Case Digest on Section 111 of the Customs Act, 1962

What Does Section 111 Cover?

Section 111 specifies customs authorities may confiscate situations in which goods are brought into India due to violations of laws and regulations. Here’s a breakdown of the provisions in this section.

1. If goods are unloaded or attempted to be unloaded at places other than officially designated customs ports or airports.
2. Goods brought through land routes or inland waterways not notified or authorized by customs authorities.
3. Goods brought into creeks, bays, gulfs, or tidal rivers for the purpose of being landed at places other than designated customs ports.
4. Goods imported or brought into Indian customs waters in violation of any law or prohibitions imposed under the Customs Act or other laws.
5. Goods found concealed in any manner within vehicles, ships, or other conveyances to evade customs detection.
6. Dutiable or prohibited goods that are not mentioned in the required import manifest, report, or other customs documentation.
7. Goods unloaded in violation of customs rules, except those accidentally unloaded but properly recorded as per the law.
8. Goods unloaded or attempted to be unloaded in contravention of Sections 33 or 34 of the Customs Act.
9. Goods hidden within packages to evade detection, either before or after unloading.
10. Unauthorized Removal from Customs Areas: Goods removed or attempted to be removed from customs zones or warehouses without proper authorization or against the terms of such permission.
11. Goods imported by land without the required clearance order under Section 109 or goods that do not match the specifications on the clearance order.
12. Goods not included in customs declarations or baggage claims, or goods in quantities exceeding those declared.
13. Goods whose declared value or other particulars differ from those stated in customs entries or baggage declarations.
14. Goods in transit or transshipment that violate the rules specified under Chapter VIII of the Customs Act.
15. Goods imported duty-free or with conditional exemptions where the importer fails to meet the conditions unless sanctioned by the customs officer.
16. Notified goods that contravene the provisions under Chapter IV-A or rules made to enforce those provisions.

Section 111(m) of Customs Act, can be invoked only upon material particulars being declared and is detriment in addition to duty liability determined: CESTAT [Read Order]

Shashi Dhawal Hydraulics Pvt Ltd vs Commissioner of Customs (Import) CITATION: 2023 TAXSCAN (CESTAT) 1339

The case involved the enhancement of the assessable value of the goods based on imports by the appellant’s sister concern. The bench held that Section 111(m) of the Customs Act, 1962, could only be invoked upon a declaration of material particulars, serving as an additional detriment beyond duty liability. It affirmed the confiscation of goods under Section 111(m) and imposed a fine of ₹20,00,000 along with penalties under Section 112.

The tribunal, comprising Ajay Sharma and C.J. Mathew, focused on the legal distinction between ‘misdeclaration’ and ‘suppression/misrepresentation’ under the Customs Act. It concluded that the appellant’s knowledge of the pricing variation through its sister concern invalidated claims for relief. The bench rejected the argument that relief from confiscation implied immunity from the extended recovery period under Section 28 of the Act, upholding the demand and penalties while emphasizing the proper application of customs law to the case.

Imported Goods cannot be Confiscated u/s 111(m) for Wrong Classification or Ineligible Exemption Claim: CESTAT [Read Order]

M/s Raj Metals & Alloys vs The Commissioner of Customs CITATION: 2024 TAXSCAN (CESTAT) 501

In this case, the importer, registered with the Rajasthan State Pollution Control Board, imported aluminium scrap described as "Thorn" and filed a Bill of Entry. Upon examination, the Customs authority found incorrect classification at the 8-digit level and reassessed the goods. The tribunal held that while the goods were liable for confiscation under Sections 111(d) and 111(o) for other violations, confiscation under Section 111(m) was not justified as the discrepancies pertained to classification and exemption claims.

The two-member bench comprising Binu Tamta and P.V. Subba Rao ruled that the confiscated goods, valued at ₹27,48,405, could be redeemed under Section 125 upon payment of a fine of ₹4,00,000, while penalties under Section 114AA were set aside. The bench emphasized that absolute confiscation was unnecessary and redemption would serve justice.

CESTAT Upholds Confiscation of Electric Motors u/s 111(m) of Customs Act on Ground of Absence of Proper Transaction Value [Read Order]

M/S Javeria Impex India Pvt. Ltd vs Commissioner of Customs (ICD) New Delhi CITATION: 2023 TAXSCAN (CESTAT) 1529

The appellant's declaration of the goods' value was alleged to be significantly low, leading to re-assessment and confiscation under Section 110. While the motors were provisionally released against bonds and guarantees, the appellant challenged the confiscation, contending that the re-assessment was unsustainable and, consequently, so was the confiscation.

The two-member bench comprising Rachna Gupta and Subba Rao ruled in favor of the department, holding that the confiscation was justified under Section 111(m), as the declared value did not correspond with the goods. The tribunal clarified that under Section 125, non-prohibited goods should be eligible for redemption on payment of a fine. Accordingly, the motors were released on redemption fine, and the penalty imposed did not exceed the market value of the goods.

No Mis-Declaration: CESTAT Deletes Customs Penalty u/s 111(m) [Read Order]

M/s M.S. Clothing Company vs Commissioner of Customs CITATION: 2024 TAXSCAN (CESTAT) 745

The case involved the import of garment accessories, where the appellant claimed exemptions under certain notifications. The authorities later alleged misdeclaration when the exemptions were deemed inapplicable after an amendment in April 2011, invoking the extended limitation period. However, the tribunal found no evidence of wilful misstatement or suppression of facts, as the Bills of Entry accurately described the goods and referenced the exemption notifications.

The tribunal, comprising R. Bhagya Devi, upheld the demand for Special Additional Duty (SAD) at 4% and interest only for the normal period, noting that the appellant had already paid ₹3,95,676, including duty and interest. Citing precedents, it concluded that the invocation of extended limitation and the penalties under Sections 111(m) and 114A were unjustified, as the exemption claim was made bona fide. Consequently, the penalty and confiscation were deleted, and the appeal was partially allowed.

Confiscation u/s 111 of Customs Act Not Invokable in Absence of Misdeclaration of Value: CESTAT [Read Order]

M/s Exclusive Motors Pvt Ltd vs Commissioner of Customs CITATION: 2024 TAXSCAN (CESTAT) 988

The case arose when the Commissioner of Customs imposed a differential duty of ₹71.74 crore, along with penalties, on M/s Exclusive Motors Pvt Ltd for importing Bentley cars from the UK between August 2018 and July 2023. The authorities alleged that the declared value did not correspond with transaction values, leading to the invocation of Sections 111, 112, and 114A. However, the tribunal found no evidence of misdeclaration or willful suppression to justify these actions.

The two-member bench, comprising Justice Dilip Gupta and C.J. Mathew, observed that the declared price serves as the default transaction value unless proven otherwise by the adjudicating authority. It held that the evidence presented failed to establish grounds for rejecting the declared value or imposing penalties. The tribunal concluded that without recourse to Section 28 of the Customs Act to establish underpaid duty, the confiscation and penalties were unsustainable. Consequently, the impugned order was set aside, and the appeals were allowed.

Goods can be Confiscated u/s 111(d) of Customs Act if Prohibited under Customs Act or Any Other Law: CESTAT [Read Order]

Sterling Agro Products vs Commissioner of Customs CITATION: 2023 TAXSCAN (CESTAT) 890

The Hyderabad bench of CESTAT upheld the confiscation of Arecanut imported by Sterling Agro Products under Section 111(d) of the Customs Act, 1962, on the grounds that the goods were prohibited. The appellant, a 100% Export Oriented Unit (EOU), imported Arecanut below the Minimum Import Price (MIP) and claimed exemption under a notification. They argued that their status as an EOU engaged in job work and re-export, coupled with a buy-back agreement, rendered MIP conditions inapplicable. However, the department contended that no policy relaxation existed for Arecanut, making the goods prohibited under the MIP condition.

A single-member bench comprising A.K. Jyothishi ruled that goods listed as prohibited under any law or policy are liable for confiscation under Section 111(d). It held that MIP conditions applied even to EOUs and that the imports below the MIP made the goods prohibited and subject to confiscation. The appeal against confiscation and penalties was dismissed, emphasizing the applicability of the Customs Act to such imports.

No Documents to Show Duty Paid for Foreign Marked Gold: CESTAT Confirms Confiscation of Gold Bars and a Piece of Gold u/s 111(d) of Customs Act [Read Order]

Kashi Kumar Aggarwal vs Commissioner of Customs (Preventive) CITATION: 2023 TAXSCAN (CESTAT) 350

The case arose when officers of the Directorate of Revenue Intelligence (DRI) seized the gold during an interception on a train. The appellant, Kashi Kumar Aggarwal, contested the confiscation, arguing that the department had not demonstrated the goods were smuggled. However, the Tribunal held that possession of foreign-marked gold without proof of duty payment provided the department reasonable belief to seize the goods.

The bench, comprising PV Subba Rao and Binu Tamta, ruled that the burden of proof rested on the appellant, who failed to produce any documentation to substantiate the claim that the goods were legally imported. The tribunal upheld the confiscation of the gold while setting aside the confiscation of jewelry and cash. It concluded that the adjudicating authority was correct in ordering the confiscation under Section 111(d) of the Customs Act and dismissed the appeal.

No Violation of Section 111 of Customs Act: CESTAT Deletes Penalty of ₹40 Lakhs [Read Order]

Shri Rajesh Kumar vs Commissioner of Customs CITATION: 2022 TAXSCAN (CESTAT) 589

The case arose from a DRI search and seizure operation where gold with foreign markings and cash worth ₹6.44 crore, allegedly proceeds from the sale of smuggled gold, were confiscated. While the Commissioner of Customs upheld the penalty, citing the appellant’s admission of dealing in smuggled gold without invoices, the tribunal concluded there was insufficient evidence linking the appellant to activities warranting confiscation under Section 111.

The bench, led by Judicial Member Anil Choudhary, ruled that the appellant was not involved in the handling or sale of goods liable for confiscation under Section 111. It held that the allegations did not meet the criteria for imposing a penalty under Section 112(b)(i), and therefore, the penalty lacked legal sustenance. Consequently, the penalty was set aside, and the appeal was allowed.

When the Goods Imported are not Prohibited, No Confiscation u/s 111(d): CESTAT [Read Order]

M/s. Kutty Impex vs Commissioner of Customs CITATION: 2022 TAXSCAN (CESTAT) 514

The case concerned the import of 502 used digital multifunctional printers (MFDs) by M/s. Kutty Impex, classified under CTH 84433100. The Adjudicating Authority confiscated the goods under Sections 111(d) and 111(m), alleging non-compliance with various domestic laws, including the Bureau of Indian Standards (BIS) Act and DGFT authorization requirements for second-hand goods. A redemption fine of ₹14,38,000 and penalties under Sections 112(a)(i) and 117 were imposed.

On appeal, the First Appellate Authority allowed provisional release of the goods, which the Revenue challenged before CESTAT. The tribunal, led by Judicial Member P. Dinesha, upheld the Appellate Authority’s decision, emphasizing that the goods were not prohibited under law. It concluded that non-compliance with procedural requirements does not render goods confiscatable under Section 111(d). Accordingly, the Revenue's appeal was dismissed for lack of merit, affirming that the import was not prohibited.

Goods are Liable for Confiscation U/S 111 and 112 of Customs Act when ‘Improperly Imported’: CESTAT Quashes Penalty against CHA [Read Order]

M/s. Maruvur Arasi Logistics Private Limited vs The Commissioner of Customs CITATION: 2022 TAXSCAN (CESTAT) 308

The Chennai bench of CESTAT quashed the penalty imposed on M/s. Maruvur Arasi Logistics Private Limited, a Customs House Agent (CHA), under Section 112(a) of the Customs Act, 1962. The Revenue alleged that the importer wrongly availed an exemption, rendering the imported goods liable for confiscation. Penalties were imposed on the importer and CHAs for non-compliance with Customs Brokers Licensing Regulations (CBLR) under Sections 111 and 112.

The tribunal, presided by Judicial Member P. Dinesha, held that Sections 111 and 112 apply only when goods are liable for confiscation due to improper import. Since the differential duty and interest had been voluntarily paid, the import was regularized, eliminating the grounds for "improper import." Consequently, the tribunal ruled that no confiscation or penalties under these sections were warranted and allowed the appeal, quashing the penalty imposed on the CHA.

CESTAT Reduces Excessive Penalty for Confiscation of Prohibited Goods Due to "Minimum Import Price" Consideration

Sterling Agro Products vs Commissioner of Customs, Visakhapatnam – I CITATION: 2023 TAXSCAN (CESTAT) 890

The Hyderabad bench of CESTAT reduced a steep penalty imposed on Sterling Agro Products for importing Arecanut below the Minimum Import Price (MIP), which was deemed "prohibited goods" under Section 111(d) of the Customs Act, 1962. The Commissioner of Customs had imposed a penalty of ₹10,00,000, citing the absence of an applicable exemption notification for the imported goods. The appellant argued that the penalty was excessive and disproportionate, highlighting that the goods were imported for job work on a "free of cost" basis, and the declared value was notional. The counsel for the department supported the penalty, asserting compliance with the law.

After reviewing the facts, a single-member bench led by A.K. Jyotishi deemed the penalty excessive, considering the nature of the transaction and the lack of malafide intent. The tribunal reduced the penalty to ₹2,00,000, balancing compliance with fairness. This decision underscores the tribunal's emphasis on proportional penalties based on circumstances and intent in cases of improper imports.

Order of Confiscation Cannot Be Invoked Without Corroborating Evidence: CESTAT

Karim Jaria vs Commissioner of Customs (Import-I) CITATION: 2022 TAXSCAN (CESTAT) 256

The Mumbai bench of CESTAT ruled that confiscation orders under Section 111(m) of the Customs Act, 1962, and penalties under Section 112 cannot be upheld without corroborating evidence. The case involved Mr. Karim Jaria, who appealed against confiscation proceedings related to nine used cranes imported by M/s Crown Lifters and five consignments imported between 2005 and 2010. Despite a voluntary deposit of ₹1.5 crore towards differential duty, the tribunal found no evidence of undervaluation or proper ascertainment of the cranes' purchase price in the show-cause notice. Consequently, the tribunal declared that the order had overstepped the notice's framework and violated principles of natural justice, especially in denying cross-examination.

A bench comprising Ajay Sharma (Judicial) and C.J. Mathew (Technical) highlighted the lack of evidence supporting allegations of undervaluation. They held that reassessing the cranes' value under Rule 3 of the Customs Valuation Rules, 2007, was improper. The confiscation orders under Section 111(m) and penalties under Sections 112 and 114AA were set aside, emphasizing the importance of evidence-based adjudication in customs matters.

No Confiscation of Gold Without Evidence of Illegal Import or Smuggling: CESTAT

Sri Shimul Sarkar vs Commissioner of Customs (Preventive), Kolkata CITATION: 2023 TAXSCAN (CESTAT) 1491

The Kolkata bench of CESTAT ruled that gold or any goods cannot be confiscated under the Customs Act, 1962, without evidence of illegal import or smuggling. The appellant, Shimul Sarkar, purchased gold with valid documents from authorized dealers but was accused of smuggling under Sections 111(b) and 111(d) of the Customs Act. The Commissioner (Appeals) confirmed the allegations, leading to penalties under Section 114AA and the possibility of prosecution under Section 135 of the Act. The appellant argued that the seizure lacked the reasonable belief required under Section 110, rendering the confiscation proceedings invalid.

The tribunal, led by Ashok Jindal (Judicial), found no credible evidence proving smuggling or illegal import. Referring to precedent, it emphasized that seizure without reasonable belief is void ab initio. The absence of a legitimate basis for the seizure mandated the unconditional release of the goods. This decision underscores the necessity of substantiated allegations in confiscation cases to ensure fairness and compliance with the law.

Goods Liable for Confiscation Can Be Released on Payment of Redemption Fine: CESTAT

Classic Interiors vs Commissioner of Customs CITATION: 2023 TAXSCAN (CESTAT) 127

The New Delhi bench of CESTAT ruled that goods held liable for confiscation may be released upon payment of a redemption fine after adjudication. The case arose when M/s Classic Interiors imported goods allegedly misdeclared in terms of value and polyvinyl chloride percentage. The Directorate of Revenue Intelligence seized the goods under Section 110 of the Customs Act, 1962. The appellant sought provisional release under Section 110A, which the Additional Commissioner allowed with conditions, including a 10% bank guarantee. Dissatisfied, the appellant appealed to the Commissioner (Appeals), who upheld the order but reduced the bank guarantee to 10% of the goods' value.

A bench comprising Justice Dilip Gupta (President) and PV Subba Rao (Technical) modified the condition further, reducing the bank guarantee requirement to 5%. It held that after adjudication, if goods are confiscated, they can be released upon payment of a redemption fine. The tribunal emphasized the necessity of securing any potential fines during provisional release. The decision highlights a balanced approach to provisional release, ensuring compliance while reducing undue financial burdens on importers.

CESTAT Reduces High-Pitched Redemption Fine on Confiscated Goods Under Section 111(d) of Customs Act

M/s Tinna Rubber & Infrastructure Ltd. vs Commissioner of Customs CITATION: 2024 TAXSCAN (CESTAT) 905

The Allahabad bench of CESTAT reduced an excessive redemption fine imposed on Tinna Rubber & Infrastructure Ltd. for importing used and cut tyres under Section 111(d) of the Customs Act. The tyres, intended for recycling at the company’s Panipat unit, were flagged by Customs authorities for lacking proper authorization. Although the company held permissions from the Ministry of Environment, Forests, and Climate Change (MOEF) and DGFT, these were specific to their Wada plant in Maharashtra, not applicable to the Panipat unit. Customs officials deemed the import improper under hazardous waste regulations and imposed a redemption fine of ₹6 lakhs and a penalty of ₹4 lakhs.

The Tribunal, led by members P.K. Choudhary and Sanjiv Srivastava, recognized the violation as a technical oversight rather than a deliberate offense. It noted the centralized import management system used by the company and agreed the fines were disproportionate to the violation. Consequently, the redemption fine was reduced to ₹3 lakhs, and the penalty to ₹2 lakhs, offering partial relief while maintaining compliance with import regulations. The decision reflects a balanced approach, accounting for procedural lapses without harsh penalization.

CESTAT Reduces Excessive Penalty for Confiscation of Prohibited Goods Due to "Minimum Import Price" Consideration

Sterling Agro Products vs Commissioner of Customs, Visakhapatnam – I CITATION: 2023 TAXSCAN (CESTAT) 890

The Hyderabad bench of CESTAT reduced a steep penalty imposed on Sterling Agro Products for importing Arecanut below the Minimum Import Price (MIP), which was deemed "prohibited goods" under Section 111(d) of the Customs Act, 1962. The Commissioner of Customs had imposed a penalty of ₹10,00,000, citing the absence of an applicable exemption notification for the imported goods. The appellant argued that the penalty was excessive and disproportionate, highlighting that the goods were imported for job work on a "free of cost" basis, and the declared value was notional. The counsel for the department supported the penalty, asserting compliance with the law.

After reviewing the facts, a single-member bench led by A.K. Jyotishi deemed the penalty excessive, considering the nature of the transaction and the lack of malafide intent. The tribunal reduced the penalty to ₹2,00,000, balancing compliance with fairness. This decision underscores the tribunal's emphasis on proportional penalties based on circumstances and intent in cases of improper imports.

Illegal Import Without Valid License Liable for Confiscation: CESTAT

M/s K Kiran Tyres vs Commissioner of Customs CITATION: 2023 TAXSCAN (CESTAT) 803

The Bangalore bench of CESTAT ruled that goods imported without a valid license are liable for confiscation under Section 111 of the Customs Act, 1962. In this case, M/s K Kiran Tyres contended that they had relied on a consultant and acted on a bona fide belief regarding the genuineness of the license. However, the revenue argued that the assessee, as the ultimate beneficiary, could not avoid liability for importing goods without proper authorization.

A single-member bench, led by P. A. Augustian, upheld the confiscation order but reduced the redemption penalty, acknowledging the assessee’s lack of involvement in fraudulent activities. The judgment highlights the importer’s responsibility to verify license validity while ensuring penalties are proportional to the intent and nature of the violation.

No Confiscation or Penalty for Import of Multi-Functional Digital Copiers: CESTAT

Pathange & Co. vs Commissioner of Customs CITATION: 2020 TAXSCAN (CESTAT) 228

The Hyderabad bench of CESTAT held that the import of second-hand Multi-Functional Digital Copiers (MFDs) before June 5, 2012, was not restricted and thus, confiscation under Section 111(d) of the Customs Act, 1962, was unsustainable. The Tribunal noted that the original confiscation and redemption fine of ₹3,30,000 were incorrectly imposed based on the assumption that the import violated restrictions under the Foreign Trade Policy.

The bench, comprising P. Venkata Subba Rao and Rachna Gupta, relied on precedent judgments, including Asian Copiers and Unitech Enterprises, to conclude that such imports were not prohibited. Consequently, the confiscation and associated penalties were set aside, providing relief to the appellant.

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