Bona fide belief bars penalty, but confiscation and a reduced redemption fine may still stand for import policy breach.

Penalty was not sustainable where the adjudicating authority had accepted bona fide belief and absence of mala fide intention to evade duty, so the condition for imposing penalty was not met and the penalty was set aside. Confiscation of the imported goods was nevertheless upheld because the import violated the applicable import policy, but the redemption fine was reduced as the fine had to be proportionate to the bona fide use of the goods and their value. The appeal succeeded only to that limited extent, with confiscation maintained.

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Issues: (i) whether penalty was exigible in view of the finding of bona fide belief and absence of mala fide intention, and (ii) whether the redemption fine imposed on confiscation of the imported goods required reduction.

Issue (i): whether penalty was exigible in view of the finding of bona fide belief and absence of mala fide intention.

Analysis: The importer did not dispute misdeclaration, but the original authority had accepted the plea that there was no mala fide intention to evade duty and had extended the benefit of bona fide belief. In such circumstances, the condition necessary for sustaining penalty was not made out.

Conclusion: Penalty was not sustainable and was set aside in favour of the assessee.

Issue (ii): whether the redemption fine imposed on confiscation of the imported goods required reduction.

Analysis: Confiscation and imposition of fine were upheld because the import was in clear violation of the applicable import policy. However, the fine was required to be scaled down in light of the bona fide use of the goods and the value of the property involved.

Conclusion: The redemption fine was reduced to Rs. 1.25 lakhs in favour of the assessee.

Final Conclusion: The appeal succeeded only to the extent of deletion of penalty and reduction of redemption fine, while confiscation was maintained.

Ratio Decidendi: Where the adjudicating authority records bona fide belief and absence of mala fide intention to evade duty, penalty is not justified, though confiscation and a proportionate redemption fine may still be sustained for violation of import policy.

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