Mere possession of imported car not to incur liability of customs duty if vehicle not registered in name: Supreme Court

New Delhi: The Supreme Court has said that mere possession of an imported car by a subsequent buyer would not make him liable to pay customs duty if the vehicle continued to be registered in the name of the original importer.

A bench of B V Nagarathna and N Kotiswar Singh said 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 matter related to a show cause notice issued by the customs department on June 27, 2007, demanding short-levied customs duty to the tune of Rs 17,92,847 for importing a Porsche Carrera Car on June 28, 2002, by Jalaludheen Kunhi Thayil, who sold it to Shailesh Kumar in 2003.

Appellant Nalin Choksey, who thereafter bought it from Kumar, challenged the Kerala High Court's 2018 judgment which upheld the demand of payment of short-levy of duty as a necessary consequence of redemption of the goods under Section 125 of the Customs Act.

The High Court said since the appellant had exercised the option to redeem the goods, he was liable to pay the customs duty despite being a subsequent purchaser.

Deciding the appeal on November 27, the bench, however, said the appellant is not the owner of the car coming within the definition of importer under the Customs Act. He is the subsequent purchaser of the vehicle.

The court pointed out the registration certificate continued 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.

Citing Section 28(1) of the Customs Act, the court 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 court said.

Adverting to the provisions of the Motor Vehicles Act, 1988, which defines ‘owner’ under Section 2(30), the bench noted 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.

"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 allowed the appeal against the High Court's order also quashed the notice. It, however, clarified department can proceed against the proper person, namely, the importer and owner of the car in question.