KUBER ENTERPRISES vs Mundra Customs

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST ZONAL BENCH : AHMEDABAD

REGIONAL BENCH - COURT NO. 2
CUSTOMS Appeal No. 10289 of 2025-DB
[Arising out of Order in Appeal MUN-CUSTM-000-APP-163-164-24-25 dated 30.10.2024
passed by the Commissioner (Appeals), Customs, Ahmedabad]

Kuber Enterprises …. Appellant
Office No. 811, A Wing, Floor 08, Plot No. 18/19,
Sector-15, CBD Belapur, Navi Mumbai, Thane,
Maharashtra- 400604
VERSUS

Commissioner of Customs – Mundra .... Respondent
Office of the Pr. Commissioner of Customs,
Custom House Mundra, Mundra Port and Special
Economic Zone, Mundra, Kachchh-370421, GUJARAT
A PPEARANCE :


Ms. Tithi Upadhyay, Advocate for the Appellant
Shri Aakash Singh, Superintendent (AR) for the Respondent

CORAM:

HON’BLE DR. AJAYA KRISHNA VISHVESHA, MEMBER (JUDICIAL)

HON’BLE MR. SATENDRA VIKRAM SINGH, MEMBER (TECHNICAL)



DATE OF HEARING : 14.10.2026
DATE OF DECISION: 28.10.2026



FINAL ORDER NO. 10793/2026


DR. AJAYA KRISHNA VISHVESHA :

This appeal is directed against the impugned Order-in-Appeal No.
MUN-CUSTM-000-APP-163-164-24-25 dated 30.10.2024 through which
learned Commissioner (Appeals) has upheld the Order-in-Original No.
MCH/ADC/MK/275/2023-24 dated 07.03.2024 passed by the Additional
Commissioner (Export), Customs House, Mundra.

2. The facts of the case, in brief, are that the Appellant filed five shipping
bills all dated 22.04.2023 at Mundra for export of 1,372 MT of goods
declared as "Refractory Bed Material" under CTH 69021090, with a declared
FOB value of Rs. 2,52,47,838/-. The goods were examined under
Panchnama dated 09.05.2023 and samples were taken which on testing by
IREL, Kollam, were found to be Natural Garnet, classifiable under CTH
25132030, export of which is canalized through IREL under DGFT

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Notification No. 26/2015-20 dated 21.08.2018. The goods were seized on
13.10.2023 and provisional release was granted on 27.10.2023 subject to
furnishing a bond of Rs. 2,52,47,838/- and a bank guarantee of Rs.
65,00,000/-. The Appellant did not comply with the conditions of provisional
release and therefore, goods continued to remain in Customs custody at the
CFS since April 2023.

2.1 A Show Cause Notice was issued to the appellant on 15.02.2024 which
was adjudicated vide Order-in-Original dated 07.03.2024 wherein learned
Adjudicating Authority rejected the description of goods and classification
declared by the exporter as "Refractory Bed Material" under Customs Tariff
Item HS Code 69021090. He held the goods as ‘Natural Garnet’ classifiable
under Customs Tariff Item 25132030. The learned Adjudicating Authority
also rejected the declared FOB value of the goods and redetermined the
value at Rs. 2,57,94,972/-, rejected the claim of drawback of Rs. 4,54,461/-
claimed by the exporter and RoDTEP of Rs. 2,52,478/- claimed by the
exporter in the shipping bills. He ordered confiscation of seized goods
attempted to be exported vide 5 shipping bills by mis-declaring them as
‘Refractory Bed Material’. However, he allowed the appellant to redeem the
goods and take the goods back to town upon payment of redemption fine of
Rs. 35,00,000/-. He imposed penalties of Rs. 15,00,000/- under Section
114(i) and Rs. 15,00,000/- under Section 114AA of the Customs Act, 1962
upon the appellant. He also imposed penalty of Rs. 3,00,000/- under
Section 114(i) and penalty of Rs. 2,00,000/- under Section 114AA of the
Customs Act, 1962 on Shri Hardik Bhanushali Proprietor of M/s. Shipjet
Shipping and Services, Mundra. The appeal filed against this order was
rejected by the learned Commissioner (Appeals) who upheld the order of the
Adjudicating Authority. Hence, the present appeal before this Tribunal.

3. Learned Counsel for the appellant submitted that the amount of
redemption fine and penalty is excessive and too much. Her submission is
that they relied upon technical material concerning the chemical composition
of the goods, including the Test Report Ref. No. 10818/22/0 dated
15.02.2023 of Gujarat Minerals Laboratory, Beawar, Rajasthan which
predates the shipping bills. The subsequent IREL reports identified the
goods as ‘Garnet’. The technical material relied upon by the appellant, the

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chronology of testing and the explanation furnished during adjudication were
not taken into consideration by the lower Authorities while.

3.1 Learned Counsel for the appellant relied upon the law laid down by
Hon'ble Supreme Court in Hindustan Steel Limited vs. State of Orissa –
reported in AIR 1970 SC 253 : (1969) 2 SCC 627, in which it is held that an
order imposing penalty for failure to carry out a statutory obligation is the
result of a quasi-criminal proceeding, and penalty will not ordinarily be
imposed unless the party obliged either acted deliberately in defiance of law
or was guilty of conduct contumacious or dishonest, or acted in conscious
disregard of its obligation. Penalty will not be imposed merely because it is
lawful to do so. Whether penalty should be imposed for failure to perform a
statutory obligation is a matter of discretion of the authority to be exercised
judicially and on consideration of all the relevant circumstances. Learned
Counsel for the appellant submits that this principle has been followed in
Cement Marketing Co. of India Limited vs. Assistant Commissioner of
Sales Tax - 1980 (6) E.L.T. 295 (S.C.), and in JSW Steels Limited vs.
Commissioner of Central Excise, Belgaum , 2010 (254) E.L.T. 318 (Tri.
Bang.). In these cases, it was held that where the default arose from a
bona fide belief and there was no dishonest or contumacious conduct,
penalty should not be imposed.

3.2 Learned Counsel for the appellant also submitted that Section 114AA
stands on its own statutory footing. It applies where a person knowingly or
intentionally makes, signs or uses, or causes to be made, signed or used,
any declaration, statement or document which is false or incorrect in any
material particular. She submits that unless the statutory ingredients are
established by the evidence, penalty is not sustainable. It is her submission
that Revenue has failed to establish the ingredients which are essential for
imposing penalty under Section 114AA of the Customs Act, 1962. She
further submits that the provision of Section 114(i) is not attracted in this
case, therefore, penalty imposed under Section 114(i) is also not
sustainable. She also submits that excessive redemption fine has been
imposed without considering the market price of the goods, margin of profit.
In Commissioner of Customs, Mumbai vs. Mansi Impex reported at
2011 (270) ELT 631 (SC), the Hon'ble Apex Court held that quantum of

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redemption fine depends on the market price of the goods, which is ceiling
prescribed by Section 125 itself.

3.3 The learned Counsel for the appellant relied upon the orders passed in
following cases where it has been held that redemption fine and penalty in
cases of policy violation may appropriately be fixed at about 10% and 5% of
the value of goods respectively.

(a) Marque Enterprises vs. Commissioner of Customs (Preventive),
Amritsar - 2015 (329) ELT 307 (Tri. Del.)

(b) Bedy Associates vs. Commissioner of Customs, New Delhi - 2017
(349) ELT 289 (Tri. Del.)

(c) H.T. Company vs. Commissioner of Customs, Hyderabad - 2007
(208) E.L.T. 507 (Tri. Bang.)

She prays that redemption fine imposed under Section 125 of the Customs
Act may be substantially reduced keeping above decisions in mind. Penalty
of Rs. 15,00,000/- under Section 114AA and penalty of Rs. 15,00,000/-
under Section 114(i) of Customs Act, 1962 may also be substantially
reduced and penalty within a reasonable time.

3.4 During arguments, learned Counsel Ms. Tithi Upadhyay, also attracted
our attention towards order dated 16.07.2026 passed by Hon'ble Gujarat
High Court in R/SCA No. 9144 of 2026 with Civil Application (for
amendment) No.1 of 2026 in R/SCA No. 9144 of 2026 and requested that
the directions given by the Hon'ble High Court may be taken into
consideration and complied with while deciding this appeal. The order of
Hon'ble High Court is as follows:-

“1. Learned Senior Standing Counsel Mr. Maunil G. Yajnik has tendered the
photocopy of the e-mail dated 14.07.2026 addressed by the respondent customs
authority to him, pointing out that the e-auction of the confiscated goods of the
petitioner scheduled to be on 15.07.2026, is not taking place. The same is taken on
record.

2. We have noticed that the petitioner has challenged the action of confiscation of
the goods vide original order dated 07.03.2024 confirmed by the Commissioner (Appeal)
vide order dated 30.10.2024, before the CESTAT by filing an Appeal. The Appeal is still
pending before the CESTAT.

3. Under the circumstances, in the interest of justice, we direct that the issue with
regard to the auction of the confiscated goods can be pointed out by the petitioner

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before the CESTAT. The CESTAT is authorized to consider all the facets of the matter
including the auction of the confiscated goods. Necessary Application shall be filed by
the petitioner before the CESTAT within a period of three weeks from the date of
receipt of the order. We further direct that the CESTAT shall examine the issue of e-
auction of confiscated goods preferably within a period of four weeks thereafter. Till
then, we direct that the respondent shall not conduct e-auction of the confiscated
goods.

With these observations, the present writ petition is disposed of alongwith the Civil
Application .”


4. Learned AR for the department submitted that in the present case, as
per test report dated 27/28.10.2023, goods meant for export by M/s Kuber
Enterprises were found to be “Natural Garnet” against the description
"Refractory Bed Material". The subject goods being "Natural Garnet" i.e.
Beach Sand Mineral, the export thereof was brought under State Trading
Enterprise (STE) regime with effect from 21.08.2018 through the canalizing
agency M/s IREL vide DGFT, Government of India. Notification No. 26/2015-
20 dated 21.08.2018 issued under Section 3 of the Foreign Trade
(Development & Regulation) Act, 1992. He submitted that the learned
Commissioner (Appeals) has correctly imposed redemption fine and penalty
on the appellant which are very reasonable and as such, do not call for any
interference. He relied upon the order passed by CESTAT Chennai in
Customs Appeal No. 40256 of 2023 in case of Scania Commercial
Vehicles Pvt. Limited vs. Commissioner of Customs in which the
Tribunal held as follows:-

“16. Confiscated goods can be redeemed either for home consumption/warehousing or
for export only on payment of a fine. I find that the impugned order is legal and proper
and no interference in the discretion exercised by the Proper Officer is called for. The
Hon'ble Supreme Court in its judgment in Duncan Industries Limited & Anr vs. Union of
India [AIR 2006 SC 3699/2006 (3) SCC 129] held as under;

"We are broadly in concurrence with the reasoning of the High Court that in matters of
administrative discretion it is not open to the courts to interfere in minute details, except
on grounds of mala fides or extreme arbitrariness. Interference should be only within
very narrow limits, such as, where there is a clear violation of a statute or a
constitutional provision, or extreme arbitrariness in the Wednesbury sense."

18. A penalty is the result of a breach of statutory duty. The main object behind the
imposition of penalty is deterrence. Re-export of the goods does not cure the breach of
statutory duty already committed. While a fine is imposed on the redemption of
offending goods imported in breach of law, a penalty is levied on a person responsible
for the breach of statutory duty. No interfere should ordinarily be made by an appellate
body, in the discretionary order passed by a lower authority, just because another view
might be possible, except on grounds of mala fides or extreme arbitrariness. No such

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ground has been made out in this case. Hence this plea also does not have any merit
and is rejected.

20. In this regards I propose to examine the Larger Bench decision in the case of Hemant
Bhai R. Patel (supra), cited by Revenue, which is binding on a Bench of lesser strength.
The question examined was that when re-export is permitted no redemption fine can be
imposed, which is the same issue involved here.

The Larger Bench of this Tribunal answered the question as under;

"Section 112 authorizes imposition of penalty. Section 125 contains the provisions
enabling the Customs Officer to grant an option to the owner or the person from whose
possession the goods have been seized to pay a fine in lieu of confiscation. In an
adjudication proceeding as in the present case these are the provisions which would
come into play. If the owner gets the goods released after payment of redemption fine,
he may either clear it for home consumption or re-export the same subject to the
relevant rules. A permission granted for re-export on the basis of a request made by the
owner of the goods is outside the purview of the adjudication proceedings, as mentioned
above. We, therefore, answer the questions referred in the affirmative and hold that it is
open to the adjudicating authority to impose redemption fine as well as penalty even
when permission is granted for re-exporting the goods. The reference is answered as
above." Judicial discipline requires that we follow the judgment of the Larger Bench. The
appellant's plea is hence rejected .

4.1 Learned AR also relied upon the order passed by Hon'ble Delhi High
Court in Hughes Network System India Limited vs. Commissioner of
Customs (Import & General), New Delhi – 2024 (388) ELT 594 (Del.) in
which the Hon'ble High Court has held as follows:-

“40. Reliance placed by Learned Counsel for the appellants on the judgment in the
case of Akbar Badrudin Giwani (supra) is misplaced, for the reason that we have found
that the discretion in the instant case has been exercised judicially by the Commissioner
of Customs.

41. In Akbar Badrudin Giwani (supra), the Supreme Court also considered the
proportionality of conduct vis-a-vis the quantum of penalty. In the present case the
Commissioner of Customs could have imposed redemption fine and penalty each of
100% of the value of the goods but has restricted the redemption fine to 19% and
penalty to 9.5%. We find that discretion has been judicially exercised and in fact has
been exercised in favour of the appellants by not imposing a harsh or excessive penalty.

42. Similarly, the decision in the case of Jain Exports Pvt. Ltd. (supra) also does not
further the case of the appellants. In Jain Exports Pvt. Ltd. (supra), this Court has
referred to the judgment of the Supreme Court in Chairman, SEBI v. Shriram Mutual
Fund - 2006 (5) SCC 361 wherein the Supreme Court has held that once contravention is
established then the penalty has to follow and only quantum of penalty is discretionary.
As noticed in Chairman Sebi (supra), in the present case discretion has been exercised
by the adjudicating officer by imposition of lesser penalty then what could have been
imposed under the provisions of the Customs Act. ”

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4.2 Learned AR also referred to Section 110(1A) of the Customs Act which
empowers Customs Officers to dispose the perishable goods after following
the procedure. This Section is reproduced as follows:-

“(1-A) The Central Government may, having regard to the perishable or hazardous
nature of any goods, depreciation in the value of the goods with the passage of time,
constraints of storage space for the goods or any other relevant considerations, by
notification in the Official Gazette, specify the goods or class of goods which shall, as
soon as may be after its seizure under sub-section (1), be disposed of by the proper
officer in such manner as the Central Government may, from time to time, determine
after following the procedure hereinafter specified.”

The learned AR also referred to Notification No.31/86-Cus dated 05.02.1986
and Notification No. 20/2004-Cus (NT) dated 16.02.2004 which have been
reproduced below:-
Seizure of perishable or hazardous goods — Section 110(1A) of Customs Act
In exercise of the powers conferred by sub-section (1A) of section 110 of the
Customs Act, 1962 (52 of 1962), the Central Government, having regard to the
perishable nature, depreciation in the value with the passage of time, constraints of
storage space and valuable nature, of the goods, mentioned in the Schedule hereto
annexed, hereby specifies the said goods for the purposes of that sub-section.
THE SCHEDULE
1. Liquors ;
2. Primary cells and primary batteries including re-chargeable batteries ;
3. Wrist watches including electronic wrist watches, watch movements, parts or
components thereof ;
4. All electronic goods including television sets, Video Cassette Recorders, Tape
recorders, calculators, computers, components and spares thereof including diodes,
transistors, integrated circuites, etc. ; and
5. Dangerous drugs and psychotropic substances.
[Notification No. 31/86-Cus., dated 5-2-1986]

Software and any goods provisionally released but not taken within one month —
Disposal of, after seizure — Amendment to Notification No. 31/86-Cus.

In exercise of the powers conferred by sub-section (1A) of section 110 of the
Customs Act, 1962 (52 of 1962), the Central Government, having regard to the
perishable nature, depreciation in value with the passage of time, constraints of storage
space and valuable nature of goods, hereby makes the following further amendments in
the notification of the Government of India in the Ministry of Finance (Department of
Revenue) No. 31/86-Customs, dated the 5th February, 1986, namely : -

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In the Schedule annexed to the said notification, after item No. 12 and the
entries relating thereto, the following item numbers and entries shall be inserted,
namely :-
“13. Software;
14. Any good seized by the proper officer under section 110 of the Customs Act,
1962 (52 of 1962) for which order for provisional release has been passed but
provisional release has not been taken by the concerned person within a period of one
month from the date of the communication of such order”.

[Notification No. 20/2004-Cus. (N.T.), dated 16-2-2004]

5. We have heard both sides and perused the record including directions
given by Hon'ble Gujarat High Court vide order dated 16.07.2026.


5.1 Learned Counsel for the appellant has challenged the amount of
redemption fine and penalties imposed under Sections 114AA and 114(i) of
the Customs Act, 1962 by Adjudicating Authority and upheld by the
Appellate Authority. In the present case, value of the subject goods sought
to be exported by appellant, was redetermined by the Adjudicating Authority
at Rs. 2,57,94,972/-. The allegations against the appellant are
misdeclaration and misclassification of goods. Considering the value of the
subject goods at Rs. 2,57,94,972/-and seriousness of the allegations against
the appellant as mentioned above, redemption fine of Rs. 35,00,000/- which
comes to around 13.5%, appears to be proper and reasonable and cannot be
termed as excessive. We are also of the view that the amount of penalty
imposed by Authorities under Sections 114AA and 114(i) of the Customs Act,
which is Rs. Fifteen Lakh each appears to be proper and cannot be termed
as grave and serious nature of allegations made against the appellant as
they attempted to export ‘Natural Garnet’ by mis-declaring description as
“Refractory Bed Material”. It is pertinent to mention here that with effect
from 21.08.2018, export of "Natural Garnet", is permissible only through the
canalizing agency M/s IREL vide DGFT, Government of India, Notification No.
26/2015-20 dated 21.08.2018 issued under Section 3 of the Foreign Trade
(Development & Regulation) Act, 1992.

5.2 We agree with the arguments of learned AR that when a fine is
imposed for redemption of offending goods confiscated by the proper
authority for breach of the provisions of law and penalty is imposed on a
person responsible for the breach of statutory duty, ordinarily no
interference should be made by the appellate body, in the discretionary

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order passed by the lower authority just because another view might be
possible, except on grounds of mala fides or extreme arbitrariness. We do
not find any such ground existing in this case to interfere in the impugned
order.

5.3 Learned Counsel for the appellant has vehemently argued that
according to settled position of law, no redemption fine is imposable on
goods which are to be re-exported. This contention cannot be accepted as
the present case relates to attempted export of restricted goods by mis-
declaring the description and classification to pose as export of normal
goods. This is not a case of re-export of imported goods. The proper officer
has allowed redemption of confiscated goods subject to fulfilment of
conditions imposed by him in exercise of his discretionary jurisdiction.
Therefore, impugned order cannot be held against the law and no
interreference is required.

The Hon'ble Supreme Court in Duncan Industries Limited and Anr
vs. UOI – AIR 2006 SC 3699 has held as under:-

“We are broadly in concurrence with the reasoning of the High Court that in matters of
administrative discretion it is not open to the courts to interfere in minute details,
except on grounds of mala fides or extreme arbitrariness. Interference should be only
within very narrow limits, such as, where there is a clear violation of a statute or a
constitutional provision, or extreme arbitrariness in the Wednesbury sense.”

5.4 As regards E-auction of the confiscated goods, we find that the
Customs authorities have initiated auction of confiscated goods E under the
provisions of Section 110(1A) of the Customs Act and under Notification No.
31/26-Cus dated 05.02.1986 and Notification No. 20/2004-Cus (NT) dated
16.02.2004 and it can’t be said that E-auction is without any authority of
law. The appeal is being finally disposed of by this order and therefore, it
cannot be said that E-auction is being undertaken by the Revenue during
pendency of appeal. Revenue authorities may go ahead with E-auction of
the subject goods after issuing proper notice to the appellant inviting
objections within atleast 30 days, in view of the directions issued by Ministry
of Finance vide CBEC Instructions issued vide F. No. 711/4/2006-Cus (AS)

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dated 14.02.2006 and after compliance with the relevant provisions of the
Customs Act and other Circulars on the subject.

6. In the light of above discussions, we uphold impugned order passed by
learned Commissioner (Appeals) and reject the appeal filed by the appellant.

7. Consequently, the appeal is rejected.

(Pronounced in the open court on 28.10.2026 )





(Dr. Ajaya Krishna Vishvesha)
Member (Judicial)








(Satendra Vikram Singh)
Member (Technical)
KL