Misdeclaration and undervaluation can justify customs penalty, though the penalty amount may be reduced on the facts.

Misdeclaration and undervaluation of imported goods attracted penalty under Section 114A of the Customs Act, 1962 because the goods were found materially misdeclared in description and quantity, the declared value was rejected, and the importer admitted the mismatch and argued the case on merits. The absence of an express reference to Section 28 in the adjudication order did not by itself bar penalty, since the assessment proceeded under Section 17 and the statutory ingredients for penalty were otherwise established. The penal consequence was nevertheless moderated because the valuation adopted by the authorised valuer showed an element of arbitrariness, justifying reduction of the penalty quantum.

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Issues: Whether penalty under Section 114A of the Customs Act, 1962 was leviable where the import of goods was found to be misdeclared and undervalued, and if so, whether the quantum of penalty required reduction.

Analysis: The goods were found on examination to be materially misdeclared as to description and quantity, and the declared value was rejected. The importer had admitted the mismatch and sought decision on merits. The order under challenge proceeded on assessment under Section 17 of the Customs Act, 1962, and there was no basis to treat the matter as one where penalty was excluded merely because no reference to Section 28 was made in the adjudication order. In view of the established misdeclaration and the acceptance of the case on merits, the ingredients for penalty were made out. At the same time, the valuation adopted by the authorised valuer was found to have an element of arbitrariness, warranting moderation of the penal consequence.

Conclusion: Penalty under Section 114A of the Customs Act, 1962 was justified, but its quantum was reduced to Rs. 5 lakhs.

Final Conclusion: The revenue's challenge succeeded to the extent of restoration of penalty liability, while the relief was limited to reduction of the penalty amount.

Ratio Decidendi: Where misdeclaration and undervaluation are admitted or otherwise established, penalty under Section 114A of the Customs Act, 1962 can be sustained, though the quantum may be moderated on the facts.

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