Nalin Choksey vs Commissioner Of Custioms

2024 INSC 933 NON-REPORTABLE IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. OF 2024 (Arising out of SLP (C) No.16123 OF 2018)

NALIN CHOKSEY APPELLANT

VERSUS

THE COMMISSIONER OF CUSTOMS, KOCHI RESPONDENT

ORDER

Leave granted.

2. Being aggrieved by the judgment dated 03.04.2018 passed

by the High Court of Kerala at Ernakulam in Customs Appeal

No.18/2009, the appellant is before this Court. By the said

judgment, the High Court allowed the Customs Appeal filed by

the respondent-Department answering the questions in favour

of the Revenue and against the appellant herein.

3. Briefly stated, the facts are that one Sri Jalaludheen

Kunhi Thayil had imported the vehicle in question being a

Porsche Carrera Car on 28.06.2002. The said car was later sold Signature Not Verified Digitally signed by RADHA SHARMA Date: 2024.12.05 11:39:47 IST Reason: Page 1 of 13 to one Sri Shailesh Kumar in the year 2003. Subsequently, the

appellant herein is stated to have purchased the said car in the

month of October, 2004. It is stated that in the year 2006, the

appellant, along with the importer Sri Jalaludheen Kunhi

Thayil, the first possessor Sri Shailesh Kumar and a broker

named Sri Haren Choksey who was the brother of the

appellant, was served with the Show-Cause Notice dated

27.06.2007 demanding short-levied customs duty to the tune of

Rs.17,92,847/-. The said Show-Cause Notice was issued under

Section 28(1) read with Section 124 of the Customs Act, 1962

[“Customs Act”] and stated that it was a case of deliberate

misdeclaration of model and the year of manufacture, along

with tampering with the chassis number of the imported car for

the purpose of under invoicing and under valuation of the

vehicle and evading the payment of the differential duty of

customs amounting to Rs.17,92,847/-. The appellant replied to

the same by letter dated 24.07.2007. This was followed by an

order-in-original dated 29.01.2008 passed by the Commissioner

of Customs, Cochin. The Commissioner of Customs confirmed

the demand of duty of Rs.17,92,847/- being the duty short-

Page 2 of 13 levied and short-paid on the imported vehicle and ordered the

confiscation of the car with an option of redemption of the

confiscated car on payment of fine and the differential duty.

The demand was raised jointly and severely against the

importer and the appellant.

4. Being aggrieved by the said order, the appellant herein

preferred Appeal No. C/311/2008 before the Customs, Excise

and Service Tax Appellate Tribunal, South Zonal Bench at

Bangalore (“Appellate Tribunal”), which was allowed in favour of

the appellant herein vide Final Order No.1235/2008 dated

23.09.2008. 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. Consequently, the appeal preferred

by the appellant was allowed.

5. Being aggrieved by the said order of the Appellate

Tribunal, the Department filed the Customs Appeal No.18/2009

before the High Court of Kerala. As already noted, by the

impugned order dated 03.04.2018, the High Court set aside the

Page 3 of 13 order passed by the Appellate Tribunal by allowing the said

appeal. The High Court, while answering the questions of law in

favor of the respondent herein, observed that 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. Hence, this appeal before this Court.

6. We have heard learned counsel for the appellant and

learned senior counsel for the respondent-Department and

perused the material on record.

7. During the course of submissions, learned counsel for the

appellant Sri Shashibhushan P. Adgaonkar drew our attention

to Section 28 as well as Section 124 of the Customs Act and

submitted that what is in issue herein is with regard to the

non-payment of the import duty in respect of the Porsche

Carrera car. The appellant 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. Further,

the said car is a motor vehicle within the meaning of the Motor

Page 4 of 13 Vehicles Act, 1988. The appellant herein is in fact not the

owner of the car (goods) within the meaning of Sections 124

and 125 of the Customs Act, 1962 inasmuch as the appellant

herein does not fall within the scope and ambit of the

expression ‘owner’ as defined under Section 2(30) of the Motor

Vehicles Act, 1988. This is because the appellant is not the

registered owner in terms of Section 39 and other relevant

provisions which are under Chapter IV of the Motor Vehicles

Act, 1988. In the absence of there being any registration

certificate issued in the name of the appellant herein

incorporating his name as owner of the vehicle, the appellant

cannot be construed to be the owner of the motor vehicle in

question. Therefore, according to learned counsel for the

appellant, the very initiation of the proceeding by the issuance

of the summons and Show-Cause Notice to the appellant is

vitiated. In the circumstances, the impugned order may be set

aside and the Show Cause Notice impugned as well as the

proceedings against the appellant herein may be dropped was

the submission on behalf of the appellant.

Page 5 of 13

8. Per contra, learned senior counsel Sri Rupesh Kumar

appearing for the respondent-Department drew our attention to

Section 28 as well as Section 124 of the Customs Act and

contended that the vehicle in question was seized when it was

in the possession of the appellant herein, and while it may be

that the vehicle has not been registered in the name of the

appellant as per the provisions of the Motor Vehicles Act, 1988

but the fact remains that the appellant is the owner of the

vehicle, that is the good, having regard to the fact that he had

admittedly purchased the same.

9. Therefore, the vehicle in question was rightly confiscated

from the appellant’s possession as insufficient customs duty

was paid by the importer and the other subsequent purchaser,

under Section 125 of the Customs Act. Thus, the appellant was

liable to pay the differential customs duty and all other

payments to the Department herein. Supporting the impugned

judgment, learned senior counsel submitted that there is no

merit in this appeal.

10. We have examined the arguments advanced at the bar in

light of the facts of the present case. It is noted that the Show-

Page 6 of 13 Cause Notice was issued, inter alia, to the appellant herein

under Section 28(1) read with Section 124 of the Customs Act,

1962 on the premise that there had been a confiscation of the

goods, i.e., the car in question and if the appellant was

interested in redeeming it, an option was available under

Section 125 to pay the redemption fine and seek release of the

car. That according to the respondent Department, 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.

11. We have considered Section 28(1) of the Customs Act in

order to ascertain whether the appellant herein is the importer

of the car in question. On a reading of the definition of the

expression ‘importer’ under clause (26) of Section 2 of the

Customs Act. The definition reads as under:

“Section 2 – Definitions. - In this Act, unless the context otherwise requires, -

x x x x

Page 7 of 13 (26) "importer", in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner, beneficial owner or any person holding himself out to be the importer;”

12. As per the above inclusive definition, an “importer” can

include an owner, a beneficial owner or any person holding

himself out to be the importer. But these personae would fall

under the above definition only during the time between the

importation of goods and the time when they are cleared for

home consumption. Admittedly, the appellant was not the

importer of the car in question, nor was the appellant involved

in the process of importation of the car. The car was neither

imported for his benefit nor on his behalf. It was Sri

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.

Page 8 of 13

13. We have also considered the reliance of the learned senior

counsel for the respondent on Section 125 of the Customs Act.

The relevant portion is as follows:

“125. Option to pay fine in lieu of confiscation.—(1) Whenever confiscation of any goods is authorised by this Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods or, where such owner is not known, the person from whose possession or custody such goods have been seized, an option to pay in lieu of confiscation such fine as the said officer thinks fit:

Provided that where the proceedings are deemed to be concluded under the proviso to sub-section (2) of section 28 or under clause (i) of sub-section (6) of that section in respect of the goods which are not prohibited or restricted, no such fine shall be imposed: Provided further that, without prejudice to the provisions of the proviso to sub-section (2) of section 115, such fine shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon.

(2) Where any fine in lieu of confiscation of goods is imposed under sub-section (1), the owner of such goods or the person referred to in sub-section (1), shall, in addition, be liable to any duty and charges payable in respect of such goods.”

14. 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

Page 9 of 13 prohibited. Also, as per the aforesaid 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,

shall 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 shall 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 as discussed above. 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 said section reads as under:

“2. Definitions. - In this Act, unless the context otherwise requires, x x x (30) “owner” means a person in whose name a motor vehicle stands registered and where such person is a minor, the guardian of such minor, and in relation to a motor vehicle which is the subject of a hire-purchase, agreement, or an agreement of lease or an agreement of hypothecation, the person in possession of the vehicle under that agreement;”

Page 10 of 13

15. A reading of the above would indicate that when a motor

vehicle stands registered in the name of a person, he would be

the owner of the said motor vehicle. Section 49 of the Motor

Vehicles Act, 1988 deals with the necessity for registration.

Admittedly, 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 Sri 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 Sri Jalaludheen Kunhi

Thayil to Sri Shailesh Kumar from whom the appellant has

purchased the vehicle. However, there is no ownership in law

which can be recognized 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 of the vehicle and

hence, he does not fall within the scope and ambit of Section

125 of the Customs Act, 1962. Further, the argument that the

Page 11 of 13 appellant can be made liable to pay the duty because the seized

car was in the possession of the appellant cannot also be

accepted, 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. However, in the instant case, it is an

admitted position that the ownership of the vehicle in law is

still with the importer Sri Jalaludheen Kunhi Thayil and thus,

the owner of the vehicle is known.

16. Consequently, 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

are not in accordance with law and are unlawful.

17. Hence, the impugned judgment of the High Court, Show-

Cause Notices and other proceedings initiated against the

appellant herein being not in accordance with law stand

quashed. The order of the Appellate Tribunal dated 23.09.2008

stands restored.

18. It is however clarified that the quashing of the proceedings

as against the appellant herein would not come in the way of

Page 12 of 13 respondent-Department proceeding against the proper person,

namely, the importer and owner of the car in question.

19. The appeal is allowed and disposed of in the aforesaid

terms.

20. No costs.

. . . . . . . . . . . . . . . . . . . . . . . . . . J.

[B.V. NAGARATHNA]

. . . . . . . . . . . . . . . . . . . . . . . . . . . J.

[NONGMEIKAPAM KOTISWAR SINGH]

NEW DELHI;

NOVEMBER 27, 2024.

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