Customs valuation misdeclaration can sustain redemption fine and penalty, but proportionality may require reduction.

Acceptance of an enhanced customs value and an importer's admission under Section 108 can justify redemption fine and penalty for misdeclaration of value. Where the goods are not smuggled and the lapse is confined to under-declaration for duty purposes, the sanction must remain proportionate to the nature of the breach and surrounding circumstances. On that approach, liability in principle was sustained, but the redemption fine and penalty were reduced because the original amounts were considered excessive.

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Issues: (i) Whether, on acceptance of the enhanced customs value of imported goods, redemption fine and penalty were liable to be sustained; (ii) whether the quantum of redemption fine and penalty imposed was excessive and required reduction.

Issue (i): Whether, on acceptance of the enhanced customs value of imported goods, redemption fine and penalty were liable to be sustained.

Analysis: The goods were valued under Rule 8 of the Customs Valuation Rules, 1988 on the basis of contemporaneous customs records after the importer failed to produce the supplier's invoice. The importer had earlier agreed to clear the goods on the customs-recorded price and later made a statement under Section 108 of the Customs Act admitting lower declaration and agreeing to the enhancement. In these circumstances, the earlier precedent relied upon by the importer was held not applicable with the same force.

Conclusion: Redemption fine and penalty were sustainable in principle.

Issue (ii): Whether the quantum of redemption fine and penalty imposed was excessive and required reduction.

Analysis: The goods were not found to be smuggled or otherwise unlawfully imported; the lapse was confined to declaration of lesser value for duty purposes. The value of the goods and the surrounding circumstances required the punishment to be proportionate. The fine of Rs. 5 lakhs and penalty of Rs. 2.5 lakhs were considered on the higher side.

Conclusion: The redemption fine was reduced to Rs. 1 lakh and the penalty was reduced to Rs. 50,000.

Final Conclusion: The order was sustained on liability but modified on the quantum of redemption fine and penalty, resulting in partial relief to the importer.

Ratio Decidendi: Where the importer accepts the enhanced value and admits the lower declaration, redemption fine and penalty may be imposed for misdeclaration of value, but their quantum must be proportionate to the nature of the lapse and the surrounding circumstances.

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