Goods used to conceal undeclared imports remain confiscable despite separate declaration and payment of duty.

The appellant imported 32 packages of garments from Guangzhou, China, under Bill of Entry No. 4699807 dated 30 August 2019, declaring the goods at a value of ₹5,51,179 and paying customs duty of ₹1,95,556.

On examination, Customs found substantial discrepancies in the quantity and description of the goods, including undeclared branded garments bearing third-party trademarks. A 100% examination conducted on 9 September 2019 resulted in seizure of the goods.

The appellant’s proprietor admitted that the consignment contained undeclared branded goods but claimed that they had been supplied by mistake by the foreign supplier and that no order had been placed for them.

The adjudicating authority ordered absolute confiscation of the branded goods, confiscation with redemption options for certain undeclared and declared goods, and imposed a penalty of ₹4,00,000 under Sections 112(a) and 112(b) of the Customs Act, 1962.

In respect of the declared garments valued at ₹5,58,126, which had allegedly been used to conceal undeclared goods, redemption fine of ₹85,000 was imposed under Section 118.

The Commissioner (Appeals) upheld the adjudication order.

Before the Tribunal, the appellant did not contest the confiscation of the branded goods or their valuation; the challenge was confined to the redemption fine of ₹85,000 imposed on the declared goods and the penalty of ₹4,00,000.

1. Whether the declared garments valued at ₹5,58,126 were liable to confiscation under Section 118 of the Customs Act, 1962 because they were used to conceal undeclared and prohibited goods, and whether the redemption fine of ₹85,000 was excessive?

2. Whether the penalty of ₹4,00,000 imposed under Sections 112(a) and 112(b) of the Customs Act, 1962 was legally sustainable and proportionate?

3. Whether the appellant’s plea that the undeclared branded goods had been supplied by the foreign supplier by mistake negatived confiscation or penalty?

The Tribunal applied Section 118 of the Customs Act, 1962, under which goods used for concealing confiscable goods are themselves liable to confiscation, and Section 125, which requires an option of redemption against payment of an appropriate fine where redemption is permissible.

Section 112(a) penalises a person who does or omits to do an act rendering goods liable to confiscation, while Section 112(b) applies to a person who knowingly or with reason to believe deals with goods liable to confiscation.

The Tribunal also relied on the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007, under which Customs may suspend clearance on its own initiative where there are prima facie grounds to believe that imported goods infringe intellectual-property rights.

The decisions in Kumar Overseas, Monica Enterprises and Muscles Fusion FZE were relied upon for the principle that unsupported pleas of supplier error or bona fide mistake cannot displace findings of misdeclaration in the absence of contemporaneous documentary evidence.

The Tribunal further referred to S. Rajagopal concerning the distinct requirements of Sections 112(a) and 112(b), and Vaibhav Exports and Aafloat Textiles concerning the consequences of statutory contraventions and the importer’s duty to exercise due care.

The Tribunal held that the declared garments had been used to conceal substantial quantities of undeclared branded goods and were therefore properly confiscated under Section 118.

The appellant’s assertion that the additional goods had been dispatched by mistake was rejected because it was unsupported by contemporaneous evidence: although the appellant claimed to have placed orders through email, no such email or other reliable documentation was produced, and the foreign supplier did not seek re-export or otherwise claim the allegedly wrongly supplied goods.

The Tribunal found that the goods were grossly misdeclared and that the appellant could not avoid the legal consequences merely by asserting lack of knowledge.

However, considering that the declared goods were valued at ₹5,58,126, the redemption fine of ₹85,000 was considered excessive and was reduced to 10% of the declared or assessed value, namely ₹55,812.

The penalty was held sustainable because the appellant had filed the declaration and imported the consignment in circumstances that rendered the goods liable to confiscation; nevertheless, the penalty of ₹4,00,000 was found disproportionate and was reduced to ₹2,00,000.

The confiscation of the declared garments under Section 118 and the liability to penalty under Section 112 were upheld.

The redemption fine imposed on the declared goods valued at ₹5,58,126 was reduced from ₹85,000 to ₹55,812, and the penalty under Sections 112(a) and 112(b) was reduced from ₹4,00,000 to ₹2,00,000.

The impugned order was upheld subject to these modifications.