Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(CESTAT) 1583

CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
Binu Tamta, Judicial Member, P.V. Subba Rao, Technical Member
Artex Textiles Pvt. Ltd. – Appellant
Versus
Commissioner Of Customs – Respondent
CUSTOMS APPEAL NO. 51741 OF 2023

Advocates:
For the Appellants/Petitioners: Richik Harikant
For the Respondents: Girjesh Kumar

Duty re-assessment prior to the 'Out of Charge' order is governed by Section 17, not Section 28. Furthermore, confiscation under Section 111(m) is discretionary rather than mandatory, requiring judicial application of mind regarding the proportionality of the penalty relative to the nature of the discrepancy.

Headnote:(A) Customs Act, 1962 - Sections 2(14), 2(25), 2(26), 17, 28, 46, 47, 111(m), 114A, 125 - Customs Valuation Rules, 2007 - Rule 12 - Re-assessment of duty vs recovery of short-levied duty - Assessment remains open until 'Out of Charge' order under Section 47 - Section 28 applies only for recovery after goods have been cleared - Process of re-assessment prior to clearance governed by Section 17(4). (Paras 14-19)

(B) Confiscation of goods - Section 111(m) - 'Liable to confiscation' implies discretion - Penal provisions require judicial discretion and reasoned orders - Not automatic - Where mis-declaration of quantity is minor and involves no fraudulent intent, confiscation and redemption fines are not warranted. (Paras 21-23)

Facts of the case:
An importer challenged an order confirming differential duty, confiscating imported goods, and imposing penalties for mis-declaration of description and quantity. The authorities argued that the quantity was higher than declared and the description differed slightly, justifying rejection of transaction value and invoking recovery under Section 28. The appellate authority upheld these findings.

Findings of Court:
The court held that the goods were effectively re-assessed under Section 17(4) before clearance, rendering Section 28 inapplicable as there was no 'short payment' post-clearance. The court further clarified that 'liable to confiscation' does not mandate confiscation; rather, it requires the exercise of judicial discretion.

Issues: Whether Section 28 of the Customs Act is applicable for duty re-assessment prior to the 'Out of Charge' order, and whether the confiscation of goods for minor discrepancies in quantity is mandatory or discretionary.

Ratio Decidendi: The assessment process is ongoing until the issuance of an 'Out of Charge' order under Section 47. Section 28 is restricted to recovery of duty after clearance. Confiscation under Section 111(m) is discretionary, and where no mala fide intent is shown for minor quantity discrepancies, such penalties are legally unjustified.

Result: Appeal partly allowed.

Table of Content
1. factual history regarding import declaration and subsequent detection of weight/content discrepancies. (Para 1 , 2 , 3 , 4 , 5 , 9)
2. contention of parties regarding valuation rules and existence of mis-declaration intent. (Para 6 , 7)
3. applicability of valuation rule 12 for rejection of transaction value. (Para 10 , 11 , 12 , 13)
4. distinction between pre-clearance assessment under section 17 and recovery under section 28. (Para 14 , 15 , 16 , 17 , 18 , 19)
5. discretionary power to confiscate goods under section 111(m) and section 125. (Para 20 , 21 , 22 , 23)
6. consequential setting aside of penalties when underlying section 28 recovery is declared inapplicable. (Para 24 , 25 , 26)

P. V. SUBBA RAO:

M/s. Artex Textiles Pvt. Ltd.¹1 The appellant filed this appeal to assail the Order dated 4.10.2022²2 Impugned order passed by the Commissioner (Appeals) in which he upheld the Order dated 10.1.2022 passed by the Joint Commissioner and rejected the appellant’s appeal before him.

2. The appellant had imported goods and declared them as ‘Polyester knitted fabric’ and quantity as 16,178 kg in the Bill of Entry no. 6111648 dated 17.12.2019 filed in Inland Container Depot³3 ICD Panchi Gujaran, Sonepat, Haryana. Acting on intelligence, the officers of the Commissioner of Customs (Preventive), New Delhi examined the goods, drew and sent samples for testing to the Central Revenue Control Laboratory⁴4 CRCL. They also weighed the goods.

3. The quantity of the goods was 17,330 kg which was 7% more than the declared weight of 16,178.60 kg. The goods were declared as ‘Polyester knitted fabric’ and after testing, CRCL reported it to be ‘Knitted fabric-95.5% polyester and 4.5% spandex’.

4. Statement of the Director of the appellant firm, Shri Fakir Chand Sarawagi was recorded in which he agreed to the rejection of the declared value and its re-determination. He also waived the issue of Show Cause Notice and personal hearing. Accordingly, the Joint Commissioner passed his order as follows:

ORDER

(i) I reject the assessable value of Rs. 21,56,541/- declared by the importer in respect of goods imported vide Bill of Entry No. 6111648 dated 17.12.2019, under Rule 12 of the Customs Valuation Rules (Determination of Value of Imported Goods) Rules 2007⁵5 Valuation Rules and re-determine the assessable value as Rs. 24,47,863/- under Rule 5 of the Customs Valuation Rules, 2007.

(ii) I confirm the total Customs duty amounting to Rs. 5,74,758/- in respect of goods imported vide Bill of Entry No. 6111648 dated 17.12.2019 as detailed in Table-A supra. The total duty of Rs. 5,74,758/- includes duty of Rs. 5,06,356/- being self assessed duty and Rs. 68,402/- (Rs. Sixty Eight Thousand Four Hundred and Two only) being differential duty on account of mis-declaration in terms of description and valuation of imported goods and the same is recoverable under Section-28 of the Customs Act. 1962 alongwith interest on delayed payment of differential duty under Section 28AA of the act ibid.

iii) I confiscate the goods seized under Panchnama dated 24.12.2019 having re-determined value of 24,47,863/- as detailed in Table-A supra attracting total differential Customs duty amounting to Rs. 68,402/- (Rs. Sixty Eight Thousand Four Hundred and Two only) under Section 111 (m) of the Customs Act, 1962. However, I give an option to the Importer to redeem these goods on payment of redemption fine of Rs. 10,000/- (Rupees Ten Thousand Only) under Section 125 of the Customs Act 1962.

(iv) I impose a penalty equal to the differential duty amount i.e. Rs. 68,402/- (Rs. Sixty Eight Thousand Four Hundred and Two only) under Section 114A of the Customs Act, 1962 on M/s Artex Textile Private Limited, Kh. No. 282, Gali Number 4 Industrial Area, Shalimar Village, Delhi-110088 (IEC-0509053581). However, the party has an option to pay penalty as per the provisions of Section 114A of the Customs Act, 1962 within a period of 30 days to avail the facility of payment of 25

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2026 Supreme(Online)(CESTAT) 1583

CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNALBinu Tamta, Judicial Member, P.V. Subba Rao, Technical MemberArtex Textiles Pvt. Ltd. – AppellantVersusCommissioner Of Customs – RespondentCUSTOMS APPEAL NO. 51741 OF 2023

CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
Binu Tamta, Judicial Member, P.V. Subba Rao, Technical Member
Artex Textiles Pvt. Ltd. – Appellant
Versus
Commissioner Of Customs – Respondent
CUSTOMS APPEAL NO. 51741 OF 2023