Illegal import through sham entities and no Import Export Code can justify confiscation, while penalties need individual proof.

Imports routed through non-existent firms without an Import Export Code were treated as unlawful, because the code requirement under the Foreign Trade (Development and Regulation) Act operated as a precondition for lawful import. The absence of a filed bill of entry did not prevent confiscation, since import was considered complete on entry into India, and re-shipment was refused where no genuine importer had declined the goods. On penalties, liability under customs law was sustained for the company and its directors, but was set aside for other appellants where there was no incriminating material, no statement under section 108, and denial of cross-examination of relied-upon CHA witnesses.

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Issues: (i) Whether the imported goods were liable to confiscation under section 111(d) of the Customs Act, 1962 for want of Import Export Code and because the importing firms were non-existent; (ii) whether penalties under section 112(a) of the Customs Act, 1962 were sustainable against the two sets of appellants.

Issue (i): Whether the imported goods were liable to confiscation under section 111(d) of the Customs Act, 1962 for want of Import Export Code and because the importing firms were non-existent.

Analysis: The import was found to have been routed through firms which did not possess Import Export Code and were held to be non-existent, sham entities. In that situation, the code requirement under section 7 of the Foreign Trade (Development and Regulation) Act, 1992 operated as a precondition for lawful import. The transfer of documents and title was also found not to have been made through normal banking channels, reinforcing the conclusion that the import transactions were not bona fide. The plea that absence of a filed bill of entry defeated confiscation was rejected, as import is complete once goods enter India. The request for re-shipment was declined because ownership had already passed to fictitious firms and no refusal by a genuine importer was established.

Conclusion: The goods were rightly held liable to confiscation under section 111(d) of the Customs Act, 1962.

Issue (ii): Whether penalties under section 112(a) of the Customs Act, 1962 were sustainable against the two sets of appellants.

Analysis: Penalties on the company and its directors were upheld because they were treated as responsible for sending the goods to India in violation of customs law and the finding of illegal import supported their liability. By contrast, the penalties on the other two appellants were set aside because no incriminating material, no recorded statement under section 108 of the Customs Act, 1962, and no reliable evidence of their involvement in the import or attempted clearance of the impugned goods was shown. Denial of cross-examination of the relied-upon CHA witnesses further weakened the case against them.

Conclusion: Penalties were sustained against the company and its directors, but were quashed in respect of the other two appellants.

Final Conclusion: The confiscation of the goods and the penalties on the company and its directors were sustained, while the penalties on the remaining two appellants were set aside.

Ratio Decidendi: Import through non-existent entities without Import Export Code is an illegal import attracting confiscation, but penalty under section 112(a) requires reliable evidence of individual involvement in the offending import.

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