2026-VIL-857-CESTAT-KOL-CU
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CUSTOMS CESTAT Cases

Customs - Confiscation of goods based solely on Classification change - An importer imported canvas shoes and declared them under CTH 6402 9990, which the revenue authorities sought to change to CTH 6404 1910. Although both tariff headings attracted the same rate of duty at 35% ad valorem, the adjudicating authority confiscated the majority of the imported goods under Section 111(m) of the Customs Act, 1962, without providing any reasoning or legal basis for such confiscation - Whether a mere change in tariff classification, which results in no change in the duty quantum, can constitute a valid ground for confiscation of goods under Section 111(m) of the Customs Act – HELD - Confiscation cannot be justified merely on the basis of change in classification when there is no material impact on the duty leviable, as such action would be arbitrary and violate principles of natural justice. The adjudicating authority's order was completely silent on reasons for confiscating these non-counterfeit goods and that the fact of physical shortage of goods in the shipment demonstrated the importer's lack of mala fides in the transaction. Accordingly, the confiscation of non-counterfeit goods was set aside and their release was ordered on payment of a redemption fine – The confiscation of non-counterfeit goods is set aside and goods are ordered to be released – The appeal is partly allowed - Confiscation of goods on account of Intellectual Property Rights Violation – Appellant received imported shoes, certain pairs of which were identified by right holders as counterfeit or infringing goods (branded shoes) based on a technical report obtained by the Revenue authorities from the right holders - Whether confiscation of goods on grounds of intellectual property rights infringement could be sustained when the determination of counterfeit nature was made without affording the importer an opportunity to participate in the verification process and without sharing the technical evidence – HELD - Although the appellant failed to formally dispute the violation of intellectual property rights and the supplier's admission of error established the infringement, procedural fairness required that the technical reports obtained from right holders should have been shared with the importer in compliance with the doctrine of natural justice, even if the importer may not have formally sought a written show cause notice. However, since the supplier himself admitted the mistake and the facts clearly established that counterfeit goods were mixed in the shipment without the importer's mala fides, the confiscation of counterfeit goods could be sustained - The absolute confiscation of counterfeit branded goods is maintained - Reduction in Penalty - The adjudicating authority imposed a penalty under Section 112(a)(i) and 112(a)(ii) of the Customs Act. However, the importer suffered significant financial losses due to delays in the clearance process, including ground rent and container rent extending over a prolonged period, caused by lapses on the part of the revenue authorities, particularly a delay of forty-nine days between the examination of goods and issuance of the seizure notice and further delays at various adjudication stages - Whether the penalty imposed on the importer should be reduced considering the severe financial hardship caused by the department's own procedural lapses and delays – HELD - While the importer's conduct in importing counterfeit goods warranted some penalty, the exceptional circumstances of departmental delays and procedural lapses that caused substantial financial loss to the importer were relevant considerations in determining the appropriate quantum of penalty. The appellant had suffered severely due to the department's negligence and that a substantial reduction in penalty would meet the ends of justice. The penalty is reduced from Rs. 75,000/- to Rs. 5000/-.
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GSTAT Appeal filed wrongly...
By CA Vivek Jalan

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