Under-Valuation of Imported Goods Justifies Confiscation, Penalty Even If Duty Is Paid Later: Madras HC

The Madras High Court has ruled that acceptance of enhanced valuation and subsequent payment of customs duty does not absolve an importer from confiscation of goods and imposition of penalty if the original declaration in the Bill of Entry was incorrect. Dismissing a civil miscellaneous appeal filed by an importer, the bench of Dr. Justice Anita Sumanth and Justice Mummineni Sudheer Kumar upheld confiscation under Section 111(m) and penalty under Section 112(a) of the Customs Act, 1962, holding that misdeclaration of value squarely attracts statutory consequences. The case arose from the import of industrial equipment—Dryers, Heater and Cooler—declared under Tariff Entry 8419 20 20. The importer filed a Bill of Entry in July 2008 declaring a value of AUD 4,16,520. However, upon investigation by customs authorities, it emerged that the declared value did not include design and related charges, resulting in significant under-valuation. Subsequent inquiries revealed that the original purchase order covered design, manufacture, testing and supply of equipment, with the actual value working out to AUD 10,13,720. The importer ultimately accepted the enhanced valuation and paid the differential customs duty. While the valuation was accepted by the importer and not challenged further, the adjudicating authority confiscated the goods under Section 111(m) of the Customs Act for misdeclaration of value. Redemption was permitted on payment of a fine of ₹43 lakh, and a penalty of ₹21.5 lakh was imposed under Section 112(a). The importer challenged only the confiscation and penalty before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), arguing that since the duty was paid on the enhanced value, confiscation and penalty were unwarranted. The CESTAT rejected the appeal, noting that once misdeclaration of value was admitted, confiscation and penalty followed as a statutory consequence. The appeal before the Madras High Court raised key questions of law, including whether goods can be confiscated merely due to incorrect valuation when their import is otherwise permissible. Whether redemption fine and penalty were justified when the importer acted on bona fide grounds. Whether fine and penalty, if any, should have been restricted only to the undeclared portion of value. The Court noted that the importer had unequivocally accepted that the declared value was incorrect and that design charges ought to have formed part of the assessable value. Once such acceptance was recorded and the enhanced valuation attained finality, the Court held that Section 111(m) was clearly attracted, as the value declared in the Bill of Entry did not correspond to the actual value of the imported goods. Rejecting the importer’s reliance on customs exemption notifications relating to “plans, drawings and designs,” the Court clarified that such notifications apply to those items as independent assessable commodities and cannot be used to exclude design charges forming part of the value of imported machinery. On the issue of penalty, the Court observed that Section 112(a) provides for a penalty where any act or omission renders goods liable to confiscation under Section 111. Since misdeclaration of value was admitted and had led to evasion of duty, the Court held that there was no scope for discretion or leniency in the present case. The Bench also rejected the argument of proportionality, ruling that once the goods themselves were liable to confiscation due to misdeclaration, fine and penalty could not be confined only to the undeclared portion of value. The High Court dismissed the appeal in its entirety, affirming the orders of the adjudicating authority and the CESTAT. It held that subsequent payment of duty does not erase the offence of misdeclaration and that confiscation and penalty are valid and enforceable in such circumstances. Case Details Case Title: M/s. Walchand Nagar Industries Ltd. Versus The Commissioner of Customs (Sea Port Import, Chennai) Case No.: C.M.A.No. 1069 of 2018 Date: 03.12.2025 Counsel For Petitioner: Krishna Srinivasan, Senior Counsel Counsel For Respondent: K.Mohana Murali Click Here To Read Order Read More: Notification No. 2/2017 Only Fixes Territorial Jurisdiction, Doesn’t Confer Power to Invoke S. 122 CGST Act: Andhra Pradesh HC

Under-Valuation of Imported Goods Justifies Confiscation, Penalty Even If Duty Is Paid Later: Madras HC

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