CESTAT Mumbai: Confiscation Unsustainable Once Declared Value Accepted; Sets Aside Fine and Penalties in Kumar Impex Case

March 17, 2026 : The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that confiscation of imported goods under Section 111(m) of the Customs Act, 1962 cannot be sustained once the declared transaction value is accepted and no material misdeclaration affecting revenue is established.

In M/s Kumar Impex v. Commissioner of Customs, Nhava Sheva (Customs Appeal No. 85820 of 2025), the Tribunal, comprising Judicial Member Ajay Sharma, allowed the appeal and set aside confiscation, redemption fine, and penalties imposed by the lower authorities.

Background

The dispute arose from import of PU coated fabric (declared thickness 0.50 mm ±10%) under a Bill of Entry dated 14.10.2016. The importer opted for first check examination. During inspection, the department noted discrepancies in thickness and description, triggering an inquiry.

The goods were provisionally released against a bond and bank guarantee. Subsequently, a show cause notice was issued proposing:

• rejection of declared transaction value,
• re-determination of value,
• confiscation of goods, and
• imposition of penalties.

The adjudicating authority confirmed value enhancement and ordered confiscation along with penalties. However, the Commissioner (Appeals) later set aside the rejection of transaction value but still upheld confiscation, redemption fine, and penalties.

Tribunal’s Findings

The Tribunal noted that the entire basis of confiscation and penalties was the allegation of undervaluation and intent to evade customs duty. Once the Commissioner (Appeals) accepted the declared transaction value, this foundation ceased to exist.

Examining Section 111(m), the Tribunal clarified:

• Confiscation requires material misdeclaration affecting assessment or revenue.
• The provision is intended to curb duty evasion, not penalize minor or technical discrepancies.
• Discrepancies that do not impact classification, valuation, or import policy cannot justify confiscation.

In the present case:

• The discrepancy related only to thickness/description.
• There was no dispute on classification or value.
• The Bill of Entry was finalized at the declared value.
• No differential duty demand survived.

The Tribunal emphasized that once the declared value is accepted, the allegation of misdeclaration leading to revenue loss collapses, and the essential requirement for invoking Section 111(m) is absent.

Decision

Holding that confiscation was unsustainable, the Tribunal ruled that:

• Redemption fine under Section 125 could not survive.
• Penalties under Sections 112(a) and 114AA were also liable to be set aside.

Accordingly, the appeal filed by Kumar Impex was allowed and the impugned order was quashed.