Duty-free import breach and diversion to domestic market can still justify confiscation and redemption fine

Duty-free goods imported by a 100% EOU and diverted into the domestic tariff area were treated as liable to confiscation because the importer breached the bond and undertaking attached to the import. The legal principle applied was that once confiscation is authorised for breach of statutory conditions, Section 125 of the Customs Act, 1962 permits redemption fine even if the goods are no longer physically available after removal or diversion. On that basis, redemption fine in lieu of confiscation was held to be imposable, and the matter was remanded only for determination of the quantum of fine.

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Issues: Whether goods imported duty free by a 100% EOU and diverted into the domestic tariff area were liable to confiscation and, if the goods were not available for confiscation, whether redemption fine in lieu of confiscation was imposable.

Analysis: The appeal was decided by applying the principle that when duty-free goods are imported subject to bond and undertaking, and the importer breaches those conditions by illicit diversion of the goods into the domestic market, the goods become liable to confiscation. The Court relied on the settled view that Section 125 of the Customs Act, 1962 applies once confiscation is authorized, even if the goods are no longer available because they were already removed or diverted. The absence of physical availability of the goods does not defeat the power to impose redemption fine where the breach of statutory and bond conditions is established.

Conclusion: Redemption fine in lieu of confiscation was held to be imposable, and the matter was sent back for determination of the quantum of fine.

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