The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) ruled that an owner must pay customs duty on redeemed confiscated goods under Section 125(2) of the Customs Act, regardless of who originally imported them.
Shri Dipesh Shah, the appellant, purchased an Audi Q7 from a Mumbai-based dealer, Shri Haren Choksey, for Rs. 55,00,000. The car was initially imported by Shri Basab Paul, and the appellant took delivery in October 2007.
Investigations by the Directorate of Revenue Intelligence (DRI) in 2009 revealed that the vehicle had been falsely declared as “new” to evade higher customs duty applicable to second-hand imports. The car was seized in 2010, and the appellant sought its provisional release by making partial duty payments.
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The customs authorities determined that the vehicle had been previously registered in the UK, proving it was not new. The duty rate was revised from 113% (for new cars) to 165% (for second-hand cars). The adjudicating authority confiscated the vehicle, allowing its redemption upon payment of a Rs. 2,00,000 fine and imposing a Rs. 1,00,000 penalty on the appellant. The Commissioner (Appeals) upheld the ruling but remanded the case for fresh adjudication.
On appeal before the CESTAT, the appellant’s counsel argued that the appellant was a bona fide purchaser and not the importer, asserting that duty liability should rest solely with the original importer, Basab Paul, under Section 28 of the Customs Act. The counsel argued that as a post-import buyer, he should not be held responsible for misdeclarations made at the time of import.
The revenue countered that the appellant, as the registered owner and possessor of the confiscated vehicle, was liable to pay the differential duty under Section 125(2). The department argued that redemption under this provision automatically triggers a duty liability, independent of Section 28, which applies only to importers.
The two-member bench comprising R. Muralidhar (Judicial Member) and Rajeev Tandon (Technical Member) observed that ownership of confiscated goods carries an inherent duty liability upon redemption. The tribunal observed that Section 125(2) mandates duty payment by the owner of the goods, separate from any obligations imposed on the importer under Section 28.
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The tribunal explained that the appellant could not selectively claim ownership for redemption while disclaiming liability for duty. The tribunal ruled that duty is an unavoidable consequence of exercising the redemption option under Section 125(2). The tribunal upheld the Commissioner (Appeals)’s decision and dismissed the appeal.
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