Designated port restrictions on unshredded steel scrap justify confiscation, but excessive penalty may still be reduced.

Import of unshredded steel scrap through a non-designated customs station, in breach of policy conditions and the applicable circular issued on security grounds, was treated as a substantive violation and confiscation of the goods was upheld. The restriction required clearance of unshredded metal scrap only through designated ports, so the breach was not regarded as merely technical. The importer's prior non-compliance was noted, but the penalty was considered excessive on the facts and was reduced. The legal effect was that confiscation remained sustained while the penal consequence was moderated.

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Issues: (i) Whether import of unshredded steel scrap through a non-designated customs station in breach of the applicable policy and circular justified confiscation of the goods. (ii) Whether the penalty imposed on the importer was liable to be sustained in full.

Issue (i): Whether import of unshredded steel scrap through a non-designated customs station in breach of the applicable policy and circular justified confiscation of the goods.

Analysis: The policy permitted import of metallic waste and scrap in shredded form through all ports, while unshredded metallic waste and scrap could be imported only through designated ports in terms of the notified conditions. Circular No. 56/2004-Cus. was issued in the context of national security concerns and clarified that import and clearance of unshredded metal scrap would be permitted only at designated customs stations. The breach was therefore not merely technical. Earlier case law cited by the importer was distinguished because those matters did not involve the same security-sensitive restriction on unshredded scrap.

Conclusion: Confiscation of the goods was upheld against the assessee.

Issue (ii): Whether the penalty imposed on the importer was liable to be sustained in full.

Analysis: Although the violation warranted confiscation, the penalty imposed was found to be on the higher side. The order also noted that the importer had previously violated the circular, but the quantum of penalty still required moderation in the circumstances.

Conclusion: The penalty was reduced in favour of the assessee.

Final Conclusion: The import violation was treated as a substantive breach warranting confiscation, but the penalty was moderated to a lesser amount.

Ratio Decidendi: Where import restrictions are imposed for national security reasons and require clearance only through designated ports, breach of that condition can justify confiscation, while the quantum of penalty remains subject to judicial moderation if found excessive.

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