2026 (3) TMI 1650 - AT - Customs

Customs duty cannot be fastened on a subsequent purchaser of an imported vehicle absent importer status or ownership in law.

A subsequent purchaser of an imported motor vehicle cannot be saddled with differential customs duty or allied penalties merely because the vehicle later ... Liability of subsequent purchaser for customs duty - Joint and several demand of differential duty - Penalty consequential to unsustainable duty demandLiability of subsequent purchaser for customs duty - Joint and several demand of differential duty - Definition of importer - Differential duty arising from alleged misdeclaration of year of manufacture in imported vehicles could not be fastened on subsequent purchasers, nor could such demand be sustained when confirmed jointly and severally on importers and purchasers. - HELD THAT: - The Tribunal held that the controversy stood covered by Nalin Choksey Vs. CC, Kochi, wherein the Supreme Court, after examining the definition of importer, held that a subsequent purchaser who was not involved in the importation cannot be treated as importer for recovery of duty under Section 28. In the present matters, the purchasers had acquired the vehicles in the ordinary course after import, and the show-cause notices sought to recover differential duty from importers and purchasers jointly and severally. Following the Supreme Court decision, such proceedings against the purchasers were held to be unsustainable. The Tribunal further held that, since the differential duty had been confirmed jointly and severally against importers and purchasers, the demand itself could not be sustained in view of Rimjhim Ispat Lt. Vs. CCE, Kanpur . [Paras 10, 11, 12]The differential duty demands against the purchaser-appellants were set aside, and the jointly and severally confirmed demands were held unsustainable.Penalty consequential to unsustainable duty demand - Penalties imposed on the appellants could not survive once the differential duty demands were found unsustainable. - HELD THAT: - The Tribunal treated the penalties as consequential to the duty demands and held that, once the demands themselves failed, the penalties imposed on the appellants could not be maintained. [Paras 12]The penalties imposed on the appellants were set aside.Final Conclusion: The Tribunal set aside the impugned orders and allowed all the appeals with consequential relief. It held that subsequent purchasers of the imported vehicles were not liable for the differential duty, and the penalties also could not survive. Issues: Whether differential customs duty and allied penalties in respect of imported motor vehicles could be fastened on subsequent purchasers, and whether the demands confirmed jointly and severally against importers and purchasers were sustainable.Analysis: The liability for customs duty under Section 28 of the Customs Act, 1962 can be fastened on an importer within the statutory meaning of that term, which includes an owner, beneficial owner, or person holding out as importer only during the period between importation and clearance for home consumption. A subsequent purchaser who was neither involved in importation nor covered by that inclusive definition cannot be treated as the importer. The scope of Section 125 of the Customs Act, 1962 also does not extend to fastening duty liability on such a purchaser where the owner in law is known. The registered owner concept under the Motor Vehicles Act, 1988 reinforces that a person whose name is not entered in the registration certificate cannot be treated as the owner in law for this purpose. As the impugned demands were confirmed jointly and severally against importers and purchasers, the confirmation against the purchasers was unsustainable, and the consequential penalties also could not survive.Conclusion: The demands and penalties against the purchaser-appellants were not sustainable.Final Conclusion: The impugned orders were set aside and the appeals were allowed with consequential relief.Ratio Decidendi: A subsequent purchaser of an imported motor vehicle, who is not the importer and is not the owner within the statutory meaning applicable to customs liability, cannot be saddled with differential customs duty under Section 28 or duty consequences under Section 125 of the Customs Act, 1962 merely because the vehicle was later in his possession or transferred in his favour.