Customs Re-Assessment Before Clearance Can’t Invoke S. 28; Confiscation Not Automatic: CESTAT

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi has clarified that differential duty arising during assessment prior to clearance of imported goods cannot be recovered under Section 28 of the Customs Act, 1962. The bench of Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member) has observed that confiscation of goods is not automatic merely because they are “liable to confiscation” under Section 111(m), emphasizing the need for judicial discretion. The dispute arose when the appellant imported goods declared as “polyester knitted fabric” weighing 16,178 kg. Upon examination by customs authorities, the actual weight was found to be 17,330 kg, indicating a variation of about 7%. Further, testing by the Central Revenue Control Laboratory revealed that the fabric contained 95.5% polyester and 4.5% spandex. Based on these findings, the department rejected the declared value, re-determined the assessable value, demanded differential duty, confiscated the goods, and imposed redemption fine and penalty. The Commissioner (Appeals) upheld this order, prompting the appellant to approach the Tribunal. The Tribunal first addressed the issue of alleged mis-declaration of description. It observed that the presence of a small percentage of spandex does not change the essential nature of polyester knitted fabric, as such blending is common in the textile industry to enhance elasticity and comfort. Therefore, it held that there was no mis-declaration of the description of goods. However, the Tribunal noted that the discrepancy in quantity—being about 7% higher than declared—was sufficient to raise doubts about the declared value and justified the rejection of the transaction value under Rule 12 of the Customs Valuation Rules. The Tribunal upheld the re-determination of value under Rule 5 of the Customs Valuation Rules, 2007. However, it strongly disagreed with the department’s invocation of Section 28 of the Customs Act for recovery of differential duty. It clarified that Section 28 applies only after goods have been cleared for home consumption and where there is short payment or non-payment of duty. In the present case, the assessment process had not been completed and the goods had not yet been cleared. Therefore, the entire exercise was one of re-assessment under Section 17(4), and not a case of recovery of duty under Section 28. The Tribunal held that treating the differential duty as recoverable under Section 28 was legally unsustainable. The Tribunal examined the scope of Section 111(m), which provides that goods not corresponding with the declaration are “liable to confiscation.” It emphasized that the term “liable” does not mean that confiscation must necessarily follow in every case. Instead, it confers discretion on the adjudicating authority, which must be exercised judiciously based on the facts of each case. Considering that the discrepancy in quantity was relatively minor and the goods were imported as mixed or stock lot, the Tribunal held that confiscation was not warranted. Consequently, the redemption fine imposed was also set aside. The Tribunal also set aside the penalty imposed under Section 114A. It noted that such penalty is applicable only where duty is determined under Section 28 due to collusion, wilful misstatement, or suppression of facts. Since Section 28 itself was held to be inapplicable in the present case, the foundation for imposing penalty collapsed, and the penalty could not be sustained. The Tribunal partly allowed the appeal by upholding the re-assessment of duty as a valid exercise under Section 17(4), while setting aside the invocation of Section 28, confiscation of goods, redemption fine, and penalty. The appellant was granted consequential relief. Case Details Case Title: M/S Artex Textiles Pvt. Ltd. Versus Commissioner Of Customs(Preventive) Citation: JURISHOUR-906-CES-2026(DEL) Case No.: CUSTOMS APPEAL NO. 51741 OF 2023 Date: 22/04/2026 Counsel For Appellant: Richik Harikant , Advocate Counsel For Respondent: Girjesh Kumar, Authorised Representative Click Here To Read Order Read More: Customs Duty Exemption Denied on ABS Components: CESTAT Holds “Suitable for Use” Includes Indirect Use in Motor Vehicles; No IGST Interest/Penalty Pre-Aug 2024

Customs Re-Assessment Before Clearance Can’t Invoke S. 28; Confiscation Not Automatic: CESTAT

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