2026 (3) TMI 479 - AT - Customs

Beneficial owner concept not retroactive; buyer after home consumption clearance is not liable for customs reassessment.

Goods cleared for home consumption cease to be imported goods and a subsequent buyer who purchased and assembled them after clearance is not chargeable as ... Validity of notice on the person chargeable with duty or interest - Duty chargeable on the goods imported or exported out of India - Who is that person who is chargeable with duty - concept of beneficial owner - Bill of Entry as unit of assessment - assessment of multiple Bills of Entry together - permissible customs duty planning. Person chargeable with duty - Liability to pay duty under section 28 could be fastened only on the person chargeable with duty at the relevant time and the concept of beneficial owner was not available at the time the show cause notice was issued. - HELD THAT:- The Court examined section 28 and the statutory scheme governing who may be served with a recovery notice. Section 28(1) and (4) authorise serving a notice on the person chargeable with the duty or interest. Section 12 and the definitions in section 2 establish that duty is chargeable on imported goods and that the importer (including an owner) for purposes of customs law is the person who owns the goods between importation and clearance for home consumption. The Act was amended only from 31.3.2017 to introduce the notion of 'beneficial owner'; the show cause notice in this case was issued before that amendment. Therefore, there was no statutory basis at the relevant time to treat a subsequent buyer or an alleged mastermind who did not import or clear the goods as the person chargeable with duty, and a notice under section 28 could not validly be served on such a person. [Paras 12, 15, 16, 17, 18] Demand of duty could not be sustained against the appellant who purchased goods after clearance because he was not the person chargeable with duty and the beneficial owner concept did not apply at the relevant time. Bill of Entry as unit of assessment - assessment of multiple Bills of Entry together - HELD THAT:- The Court held that each Bill of Entry constitutes a separate unit of assessment under sections 17, 46 and 47: the importer files the Bill of Entry, self-assesses duty, the proper officer may re-assess, and clearance is issued. Once clearance under section 47 is given, the goods cease to be imported goods. The statute contains no power to aggregate goods imported under different Bills of Entry and assess them jointly to treat them as a single article for reclassification or re-assessment, except in the special Project Imports regime. The show cause notice and the impugned order proceeded on the mistaken premise that panels and other parts imported under different Bills of Entry and by different importers could be treated together and re-assessed when sold to the appellant after clearance; that approach has no foundation in the Act. [Paras 21, 22, 23] The impugned re-assessment treating goods imported under various Bills of Entry together is without authority of law. Permissible customs duty planning - Importing parts and assembling them domestically to obtain a lower duty burden is lawful tax planning and not by itself a basis for imposing additional duty. - HELD THAT:- The Tribunal recognised that tariff design commonly imposes lower duty on raw materials and intermediate products and higher duty on finished articles to encourage local manufacture. Where importers choose to import intermediate goods and assemble them in India, that constitutes lawful commercial structuring or 'smart customs duty planning.' Absent a statutory provision treating such conduct as unlawful or as a basis for recovery from persons who did not import or clear the goods, taking advantage of the tariff structure cannot be equated to evasion that attracts duty beyond the statutory scheme. [Paras 24, 25, 26] Importing components and assembling them domestically to reduce duty liability is not illegal and does not justify imposing duty on a subsequent purchaser who did not import or clear the goods. Final Conclusion: The impugned order confirming demand of duty, interest and penalties against the appellant is without authority of law: the appellant was not the person chargeable with duty at the relevant time, the statutory unit of assessment is the Bill of Entry and multiple Bills of Entry cannot be combined for re-assessment, and importing parts for domestic assembly is lawful planning; accordingly the impugned order is set aside and the appeal is allowed. Issues: (i) Whether duty, interest and penalties could be lawfully demanded from the appellant who purchased and assembled goods after they had been cleared for home consumption; and (ii) Whether goods imported under different Bills of Entry can be combined for re-assessment of duty against a person who was not the importer for those Bills of Entry.Analysis: Section 28 prescribes serving notice on the person chargeable with duty or interest; section 12 charges duty on goods imported into India; section 46 requires the importer to present a Bill of Entry and section 17 provides for assessment of duty; section 47 permits clearance for home consumption only after duty is paid. Definitions in section 2 show that once goods are cleared for home consumption they cease to be imported goods and the owner thereafter is not an importer for purposes of charging customs duty. The concept of beneficial owner was introduced only by amendment effective from 31.3.2017 (section 2(3A) and amended section 2(26)); the SCN in this case was issued prior to that amendment. Each Bill of Entry constitutes a separate unit of assessment; there is no provision in the Act for aggregating goods imported under different Bills of Entry for joint assessment or re-assessment against a non-importer. Differential or retrospective aggregation of separate Bills of Entry to re-classify and re-assess duty against a buyer who acquired goods after customs clearance is unsupported by the statutory scheme.Conclusion: The demand of duty, interest and penalties against the appellant cannot be sustained; the appellant is not liable as importer for goods already cleared for home consumption and separate Bills of Entry cannot be combined to re-assess duty against him. In favour of Assessee.