Restricted second-hand goods cannot be absolutely confiscated absent specific reasons justifying denial of redemption.

The appellant imported a “Posalux Machine DLR Measuring Unit,” which was examined by Customs and found to be second-hand goods.

Since the goods were second-hand capital-goods parts imported without the requisite authorisation, they were treated as restricted under the Foreign Trade Policy 2015–2020.

The original adjudicating authority permitted redemption of the goods on payment of ₹30,000 under Section 125 of the Customs Act, 1962, and imposed a penalty of ₹10,000 under Section 112(a).

On appeals filed by both parties, the Commissioner (Appeals) ordered absolute confiscation and enhanced the penalty to ₹1,00,000 under Section 114AA.

The record also showed that the appellant had waived the show-cause notice and did not appear for personal hearing; the examination report and Chartered Engineer’s report described the goods as second-hand parts of capital goods, aged above six months, with residual life exceeding six years.

1. Whether the imported goods were second-hand and restricted goods under the applicable Foreign Trade Policy, thereby rendering them liable to confiscation.

2. Whether the Commissioner (Appeals) was justified in directing absolute confiscation instead of allowing redemption under Section 125 of the Customs Act, 1962.

3. Whether the Commissioner (Appeals) could enhance the penalty under Section 114AA when the original authority had imposed a penalty under Section 112(a).

Section 125 of the Customs Act, 1962 provides that where confiscation is authorised, redemption is discretionary for prohibited goods but must ordinarily be offered for goods other than prohibited goods; the discretion must be exercised judiciously, on relevant considerations and with reasons.

Paragraphs 2.31(II) and 2.10 of the Foreign Trade Policy 2015–2020 provide that import of second-hand goods other than capital goods is restricted and requires authorisation, while freely importable goods may be imported without restriction.

Section 128A permits the Commissioner (Appeals), after giving a reasonable opportunity, to confirm, modify or annul the adjudication order, including enhancement of penalty or fine.

The Tribunal relied on Union of India v. Raj Grow Impex LLP, 2021 (377) E.L.T. 145 (S.C.), for the principle that discretion under Section 125 must be exercised consciously and not mechanically.

Sections 112(a) and 114AA operate on distinct statutory grounds, and enhancement under Section 114AA cannot be sustained merely because the original authority imposed a penalty under Section 112(a).

The Tribunal accepted that the goods were second-hand and restricted, relying on the examination report and the Chartered Engineer’s report, as well as the appellant’s failure to contest those findings during adjudication.

However, restricted goods were not thereby equivalent to prohibited goods warranting automatic absolute confiscation.

Applying Section 125, the Tribunal held that the Commissioner (Appeals) had not recorded specific reasons showing why absolute confiscation was necessary in this case.

The reliance on Raj Grow Impex was misplaced because that case involved imports beyond prescribed quotas, contrary to national economic and agricultural interests, whereas the present case involved restricted second-hand goods without comparable public-interest considerations.

The original authority had therefore properly exercised its discretion by permitting redemption on payment of fine.

The Tribunal further held that the Commissioner (Appeals)’ enhancement of penalty under Section 114AA was legally unsustainable because the original penalty had been imposed under Section 112(a), and the two provisions rested on different statutory premises.

It upheld the original adjudication order permitting redemption of the second-hand restricted goods on payment of ₹30,000 under Section 125 and imposing a penalty of ₹10,000 under Section 112(a).

The direction for absolute confiscation and the enhanced penalty of ₹1,00,000 under Section 114AA were consequently annulled.