2025 (5) TMI 846 - AT - Customs

Subsequent purchaser of imported vehicle not liable for differential customs duty as actual importer responsibility remains with original importer

Shri Sachin Joshi Versus Commissioner of Customs, Kolkata

CESTAT Kolkata held that subsequent purchaser of imported vehicle could not be treated as actual importer liable for differential customs duty. Vehicle ... Actual importer - importer (who filed the bills of entry and cleared the goods) of goods or subsequent purchaser - appellant, who purchased the imported vehicle after customs clearance, can be treated as the actual importer liable for payment of differential customs duty or not - mis-declaration of CIF value of the car - Confiscation - redemption fine - Penalties. Actaul importer - HELD THAT:- The vehicle was imported by Mr. Arshad Vayal Peedika by availing the benefit of ‘Transfer of Residence’. The vehicle was cleared at concessional rate of duty as applicable to cases of transfer of residence by using the passport no. E2603762 of Mr. Arshad Vayal Peedika. Thus, it is observed that it is a case of baggage/transfer of residence and not a regular import. Mr. Arshad Vayal Peedika is the person who has availed the transfer of residence and hence, as per records, he is the actual importer in whose name the vehicle had been cleared by the Customs Authorities. The investigation found that the Customs duty had been paid by the appellant viz. Mr. Sachin Joshi and that the vehicle had also been subsequently registered and used by him for many years. However, the person who purchased the vehicle from the importer, in whose possession the vehicle was seized cannot be considered as the actual ‘importer’ of the vehicle. Mr. Arshad Vayal Peedika, who filed the Bill of Entry and in whose name the vehicle was cleared, is to be considered as the actual importer of the vehicle in question. Hence, the differential duty, if any, was required to be demanded from the actual importer Mr. Arshad Vayal Peedika. However, it is observed that the demand of differential Customs duty has not been raised against Mr. Arshad Vayal Peedika in the present case. Accordingly, the differential duty demanded from Mr. Sachin Joshi is not sustainable and thus the same is set aside. Confiscation - redemption fine - HELD THAT:- It is observed that the appellant is not the importer of the car and did not have any role in its import or clearance thereof. The Department has failed to bring in any corroborative evidence on record to substantiate their allegation that the appellant was the actual importer of the vehicle in question and not Mr. Arshad Vayal Peedika. In these circumstances, the confiscation of the vehicle from the appellant, who is not the importer of the car and who had only purchased the said vehicle, is not sustainable and accordingly, the order of confiscation made vide the impugned order set aside. Accordingly, the demand of redemption fine in lieu of confiscation from the appellant is not sustainable. Penalties imposed on the appellant under Section 114A and Section 114AA of the Customs Act, 1962 - HELD THAT:- As per Section 114A, penalty is imposable on the person who short paid or not paid the duty due to wilful misstatement or suppression of facts. It is imposable on the person who is liable to pay the duty. As the appellant is not the person who is liable to pay the duty in this case, the penalty under section 114A cannot be imposed on him. Penalty under section 114AA is imposable for using false and incorrect material in the transaction of business. In this case, the appellant has not filed any document for clearance of the car. Hence, it is clear that he has not made any false declaration for clearance of the car. Accordingly, penalty u/s 114AA cannot be imposed on him. Accordingly, the penalties imposed under sections 114A and 114AA of the Customs Act, 1962 set aside. Conclusion - i) The liability to pay customs duty and differential duty lies with the actual importer who files the Bill of Entry and clears the goods, not with subsequent purchasers. ii) Confiscation and redemption fine under Section 125 apply only to the importer or person from whom goods were seized who opts to redeem the goods; bona fide purchasers who do not exercise this option cannot be held liable. iii) Penalties for misdeclaration or suppression under Sections 114A and 114AA cannot be imposed on persons who did not participate in import clearance or make false declarations. iv) Goods cleared for home consumption cease to be imported goods, and confiscation post-clearance requires proper revision or cancellation orders. Appeal disposed off. Issues Presented and ConsideredThe core legal questions considered by the Tribunal are:1. Whether the appellant, who purchased the imported vehicle after customs clearance, can be treated as the actual importer liable for payment of differential customs duty under the Customs Act, 1962.2. Whether the demand of differential customs duty and confiscation of the vehicle from the appellant, who is a subsequent purchaser and not the importer, is sustainable.3. Whether the redemption fine imposed under Section 125 of the Customs Act, 1962 can be demanded from the appellant as a bona fide purchaser who did not exercise the option to redeem the confiscated goods.4. Whether penalties under Sections 114A and 114AA of the Customs Act, 1962 can be imposed on the appellant who neither imported the vehicle nor made any false declarations or suppressed facts during import clearance.5. The applicability and interpretation of relevant judicial precedents regarding liability for customs duty, confiscation, redemption fine, and penalties in cases involving subsequent purchasers of imported goods.Issue-wise Detailed Analysis1. Liability of the Appellant as Importer for Differential Customs DutyThe legal framework governing importation and customs duty liability is primarily the Customs Act, 1962, including Sections 2(26) (definition of importer), 28 (recovery of duty), 111(m) (confiscation), and 125 (option to pay fine in lieu of confiscation). The Import Licensing Notes under Chapter 87 of the ITC (HS) Classification also regulate import of vehicles under transfer of residence benefits.The Tribunal examined whether the appellant, who purchased the vehicle after customs clearance, qualifies as the importer liable for differential duty. The vehicle was imported by Mr. Arshad Vayal Peedika, who filed the Bill of Entry and cleared the vehicle under transfer of residence provisions, supported by his passport and residence status abroad. The appellant purchased the vehicle post-clearance and paid the customs duty amount to the importer as part of the sale arrangement.Precedents such as Gagandeep Singh Anand v. Commissioner of Customs (Bom. HC) and Commissioner of Customs v. Nalin Choksey (Kerala HC) were extensively relied upon. These cases establish that the liability to pay customs duty under Section 28 is on the importer who filed the Bill of Entry and cleared the goods. A subsequent purchaser, even if in possession of the goods, is not the importer and cannot be fastened with the duty liability unless he opts to redeem confiscated goods under Section 125.The Tribunal noted that the appellant did not file the Bill of Entry, did not import or clear the vehicle, and was not the beneficial owner at the time of import. The Department failed to produce corroborative evidence to prove the appellant as the actual importer. Thus, the Tribunal held that the demand of differential duty from the appellant is unsustainable and set aside the demand.2. Confiscation and Redemption Fine Imposed on the AppellantSection 111(m) of the Customs Act permits confiscation of goods in cases of misdeclaration or undervaluation. Section 125 provides an option to the owner or person from whom goods were seized to pay a fine in lieu of confiscation and recover the goods.The vehicle was confiscated, and a redemption fine imposed on the appellant. However, the appellant was a subsequent purchaser, not the importer or original owner at the time of import. The Tribunal referred to the principle that confiscation can only be enforced against the importer or owner from whom goods were seized, and redemption fine applies only if the person opts to redeem the goods.Since the appellant did not exercise the option to redeem, and the vehicle was cleared in the name of the importer, the Tribunal held that confiscation and redemption fine imposed on the appellant are not sustainable. The vehicle was cleared for home consumption, and confiscation after clearance without revision or cancellation of clearance order is impermissible as per the Madras HC judgment in Nakoda Unique Gold Pvt Ltd.3. Penalties under Sections 114A and 114AA of the Customs ActSection 114A imposes penalty for short payment or non-payment of duty due to wilful misstatement or suppression. Section 114AA penalizes knowingly or intentionally making false or incorrect declarations in material particulars.The appellant contended that he did not import the vehicle, did not file any documents for clearance, had no knowledge of misdeclaration, and was a bona fide purchaser. The Department alleged involvement in a fraudulent scheme but failed to produce evidence linking the appellant to any collusion or misdeclaration.The Tribunal examined the legal requirements for imposing these penalties and found that since the appellant was not liable to pay duty and did not make any false declarations, penalties under Sections 114A and 114AA could not be imposed on him. The Tribunal also relied on the CESTAT Bangalore decision in Buhler India Pvt. Ltd., which held that penalty under Section 114AA cannot be imposed if penalty under Section 114A is already imposed for the same offence.4. Treatment of Competing Arguments and EvidenceThe Department argued that the appellant was the actual importer as he paid customs duty and used the vehicle for years, including registration and insurance in his name. However, the Tribunal emphasized that importation liability is determined by who filed the Bill of Entry and cleared the goods, not by subsequent use or registration.The appellant highlighted the fraudulent modus operandi involving other parties, who were not adequately investigated or penalized, and argued that he was a victim of misrepresentation. The Tribunal noted the absence of investigation or statements recorded from key alleged conspirators and the lack of evidence implicating the appellant.The Tribunal gave precedence to the statutory definitions and judicial precedents over the Department's contentions, finding the appellant's arguments more consistent with the law and facts.Significant Holdings'The person who purchased the vehicle from the importer, in whose possession the vehicle was seized cannot be considered as the actual 'importer' of the vehicle.''The demand of differential Customs duty has not been raised against Mr. Arshad Vayal Peedika in the present case. Accordingly, we hold that the differential duty demanded from Mr. Sachin Joshi is not sustainable and thus the same is set aside.''The confiscation of the vehicle from the appellant, who is not the importer of the car and who had only purchased the said vehicle, is not sustainable and accordingly, we set aside the order of confiscation made vide the impugned order.''Penalty under section 114A cannot be imposed on him. Penalty under section 114AA cannot be imposed on him. Accordingly, we set aside the penalties imposed under sections 114A and 114AA of the Customs Act, 1962.'Core principles established include:The liability to pay customs duty and differential duty lies with the actual importer who files the Bill of Entry and clears the goods, not with subsequent purchasers.Confiscation and redemption fine under Section 125 apply only to the importer or person from whom goods were seized who opts to redeem the goods; bona fide purchasers who do not exercise this option cannot be held liable.Penalties for misdeclaration or suppression under Sections 114A and 114AA cannot be imposed on persons who did not participate in import clearance or make false declarations.Goods cleared for home consumption cease to be imported goods, and confiscation post-clearance requires proper revision or cancellation orders.Final determinations:The demand of differential customs duty from the appellant is set aside.The order of confiscation and redemption fine imposed on the appellant is set aside.The penalties under Sections 114A and 114AA imposed on the appellant are set aside.