellant herein had exercised the option to redeem the goods, he was liable to pay the customs duty despite being a subsequent purchaser.

 

Before the apex court, the appellant said he 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.

 

The department, on the opposite, claimed the appellant has not complied with the provisions under the Customs Act and instead has sought to evade the customs duty payable by him; that in fact the vehicle in question was seized from the possession of the appellant herein and thereafter confiscated and therefore he was liable to pay the custom duty as well as the redemption fine.

 

Referring to Section 28(1) of the Customs Act, the bench said admittedly, the appellant was not the importer of the car in question, nor was he involved in the process of importation of the car. The car was neither imported for his benefit nor on his behalf. It was 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 bench said.

 

The court also pointed out it is undisputed that there is a confiscation of the car in question in this case and the import of the said car is not prohibited.

 

It noted also, as per the definition, the owner of the goods, or where such owner is not known, the person from whose possession or custody such goods have been seized, should be given the option to pay a fine in lieu of confiscation and where such fine is imposed on the owner or the other person, they should be also liable to pay any duty and charges payable in respect of such goods.

 

"However, firstly, the appellant is not the owner of the car coming within the definition of importer under the customs Act. Secondly, in order that the appellant is to be construed to be the owner of the vehicle in question, it is necessary to advert to the provisions of the Motor vehicles Act, 1988, which defines ‘owner’ under Section 2(30) of the said Act," the bench said.

 

The court further pointed out 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 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 Jalaludheen Kunhi Thayil to Shailesh Kumar from whom the appellant has purchased the vehicle, the court said.

 

"However, there is no ownership in law which can be recognised 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 and hence, he does not fall within the scope and ambit of Section 125 of the Customs Act, 1962," the bench said.

 

The court thus quashed the judgment of the High Court, show cause notices and other proceedings initiated against the appellant and restored the order of the appellate tribunal of 2008.

 

The bench, however, clarified the quashing of the proceedings as against the appellant herein would not come in the way of respondent-department proceeding against the proper person, namely, the importer and owner of the car in question.