CESTAT Mumbai Sets Aside Confiscation and Penalties as Accepted Transaction Value Negates Undervaluation Claims

March 17, 2026 : The West Zonal Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has ruled that confiscation of goods under Section 111(m) of the Customs Act, 1962, is unsustainable when the declared transaction value is accepted and no revenue loss is established. The Tribunal emphasized that minor or technical discrepancies that do not impact duty, classification, or import policy should not trigger such punitive actions.

Case Background

The appellant, M/s Kumar Impex, imported “PU coated fabric” (0.50 mm thickness +/- 10%) via a Bill of Entry dated October 14, 2016. Following a “first check” examination request, the Customs Department alleged discrepancies in the description and thickness of the material.

Initially, the Adjudicating Authority rejected the declared value based on a contemporaneous Bill of Entry from December 2016. It accused the importer of misrepresentation and suppression of facts intended to defraud the government, subsequently ordering confiscation and imposing penalties under Sections 112(a) and 114AA.

The Appellate Transition

Upon further appeal, the Commissioner (Appeals) modified the original order. While the Commissioner accepted the transaction value declared by the appellant and set aside the differential duty demand, he nonetheless upheld the confiscation of goods and sustained a reduced redemption fine of ₹4,00,000/- along with penalties.

Tribunal’s Findings

Hon’ble Mr. Ajay Sharma (Member Judicial), presiding over the Single Member Bench, observed that the entire foundation for confiscation was the allegation of undervaluation. Once the Commissioner accepted the declared value, that foundation effectively collapsed.

Key observations from the Tribunal included:

• Materiality of Mis-declaration: Section 111(m) is intended to prevent duty evasion and safeguard revenue. For confiscation to be valid, a mis-declaration must relate to a material particular affecting assessment.
• Technical vs. Substantive Discrepancies: The Tribunal noted that differences regarding thickness or description, without disputes over classification or value, are insufficient for confiscation—especially when the Bill of Entry is finalized at the declared value.
• Absence of Intent to Defraud: Because the declared value was accepted, the Tribunal found no evidence of an attempt to evade customs duty or cause loss to the exchequer.

Final Order

The Tribunal concluded that the essential ingredients for invoking Section 111(m) were absent. Consequently, as the confiscation was deemed unsustainable, the associated redemption fines and penalties under Sections 112(a) and 114AA could not survive. The Tribunal set aside the impugned order and allowed the appeal.

Case Reference : M/s Kumar Impex v. Commissioner of Customs, Nhava Sheva Case No.: Customs Appeal No. 85820 of 2025 Order No.: Final Order No: 85424/2026 Date of Decision: March 17, 2026