Breach of bonded import conditions sustained duty liability, but penalty failed for lack of suppression or wilful misstatement.

Breach of bonded import conditions and failure to maintain proper stock records justified duty recovery on unaccounted platinum, because the shortage was unexplained, the accounts did not tally with physical stock, and permissible process loss was exceeded. Penalty under Section 114A was not sustainable since the record did not show collusion, wilful misstatement, or suppression of facts; mere non-reporting of shortage was insufficient to meet the statutory threshold. The reasoning on confiscation and redemption fine was treated as applicable in principle where the import conditions were breached, even though the goods were not physically available.

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Issues: (i) Whether duty was recoverable on the platinum found short for breach of the import conditions under the exemption notification and the EXIM policy. (ii) Whether penalty under Section 114A of the Customs Act, 1962 and redemption fine in lieu of confiscation were sustainable.

Issue (i): Whether duty was recoverable on the platinum found short for breach of the import conditions under the exemption notification and the EXIM policy.

Analysis: The exemption notification required the importer to maintain proper financial-year-wise accounts and to use the goods in accordance with the prescribed import conditions. The shortage in platinum was not satisfactorily explained, the records did not tally with the physical stock, and the permissible process loss under the policy was exceeded. On that basis, the unaccounted platinum was held to have lost the benefit of the notification.

Conclusion: Duty on the unaccounted platinum was rightly payable and this issue was decided against the assessee.

Issue (ii): Whether penalty under Section 114A of the Customs Act, 1962 and redemption fine in lieu of confiscation were sustainable.

Analysis: Section 114A applies only where non-levy or short-levy is attributable to collusion, wilful mis-statement, or suppression of facts. The record disclosed no evidence of clandestine removal or intentional suppression, and the allegation of non-reporting of shortage did not establish the statutory ingredients for penalty. As to confiscation, the goods were imported under bond and the governing conditions were breached, so the reasoning in relation to confiscation and redemption fine was treated as applicable in principle even though the goods were not physically available.

Conclusion: Penalty under Section 114A was not sustainable, while the Revenue's challenge to the absence of confiscation and redemption fine failed.

Final Conclusion: The demand of duty was maintained, but the penalty was set aside and the Revenue's appeal did not succeed.

Ratio Decidendi: Penalty under Section 114A of the Customs Act, 1962 requires proof of collusion, wilful mis-statement, or suppression of facts, whereas breach of bonded import conditions can sustain duty liability on unaccounted goods.

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