Customs Duty Can’t Be Recovered from Subsequent Buyer Who Did Not Import Goods: CESTAT

The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside a customs duty demand of ₹9.76 lakh against Delhi-based trader holding that duty under the Customs Act can only be recovered from the importer or the person chargeable with duty, and not from a subsequent buyer of imported goods. The Bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has explained that imported goods can change hands multiple times before clearance for home consumption, such as through high-sea sales transactions. However, these subsequent transactions do not transfer the liability for customs duty to later buyers who did not undertake the import. The case arose from an investigation initiated by the Directorate of Revenue Intelligence (DRI) based on intelligence that certain importers were allegedly importing LED televisions in parts to evade customs duty. According to the investigation, some traders were purchasing complete LED televisions abroad but removing certain components such as master cards, power supply units and RF cards. The remaining LED panels were then imported at lower declared values, while the removed components and accessories were imported separately under different names. These parts were later assembled in India to produce complete LED televisions for sale in the domestic market. During the investigation, DRI officers searched the premises of Rajesh Trehan and found that he had purchased LED panels from suppliers such as Siya Ram Sales Corporation and ABC International, and other components from Mahalaxmi Enterprises. These parts were allegedly assembled by him to manufacture complete LED TVs. Based on the investigation, a show cause notice dated September 26, 2015 was issued proposing recovery of customs duty along with interest and penalties. The adjudicating authority subsequently confirmed a duty demand of ₹9,76,424 along with interest against Trehan and another individual, Harish Mohindru. In the first round of litigation, the Tribunal had set aside the original order and remanded the matter to the adjudicating authority. The Tribunal had noted that duty had been demanded from two persons without clearly identifying the actual importer. It had directed the Commissioner to determine who the importer was and to re-adjudicate the case after providing the noticees a proper opportunity to present their defence. Following the remand, the Commissioner again confirmed the duty demand against Trehan alone, prompting him to file the present appeal before the Tribunal. The appellant argued that he had not imported the LED panels or other components. Instead, he had merely purchased the goods from other suppliers in India and assembled them. The customs duty cannot be demanded from a person who merely buys goods after import. The counsel further argued that the show cause notice itself was defective because it sought to recover duty from multiple persons without identifying the actual importer. The appellant also submitted that the allegations of conspiracy were largely based on statements recorded during investigation, and that such allegations cannot justify recovery of customs duty from a person who was not the importer of the goods. The Department defended the adjudication order and argued that Trehan was involved in the scheme to evade customs duty by importing television components separately and assembling them domestically. It maintained that the demand confirmed by the Commissioner was legally valid. The Tribunal examined the provisions of Section 28 of the Customs Act, which governs recovery of duties not levied or short-levied. The Bench observed that the law clearly requires issuance of notice to the “person chargeable with duty.” The Tribunal further noted that under Section 12 of the Customs Act, customs duty is levied on goods imported into India, and the liability to pay such duty normally rests with the importer or the person who owns and clears the goods through customs. The Bench found that Trehan had purchased the goods from other parties after import and had not imported the goods himself. Holding that customs duty cannot be demanded from a subsequent purchaser who did not import the goods, the Tribunal concluded that the demand confirmed against Trehan was unsustainable in law. The Tribunal set aside the duty demand, interest and associated liabilities imposed on the appellant and allowed the appeal. Case Details Case Title: Rajesh Trehan Versus Customs Commissioner Citation: JURISHOUR-291-CES-2026(DEL) Case No.: CUSTOMS APPEAL NO. 50422 OF 2019 Date: 09/03/2026 Counsel For Appellant: Devesh Tripathi, Advocate Counsel For Respondent: Shiv Shankar, Authorised Representative Click Here To Read Order Read More: Extended Limitation Can’t Be Invoked in Classification Dispute: CESTAT

Customs Duty Can’t Be Recovered from Subsequent Buyer Who Did Not Import Goods: CESTAT

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