The Customs, Excise & Service Tax Appellate Tribunal, Mumbai West Zonal Bench, has clarified that confiscation under Section 111(m) of the Customs Act, 1962, cannot be sustained without proof of a material misdeclaration that directly affects revenue or assessment. This ruling reinforces the principle that minor or technical discrepancies, absent any duty loss, do not justify confiscation or consequential penalties.
Background & Facts
The Dispute
The appellant, M/s Kumar Impex, imported PU coated fabric (thickness 0.50 mm +/- 10%) under Bill of Entry dated 14.10.2016. During examination, the Department noted discrepancies in the description and thickness of the goods, triggering an inquiry. The appellant sought provisional release, which was granted upon execution of a PD Bond and furnishing of a 100% bank guarantee covering differential duty. The goods were released provisionally.
Key Facts
- The imported goods were classified under the same heading as declared.
- The declared transaction value was challenged by the Department, leading to a Show Cause Notice dated 25.01.2018.
- The Adjudicating Authority, by Order-in-Original dated 13.12.2018, rejected the declared value, re-determined the value, and ordered confiscation under Section 111(m), along with redemption fine and penalties under Sections 112(a)(ii) and 114AA.
- The Adjudicating Authority found that the appellant had misrepresented facts with intent to defraud the government of duty.
- The Commissioner of Customs (Appeals), by Order-in-Appeal dated 17.06.2019, set aside the value re-determination but upheld confiscation, redemption fine, and penalties.
- The Tribunal, by order dated 13.06.2023, allowed the appeal and remanded the matter for fresh consideration, noting that the Bill of Entry had since been finalized at the declared value.
- The Commissioner (Appeals), on remand, passed the impugned order dated 15.01.2025, again upholding confiscation and penalties despite accepting the declared value.
Procedural History
- 14.10.2016: Import of PU coated fabric under Bill of Entry No. [unspecified]
- 25.01.2018: Show Cause Notice issued proposing rejection of declared value, re-determination, confiscation, and penalties
- 13.12.2018: Order-in-Original passed by Adjudicating Authority rejecting declared value and ordering confiscation under Section 111(m), penalties under Sections 112(a)(ii) and 114AA
- 17.06.2019: Commissioner (Appeals) set aside value re-determination but upheld confiscation, redemption fine, and penalties
- 13.06.2023: CESTAT allowed appeal, set aside Commissioner’s order, and remanded matter noting Bill of Entry had been finalized at declared value
- 15.01.2025: Commissioner (Appeals) passed impugned order on remand, again upholding confiscation and penalties despite accepting declared value
- 23.02.2026: Hearing before CESTAT Mumbai West Zonal Bench
- 17.03.2026: Final Order passed
Relief Sought
The appellant sought setting aside of the impugned Order-in-Appeal dated 15.01.2025, particularly the confiscation of goods under Section 111(m), the redemption fine of ₹4,00,000 under Section 125(1), and penalties of ₹5,000 under Section 112(a)(ii) and ₹2,00,000 under Section 114AA.
The Legal Issue
Can confiscation under Section 111(m) of the Customs Act, 1962, be sustained when the declared transaction value has been accepted by the authorities, there is no differential duty demand, and the only alleged discrepancy relates to non-material details such as thickness or description?
Arguments Presented
For the Appellant
The appellant argued that once the Commissioner accepted the declared transaction value, the foundational basis for confiscation - namely, undervaluation or revenue evasion - ceased to exist. The discrepancy in thickness (0.50 mm +/- 10%) was within permissible tolerance and did not affect classification, duty rate, or import policy. Reliance was placed on judicial precedents holding that Section 111(m) requires a material misdeclaration affecting revenue or assessment. The appellant emphasized that the Bill of Entry had been finalized at the declared value, rendering any prior dispute moot.
For the Respondent
The Revenue contended that the initial discrepancies in description and thickness indicated deliberate misdeclaration, justifying confiscation under Section 111(m). It argued that the acceptance of declared value on remand did not erase the prior intent to misrepresent, and that confiscation was justified as a deterrent. The Revenue also relied on the Adjudicating Authority’s finding of fraudulent intent.
The Court's Analysis
The Tribunal undertook a rigorous analysis of Section 111(m), which permits confiscation of goods that "do not correspond in respect of value or in any other particular with the entry made under this Act." The Court emphasized that judicial precedent has consistently held this provision to be triggered only by material discrepancies that affect duty assessment, import policy compliance, or result in revenue loss.
"Discrepancies that do not affect duty, import policy, compliance or assessment should not normally lead to the confiscation."
The Tribunal noted that the Commissioner himself had set aside the re-determination of value, thereby accepting the declared transaction value. This acceptance negated the allegation of undervaluation and, by extension, the claim of revenue evasion. The only remaining discrepancy - thickness variation within ±10% - was deemed technical and immaterial, as it did not alter the tariff classification or duty liability.
The Court further observed that the mere existence of an initial inquiry or a finding of intent by the Adjudicating Authority could not override the subsequent factual development: the Bill of Entry had been finalized at the declared value. The Tribunal held that confiscation under Section 111(m) cannot be sustained on the basis of a now-resolved dispute.
"Every incorrect or imperfect declaration cannot automatically lead to confiscation under Section 111(m) that too when the Bill of Entry has been finalised at declared value and there is no differential duty demand."
The Tribunal concluded that the Revenue had failed to establish any material misdeclaration affecting revenue or assessment. Without this essential ingredient, the confiscation was legally unsustainable.
The Verdict
The appeal was allowed. The Tribunal set aside the confiscation of goods under Section 111(m), the redemption fine of ₹4,00,000 under Section 125(1), the penalty of ₹5,000 under Section 112(a)(ii), and the penalty of ₹2,00,000 under Section 114AA. The order dated 15.01.2025 was quashed in its entirety. The appellant’s goods were ordered to be released without any further encumbrance.
What This Means For Similar Cases
Confiscation Requires Materiality, Not Mere Discrepancy
- Practitioners must now argue that Section 111(m) requires proof of a material misdeclaration affecting duty, classification, or import policy - not just any deviation from the declaration.
- Technical variations in thickness, packaging, or minor description errors, where duty remains unchanged, cannot justify confiscation.
- The acceptance of declared value by authorities, even after initial dispute, extinguishes the basis for confiscation.
Finalization of Bill of Entry Is Conclusive
- Once a Bill of Entry is finalized at the declared value, any prior adjudication based on re-determination becomes legally irrelevant.
- Revenue authorities cannot resurrect allegations of fraud or misdeclaration after accepting the declared value.
- This precedent strengthens the position of importers who cooperate with authorities and rectify discrepancies promptly.
Penalties and Redemption Fines Are Dependent on Confiscation
- Penalties under Section 112(a) and Section 114AA, as well as redemption fines under Section 125(1), are consequential to confiscation.
- If confiscation is set aside, these penalties must fall automatically unless independently justified by separate, substantiated violations.
- Practitioners should challenge penalties on this ground in all similar cases where confiscation is the sole basis.
