SEZ reconditioning permission defeats confiscation where misdescribed imported garments still fall within the approved activity.

Imported T-shirts were held to fall within the unit's approved SEZ activity because the letter of permission, read with the project report, contemplated import of similar garments for reconditioning, cleaning, pressing, repair and re-export. The inaccurate description in the Bill of Entry as old and used clothing rags did not alter the substantive permission, so the goods were entitled to clearance to the SEZ at nil duty. As the import was covered by the approved activity, confiscation under Sections 111(d) and 111(m) of the Customs Act, 1962 could not be sustained, and the redemption fine and penalties also failed for want of an independent basis.

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Issues: (i) whether the imported T-shirts, though described in the Bill of Entry as old and used clothing rags, were covered by the unit's letter of permission and project report so as to permit clearance to the SEZ for reconditioning without duty; and (ii) whether confiscation under Sections 111(d) and 111(m) of the Customs Act, 1962, along with redemption fine and penalties, could be sustained.

Issue (i): whether the imported T-shirts, though described in the Bill of Entry as old and used clothing rags, were covered by the unit's letter of permission and project report so as to permit clearance to the SEZ for reconditioning without duty.

Analysis: The permission granted to the unit was read along with the project report, which contemplated import of almost new garments, export surplus and similar clothing for reconditioning, cleaning, pressing, repair and re-export. On that basis, the imported T-shirts were found to fall within the permitted activity of reconditioned clothing. The description in the Bill of Entry was inaccurate because new garments could not be treated as rags, but the goods themselves were still within the scope of the approved SEZ activity and could be taken to the SEZ at nil duty.

Conclusion: The issue is answered in favour of the assessee. The goods were covered by the permission and were entitled to clearance to the SEZ for reconditioning.

Issue (ii): whether confiscation under Sections 111(d) and 111(m) of the Customs Act, 1962, along with redemption fine and penalties, could be sustained.

Analysis: Since the goods were held to be covered by the approved SEZ activity, the allegation of prohibited import or misdeclaration so far as confiscation was based could not stand. The reliance on the absence of a pre-shipment certificate also did not support confiscation because the regulatory framework contemplated testing and confiscation only if the goods failed such scrutiny, which had not been shown. Once the basic confiscatory provisions failed, the consequential redemption fine and penalties also had no independent footing.

Conclusion: The issue is answered in favour of the assessee. The confiscation, redemption fine and penalties were unsustainable.

Final Conclusion: The appeal succeeded and the impugned confiscation and penal consequences were set aside, with the goods permitted to be taken to the SEZ.

Ratio Decidendi: Where imported goods are shown by the letter of permission and project report to fall within an approved SEZ activity, a mere wrong description in the Bill of Entry does not justify confiscation, and consequential redemption fine and penalties cannot survive.

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