No Penalty Without Confiscation of Imported Goods: CESTAT

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that penalties under Section 112(a) of the Customs Act cannot be imposed when the imported goods themselves are not liable for confiscation. The Bench of Justice Dilip Gupta (President) and P. Anjani Kumar (Technical Member) has held that Section 112(a) penalties can be imposed only when goods are liable for confiscation. Since the adjudicating authority had already concluded that the imported goods were not confiscable, the very basis for imposing penalties disappeared. The Customs Department had challenged an adjudication order dated December 21, 2023, through which proceedings initiated by a show cause notice dated August 31, 2016, were dropped against five noticees. These included: M/s Electrogen Infra FZE, UAE; Vinod Shantilal Shah alias Vinod Shantilal Adani; Jatin Shah; Mitesh Dani; and Mehul Jani. The show cause notice sought imposition of penalties under Section 112(a) of the Customs Act, 1962, alleging involvement in transactions relating to imported goods whose valuation was questioned by the Department. The central question before the Tribunal was whether penalties under Section 112(a) of the Customs Act could survive when the imported goods were found not liable for confiscation. Section 112(a) provides for penalties in cases involving goods that are liable to confiscation. Therefore, the existence of confiscable goods is a foundational requirement for invoking the provision. The Department also relied upon allegations that import documentation contained incorrect declarations and manipulated invoices, seeking to justify penal consequences. The Principal Commissioner had earlier examined allegations relating to overvaluation of imported goods and concluded that the declared transaction value was at arm’s length and was not influenced by any relationship between the parties. The adjudicating authority further held that the goods were neither prohibited goods nor goods involving any duty implication. Mere allegations of misdeclaration of value could not justify confiscation under Section 111(m) where no duty impact existed. Since the goods were not liable to confiscation, penalties under Section 112(a) could not be imposed. Allegations of false declarations and manipulated invoices were not established. Consequently, penalties under Section 114AA also could not be sustained. The adjudication order specifically recorded that penalty against Electrogen Infra FZE and the four individuals was not imposable because the goods had been held not liable for confiscation. After examining the record, the CESTAT agreed with the findings of the Principal Commissioner. The Bench noted that there was no error in the order dropping the proceedings and that the Department had failed to demonstrate any legal infirmity warranting interference. The Tribunal succinctly held, “As the goods have been held not liable to confiscation, penalty under section 112(a) of the Customs Act could not have been imposed upon the five respondents.” Dismissing all five departmental appeals, the CESTAT ruled that where imported goods are not liable for confiscation, consequential penalties under Section 112(a) cannot be imposed on importers or associated individuals. The ruling reinforces the principle that confiscation is a prerequisite for invoking penal provisions under Section 112(a) and that penalties cannot be sustained merely on allegations of overvaluation or incorrect declarations when such allegations ultimately fail on merits. Case Details Case Title: The Commissioner of Customs (Import-I) Versus M/s. Electrogen Infra Fze. Citation: JURISHOUR-1574-CES-2026(MUM) Case No.: CUSTOMS APPEAL NO. 86122 OF 2024 Date: 05.06.2026 Counsel For Appellant: Deepak Sharma, Authorized Representative Counsel For Respondent: None Click Here To Read Order Read More: Marble vs Dolomite Dispute: CESTAT Rejects Reclassification Based on Samples of Other Importers

No Penalty Without Confiscation of Imported Goods: CESTAT

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