Procedural breach in pre-shipment inspection conditions does not justify confiscation when no prohibited goods are imported.

Procedural non-compliance with pre-shipment inspection conditions under the Foreign Trade Policy and Handbook of Procedures did not justify confiscation where the obligation to obtain the certificate was primarily on the exporter and the goods were 100% examined with no prohibited material found. Section 111(d) of the Customs Act applies only when import is contrary to a statutory prohibition, and a lapse in the timing or recognition of the issuing agency, by itself, did not convert the import into prohibited importation. On that basis, confiscation and penalty under the Customs Act were unsustainable.

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Issues: Whether goods imported with a pre-shipment inspection certificate issued by an agency not recognised on the date of issue could be confiscated and penalised under the Customs Act for alleged violation of the Foreign Trade Policy and Handbook of Procedures conditions.

Analysis: The obligation under paragraph 2.32 of the Handbook of Procedures was directed primarily at the exporter to furnish the prescribed pre-shipment inspection certificate and related documents. The Court noted that the goods were in fact subjected to 100% examination and no explosive or war material was found. On that footing, any lapse in the timing or recognition of the issuing agency did not result in import of prohibited goods. Section 111(d) of the Customs Act applies only where import is contrary to a prohibition imposed by the Act or by any other law, and a mere non-compliance with procedural conditions, particularly one attributable to the exporter, does not amount to improper importation. Since the factual violation did not translate into import of prohibited goods, confiscation and penalty were not justified.

Conclusion: The issue was answered in favour of the assessee, and the confiscation and penalty were held unsustainable.

Ratio Decidendi: A procedural breach of import conditions under the Foreign Trade Policy or Handbook of Procedures, without import of prohibited goods and where the statutory obligation is cast on the exporter, does not by itself attract confiscation under Section 111(d) or penalty under Section 112 of the Customs Act, 1962.

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