Manas Fabrics vs Tuticorin

IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL, CHENNAI

Customs Appeal No.220 of 2011

(Arising out of Order-in-Original No.01/2011 dated 27.1.2011 passed by the
Commissioner of Customs, Tuticorin)

M/s. Manas Fabrics Appellant
st st st
78/1, 1 Floor, 1 Main, 1 Cross
S.G Palya, Bangalore – 560 029.

Vs.

Commissioner of Customs Respondent
Custom House, New Harbour Estate
Tuticorin.

APPEARANCE:

Shri N. Viswanathan, Advocate for the Appellant
Shri R. Govindaraj, Authorized Representative for the Respondent

CORAM

Hon’ble Shri M. Ajit Kumar, Member (Technical)


FINAL ORDER NO. 41148/2026

Date of Hearing : 12.10.2026
Date of Decision: 30.10.2026


This appeal is filed by the appellant against Order-in-Original
No.01/2011 dated 27.1.2011 passed by the Commissioner of Customs,
Tuticorin.
Brief Facts
2. The dispute concerns the import of SWF-brand computerized
embroidery machines by M/s. Macro Agencies, Bangalore, claiming
exemption under Notification No. 21/2002-Cus. dated 01.03.2002. The
DRI alleged that the machines, imported through nine Bills of Entry at
Tuticorin Port between November 2002 and August 2003, did not have
the plotter required for the exemption and that fabricated catalogues

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and an incorrect write-up had been submitted to Customs. Technical
Consultancy Services Organisation of Karnataka (TECSOK), Bangalore,
inspected and reported that the machines were automatic/
computerized embroidery machines and not computerized embroidery
pattern-making machines equipped with plotters. M/s. Macro Agencies
admitted the duty liability and paid ₹ 18,40,250/-. The appellant, a local
purchaser of one such machine, was issued a show cause notice
proposing confiscation and penalty, on the ground that it had
purchased goods which appear liable for confiscation under
Section111(m) of the Customs Act, 1962 and consequent the Appellant
was liable for a penalty under Section 112 (b) ibid. Since M/s. Macro
Agencies obtained immunity from confiscation and penalty from the
Settlement Commission, the Commissioner refrained from taking
action against it but imposed a penalty of ₹ 4,00,000/- on the appellant
under Section 112(b) of the Customs Act, 1962. Aggrieved, the
appellant has filed the present appeal before the Tribunal .
3. Shri N. Viswanathan, Ld. Counsel appeared for the appellant and
Ld. Authorized representative Shri R. Govindaraj appeared for the
respondent.
Submissions made by the Appellant
3.1 Shri N. Viswanathan the Ld. Counsel for the appellant submitted
that:
A. The Appellant was a bona fide purchaser of the imported
machinery and had neither abetted nor participated in the alleged
offence. The full amount, inclusive of duty without availing the
exemption, had been paid to M/s. Macro Agencies, as evidenced by the

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local sale invoices, which described the goods merely as “computerized
embroidery machines”. The importer had also admitted these facts.
B. It had received only local sale proforma invoices and had not
been provided with copies of the Bills of Entry under which the
machinery was imported. Although it was aware that the machinery
was imported and that M/s. Macro Agencies was an agent of M/s SWF,
the Appellant had no knowledge of the alleged misdeclaration or
wrongful availment of the exemption. Payment of the full price,
inclusive of duty, further demonstrated that the Appellant had not
benefited from the exemption claimed by the importer.
C. The failure to obtain or verify the import documents could not,
by itself, establish abetment or render the Appellant liable to penalty
under Section 112(b) of the Customs Act, 1962. The alleged
misdeclaration and wrongful availment of the exemption were
attributable to M/s. Macro Agencies, and no concrete evidence had
been produced to establish the Appellant’s knowledge of, or
involvement in, those acts.
D. In the absence of evidence establishing the Appellant’s
involvement in the wrongful import or the requisite ingredients of
Section 112(b), the penalty imposed was unsustainable.
E. The ld. Counsel prayed that the impugned Order may be set
aside.
Submissions made by the Respondent-Revenue
3.2 Shri R. Govindaraj, the ld. Authorised Representative, took us
through the impugned order. He submitted that:

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A. Once an importer mis-declares facts in the Bill of Entry, then
every subsequent domestic purchaser is liable for the original
importer's misdeclaration.
B. As per Advanced Law Lexicon by P. Ramanatha Aiyar , 3rd
Edn. 2005 at page 721: Caveat emptor means "Let the purchaser
beware."
C. It is the bounden duty of the purchaser to make all such
necessary enquiries and to ascertain all the facts relating to the
property to be purchased prior to committing in any manner.
D. He prayed that the appeal may be rejected.
4. Heard both sides and perused the appeals.
Discussion and Analysis
5. The Appellant purchased the machinery from M/s. Macro
Agencies under domestic invoices and paid the invoiced consideration,
including applicable taxes. The alleged misdeclaration and wrongful
availment of customs exemption arose at the import stage. The
following circumstances favour the Appellant:
(i) The machinery was purchased domestically and not directly
imported by the Appellant. The Appellant paid the invoiced price and
domestic taxes but did not claim the customs exemption.
(ii) The invoices described the goods as computerized embroidery
machines without representing that they qualified for a particular
customs exemption.
(iii) The alleged fabrication of catalogues and misdeclaration related
to the import transaction. No material has been shown to establish the
Appellant’s participation or knowledge.

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(iv) The Appellant is not responsible for knowing let alone
independently proving every aspect of the upstream sellers tax
compliance, when there are no allegations of the Appellant colluding
with the importer in evading tax.
In Amritlakshmi Machine Works Vs Commissioner of Customs
(Import) [2016 (335) E.L.T. 225 (Bom.)], the Bombay High Court
distinguished Sections 112(a) and 112(b), holding that the latter
requires knowledge or reason to believe that the goods are liable to
confiscation. Mere facilitation without knowledge does not constitute
abetment. Knowledge that goods are imported cannot, by itself, be
equated with knowledge that they are liable to confiscation.
Accordingly, an ordinary domestic purchase does not establish
abetment under Section 112(a) or attract Section 112(b) merely
because the importer allegedly obtained an exemption fraudulently.
5.1 The principle of caveat emptor does not dispense with the
Department’s burden to establish the statutory ingredients of the
alleged contravention. Payment of the invoiced price and taxes is a
relevant circumstance supporting the Appellant’s case, though not
conclusive by itself. In the absence of evidence establishing the
requisite knowledge, reason to believe or participation, penalty cannot
be sustained merely on the basis of the domestic purchase. Revenue
has hence not discharged its burden and the impugned Order merits
to be set aside.
6. There being no reference to the confiscation of the goods in this
appeal, the same is not before me for consideration.

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Conclusion
7. In view of the foregoing, the impugned order is set aside to the
extent it imposes a penalty on the Appellant, with consequential relief,
if any, in accordance with law. The appeal is disposed of accordingly.
(Pronounced in open court on 30.10.2026)




Sd/-
( M. AJIT KUMAR )
Member (Technical)




Rex