2026-VIL-1229-GUJ-CU
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CUSTOMS High Court Cases

Customs - Confiscation of export goods and imposition of penalties on alleged diversion of rice declared for export to one country to a different country - Respondent exported rice under shipping bills declared for Iran, and the Department alleged on investigation that the consignments had been delivered to the UAE in violation of Paras 2.40 and 2.53 of the Foreign Trade Policy - Adjudicating Authority held the goods liable to confiscation under Sections 113(i) and 113(d) and imposed penalties under Sections 114 and 114AA - CESTAT set aside the orders after noting that the documents were in the name of the buyers in Iran, that re-export documents, phytosanitary certificates and bank remittances were produced, and that no evidence showed that the documents were amended or fabricated - Whether the CESTAT was justified in setting aside the confiscation and penalties - HELD - At first blush the diversion of goods intended for export to Iran appeared to be a grave offence. The CESTAT, however, recorded a categorical finding of fact that the goods were intended for export to Iran, as the phytosanitary certificates placed on record contained the registration number, the name of the exporter, the name of the consignee in Iran, the number of bags and the quantities, and the Adjudicating Authority and the FAA neither pointed out any discrepancy nor made any allegation supported by evidence that the certificates were amended to facilitate clearance in another country - Once the goods are permitted to be exported by the issuance of a Let Export Order, ownership is transferred to the buyer as soon as the ship carrying the goods crosses the territorial waters of India, as per the CBEC Circular and the decision of the Apex Court. None of the buyers in Iran claimed short shipment or non-receipt, the remittance receipts were not objected to by the banks or alleged to be non-genuine, and under the RBI regulations payment can be received only from the consignee named in the export documents, so the contention of third-party payment had no basis. The conclusion that the goods were exported to the UAE was based merely on assumptions and presumptions - in the absence of evidence the CESTAT was justified in setting aside the confiscation and penalties - The Revenue appeal is dismissed - Jurisdiction of Customs authorities to confiscate goods and impose penalties for alleged violation of the Foreign Trade Policy relating to receipt of export proceeds in freely convertible foreign exchange - The entire basis of the decision of the Adjudicating Authority was the alleged violation of Para 2.53 of the Foreign Trade Policy, on the ground that goods actually exported to the UAE required payment in freely convertible foreign exchange, and the SCN invoked Sections 113(d) and 113(i) of the Customs Act. - Whether the Customs authorities could confiscate the goods and impose penalties on the allegation of violation relating to receipt of foreign exchange for the exported goods - HELD - No proceedings had been initiated against the Respondents for any violation relating to the receipt of foreign exchange for the exported goods, and no allegation was made or SCN issued under the Foreign Exchange Management Act or the Customs Act in this regard. The CESTAT rightly arrived at the finding that there was no violation of the Customs Act in any manner, as there was no dispute regarding the description, quantity or value of the goods, and the export of rice was neither prohibited nor restricted at the relevant time - The appeals of the Revenue are dismissed
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