In a landmark judgment, the Supreme Court of India ruled that a subsequent purchaser of a vehicle cannot be held liable for customs duty shortfalls solely based on possession. The decision, delivered by a bench comprising Justice B.V. Nagarathna and Justice Nongmeikapam Kotiswar Singh, quashed proceedings against Nalin Choksey in a long-standing customs duty dispute involving a Porsche Carrera car.
Case Background
The case originated in 2002 when Jalaludheen Kunhi Thayil imported a Porsche Carrera car. The vehicle was later sold to Shailesh Kumar in 2003 and subsequently purchased by Nalin Choksey in 2004. Allegations of customs duty evasion, including misdeclaration and undervaluation of the car, led to a demand for unpaid duty of ?2.17 crore by the Customs Department in 2007. While the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled in favor of Choksey in 2008, the Kerala High Court reversed this decision in 2018, holding him liable under Section 125 of the Customs Act. This prompted Choksey to approach the Supreme Court.
Key Legal Questions
1. Can a subsequent purchaser be held liable for customs duty?
The Court ruled that liability for customs duty rests with the importer or registered owner, not a bona fide purchaser uninvolved in the import process.
2. What defines ownership under Customs and Motor Vehicles Law?
The Court emphasized that "ownership" under the Customs Act is tied to registration under the Motor Vehicles Act, which remained with the original importer, Jalaludheen Kunhi Thayil.
3. Does possession imply liability?
It was clarified that possession alone does not establish liability, particularly when the actual owner is identifiable.
Supreme Court’s Observations
No Liability for Subsequent Purchasers: The Court stated that Choksey, a bona fide purchaser, was neither the importer nor benefited from the import process.
Ownership Linked to Registration: Referencing the Motor Vehicles Act, the Court noted that the car’s legal ownership rested with the original importer.
Invalid Proceedings: The proceedings against Choksey were deemed unlawful as they targeted an individual with no legal obligation under customs laws.
Verdict
The Supreme Court restored the 2008 decision of the CESTAT and quashed the Kerala High Court’s 2018 judgment. The Customs Department may now pursue action only against the original importer, Jalaludheen Kunhi Thayil.
Significance
This ruling reinforces the principle that liability for customs duty must align with legal ownership and import responsibility, protecting subsequent purchasers from undue burden. It also clarifies the scope of the Customs Act in such disputes, ensuring fairness in its application.
