Improper export penalty cannot stand on selective capacity readings without proven misdeclaration or other established contravention.

Penalty under Section 114 of the Customs Act was found unsustainable where the allegation of improper export rested only on a selective reading of the exporter's registered processing capacity. The export policy conditions requiring veterinary and quality-control certificates and the declaration under Note 6 were complied with, and no misdeclaration in the shipping bills was alleged. The department's reliance on a single frozen-meat capacity figure, while ignoring the plant's additional chilled-meat capacity, was insufficient to establish unlawful export. The penalty was therefore set aside in favour of the assessee.

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Issues: Whether penalty under Section 114 of the Customs Act was sustainable for alleged improper export of frozen boneless buffalo meat on the basis of production-capacity mismatch and alleged non-compliance with export policy conditions.

Analysis: The export policy conditions required production of the prescribed veterinary and quality-control certificates and compliance with the declaration requirement under Note 6. Compliance with those express conditions was not disputed. The dispute turned on whether the exporter had exceeded the lawful sourcing and production capacity of the APEDA-registered plant so as to justify a finding of improper export. The record showed that the plant registration covered both frozen meat and chilled meat, but the departmental case proceeded only on a 62 MT per day frozen-meat figure while ignoring the additional chilled-meat capacity. The show-cause notice also did not allege misdeclaration in the shipping bills or propose penalty on that footing. On that basis, the presumption of unlawful export drawn from a mathematical variation in quantity could not be sustained.

Conclusion: The penalty under Section 114 of the Customs Act was held unsustainable and was set aside in favour of the assessee.

Final Conclusion: The appellate authority granted relief by quashing the reduced penalty, leaving no surviving adverse fiscal consequence on the appellant.

Ratio Decidendi: A penalty for improper export cannot be sustained where the alleged violation is founded only on a selective and incomplete reading of the registered processing capacity and the record does not establish a specific misdeclaration or other proven contravention.

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