Luxury Vehicle Smuggling from Bhutan has triggered high-profile customs raids on Malayalam actors Prithviraj Sukumaran and Dulquer Salmaan, spotlighting the severe legal consequences under India’s Customs Act, 1962.
Customs officials in Kerala executed coordinated raids on the residences of prominent Malayalam film actors Prithviraj Sukumaran and Dulquer Salmaan as part of “Operation Numkhor,” a targeted crackdown on the illegal importation of luxury vehicles from Bhutan. The operation, which spanned approximately 30 locations across the state, stems from intelligence reports alleging a sophisticated network smuggling high-end cars—such as Mercedes-Benz and BMW models—into India without paying requisite customs duties. Officials confirmed searches at Prithviraj’s home in Thevara and Dulquer’s residence in Ilamkulam, with documents and records seized for further scrutiny.
The raids highlight a growing concern over cross-border smuggling routes exploiting India’s open border with Bhutan, where vehicles are allegedly registered under false pretenses and brought into India via northeastern states or air cargo, bypassing formal import channels. Authorities suspect the involvement of intermediaries, including local businessmen and agents in Himachal Pradesh, who facilitate the transfer of these vehicles to buyers in Kerala at significantly reduced prices by evading duties that can exceed 100% of the vehicle’s value.
The Modus Operandi: Exploiting Border Loopholes
According to customs sources, the smuggling racket involves purchasing second-hand luxury vehicles in Bhutan, where they are available at lower costs due to the country’s tax structure, and then illegally transporting them to India. These cars are often driven across the Indo-Bhutan border or shipped via specified ports, but misrepresented with forged documents on platforms like the Parivahan website of the Motor Vehicles Department. Violations identified include up to 10-15 infractions, such as under-invoicing, fake registrations, and altering vehicle appearances to avoid detection. For instance, vehicles bought for as low as Rs 3 lakh in Bhutan are resold in India for Rs 30 lakh or more, profiting from the duty evasion.
Indian law strictly prohibits the import of second-hand vehicles except under limited circumstances, such as for non-resident Indians returning after a prolonged stay abroad or for diplomatic purposes. Bhutan-registered vehicles are barred from operating in India without paying import duties, and any such use constitutes smuggling. The Directorate of Revenue Intelligence (DRI) has been leading the probe, utilizing advanced intelligence to map the network.
Provisions Under the Customs Act, 1962
The core legislation governing these imports is the Customs Act, 1962, which empowers the Central Board of Indirect Taxes and Customs (CBIC) to regulate and penalize improper importations. Section 11 of the Act allows the government to prohibit or restrict the import of certain goods, including used vehicles, to protect domestic industries and fiscal revenues. Fully built-up (CBU) vehicles attract a basic customs duty (BCD) of up to 100% for engines exceeding specified capacities (e.g., 3,000cc for petrol or 1,500cc for diesel), plus integrated goods and services tax (IGST) at 28%, compensation cess, and other surcharges, resulting in an effective duty rate of 150-200% or higher.
Evasion of these duties triggers multiple penal provisions:
- Section 112: Penalty for Improper Importation – This section imposes penalties for goods improperly imported or exported. For dutiable but non-prohibited goods, the penalty can reach the duty evaded or Rs 5,000, whichever is higher. In cases involving prohibited goods, it escalates to the value of the goods or Rs 5,000. If intent to evade is proven, the penalty can be up to five times the evaded duty.
- Section 114: Penalty for Attempt to Export/Import Improperly – Similar to Section 112, this targets attempts at improper handling. For dutiable goods, the penalty is the duty sought to be evaded; for prohibited goods, it equals the value of the goods. Recent amendments have increased scrutiny on commercial frauds, where misdeclaration of value, quantity, or description leads to enhanced penalties.
- Section 114A: Penalty for Fraudulent Evasion – Introduced to deter deliberate fraud, this mandates a penalty equal to the duty evaded in cases of willful misstatement or suppression of facts. It’s non-compoundable and can lead to mandatory penalties without discretion. In high-value evasions exceeding Rs 50 lakh, it becomes a non-bailable offense, potentially involving imprisonment.
- Section 111: Confiscation of Goods – Improperly imported vehicles are liable to confiscation if they violate prohibitions, are undervalued, or involve fraudulent documentation. This includes any conveyance used in smuggling, such as transport vehicles. Courts have upheld confiscations in similar cases, emphasizing that even unintentional lapses can infer intent if benefits are availed fraudulently.
- Section 135: Criminal Prosecution – For serious offenses like smuggling or duty evasion over Rs 50 lakh, this section allows for imprisonment up to seven years and unlimited fines. It’s a cognizable offense, enabling arrests without warrants. The Finance Act amendments have integrated AI and data analytics to detect such evasions, making prosecutions more evidence-based.
- Sections 100-110: Enforcement Powers – Customs officers have broad authority for searches, seizures, and inquiries without prior judicial approval if there’s “reason to believe” an offense has occurred. This was evident in the warrantless raids conducted under Operation Numkhor.
Additionally, the Bhutan Customs Rules and Regulations (revised 2023) complement Indian laws by imposing fines for failing to renew security deposits or violating export norms, but primary liability falls under Indian jurisdiction for imports. Owners of smuggled vehicles face separate fines for alterations and must pay retrospective duties.
Judicial Precedents and Broader Implications
Indian courts have consistently ruled against duty evasion in vehicle imports. For example, in cases involving under-invoicing, the Supreme Court has affirmed penalties under Section 114A, stressing that commercial intent aggravates the offense. The government has reduced certain penalties by 10% in non-fraud cases to encourage compliance, but fraud remains heavily penalized.
This probe could expose a larger syndicate, impacting celebrities and businessmen alike. For the Malayalam film industry, it raises questions about asset transparency and could lead to reputational damage. Economically, such evasions deprive the exchequer of billions in revenue, prompting calls for tighter border controls and digital tracking of imports.
As the investigation progresses, experts anticipate adjudication proceedings where penalties could run into crores, depending on the evasion quantum. The Customs Department has urged public vigilance, signaling a zero-tolerance stance on smuggling.
FAQs on Importing a Luxury Car in India
1. What are the legal requirements for importing a luxury car into India?
To legally import a luxury car into India, the importer must comply with the Customs Act, 1962, and the Foreign Trade Policy (FTP). Only new vehicles or specific used vehicles (e.g., by returning non-resident Indians after a minimum stay abroad) are permitted, subject to approval from the Directorate General of Foreign Trade (DGFT). The car must meet India’s Central Motor Vehicles Rules (CMVR), 1989, requiring type approval for safety and emissions. Importers must obtain an Import Export Code (IEC) and submit documents like the bill of lading, invoice, and registration certificate at the port of entry. Customs duties, including a basic customs duty (BCD) of up to 100%, 28% IGST, compensation cess, and surcharges, must be paid, often exceeding 150-200% of the car’s value. Non-compliance risks confiscation under Section 111 and penalties under Sections 112 and 114 of the Customs Act.
2. How can I avoid penalties when importing a luxury car?
To avoid penalties, ensure full compliance with customs regulations by accurately declaring the car’s value, origin, and specifications on import documents to prevent under-invoicing or misdeclaration, which attract penalties under Section 114A (up to 100% of evaded duty) or prosecution under Section 135 for evasion exceeding Rs 50 lakh. Pay all applicable duties and taxes upfront, and verify the vehicle’s eligibility under the FTP, as second-hand cars are generally prohibited except for specific exemptions. Engage a licensed customs broker to navigate documentation and ensure CMVR compliance through homologation. Retain records of payments and approvals, as customs authorities may conduct post-clearance audits under Section 17(3). Failure to comply can lead to fines, vehicle seizure, or imprisonment for deliberate fraud.
3. What steps should I take to clear a luxury car through Indian customs?
First, secure an IEC from the DGFT and confirm the car’s eligibility for import (new or approved used vehicle). Obtain CMVR type approval from an authorized agency like the Automotive Research Association of India (ARAI). At the port of entry, submit required documents, including the invoice, packing list, bill of lading, insurance certificate, and proof of compliance with emission and safety standards. Pay the applicable customs duties and taxes, which can be calculated using the car’s CIF (Cost, Insurance, Freight) value plus additional levies. Use a customs house agent to facilitate clearance and ensure proper filing on the Indian Customs EDI System (ICES). After clearance, register the vehicle with the Regional Transport Office (RTO) within the stipulated time. Non-compliance may result in delays, penalties under Section 112, or confiscation under Section 111 of the Customs Act.