2026-VIL-1848-CESTAT-CHE-CU
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CUSTOMS CESTAT Cases

Customs - Penalty under Section 112(b) of the Customs Act, 1962 on local purchaser of imported machinery - Alleged misdeclaration and wrongful availment of exemption by the importer - Appellant, a local purchaser of computerized embroidery machine imported by another person claiming exemption, was issued SCN proposing penalty on the ground that the machine appeared liable to confiscation under Section 111(m) - Whether penalty under Section 112(b) can be imposed on a domestic purchaser merely on the basis of the purchase when there is no evidence of knowledge, reason to believe or participation in the importer's misdeclaration - HELD - The Appellant purchased the machinery under domestic invoices, which described the goods merely as computerized embroidery machines without representing any customs exemption, and paid the invoiced price including applicable taxes without claiming the exemption. The misdeclaration related to the import transaction, and no material was shown to establish the Appellant's participation or knowledge. The Appellant is not responsible for independently proving every aspect of the upstream seller's tax compliance, when there is no allegation of collusion with the importer. Section 112(b) requires knowledge or reason to believe that the goods are liable to confiscation, and knowledge that goods are imported cannot by itself be equated with such knowledge. The principle of caveat emptor does not dispense with the Department's burden to establish the statutory ingredients of the contravention - Revenue has not discharged its burden, and the penalty imposed on the Appellant is set aside - The appeal is disposed of
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